Walter Investment Management Corp. posted a $61.7 million loss in the third quarter, citing higher operating and debt costs tied to its purchase of specialty servicer Green Tree Servicing, St. Paul, Minn.
In the year ago period it earned $9.6 million.
Still, the Tampa-based Walter, until recently a REIT, took in $151 million of revenue in 3Q11, more than triple what it did a year ago.
In its earnings statement the firm highlighted the addition of 97,000 servicing accounts tied to $19 billion of home mortgages during the quarter, noting that more contracts – to the tune of $28 billion – are incoming.
It did not cite the source of those servicing contracts, but industry officials said they likely are coming from Fannie Mae, which two months ago bought $70 billion of MSRs from Bank of America.
Some of those GSE contracts have been outsourced to Green Tree, officials said. B of A and Fannie have yet to confirm that such a transaction took place. At press time a Walter spokeswoman had not returned a telephone call about the matter.
"The significant growth this quarter in our serviced accounts and solid earnings results are further confirmation of our belief that there is a continuing strong secular movement toward special servicers and a solid validation of the strategic reasoning behind our acquisition of Green Tree," said company CEO Mark J. O'Brien.
“We continue to see significant movement of higher-risk assets to special servicers across the industry and anticipate there will be continued high levels of servicing transfers for the next several years,” he said.
Although the purchase of Green Tree is helping the firm bring in more revenue, its costs are higher too. Total expense increased to $153 million from $35 million in 3Q10.
Its biggest hit came in the form of an income tax expense charge of $59.8 million related to the company no longer qualifying as a REIT (for tax purposes), requiring the recognition of all deferred tax items under GAAP accounting.
“The increase in total expense includes operating and overhead costs, including salaries and benefits and general and administrative expenses at Green Tree,” the firm said.
It also booked higher expenses from increased depreciation and amortization costs, “$21.5 million of higher interest expense on corporate debt and $3.6 million of transaction and integration-related costs associated with the Green Tree acquisition,” it said.
In trading Tuesday, its share price tumbled 10% to $23.
