NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has taken the following actions on the U.S. residential primary servicer ratings for Financial Freedom Acquisition LLC (Financial Freedom):

--U.S. Residential primary servicer rating for reverse product affirmed at 'RPS3'.

The servicer rating actions reflect Financial Freedom's significant management changes; improved real estate owned (REO) reporting and tracking capabilities; uncertain strategic plan; financial support from parent; and below-target customer service metrics. The ratings also 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, which are likely to be mandated by regulators and other parties.

In addition, the ratings were determined in accordance with Fitch's criteria 'U.S. Residential and Small Balance Commercial Mortgage Servicer Rating' and 'Global Rating Criteria for Structured Finance Servicers'.

As of June 30, 2011, Financial Freedom's servicing portfolio consisted of 152,038 loans with an unpaid principal balance (UPB) of approximately $24.9 billion. The reverse portfolio is composed of 69.3% GSE loans (based on UPB), 16.2% non-agency RMBS, 9.2% third-party servicing, and 5.3% owned loans.

Financial Freedom is a wholly owned subsidiary of OneWest Bank Group, LLC (OneWest), which was founded in March 2009 by a consortium of investors including Paulson & Co, J.C. Flowers & Co., and Soros Fund Management. OneWest is also the parent of IndyMac Mortgage Services (IndyMac); however, Financial Freedom operates materially separately from IndyMac and maintains its own operations and systems. Financial Freedom has been servicing reverse mortgage product for 15 years and has operations in Austin, TX, Kalamazoo, MI, and Norcross, GA, which is expected to be closed by year-end 2011.

Fitch believes that Financial Freedom continues to maintain an adequate servicing operation with the staff, procedures, controls, default management processes, and technology to manage its current reverse servicing portfolio. Fitch will continue to monitor Financial Freedom's ability to maintain performance in this high delinquency environment.

In November 2010, Fitch assigned a negative outlook for the entire U.S. Residential Mortgage Servicer ratings sector on increased concerns surrounding alleged procedural defects in the judicial foreclosure process. Responses to Fitch's survey of its rated servicers regarding internal procedures used to verify and execute foreclosure affidavits indicated that all servicers are taking this matter seriously and are continuing to work to resolve any issues uncovered. Fitch may place an individual servicer's ratings on Rating Watch Negative and/or downgrade the ratings if the servicer does not make a diligent and timely review of its processes and take immediate corrective action to remediate any foreclosure action or documentation failures. Fitch may take similar actions on a servicer's ratings if the impact of the additional costs that must be borne by the servicer significantly affect its financial condition. Until those conclusions are reached, the negative outlook on the sector affects all U.S. RMBS servicers.

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, 2011 which is available on the Fitch Ratings web site at 'www.fitchratings.com'.

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

Applicable Criteria and Related Research:

--'Global Rating Criteria for Structured Finance Servicers' (Aug. 16, 2010);

--'U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria' (Jan. 31, 2011).

Applicable Criteria and Related Research:

Global Rating Criteria for Structured Finance Servicers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547305

U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria

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

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CONTACT:

Fitch Ratings
Shashi Srikantan, +1-212-908-0393
Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Diane Pendley, +1-212-908-0777
Managing Director
or
Media Relations
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sandro.scenga@fitchratings.com

KEYWORDS:   United States  North America  New York

INDUSTRY KEYWORDS:   Professional Services  Finance

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