|The servicing operation at Financial Freedom Senior Funding Corp. has yet to establish its performance capabilities, prompting one ratings agency to downgrade its servicer rating.
The company's servicer quality rating for reverse mortgages was lowered to SQ3+ by Moody's Investors Service, a statement today said. The rating previously stood at SQ2- and could be downgraded again.
Servicers are rated based on a scale of one to five, with an SQ1+ rating being the strongest and an SQ5- rating being the poorest.
"The rating action was prompted by deterioration in certain performance metrics described below as well as greater competition and slowing industry lending amidst a troubled economy," Moody's explained.
Moody's said it would view improvements made to call center performance more favorably if a track record of consistent results were developed. Focus should be shifted from operational milestones to tighter management controls over an aging portfolio.
The ratings agency warned that reverse mortgage business is slowing, while new smaller players are eating into Financial Freedom's market share. An October 2008 report from Reverse Market Insight Inc. indicated that the Orem, Utah-based firm's growth rate had turned negative -- leaving it vulnerable to losing its No. 1 ranking.
Financial Freedom became a subsidiary of OneWest Bank FSB on March 19 when parent IndyMac Federal Bank FSB was acquired from the Federal Deposit Insurance Corporation.
At the time of the acquisition, Financial Freedom's reverse mortgage servicing portfolio stood at $21.3 billion.
In a separate action today, Moody's affirmed IndyMac's primary servicer rating for prime and subprime residential mortgages. In addition to the company's positive performance metrics, the FDIC's continued investment in the servicing platform as well post-sale FDIC support and loss-sharing were highlighted.