CIT Bank on Friday announced a deal to sell Financial Freedom, its reverse mortgage servicing arm, along with its Home Equity Conversion Mortgage portfolio to an undisclosed buyer.
The transaction will include $900 million in reverse mortgage whole loans, as well as servicing rights and other real estate assets, according to CIT.
“This transaction marks another step in our plan to simplify CIT,” company chairwoman and CEO Ellen R. Alemany said in a statement. “Throughout this year we have made continued progress in transforming the company and applying our focus toward maximizing the potential of our commercial banking and deposit franchises, which are the core of our go-forward strategy. We are pleased to have reached this agreement, which will enable CIT to exit the reverse mortgage business.”
Financial Freedom became part of CIT in 2015, when parent company CIT Group, Inc. (NYSE: CIT) acquired OneWest Bank for $3.4 billion in cash and stock. Financial Freedom had been listed as a discontinued operation for CIT since the acquisition, the company said, though the servicing portfolio remained an ongoing part of its business; once the seventh-largest lender in the industry, Financial Freedom shuttered both its wholesale and retail reverse mortgage in 2011, with OneWest citing the overall regulatory landscape and a desire to focus on its core banking business.
OneWest and Financial Freedom have been intertwined since 2009, when the Federal Deposit Insurance Corporation (FDIC) sold IndyMac to the newly-formed OneWest.
Financial Freedom and OneWest brought negative headlines for CIT when President Trump nominated Steven Mnuchin, formerly OneWest’s chairman, to the position of treasury secretary last year. Multiple media outlets reported on OneWest’s history with reverse mortgage foreclosures, prior to CIT’s acquisition, though HECM industry leaders pointed out that the foreclosures also included title transfers following the death of homeowners.
The reverse mortgage business also cost CIT more than $89 million earlier this year, with Financial Freedom shelling out the cash to settle a Department of Housing and Urban Development investigation into its servicing practices.
Sidley Austin LLP represented CIT Group Inc. on the deal.
Written by Alex Spanko