A OneWest Bank spokeswoman has confirmed the company is exiting the reverse mortgage origination business it operated through Financial Freedom, once the dominant player in the industry.
A letter purporting to be from Financial Freedom that was posted on MortgageGrapevine.com said the company was shutting its wholesale production channel because of regulatory requirements and the desire to focus on OneWest's core businesses.
As a result of the decision to leave wholesale, it also decided to close its retail production channel due to limited presence and scale, the letter said.
The OneWest move follows the recent announcements by the nation's second largest reverse mortgage lender Bank of America to exit the business completely, and by Wells Fargo to exit the wholesale channel; Wells is the seventh largest wholesaler and top reverse mortgage producer according to Reverse Mortgage Insight.
In July 2004 Lehman Brothers sold Financial Freedom to IndyMac. OneWest came into possession of Financial Freedom in March 2009 after regulators shut IndyMac's banking operations in July 2008.
Those industry sources noted that Financial Freedom had been scaling back its involvement in the business. At one time, it was the dominant player in the business; in 2003, when it was owned by Lehman Brothers, its president bragged that in the first four months of that year, it originated more reverse mortgages than all of its nearest competitors did for 2002.
According to Reverse Mortgage Insight, from February 2010 to January, the company ranked eighth overall, with a 3.7% market share. It was sixth among wholesale producers and nine among retailers.
For February 2010 it did 439 loans; in January it did just 114.
The letter from Financial Freedom says all completed loan applications must be received by March 31 and funded by May 20.
Financial Freedom will remain as a servicer of reverse mortgage loans, the letter said and industry sources confirmed.
