OneWest Exits Reverse Mortgage Business, Shuts Down Financial Freedom (update)

Financial Freedom is shutting down all reverse mortgage channels according to an official letter addressed to business partners from CEO Michelle Minier, sent today.

“After careful consideration, we have decided to exit the wholesale reverse mortgage origination business based on the regulatory environment and the desire to focus on the bank’s core businesses,” she said.  “The wholesale reverse mortgage origination channel represents the majority of Financial Freedom’s origination business and is the only wholesale origination channel within OneWest.”

As a result of exiting wholesale, the company said it’s also closing its retail origination channel due to the limited presence and scale.

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“While we are exiting these origination channels, we remain committed to servicing our significant reverse mortgage loan portfolio.  We will continue to place a strong emphasis on providing professional, quality service to our customers.”

All completed loan applications must be received no later than March 31, 2011 and all pipeline loans must be funded no later than May 20, according to the letter. For current Financial Freedom customers, loans will continue to be be serviced, so there will be no impact on borrowers.

The shutdown has been rumored for several weeks, but the official announcement came today.

Financial Freedom’s volume and influence in the industry has fallen drastically the last few years, especially since OneWest Bank acquired the company as part of the IndyMac acquisition in 2009. While One West expressed an interest in reverse mortgages, it never really backed up its claims by letting volume continue to fall after the acquisition.

By the end of 2010, wholesale volume fell 78.5% from the prior year and retail was down 71.4% according to data from Reverse Market Insight.  The company endorsed 3,314 reverse mortgages in 2010 and was the 7th largest lender.

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  • It seems it was not that long ago we were all wishing the California staff of FF the best in finding new jobs as operating headquarters moved from Southern California to the East Coast. It seems those who were pointing to the quick demise of FF were correct. We wish the current staff at FF the very best and hope they quickly find new positions.

    When I came into the industry, my broker was with FF and then eventually signed with Seattle Mortgage. We looked up to the staff in both companies for advice, support, service, and up-to-date information. Now not only are these two out of the industry but so is a goliath in our industry, Bank of America, whose exit was with the same thump its entrance had been when purchasing the greatest part of the reverse mortgage operations of Seattle Mortgage almost five years ago. With two of the top seven gone, will more large entities follow?

    While both the Seattle Mortgage and Bank of America moves are quite understandable, this move is less so. In prior comments several said that those selected to management positions would shortly result in the demise of FF.

    Could the Bart Johnson move be better timed? While stability may not be the rule of the day, opportunity just might be. One thing that is true about our industry is that it has gone from dull, predictable, and staid to very turbulent and interesting. It started about the time of the introduction of the first major competition to the FF Cash Account in 2006 and has hardly slowed since.

    The future is bright but like daylight during winter in northern Alaska, it sure seems dark for a long time before we see much daylight.

  • I worked with FF when it was owned by Lehman and it was a great company to work for then Indy Mac bought them. The Wharton School will do a case study on what happened here – how a company can go from almost monopolizing the RM business to gone in less then 5 years. Many of my friends and collegues in the RM business learned the business at FF. It is a sad day for the industry as we have lost a company whose founders embraced the concept that the senior comes first. I am wearing my FF shirt from the Florida FF conference today as a memory of a better time for FF.

  • I worked with FF when it was owned by Lehman and it was a great company to work for then Indy Mac bought them. The Wharton School will do a case study on what happened here – how a company can go from almost monopolizing the RM business to gone in less then 5 years. Many of my friends and collegues in the RM business learned the business at FF. It is a sad day for the industry as we have lost a company whose founders embraced the concept that the senior comes first. I am wearing my FF shirt from the Florida FF conference today as a memory of a better time for FF.

    • Scollins,

      With companies like Countrywide and First Charter, why would any business school waste their students’ time with a case study on such an insignificant operation as Financial Freedom? While it might have been gigantic in a thimble that thimble is somewhere at the bottom of an ocean commonly called the mortgage industry.

    • Scollins,

      With companies like Countrywide and First Charter, why would any business school waste their students’ time with a case study on such an insignificant operation as Financial Freedom? While it might have been gigantic in a thimble that thimble is somewhere at the bottom of an ocean commonly called the mortgage industry.

    • Scollins,

      With companies like Countrywide and First Charter, why would any business school waste their students’ time with a case study on such an insignificant operation as Financial Freedom? While it might have been gigantic in a thimble that thimble is somewhere at the bottom of an ocean commonly called the mortgage industry.

    • Scollins07,

      With companies like Countrywide and First Charter, why would any business school waste their students’ time with a case study on such an insignificant operation as Financial Freedom? While it might have been gigantic in a coffee mug that mug is somewhere at the bottom of Lake Tahoe (commonly called the mortgage industry).

      It is not that I do not respect the FF history or do not perceive its significance within our industry BUT it is not much of a tale in the midst of the stories that surround it. The collapse of a company (First Charter) which did over $40 billion in loans in just one year is of far greater interest to Wharton students than an entire industry which has yet to exceed over $31 billion in just MCA in any one fiscal year; total principal limits in any one fiscal year are lower yet. Dollars borrowed at funding are much lower still.

