FBR Capital Markets has initiated coverage of Walter Investment Management Corp., which is in the special servicing business, giving the company an "outperform" rating after it closed on its acquisition of Green Tree Credit Solutions.

With the completion of this transaction, FBR analyst Paul Miller said, "The company is well positioned to take advantage of the housing crisis and should see material growth over the next several quarters in a sector of the economy that is shrinking."

FBR believes that Walter is in a business that is expected to be robust going forward given the amount of unresolved delinquencies, unsettled foreclosures, and outlook for the origination of high-risk, high loan-to-value ratio mortgages over the next two years.

"Out of the $1 trillion to $1.1 trillion in mortgages expected to be originated annually over the next two years, approximately $300 billion of those mortgages are the type of loans Walter would target for servicing. In other words, the high-risk loan origination market has not disappeared with the subprime bubble; rather, it is being filled with FHA-backed lending," Miller said.

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