An analyst for FBR Capital Markets thinks Walter Investment Management could see the servicing rights for more loans coming to it from the Bank of America/Fannie Mae transaction.
Analyst Paul Miller has upsized his predictions for growth in Walter Investment Management's mortgage loan servicing portfolio to $64 billion from $52 billion by the end of this year.
He said based on a recent filing from the company, Walter boarded nearly 150,000 loans during the third quarter. It now has a $59 million servicing portfolio, up from $33 million two quarters ago.
Much of that (nearly 100,000 loans) could have come from Bank of America's sale of 400,000 loans to Fannie Mae, but Walter will not confirm that is the case, Miller said.
And he thinks Walter could be getting more of that servicing.
"It will take a few months for the entire block of servicing rights to be allocated and boarded by special servicers. Hence, there is the possibility Walter could be in line for another block of servicing contracts in the fourth quarter. Considering there are very few servicers that have the capability to physically board the loans, we think Walter could see another jump in their servicing portfolio," Miller said.
Furthermore, he said because of the private label mortgage-backed securities settlement B of A entered into this summer, it has to assign a large number of loans to special servicers. Walter, which acquired mortgage servicer Green Tree earlier this year, "is positioned to be a part of that settlement, and it is possible they could be the recipient of 60,000 loans, which would increase their residential mortgage book by19%," he noted.
Miller cut his 2011 EBIDTA prediction to almost $185 million from $189 million due to fee recognition changes in FBR Capital Market's model. But the 2012 EBIDTA outlook was increased to $231 million from $205 million.
