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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.

“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.