Walter Investment Management, best known for purchasing huge mortgage servicing portfolios from Bank of America and others, also is a large player in the reverse mortgage business and it wants to get even bigger.
In the past 13 months, the Tampa, Fla.-based lender and servicer has gobbled up Reverse Mortgage Solutions of Spring, Texas, and another reverse mortgage shop in San Diego called Security One Lending.
Walter executive president and chief investment officer Denmar Dixon says the reserve mortgage market is “underserved.”
Major banks and insurance companies have exited the reverse mortgage space over the past few years as seniors defaulted on their obligations to pay taxes and homeowners insurance.
In the past year, the Federal Housing Administration has revamped its Home Equity Conversion Mortgage (reverse) program twice to keep it from going under.
“The chaos is keeping people out of the market,” Dixon said at a FBR Capital Markets investor conference last week. “As a market leader today we feel we will take more than our fair share of the market over time,” he added.
Walter serviced $15.2 billion in reverse mortgage as of Sept. 30. And its reverse mortgage units originated $440 million in HECM loans during the third quarter.
The company acquired Reverse Mortgage Solutions in November 2012. And RMS acquired $12 billion in reverse mortgage servicing from Wells Fargo Home Mortgage the following April.
In January 2013, Walter acquired Security One Lending, which is a “strong retail originator,” Dixon says. “We are very focused on growing our retail business.” This growth will come from employing more loan officers and through acquisitions.
In the terms of the FHA reforms, the EVP says the changes will make HECMs a better product. “We agreed with the majority of all the changes,” he says, “including basic underwriting to make sure there is cash flow for taxes and insurance.”
FHA changed its rules in September and seniors can only tap 60% of their equity under their reverse mortgages during the first year. Going forward, seniors can draw down more of their equity.
Due to its large servicing portfolio, Walter is already pooling draws and securitizing them via Ginnie Mae.
These securities have a long duration, says Dixon, because it takes a lot of small draws to make up a $1 million to $5 million MBS. But investors will “pay a premium for that duration,” he added.