CIT Group’s exit from the reverse mortgage business is now complete, but that’s not the only big change for the bank.
CIT Group, the parent company of CIT Bank, OneWest Bank, and Financial Freedom, announced Tuesday that it completed the previously announced sale of reverse mortgage company Financial Freedom to an unknown buyer.
The sale was originally announced back in October and expected to be completed in the second quarter of 2018, so the completion of the deal and CIT’s exit from the reverse mortgage business does not come a surprise.
But that wasn’t the only piece of news that CIT dropped on Tuesday.
The company also revealed that it is exiting the mortgage servicing business. According to CIT, the company “outsourced the payment, servicing and administration of duties” on its $5.2 billion mortgage servicing portfolio to a “leading national provider” of residential servicing.
The company did not disclose which company is taking over the servicing of its mortgage portfolio, nor did it disclose any financial details of the servicing deal.
The company also did not reveal any further financial details on the sale of Financial Freedom, which it acquired as part of its 2015 acquisition of OneWest.
Over the last year or so, Financial Freedom and its business practices became quite the topic of discussion around Washington, D.C., due to Department of the Treasury Secretary Steven Mnuchin’s relationship to OneWest Bank.
Mnuchin and his partners at Dune Capital Management formed OneWest in 2009 after buying the remains of IndyMac Federal Bank from the Federal Deposit Insurance Corp.
Dune Capital Management then sold OneWest and Financial Freedom to CIT Group in 2015 for a profit.
During Mnuchin’s confirmation process, Congressional Democrats attempted to use OneWest Bank’s mortgage practices that took place during Mnuchin’s time as chairman against him, claiming that Mnuchin oversaw a “foreclosure machine.”
Democrats also claimed that Financial Freedom was responsible for a “disproportionately high” foreclosure rate on reverse mortgages from April 2009 through April 2016 and nicknamed Mnuchin the “foreclosure king.”
Then, the Department of Justice announced in May 2017 that Financial Freedom agreed to an $89 million settlement over reverse mortgage allegations, some of which allegedly took place while Mnuchin was chairman at OneWest.
The settlement covered Financial Freedom’s recovery of mortgage insurance payments from the Federal Housing Administration that the company was allegedly not entitled to.
But now, Financial Freedom belongs to another company, although CIT did not reveal any details about the buyer or how much said buyer paid for Financial Freedom.
Included in the deal were the sale of mortgage servicing rights and $879 million of reverse mortgage whole loans and other real estate owned assets.
According to CIT, the moves to exit reverse mortgages and servicing are part of a plan to “simplify” its mortgage business.
“These efforts support our plan to simplify CIT and gain greater efficiency in our business,” CIT Chair and CEO Ellen Alemany said.
“We have addressed another legacy issue by exiting the reverse mortgage business, and we have created greater efficiency in our ongoing mortgage operation by partnering with an industry leader to service our portfolio,” Alemany added. “CIT remains focused on growing our core commercial and consumer operations, and these actions allow us to apply greater focus in those areas of the business.”
The company said that going forward, its mortgage business will include single- family purchase or refinance mortgages through both its national CIT Bank direct franchise or through the OneWest Bank branch franchise in Southern California.
CIT also originates residential mortgages indirectly through a network of correspondent lenders.