Bright Prospects for Reverse Mortgages Keeps Indymac In
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[tag]Indymac Bank[/tag], which in May had announced plans for the [tag]Initial Public Offering[/tag] (IPO) of [tag]reverse mortgage[/tag] provider [tag]Financial Freedom[/tag] instead has switched gears and today announced that it will increase its ownership stake from 93.75% to 100 percent in Financial Freedom. The Company has concluded that the benefits of keeping Financial Freedom as a wholly owned subsidiary outweigh those associated with an IPO.
It’s clear that Indymac likes the prospects for the [tag]reverse mortgage market growth[/tag] and wants to be totally prepared for the expected entry of other major players into the market:
“Financial Freedom’s management team, led by CEO Jim Mahoney, has done a phenomenal job in building strong brand identification among seniors and becoming the dominant player in reverse mortgages, with an estimated 56 percent market share as of Q1-06,” continued Perry. “However, other major mortgage players are likely to soon enter the market, and competition will intensify. Just as we have successfully competed as competition intensified in the Alt-A market, I am confident we will do so in reverse mortgages.”
James Mahoney, Financial Freedom’s CEO, added, “A positive to having other mortgage players enter the market is that their presence will serve to increase the awareness of the benefits of reverse mortgages among seniors. This will result in the whole market expanding more rapidly and benefit all players, including Financial Freedom.”
Financial Freedom will continue to focus on what it does best — marketing, sales, operations, and servicing — as it seeks to execute efficiently while growing rapidly. Indymac can provide Financial Freedom the financial muscle and expertise it needs in several other areas to rapidly scale its business.
Indymac’s 2005 Annual Report notes that the Financial Freedom acquisiton clearly has been a good move for the company:
Finally, I reported last year that we had acquired Financial Freedom, the largest reverse mortgage lender in the country. We invested $85 million in the acquisition, or 7 percent of our capital at that time, and I am pleased to report that in 2005 Financial Freedom increased its volume by 64 percent and its net income by 91 percent to $25 million, 8.3 percent of Indymac’s total net income. We believe that the market value of Financial Freedom today is several times what we paid for it in 2004, demonstrating that well-planned and well-executed acquisitions can greatly enhance our financial performance and that specialty products are of great importance to our overall strategy.
(From Indymac’s 1st Quarter 2006 Report)
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