“The question remains as to why the Federal government is guaranteeing and subsidizing reverse mortgages for seniors,” said Anthony Sanders, Professor of Real Estate Finance and Senior Scholar, Mercatus Center at George Mason University.

With more than 95% of today’s reverse mortgage market comprising FHA loans, the representatives say they are not against using home equity to fund retirement, but that the government needs to have a smaller role in light of the FHA’s financial situation.

“I am not against reverse mortgages as an equity extraction tool,” Sanders said. “But I do not see any reason for the Federal government to guarantee and subsidize it.”

Private products have had a hard time competing in light of recent market shifts, but the discrepancy is not due to government risk, said Jeff Lewis, Generation Mortgage Chairman.

“In the traditional mortgage space the economic difference between a government loan and a jumbo is marginal,” Lewis said. “In the Reverse Mortgage space, the difference between a government loan and a private loan is immense. This difference is not a reflection of increased risk on the part of the government. Rather, it is a function of the fact that the government’s cost of capital is dramatically less than the private sector’s.”

When the market comes back, so will private reverse mortgages, another law professor said.

“Conventional reverse mortgages will likely increase in market share as the economy recovers, housing prices stabilize, and credit conditions improve,” Houman Shadab, Associate Professor of Law at New York Law School told the panel.

“Currently, the most important obstacles to the development of private reverse mortgages seem to be continued uncertainties regarding housing prices and the willingness of lenders, insurers, and investors to assume housing price risk.”

The outlook is strong, he said. And insurers could become larger players as they are already equipped in actuarial-based products. It was rumored this year, for example, that New York Life was seeking entry into the reverse mortgage business, in addition to active insurers in the space such as Genworth Financial and, previously, MetLife.

“There now seems to be a market consensus developing around how to better underwrite and produce what could become a standardized privately insured reverse mortgage. For example, an underwriter of life insurance and similar products has recently argued that the reverse mortgage market could greatly expand if actuarial methods used in other industries were applied to reverse mortgages.”

Written by Elizabeth Ecker

Cushman bring more than five years as a Federal Housing Administration risk management official, and is credited in large part by the reverse mortgage industry for his work in FHA’s launch of the HECM Saver in late 2010.

He served as FHA’s Director of Portfolio Analysis where he was responsible for developing valuation models to support product development, premium pricing, risk management, and operations. He also helped shape policy guidance on the HECM program, and co-authored the paper titled, “Identification of Home Maintenance Risk in Reverse Mortgages.” In addition to his role at FHA, Cushman also has experience in business and consulting.

“Colin brings to the Generation Mortgage team a deep understanding of the reverse mortgage industry and the federal oversight of our products and services. His leadership and vision at FHA, including the development of the innovative Saver product, will be invaluable to our company as we continue to provide unparalleled products and services to our customers across the country,” Jeff Lewis, CEO of Generation Mortgage said. “We are pleased to welcome him to Generation Mortgage.”

Cushman has received a National Reverse Mortgage Lenders Association distinguished service award, as well as a David L. Boren international graduate fellowship and Howard Hughes fellowship.

Written by Elizabeth Ecker

“Wells Fargo and MetLife were far and away the biggest originators of Savers,” says John Lunde, president and co-founder of Reverse Market Insight. ”That’s going to be one of the things that is unknown right now,” he says. “MetLife definitely was leading the way, although some other companies have been active as well.”

While the Saver has never reached the 20% benchmark that was hoped for it when it launched via the Department of Housing and Urban Development in late 2010, it has shown climb in term of proportion of overall reverse mortgage volume from less than 5% in early 2011 to 7.02% in February, the latest month for which HUD data is available. In mid- to late-2011, that percentage reached and surpassed 9% for three consecutive months.

In 2011, MetLife told RMD its Saver volume was around 20% of its business overall. Some originators have focused exclusively on the market, with others reporting that Saver adoption has recently picked up as borrowers use the credit line option as a short term solution for immediate financial needs.

Without the big banks in the market, pricing for the fixed rate Saver is likely to suffer, one originator told RMD.

“The issue right now I see is LIBORs and Savers, with most lenders having sold them through MetLife,” he said. “The products will be weak for a while coming at the worst timing.”

Other lenders will likely step in to fill the gap, Lunde predicts, although it will take a certain kind of lender to drive the market forward.

“If the Saver is going to continue to grow, there needs to be a company that has the right capability,” he says. “Not every company is well suited to offer the right economics on the Saver.”

As long as there is a lender—or lenders—to offer the right economics and allow for brokers to market Saver loans, the industry may not need a corporate giant to lead the market, however.  Recent interest from industry outsiders with the potential to spur growth could be a major factor.

“We’re past the point where we have to have a single lender leading the charge,” Lunde says. “On the academic side and in the financial planning community, hopefully that interest keeps going. That’s where a lot of future borrowers and growth comes from.

Written by Elizabeth Ecker

Generation Mortgage’s Jeff Lewis looked on the bright side of the MetLife exit in a recent statement, but made mention of the fact that the industry has lost a major supporter of reverse mortgage products.

