Walter Management Expects Good Returns on Fannie MSRs

In purchasing the servicing rights to 650,000 Fannie Mae loans from Bank of America, Walter Management Investment Corp. is looking to refinance over 45% of those loans through the Home Affordable Refinance Program.

WMIC chief financial officer Charles Cauthen told investors and analysts during a conference call Monday afternoon that 80% of the Fannie loans are current and 20% are delinquent.

The Tampa, Fla.-based mortgage servicer and originator intends to increase its returns by mining the new portfolio for HARP refinancings and collecting  incentive fees from Fannie from servicing the delinquent loans.

“The ability to utilize the ResCap origination platform to mine this potential pool of customers and target them for refinancings provides a very significant opportunity to generate meaningful origination revenues and margins in 2013,” Cauthen said.

“Based on expected levels of eligibility, pull-through rates and net originations margins, we estimate EBITDA associated with HARP refinancings for this pool of assets in 2013 will to be in the range of $110 million to $135 million,” the CFO said.

WMIC purchased the B of A mortgage servicing rights portfolio for $519 million.

Walter Management has experience in acquiring Fannie Mae MSRs and the B of A portfolio will be transferred over several quarters.

The company purchased MSRs on 257,000 Fannie loans in 2011 and it has the systems and teams ready to complete the transfer to its servicing platform, according to WMIC executive vice president Denmar Dixon. “We will be very successful in boarding these transactions,” he said.

After WMIC closes its acquisition of ResCap at the end of this month, “we will be one of Fannie Mae’s top five servicers by volume,” WMIC chairman and chief executive Mark O’Brien said.

Walter Management also said Monday that it has signed a tentative agreement to purchase the MetLife Bank servicing platform.

The platform in Irving, Texas, services $70 billion in Fannie, Freddie Mac and Ginnie Mae loans, according to Dixon. “We are looking to retain about 300 of the MetLife servicing employees” and management team.