Walter Investment Management Corp., a Tampa, Florida based services business that offers solutions to owners of subprime and other asset-light mortgage platforms, announced in its quarterly financial report released today that the company experienced a GAAP net loss of $12.9 million for Q2 2014.
"Walter Investment delivered strong operating results for the quarter as we focused on executing against our strategic plan" said Mark J. O'Brien, Walter Investment's Chairman and CEO. "Our Servicing segment boarded 289,000 accounts while continuing to enhance the performance of our existing portfolios, lowering delinquencies on our first-lien mortgage portfolios by 28% as compared to the prior year quarter. Additionally we provided more than 14,000 modifications to consumers driving positive outcomes for both consumers and investors."
The company's net income was $45.0 million after adjustments made for goodwill impairment charges in the reverse mortgage segment and reductions in the company's servicing rights' fair value, regarding chances in valuation inputs. The net income of $45.0 million is down from the $88.6 million reported for Q2 2013. Walter Investment reported an adjusted pre-tax earnings rate (previously known as core earnings) from Q2 2014 of $70.1 million after taxes, which was a 43 percent decrease from Q2 2013.
Those were not the only areas where Walter Investment experienced a loss, however. The company's total revenue for Q2 2014 was $413.7 million, down 31 percent from Q2 2013. That figure includes a decrease of $116.3 million in servicing revenue and fees, fueled by a decrease of $136.7 million from variation inputs changes – offset by $31.3 million in increased servicing revenue and fees and a decrease of $91.3 million in net gains on sales of loans in originations.
All the company's other revenues experienced a $25.4 million increase impacted by a performance fee of $34.2 million the Investment Management business earned.
The 2014 Q2 report states that the near-term profitability of Walter Investment and the reverse mortgage sector as a whole were greatly affected by new regulations implemented in the last 12 months, but the company believes the changes will benefit the business in the long term.
"We believe the combination of strong execution against our strategic plan coupled with ensuring each of our businesses embraces and drives a culture of compliance and positive consumer experience will provide benefits to each of our core constituencies: consumers; clients; our stakeholders; and regulators," continued O'Brien.