Fitch Affirms Negative Reverse Mortgage Servicer Rating for Financial Freedom

Fitch Ratings this week affirmed its negative outlook reverse mortgage servicer rating for Financial Freedom, a division of CIT Bank, N.A.

The reverse mortgage servicing rating of “RPS3” Outlook Negative is based on the pending sale of Financial Freedom’s servicing platform and the unclear future of the platform post-sale amidst an environment of continued regulatory scrutiny, according to a Fitch Ratings report published Tuesday.

“Fitch believes that Financial Freedom has adequate technology for its servicing platform and an established risk management framework,” Fitch Ratings states in the report. “Additionally, Financial Freedom has realigned its senior management.”

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The rating also takes into consideration the financial support of Financial Freedom’s parent company, CIT Bank, N.A., the commercial bank subsidiary of CIT Group Inc. (NYSE: CIT).

In August 2015, CIT Group completed its $3.4 billion purchase of OneWest Bank, N.A.’s parent company, IMB Holdco LLC. The purchase included OneWest Bank, N.A., which services forward mortgages under the name OneWest Bank Mortgage Servicing and reverse mortgages under the name Financial Freedom. Since the acquisition, the name OneWest Bank, N.A. has changed to CIT Bank, N.A.

While OneWest has not originated any new reverse mortgage loans since 2011, Financial Freedom’s servicing portfolio consisted of 91,000 loans with an unpaid principal balance of approximately $18.7 billion as of March 31, 2016, according to Fitch Ratings.

The reverse mortgage portfolio is composed of 68% GSE loans, 18% non-agency residential-backed mortgage securities, 8% third-party servicing and 6% owned loans.

OneWest Bank acquired Financial Freedom in a 2009 purchase from The Federal Deposit Insurance Corporation.

In March 2011, OneWest announced the company was exiting the reverse mortgage business and shutting down Financial Freedom.

At the time of shutdown, Financial Freedom leadership indicated that although it was shuttering its wholesale and retail reverse mortgage origination channels, the company remained committed to servicing its reverse loan portfolio.

This week’s rating echoes a previous rating from Fitch issued in 2013, which affirmed Financial Freedom’s primary servicer rating for the company’s reverse mortgage portfolio, but revised its outlook from Positive to Negative.

Written by Jason Oliva

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