In its heyday, Financial Freedom wasn’t just a dominant wholesale lender for reverse mortgages – it was the only wholesale lender for reverse mortgages. But this month, its parent announced that the now-sickly lender would swiftly be put out of its misery.
That’s bad news for brokers who still had partnerships with the California-based company, currently a subsidiary of OneWest Bank. OneWest announced March 21 that Financial Freedom would not accept new applications after March 31, and all pending applications had to be funded by May 20. That’s a quick turnaround, especially for a delicate financial process like a reverse mortgage – and it’s left some local brokers scrambling.
“It would have been nice if they’d given us three or four months,” said Chris Grevelis, reverse mortgage officer for East Boston Savings Bank. “Unfortunately, the way they did it, you’ve got a lot of people on the retail side just running around like chickens with their heads cut off.”
Fortunately for East Boston, the bank has another wholesale reverse mortgage relationship with MetLife, and is working to transfer pending Financial Freedom loans over to the other wholesaler, rather than trying to find a new partner or scurrying to get all those Financial Freedom applications in before the deadline. Grevelis said the bank was working to make those transitions happen with no customer disruptions.
No Longer Committed
But not everybody has a back-up wholesaler handy, said John Brodrick, senior vice president of mortgage banking for Boston-based Eastern Bank.
“I’ve heard some stories about lenders who are really scrambling to find new partners,” he told Banker & Tradesman.
Reverse mortgages, if done properly, tend to be a lengthier process than traditional purchase mortgages, he said, and May 20 is a stiff deadline to meet. The pending transactions involve elder planning, and issues concerning trusts and estates – thorny details that could easily prevent consummating many of these deals on time.
But the damage isn’t nearly as bad as it could have been: Many local banks and mortgage companies, including Eastern, had already broken ties with the fading wholesaler in the past year.
But in 2004, a year in which Financial Freedom was, by many accounts, the only wholesaler in reverse mortgages, cutting ties would have been unthinkable for many brokers. Then owned by Lehman Brothers, it was later sold to IndyMac, which famously failed in 2008. An investor group formed OneWest Bank to purchase some of the assets of IndyMac’s failure, and inherited Financial Freedom – a gift local brokers unanimously say OneWest did not want.
“It was clear to me… a couple months [after the purchase] that they weren’t committed to the space on the wholesale side,” said Robert Tranchell, reverse mortgage manager with Weymouth-based Mount Vernon Mortgage Corp. “They did just about everything you could to tick off a client.”
Leaving In Droves
Tranchell should know. He was an account manager for Financial Freedom until about a year ago, and views the company’s demise with a twinge of personal regret. He initially trained in the reverse mortgage business with the company in 2004, when it was the only reverse mortgage wholesaler in the market.
Giants like MetLife, Genworth, Bank of America all came later, following Financial Freedom’s lead. But when the company passed to OneWest, the writing was on the wall.
“My personal production went from $9 million a month to $1 million a month,” Tranchell said. “And it wasn’t anything I was doing.”
The company became unreasonably tight on its underwriting, he said, as if it didn’t want to take any risk whatsoever. They scrutinized so closely it didn’t make sense for brokers to send loans to them. Account executives started leaving in droves, and Tranchell joined them.
Others, such as David Brennan, senior vice president at Cape Cod Five Cent Savings Bank, said customer service took a nose-dive.
Once Financial Freedom emerged from IndyMac and the FDIC, it seemed like it never regained its footing, he said. So, the bank found a new partner.
A call to OneWest Bank’s public relations representative went unreturned, but in a statement the company blamed stiffer regulatory requirements within the reverse mortgage industry and a desire to focus on its “core businesses” as its two reasons for exiting the business.
The National Reverse Mortgage Lenders Association also declined official comment on the company’s exit.
East Boston Savings Bank, which still works with Freedom Financial, may have been caught off guard by the swiftness of the company’s end, but Grevelis said the bank had its doubts about the company’s longevity even last year. Those concerns led to its additional partnership with MetLife.
“We’re fortunate enough that we didn’t leave anyone as an exclusive,” Grevelis said.
