Walter Investment Drops as Feds Clamp Down

Jacob Harper |

On Feb 27 the Federal Trade Commission revealed they are investigating mortgage servicer Walter Investment (WAC) , alleging that the company violated “various consumer finance laws.” The focus on Walter comes mere two months after competitor Ocwen (OCN) was fined $2.1 billion for many of the same improprieties.

As the fallout from the 2008 global financial meltdown continues to rectify, the mortgage servicers in charge of collecting delinquent payments have come under fire for failing to work in good faith. The bad news of the day coincided with the release of the company’s fourth quarter and 2013 fiscal year earnings report, which was disappointing as well.

For their fourth quarter 2013 earnings report, Walter reported a net gain of $40.6 million or $1.07 per share, versus the net profit of $25 million, or $0.60 per share, from the same period a year ago. Revenue for the quarter was $402.8 million, as compared to $171 million from the same quarter the previous year. Analysts were expecting a profit of $1.21 per share on revenues of $400.3 million.

The earnings miss can be partly attributed to a sizable uptick in expenses. Additional operating costs, increased salaries and benefits, and administrative expenses drove fourth quarter expenses from $171 million in 2012 to $382.6 million in 2013.

The “nonbank mortgage service” industry, comprised of companies that buy mortgages from banks, has suffered greatly in the beginning of the year. While the companies grew quickly as banks unloaded delinquent mortgages to focus on traditional banking practices, companies like Ocwen and Walter initially prospered. However, as regulators clamp down and earnings come up short, the future for the industry is looking less far rosy.  

Walter shed 8.43 percent to hit $25.90 a share. The company’s shares are down 19.48 percent on the year, and 39.12 percent from its price a year ago.

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Companies

Symbol Name Price Change % Volume
OCN Ocwen Financial Corporation NEW 5.05 0.02 0.40 2,033,603
WAC Walter Investment Management Corp. 6.20 0.40 6.90 219,240
LIHC Liberty Intl Hldg Corp 0.03 0.00 0.00 0

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