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Growing Reverse Mortgage Firm to be Acquired

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A company that started out five years ago as a technology provider for reverse mortgage servicers and has since expanded into an originator, servicer and issuer of reverse mortgages is being acquired by a servicer of traditional residential loans.

An agreement has been reached for Walter Investment Management Corp. to acquire Reverse Mortgage Solutions Inc., a news release said. Walter’s board of directors has approved the transaction, which is subject to government approval, third-party consents and other closing conditions.

The $120 million deal, which is expected to close in the fourth quarter, includes $60 million in cash, $25 million in stock and a $35 million seller mortgage servicing rights note.

RMS was launched in April 2007 with $7 million from JAM Equity Partners LLC. It initially provided private-label sub-servicing technology and reverse consulting services. Later that same year, RMS said it had started servicing reverse mortgages in 29 states and had acquired servicing rights on 2,500 loans.

In September 2007, JAM Equity Partners pumped another $4 million into the company. By April 2008, the servicing portfolio would grow to 4,000 loans, and in today’s announcement, the portfolio was reported at $12 billion — making RMS “the fourth largest reverse mortgage servicer.”

“The acquisition of RMS will position Walter Investment as a full-service leader in the $140.0 billion reverse mortgage servicing sector with significant growth opportunities in each of the RMS businesses, all of which generate strong earnings and cash flow,” the statement said.

RMS rolled out a loan origination system in June 2008. As was the case with the evolution of its servicing technology business, the company made the transition to originator in March of last year. RMS said at the time that it had “moved aggressively into the reverse origination sector” and was closing business through retail and correspondent channels.

In an October 2011 telephone interview, RMS Chief Executive Officer Bob Yeary explained that as few four loans a month per originator could be lucrative for both the company and the originator. Origination fees are 2 percent in addition to “some pretty over-par premiums that the loans are selling for.”

A third-party origination channel for mortgage brokers was announced on Aug. 11, 2011.

Yeary said in the October 2011 interview that the company was issuing around $120 million a month in Ginnie Mae MBS and had issued more securities than any other firm. Today’s announcement indicated that RMS has issued around $1.1 billion in HMBS during the first-half 2012, leaving the company as “the second largest issuer of HMBS in the sector this year.”

Tampa, Fla.-based Walter Investment employs 2,600 people. Through subsidiary Walter Mortgage Co., it serviced $81.8 billion in mortgages as of June 30, according to financial data on file with the Securities and Exchange Commission.

Walter Investment acquired GTCS Holdings LLC, which is also known as Green Tree, in July 2011.

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