June2016 - Chase[ing] the Dream

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48 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T SERVICING THE LATEST SERVICING THE LATEST for responding to borrowers about missing or incomplete information. • Metric 23 tests the servicer's compliance with the require- ment to notify borrowers of any missing documents within 30 days of a borrower's request for a short sale. The NMS was originally final - ized in April 2012 among 49 states and the District of Columbia, the federal government, and five banks and/or mortgage servicers (Bank of America, Citi, JPMorgan Chase, ResCap Parties, and Wells Fargo—ResCap's assets were acquired by Ocwen after the settlement), creating new servicing standards and providing relief to distressed homeowners as well as funding for state and federal governments. As part of the agreement, the five servicers were required to pro - vide $20 billion in consumer relief and $5 billion in other payments. The settlement is considered landmark because it established the first-ever nationwide reforms to mortgage servicing that include better communication between servicers and borrowers as well as a single point of contact and appropriate standards for servicers for executing documents in fore - closure cases. Bad News for Walter Investment's Origination, Servicing Segments WALTER INVESTMENT CEO ATTRIBUTES THE DIFFICULT FIRST QUARTER TO A "CHALLENGING RATE ENVIRONMENT." FLORIDA // Walter Investment Management Corp., in May con- tinued a trend observed among many non-bank servicers in the last year and the start of this year with a major loss to its first-quar - ter earnings, particularly in its mortgage servicing and origina- tion segments. Walter Investment reported in its first-quarter 2016 earn- ings statement that the servicing segment of the company added approximately $17.5 billion of UPB to the serviced book of business, bringing the quarterly total to approximately 2.2 million total accounts serviced with a UPB of approximately $255.3 billion. The company experienced a net disappearance rate of 13.0 per - cent as compared to 13.8 percent in the prior year quarter, which was "aided by the retention performance of the originations segment," Walter Investment said in the report. Servicing also endured negative revenue of -$63.3 million, down $207.0 million from the first quar - ter of 2015. The company said that this reflects "the impact of fair value charges to our mortgage servicing rights." According to the earnings state - ment, total pull-through adjusted locked volume for the first quarter of $4.6 billion declined as com- pared to $6.9 billion in the first quarter of 2015, "primarily due to volume decreases in the corre- spondent lending channel resulting from an increase to return hurdles for acquired MSR and increased market competition," Walter Investment reported. Funded loans in the current quarter totaled $5.0 billion, down 9.1 percent from the prior year quarter. Approximately 36 percent of that volume is in the consumer lending channel and approximate - ly 64 percent is generated by the correspondent lending channel. The originations segment gen- erated revenue of $100.3 million in the first quarter of 2016, a 23 per- cent decline as compared to the prior year quarter. This occurred mostly because of a $37.4 million decrease in net gains on sales of loans driven by a lower volume of locked loans during the cur - rent quarter as compared to the prior year quarter resulting from an increase in market competition within the correspondent lending channel and lower retention vol - umes as there was a slight market shift toward increased volumes of purchase money originations and away from refinancing volumes, the company said. A significant rate decline in the first quarter negatively impacted earnings for Walter Investment Management Corp., and as a result, the company took a net loss of $172.7 million during the three-month period, according to the company's Q1 2016 financial results. The net loss represented a year-over-year decline of about $142 million in net income; in Q1 2015, Walter suffered a net loss of $31 million. Walter's total serviced portfolio had $275.7 billion in unpaid principal balance (UPB) at the end of Q1 2016, an increase of 3 percent from the previous quar - ter, and the company was ranked nationally as a top 10 servicer, according to the announcement from Walter. The company's total revenue in the first quarter declined by $244.1 million year-over-year down to $66.8 million, largely due to a $196.6 million decline in net servicing rev - enue and fees reflecting a $197.3 mil- lion change in fair value changes to mortgage servicing rights, according to Walter. "First quarter performance was significantly impacted by the chal - lenging rate environment. The de- cline in rates drove a volatile MSR market and negatively impacted results through the revaluation of mortgage servicing rights and accelerated prepayments," said - Dixon continued, "We are mov- ing with a sense of urgency to improve upon both the customer experience and our operating performance, and we are in the early stages of a transformation of the company. We are working to significantly lower our cost structure while redesigning our processes and driving a culture of excellence at Walter that puts our home-owning customers first." "We are moving with a sense of urgency to improve upon both the customer experience and our operating performance." — Denmar J. Dixon, Vice Chairman of the Board, CEO, and President, Walter Investment Management Corp.

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