Changes in the top leadership ranks come at a challenging time for the company. It recently released its results for the first quarter ended March 31, posting a net loss of $64 million. Net loss includes negative changes in fair value of $96 million, predominantly due to model assumption updates to account for widening spreads, the company noted. For the first quarter of 2022, the company generated adjusted net income of $37 million, or $0.20 per fully diluted share.
“The first quarter saw interest rates increase at an unprecedented pace, and spreads also increased dramatically,” Cook said during the company’s earnings call. “To account for these changes, we updated the fair value modeling assumptions for the assets and liabilities on our balance sheet. This resulted in $96 million of negative fair value adjustments as we marked our balance sheet to reflect the higher spreads over the lifetime of the balance sheet. This resulted in a GAAP loss, however, on an adjusted basis, our combined Specialty Finance and Services segments were profitable and delivered strong results in a difficult environment for the mortgage market.”
The company’s Specialty Finance & Services segment also faced challenges amid the volatile market: “Within SF&S, our reverse and commercial originations businesses faced pressures in the first quarter as rates and spreads rose at the fastest pace in decades,” Cook said. “However, the pipeline for both reverse and commercial originations continues to be strong. Lender services revenue declined due to the decrease in refinance volume impacting the title and title insurance businesses. This was partially offset by continued expansion in third-party clients and our diversified product set. We recently added a new tax solutions business that assists homeowners with their property tax assessments, and helps our customers lower their property tax bills. Our home improvement business continues to benefit our broader business as we invest in our vision to evolve from a product-centric to a customer-centric company.”
Like many mortgage firms, the company found itself having to pivot to a purchase market after record-setting levels of refinancing cooled as rates climbed, Cook explained. She noted brokers are now refocusing efforts on commercial loans and reverse mortgage products in light of the changed environment.