Large Reverse Mortgage Lender Securitizes HECM Draws

Mortgage & Real Estate

Walter Investment Management has spotted a nice way to increase returns on its reverse mortgage business.

The Tampa, Fla.-based lender and servicer has acquired two reverse mortgage companies over the past year and built a huge reverse mortgage servicing portfolio.

As Federal Housing Administration reverse mortgage borrowers tap their lines of credit, Walter advances the funds and securitizes the draws via Ginnie Mae.

We are advancing the principal at par and putting it in a Ginnie Mae tail MBS and earning a retail premium rate of return, according to executive vice president Denmar Dixon. He spoke at a FBR Capital Markets investor conference Tuesday.

Walter is securitizing these FHA Home Equity Conversion Mortgage draws a couple of times a month.

It has a long duration, says Dixon, because it takes a lot of small loans to make up a $1 million to $5 million MBS. But investors will pay a premium for that duration, he added.

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