Interesting Info About Financial Freedom Reverse Mortgage Operations
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We came across a recent press release that included a few interesting tidbits about the Financial Freedom reverse mortgage operations, the recognized industry leader (at least in terms of loan volume):
As of June 30, 2007, Financial Freedom serviced a portfolio of 131,315 loans with an outstanding principal balance of nearly $16 billion, representing a 41% growth over the prior year. Financial Freedom originates the Home Equity Conversion Mortgage (HECM), the Fannie Mae Home Keeper, as well as its own proprietary Cash Account Advantage products. The company sources 75% of its production through its wholesale, 25% through retail and 5%-10% through its correspondent channels. Financial Freedom expects portfolio volumes to reach 145,000 loans by year-end 2007.
The press release reported on a recent rating affirmation by Fitch of Financial Freedom’s “primary specialty reverse mortgage servicing” operations. These are the operations that perform “backroom” duties like maintaining loan records, processing payments, and collecting on reverse mortgages upon termination.
The Fitch rating isn’t so much for the general publics benefit as it is for buyers of securities made up of individual reverse mortgages packaged together for large investors. These investors want assurance from an independent reviewer like Fitch that the loans they are investing in will be processed, monitored and, ultimately, paid back to them.
Anyway, we thought the information accompanying the rating report was noteworthy. We were also a little surprised the rating wasn’t better - given Financial Freedom’s leadership position in the reverse mortgage industry. According to Fitch’s rating scale, Financial Freedom’s RPS3+ rating is good, but middle of the road:
Fitch rates residential mortgage primary, master, and special servicers on a scale of 1 to 5, with 1 being the highest rating. Within some of these rating levels, Fitch further differentiates ratings by plus (+) and minus (-) as well as the flat rating.
It looks to be a case where sub prime mortgage problems of the parent company (Indy Mac) are negatively impacting the reverse mortgage servicing rating.
Social tagging: Financial Freedom > reverse mortgage information > reverse mortgage servicingThe rating action reflects Financial Freedom’s experienced management team, proficiency in servicing reverse mortgages, and capable loan servicing systems. Financial Freedom is a wholly owned subsidiary of Indymac Bank F.S.B. whose long term debt is rated ‘BBB-’, with a Rating Watch Negative, by Fitch
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November 15th, 2007 at 11:07 am
Just curious why the subprime mortgage problems of IndyMac would influence the Fitch rating for Financial Freedom ? Even though Indy owns them, FF operates separately and I would think they service the loans separately also. Unless they are downgrading FF thinking IndyMac could potentially go out of business - taking down FF as well. Maybe this is what caused the private investors to shy away from buying RM’s from FF resulting in the lower revenue for the third qtr. I also noted the Indy CEO said FF was for sale.
April 9th, 2008 at 6:11 pm
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