      We have a tendency to put far too much importance on this industry and what we do. Yes, it is very important to the seniors we serve but the withdrawal of B of A from our industry speaks far more than my mere words could ever say.

      Our need today is perceptive not nostalgia.

    • Scollins07,

      With companies like Countrywide and First Charter, why would any business school waste their students’ time with a case study on such an insignificant operation as Financial Freedom? While it might have been gigantic in a coffee mug that mug is somewhere at the bottom of Lake Tahoe (commonly called the mortgage industry).

      It is not that I do not respect the FF history or do not perceive its significance within our industry BUT it is not much of a tale in the midst of the stories that surround it. The collapse of a company (First Charter) which did over $40 billion in loans in just one year is of far greater interest to Wharton students than an entire industry which has yet to exceed over $31 billion in just MCA in any one fiscal year; total principal limits in any one fiscal year are lower yet. Dollars borrowed at funding are much lower still.

      We have a tendency to put far too much importance on this industry and what we do. Yes, it is very important to the seniors we serve but the withdrawal of B of A from our industry speaks far more than my mere words could ever say.

      Our need today is perceptive not nostalgia.

  • This is like a loved one with terminal cancer. You know the time is near but when it strikes, you never are really prepared for it. I sold most of my product to Financial Freedom when Leman Brothers was in the picture and when Craig Corn was waving the banner. I miss those days, we did a lot of good for our seniors! It is sad to see what is happening all around us today. It would be good if the small players in the industry could come back, just like it would be great to see the community bank sector thrive and grow. However, I don’t think we will see that happening, especially in the environment we live in today

    Biggest does not mean being the best. We need the good old players back, we need the passion and service come back to our industry. We are experts at destroying what used to work so well and what helped our seniors survive the rough times in their lives. Will we ever see the forest through the trees, will we ever realize what we have done to our society and man?

    Good by Financial Freedom.

    John A. Smaldone

  • Yes, it is sad to see a company that helped ME get my business going to suddenly be gone, but I also miss The Monkees and ER. Life will go on and change, we still have many great companies who will take their place and support us now. I hope those who made the RM industry the standout industry it continues to be will remain in prominent positions. Take Care and RIP.

  • Yes, it is sad to see a company that helped ME get my business going to suddenly be gone, but I also miss The Monkees and ER. Life will go on and change, we still have many great companies who will take their place and support us now. I hope those who made the RM industry the standout industry it continues to be will remain in prominent positions. Take Care and RIP.

  • Yes, it is sad to see a company that helped ME get my business going to suddenly be gone, but I also miss The Monkees and ER. Life will go on and change, we still have many great companies who will take their place and support us now. I hope those who made the RM industry the standout industry it continues to be will remain in prominent positions. Take Care and RIP.

  • My mother took out a RM with FF several years ago. I wonder if OneWest will honor the contract and continue to make funds available to her or will they just continue to service the mortgage as it stands today with no future withdrawals allowed.

    • ajt3,

      No need to worry about a HECM. If it is a Cash Account, their proprietary product, they will most likely honor that but it is important you contact them ASAP.

    • ajt3,
      Servicing the reverse mortgage includes upholding the terms of the loan which means funds can be drawn, payment plans changed, etc. If the loan is insured by HUD if there are any problems HUD will assist with issues of servicing. A few months after the closing your mother would have received a letter from HUD stating to contact them (HUD) if there were any problems.

      • Thanks for taking the time to answer this. Unfortunately, the jumbo loan is not insured by HUD. FF tried to get my mother to refinance into an insured mortgage but she declined due to the high costs. She recently called FF to get their take on the recent news of their demise and they said not to worry because OneWest would honor the contract. I wonder if that’s just lip service.

    • ajt3,
      Servicing the reverse mortgage includes upholding the terms of the loan which means funds can be drawn, payment plans changed, etc. If the loan is insured by HUD if there are any problems HUD will assist with issues of servicing. A few months after the closing your mother would have received a letter from HUD stating to contact them (HUD) if there were any problems.

  • My mother took out a RM with FF several years ago. I wonder if OneWest will honor the contract and continue to make funds available to her or will they just continue to service the mortgage as it stands today with no future withdrawals allowed.

  • It is creative destruction;it is free enterprise. FF was a pacesetter led by a great team for many years until the great reckoning in 2008. Out of the ashes of FF, others will rise and thrive. The industry’s best days are yet to come.

  • FF was slow and always behind in the times. The jumbo program was their only product that was worth sending something their way. I dont see any big loss here. More will follow FF, BOA, Wells Fargo in 2011. But the good news is April 1st is almost here.

  • There were two things about Financial Freedom. The first is that every retail rep had the best interest of the senior first.

    Secondly, I can tell you from personal experience that employees not only cared about seniors but they cared about fellow employees. When my daughter had surgery 1500 miles from home, our hotel bill of six weeks was paid for by a FF executive, no questions asked. Many sent help in any way they could. Three years later there are still former FF people who still ask how my daughter is doing.

    Sure, businesses come and go, life goes on, but if any other reverse company had the same culture FF had today they would not have to recruit reps.

    Peter Klamkin

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