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Walter Delves Deeper Into Reverse Mortgages

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On the heels of a reverse mortgage acquisition, Walter Investment Management Corp. is doubling down on the sector with a second acquisition.

Late last year, the Tampa, Fla.-based company acquired Reverse Mortgage Solutions — a servicer and technology provider in the reverse mortgage business — for $120 million.

At the time, Walter said that the RMS servicing portfolio stood at $12 billion — making RMS “the fourth largest reverse mortgage servicer.”

Walter said Wednesday that an agreement was signed to acquire 100 percent of the stock of Security One Lending.

The deal is valued at $31 million, including $20 million in cash paid at signing and $11 million in performance incentives for activity over the next 12 months. It is expected to compliment the RMS acquisition.

“RMS has a long-standing relationship with Security One Lending, as Security One Lending has been delivering loans using RMS’ technology and RMS has acquired more than 60 percent of Security One Lending’s reverse origination production during 2012,” the statement said. “The strategic acquisition of Security One Lending will enhance RMS’ position as the leading issuer of reverse mortgage product in the sector, while also significantly increasing RMS’ retail origination presence.”

Security One ranked as the second-biggest originator of home-equity conversion mortgages during November with 477 HECMs closed. HECM originations during the 12 months ended Nov. 30 totaled 3,593 — making it the fourth-biggest HECM lender during the period.

Today’s announcement indicated that nearly 5,000 reverse mortgages were originated by Security One for more than $700 million during 2012.

Security One opened for business in November 2006 and originates through retail and wholesale production channels. Nearly 400 loan officers were originating from 20 branch offices — bringing annual production to 12.5 loans per originator.

The San Diego-based company is currently owned by management, independent investors and funds managed by Jacobs Asset Management LLC.

Walter is putting up $540 million of a $3 billion joint bid with Ocwen Loan Servicing LLC to acquire rights on mortgage servicing that will increase Walter’s $82 billion servicing portfolio as of June 30, 2012, by another $50 billion and place it within striking range of a top-10 servicer slot.

In July 2011, Walter Investment acquired GTCS Holdings LLC, also known as Green Tree, for $1.1 billion. It purchased Marix Servicing LLC in November 2010.

Walter appears to be positioning itself similarly to Ocwen — which is beefing up its mortgage servicing portfolio with its recent acquisition of Homeward Residential and the accompanying $77 billion in servicing as well as its upcoming ResCap acquisition and the accompanying $127 servicing portfolio; inherited an origination channel with the Homeward deal; and is entering the reverse mortgage business with its planned first-quarter acquisition of Genworth Financial Home Equity Access Inc.

Walter Investment’s acquisition of Security One, which is contingent on the receipt or waiver of required regulatory approvals and other consents, is expected generate a two-times multiple of 2012 EBITDA and be immediately accretive.

Walter Investment says it employs more than 2,900 people.

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