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Walter Management Assures Investors Its Reverse Mortgage Deal Will Pay Off

DEC 26, 2012 1:51pm ET
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HUD’s decision to impose a moratorium on the FHA-insured fixed-rate Standard reverse mortgage product will not change the economics of its acquisition of Reverse Mortgage Solutions Inc., according to officials at Walter Investment Management Corp.

The Department of Housing and Urban Development recently announced that it would shut down the fixed-rate Standard Home Equity Conversion Mortgage product by Jan. 31 due to losses caused by technical defaults.

WIMC chairman and chief executive Mark O’Brien told investors and equity analysts last Friday that he supports HUD’s decision. And the CEO assured investors that its acquisition of RMS will not be impacted by the changes to the HECM program.

“We have not revised our expectations for RMS,” O’Brien said during the conference call.

WIMC executives said borrowers will likely mitigate the ARM Standard product, which will allow them to take a full draw in nearly the same amount as the fixed-rate product.

And they stressed the economics of the fixed-rate and ARM Standard HECM product are nearly the same in terms of margins for the lenders.

“It is my belief in the current rate environment, it is unlikely people are going to go in any volume to the [HECM] Saver product,” O’Brien said.

In a higher rate environment, the Saver product would be more attractive due to lower cost structure.

The CEO of the Tampa, Fla.-based mortgage servicer and a loan aggregator also noted that its ResCap acquisition of a $50 billion servicing portfolio and ResCap origination platform should close on Feb. 1.

“We are feeling great,” O’Brien said, about the deal. His team has been working with ResCap’s origination management team. “It has been going really, really well,” he added. “They will greatly enhance our ability to be a full-product originator over time.”

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