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T-3
WALTER INVESTMENT MANAGEMENT CORP filed this Form T-3 on 11/06/2017
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The Projections assume that the Company qualifies for Section 382(l)(5) of the Tax Code whereby it benefits from preservation of certain deferred tax attributes. Should this not be the case and the Company elects out of or does not maintain the requirements of Section 382(l)(5), it is estimated that over the period of the projections (the period through December 31, 2020) the Company’s cash taxes would be approximately $29 million greater than projected herein.

It is expected that upon emergence the Company will adopt fresh-start accounting. The adoption of fresh-start accounting will result in adjustments to assets and liabilities due to the assignment of reorganization value and the effects of forgiveness or restructuring of debt which will be reflected in the final statement of operations of the predecessor entity. Although the Projections do not reflect such adoption, the projected Stockholders’ Equity of approximately $135 million as shown in the projected Balance Sheet above as of December 31, 2017 is within the range of estimated Total Equity Value ($120 million to $195 million) estimated by the Company’s financial advisor Houlihan Lokey as of the same Assumed Effective Date and more fully described in Section VIII Valuation Analysis below.

 

  2. Income Statement Projection Assumptions

 

  (a) Servicing Segment

The Servicing segment reflects the servicing of GSE and Ginnie Mae (respectively “Core”) and private label (“Legacy”) residential mortgages. Revenues comprise servicing fees, incentive and ancillary fees and other servicing revenue. The Projections reflect an increasing mix of subservicing both as subserviced portfolios are onboarded and as owned MSR is sold or runs off, consistent with the Debtor’s transition to a capital-light, fee-for-service model.

The servicing operation is projected to benefit from cost improvement initiatives focused on technology investments and simplification, a reduced delinquency population with a resulting lower cost to service and the reduced exposure to amortization of servicing rights and exposure to fair value marks as the MSR asset declines over time.

Challenges to achieving the projected profitability include the ability to grow the subservicing portfolio through originations via the Company’s consumer, correspondent or wholesale channels or onboarded via subservice agreements. On the expense side, the ability to realize improvements in cost to service are dependent upon the ability to implement technology, realize process efficiencies and benefit from a projected decrease in portfolio delinquency. From a liquidity perspective, the projections are dependent depend, among other things on the ability of the Company to forge relationships with additional MSR capital partners.

 

  (b) Originations Segment

The Originations segment reflects the origination of GSE and Ginnie Mae residential mortgages through the direct to consumer channel (both portfolio retention and new acquisition) and the correspondent and warehouse lending channels. Revenues comprise gain on sale revenue, interest and other fee income.

The Projections reflect a transition from principally a refinance-focused strategy to a combination refinance and purchase money strategy. This is intended to be achieved through current and projected investments in the “Ditech” brand and will include consumer marketing, enhanced mobile capabilities, improved closing cycle timelines, improved customer retention, new customer acquisition, and growth in the correspondent and wholesale lending channels. The success of these investments in supporting the projected growth of the originator are critical to achievement of the Projections.

 

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