Moody's has affirmed Freedom Mortgage Corp.'s B1 corporate family rating and revised the ratings outlook to negative from positive.
The rating action follows Ginnie Mae's announcement that it has restricted Freedom from contributing VA single-family loans to Ginnie Mae I and Ginnie Mae II multi-issuer securities, while only allowing it to sell VA loans into Ginnie Mae II custom pools. Loans that are, in part, guaranteed by the Department of Veterans Affairs are known as VA loans.
The restriction will be lifted on Jan. 1, 2019, if Freedom demonstrates that its prepayment speeds are substantially more in-line with those of equivalent multi-issuer cohorts and that such improved performance is sustainable. VA loans comprise approximately 25% of Freedom's aggregate originations, the rating agency noted.
The outlook revision reflects the expected negative impact on the company's profitability and franchise as a result of the Ginnie Mae's move.
Moody's may revise the outlook to stable once the company demonstrates that Ginnie Mae's restriction has only a modest negative impact on its profitability, franchise and liquidity, the rating agency said.
