Walter Investment Management to Buy $93B UPB of Servicing Assets

Walter Investment Management Corp.
("Walter Investment" or the "Company") today announced that it has signed a definitive agreement to acquire approximately $93 billion of unpaid principal balance ("UPB") of Fannie Mae backed residential servicing assets, including related advance receivables of approximately $1 billion, from Bank of America. The purchase price for the mortgage servicing rights ("MSRs") of $519 million represents a multiple of approximately 2.05x the 27 basis point base contractual servicing fee of the portfolio. The related advance receivables will be purchased at par. The purchase price will be subject to customary adjustments, including an adjustment to actual UPB as of the January 31, 2013 closing date. The portfolio of assets acquired consists of over 650,000 loans that are projected to be approximately 80% current at transfer. The transaction will have an economic closing as of January 31, and the bulk of the servicing transfers will take place during the first and^second quarters of 2013. The purchase will be funded with 10% paid at signing and with an additional 40% due with the January 31 economic close.  The remainder will be paid on a pro rata basis in conjunction with an agreed-upon transfer schedule. The Company intends to fund the acquisition from cash on hand and through the issuance of private and public debt securities, or through transactions with capital partners. Advance obligations will be met under existing facilities. The Company expects the revenues from these MSRs to drive servicing EBITDA margins within its targeted range of 40% to 45% over the life of the portfolio. However, servicing revenues and margins are expected to be modestly lower than these averages in the first year as a result of the higher initial delinquency rate of the portfolio, the incurrence of certain one-time, up-front transfer costs and the expected ramp in earnings over time that occurs in incentives and performance-based fees. The Company expects a servicing EBITDA contribution of between $55 and $60 million in 2013, and an average servicing EBITDA contribution of between $70 and $80 million per year for the following two years. In addition to the servicing revenues associated with these MSRs, the pool of assets being acquired also includes a significant number of customers that are eligible for the HARP 2.0 refinancing program. The Company expects to utilize the ResCap originations platform to target the estimated 290,000 accounts in the portfolio that are potentially eligible for HARP refinancing. Based on the expected levels of eligibility, pull through rates, and net originations margins, the Company expects to realize significant additional EBITDA associated with HARP refinancings in 2013, estimated to be in the range of $110 to $135 million. The contribution from originations is expected to return to more normalized levels in subsequent years, following the expiration of the HARP program.

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