Walter Loses $232M in the Second Quarter on Servicing Charges

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Walter Investment Management Corp. lost $232.4 million during the second quarter as it wrote off $133.6 million of goodwill and took an $82.7 million fair value charge from the company's servicing operations.

For the same period last year the Tampa, Fla.-based company lost $38.1 million.

"Our results continue to fall short of expectations, driven by both external factors such as the declining interest rate environment as well as internal operational inefficiencies," said Executive Chairman and Interim CEO George Awad in a press release.

Anthony Renzi will be joining Walter as the new CEO in the fourth quarter, the press release said.

Renzi most recently served as the chief operating officer, managing director and head of operations for Citi's North America Retail Bank, Commercial Bank and CitiMortgage. Before that he was executive vice president of the single family business, operations and technology at Freddie Mac and the chief operating officer of GMAC Residential Capital and president of GMAC Mortgage.

The servicing segment reported a $356 million pretax loss for the second quarter, compared with pretax income of $82.3 million in the prior year.

Walter's reverse mortgage business lost $9.1 million on a pretax basis, an improvement over the $91 million loss in the second quarter last year.

The company has begun a review of its strategic options for the reverse mortgage business with the objective of reducing its balance sheet, Awad said during the conference call.

The originations segment had a pretax profit of $45.6 million, an improvement over the pretax profit of $33 million one year prior. After the quarter ended, its Ditech subsidiary announced it is getting back into wholesale originations.

Walter also announced it is selling $35 billion of mortgage servicing rights to New Residential Investment Corp. for $231 million. In addition, New Residential will acquire MSRs on newly originated loans from Walter and its Ditech subsidiary for a three-year period going forward.

Plus, Walter will sell New Residential its Walter Credit Opportunity unit, a REIT which owns an additional $37 billion of MSRs. The purchase price will be $283 million.

The parties have reached an agreement where Ditech will subservice all of the MSRs being purchased.

"We are excited about this transaction because it will increase our liquidity, enhance our origination capacity and allow us to grow our sub-servicing portfolio," Awad said during the conference call.

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