Fitch Affirms Financial Freedom's U.S. RMBS Servicer Rating; Maintains Negative Outlook

NEW YORK--()--The Fitch Rating press release originally released on September 5 is being revised to include the language in the paragraph indicated by 'update' below. There are no other changes.

Fitch Ratings has affirmed the following rating on the U.S. residential primary servicer rating for Financial Freedom, a division of OneWest Bank, N.A. (Financial Freedom):

--U.S. Residential primary specialty - reverse mortgage servicer rating at 'RPS3', Outlook Negative.

The rating affirmation reflects Financial Freedom's experience and performance in managing the reverse mortgage product. The company's senior management has over 29 years of reverse mortgage servicing experience. The rating action also considers that information related to the financial condition of Financial Freedom, a division of OneWest Bank N.A., is limited. The Negative Outlook predominantly reflects uncertainties relating to the pending sale of the servicing platform and Fitch's concerns that the servicing operation could deteriorate while the pending sale remains unresolved.

The rating review assessed performance metrics from April 2013 to March 2014. During the time period reviewed, call metrics such as average speed to answer and average abandonment rates were elevated. However, call metrics have shown positive trends recently and subsequent data provided by Financial Freedom including months outside of the time period reviewed indicate notable improvements.

The rating also considers the financial condition of Financial Freedom as servicer. Financial Freedom is a division of OneWest Bank N.A. and does not report financials independently. OneWest is privately held; the limited amount of financial information available to Fitch negatively impacted the overall assessment of Financial Freedom as a servicer.

On July 22, 2014 CIT Group Inc. and IMB Holdco LLC, the holding company of OneWest Bank N.A., announced that they had entered into an agreement and plan of merger. The merger is subject to necessary regulatory approvals. Separately, the Financial Freedom servicing platform has been for sale for approximately one year. The company's management stated that the effort to sell the servicing platform is ongoing, and is not impacted by the plan of merger.

Finally, the ratings reflect Fitch's overall concerns for the U.S. residential servicing industry which include the ability to maintain high performance standards while addressing the rising cost of servicing and changes to industry practices.

Financial Freedom maintains its operations in Austin, TX and Kalamazoo, MI. As of March 31, 2014 Financial Freedom's servicing portfolio consisted of 117,831 loans with an unpaid principal balance of approximately $22.4 billion. The reverse portfolio is composed of 68.5% GSE loans (based on UPB), 16% non-agency RMBS, 9.7% third-party servicing, and 5.8% owned loans.

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. For more information on Fitch's residential servicer rating program, please see Fitch's report 'Rating U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria', dated Jan. 31, 2014 which is available on the Fitch Ratings web site at 'www.fitchratings.com'.

--Update

In accordance with Fitch's policies the issuer appealed and provided additional information to Fitch that resulted in a rating action that is different than the original rating committee outcome.

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research:

--' Rating Criteria for Structured Finance Servicers' (Jan. 31, 2014);

--'U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria' (Jan. 31, 2014).

Applicable Criteria and Related Research:

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=751136

U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria -- Effective January 31, 2011 to January 30, 2014

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=600065

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=870516

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Contacts

Fitch Ratings
Primary Analyst
Natasha Aikins
Director
+1 212-908-0272
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Roelof Slump
Managing Director
+1 212-908-0705
or
Committee Chairperson
Grant Bailey
Managing Director
+1 212-908-0705
or
Media Relations, New York
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Natasha Aikins
Director
+1 212-908-0272
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Roelof Slump
Managing Director
+1 212-908-0705
or
Committee Chairperson
Grant Bailey
Managing Director
+1 212-908-0705
or
Media Relations, New York
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com