Fitch Affirms Walter Mortgage’s Subprime Servicer Rating

Posted by Orb Staff on July 02, 2009 No Comments
Categories : Mortgage Servicing

Ratings has affirmed Walter Mortgage Co.'s (WMCo) U.S. residential primary servicer rating for subprime product at RPS3-. The rating action reflects WMCo's seasoned management team, adequate loan administration procedures and competent default management practices, the agency says. Since Fitch's prior review, WMCo has undergone significant changes regarding ownership structure and sourcing of loans. In September 2008, Walter Industries Inc. announced a strategic decision to spin off its financing business, including the mortgage servicing operations of WMCo. In April 2009, the spin-off was completed, and the former financing business was merged with Hanover Capital Mortgage Holdings Inc. to form Walter Investment Management Corp. (WIMC). WMCo is now a subsidiary of WIMC. In December 2008, Walter Industries Inc. announced the closure of its Jim Walter Homes (JWH) subsidiary. Approximately 90% of the accounts in WMCo's servicing portfolio had been sourced through JWH, which provided financing on the majority of houses it constructed. The balance of WMCo's servicing portfolio was purchased from third parties, including other home builders, mortgage companies, and banks, under a program that the company terminated in August 2007 in light of volatile market conditions. WMCo's servicing operation is headquartered in Tampa, Fla., with an additional servicing site in Fort Worth, Texas, and divisional field offices in Atlanta, Ga., Birmingham, Ala., Charlotte, N.C., and Houston, Texas. The company's business model for servicing focuses on a niche market that includes accounts originated by JWH that often involve first-time home buyers, and are generally subprime fixed-rate mortgage loans with rural collateral. WMCo's strategy of high-touch, direct-contact servicing, employing field representatives who are involved in all stages of collections and default management through disposition of real estate owned properties, allows the company to pursue loss mitigation resolutions during the collections process on a face-to-face basis,but results in a significantly higher cost of servicing than most subprime servicers, Fitch says. However, WMCo's portfolio performance is also stronger as a result, with overall delinquencies of 11.6% as of March 31. WMCo's servicing portfolio consisted of over 36,900 accounts totaling $1.9 billion as of March 31, with approximately 87% of the accounts included in residential mortgage-backed securities and the balance owned by the company. SOURCE: Fitch

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