“MetLife’s decision to discontinue their reverse mortgage operations, following on the heels of their decision to close their banking and traditional mortgage operations, is disappointing news for an industry with a bright future,” Lewis said in a statement Tuesday. “MetLife was an enthusiastic supporter of the Home Equity Conversion Mortgage (HECM) program and an enthusiastic promoter of the new and successful Saver product.”

Lewis expressed hope that the remaining lenders will be able to absorb as many of MetLife’s former staff as possible.

The National Reverse Mortgage Lenders, too, noted the departure in a weekly email to members in the week following the decision.

“MetLife, Inc. has been a solid and generous partner of NRMLA. The company’s reverse senior executive team has assumed leadership roles and large responsibilities within the association,” NRMLA wrote. “We are extremely grateful for their contributions.”

Additionally, Generation focused on the exit’s potential impact on consumers, which, Lewis says, should not be significant.

“Consumers should understand that Met’s departure says nothing about the value of the HECM product from a consumer standpoint. Theirs was a strategic decision. The industry’s remaining producers were already doing 80%-plus of the originations and the HECM product, fixed and floating, Standard and Saver, will continue to be broadly available across the country,” he said.

Written by Elizabeth Ecker

BusinessWeek: MetLife posts 1Q loss, exiting reverse mortgages…MetLife Inc. said Thursday it is getting out of the reverse mortgage business as part of its exit from retail banking, which it says accounted for only a small fraction of its profits. Read more.

The Wall Street Journal: MetLife Exiting Reverse Mortgage Business, Selling Portfolio To Nationstar….MetLife Inc. (MET) said Thursday it is selling its reverse mortgage business, its latest move to avoid increased regulatory scrutiny and stay focused on its core operations. Read more.

Bloomberg News: MetLife Exits Reverse Mortgages in Retreat From Banking. MetLife Inc. (MET), the largest U.S. life insurer, agreed to sell its reverse-mortgage portfolio to Nationstar Mortgage LLC as Chief Executive Officer Steven Kandarian retreats from banking to limit U.S. regulation. Read more.

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Reuters: MetLife exits reverse mortgage business. MetLife Inc, the largest U.S. life insurer and reverse mortgage lender, made a surprise shift on Thursday with the sale its reverse mortgage business as part of its exit from banking-related activities.

Fox Business: MetLife Exiting Reverse Mortgage Business, Selling Portfolio To Nationstar. MetLife Inc. (MET) said Thursday it is selling its reverse mortgage business, its latest move to avoid increased regulatory scrutiny and stay focused on its core operations. Read more.

Written by Elizabeth Ecker

“Ken has extensive knowledge and experience in all areas of origination, processing and leading professionals within the senior community,” said Sherry Apanay, managing director of sales for Urban. “We are excited to add his depth of experience and leadership to our growing team.”

Sawan brings more than 20 years of reverse mortgage experience including his most recent position as assistant vice president and regional manager of the Great Lakes region for MetLife Home Loans. He also has worked with Unity Mortgage Corp and Financial Freedom Senior Funding Corporation.

Urban is positioned to become the largest reverse mortgage lender by volume upon the exit of MetLife from the business last week. The company has closed 8,137 reverse mortgage loans over the last 12 months, according to data from Reverse Market Insight. It already holds the position of largest reverse mortgage wholesaler by volume.

Written by Elizabeth Ecker

“This is one more opportunity for us to continue to grow,” Richard Mandell, CEO of One Reverse Mortgage told RMD. “We’re excited. There are no negatives for us.”

MetLife announced to its employees and business partners on Thursday that it would be winding down its reverse mortgage origination platforms, and has agreed to sell its servicing operations to Texas-based Nationstar Mortgage, which also recently bought the rights to Bank of America’s reverse mortgage servicing.

Some remaining lenders expressed surprise in light of the decision, but most are seeing it as a chance to hire top talent and increase market share.

One Reverse recently announced expansion plans including a new San Diego office to house some of its retail operations and welcomes the chance to grow its team further.

“We view this as an opportunity for some of those who are not working with MetLife any more. We have a system for licensing and have since we started the company under Quicken Loans,” Mandell says.

MetLife, which stood as the largest lender in terms of volume, employed 500 people in its reverse mortgage department. While the opportunity presented to other lenders is seen as a positive from a growth standpoint, most agree, the news is not all good.

“I think it’s a two edged sword,” says Torrey Larsen,  president and CEO of S1L. “The positive is the opportunity for us to expand retail and wholesale. We’re excited to add quality originators and managers and we are committed to the space.”

However, the overall reaction to the exit will take time, Larsen says.

“The bigger concern is whether the current players have the bandwidth to absorb that amount of volume,” he says. “Most other players are restricted by their own financing vehicles. Can all that volume that MetLife has had be absorbed? That is a question mark.”

The reasoning MetLife provided for the exit, including a heightened regulatory climate, could also be seen as a challenge, or as an opportunity, says John Mitchell, CEO and founder of Austin, Texas-based Reverse Mortgage USA.

“In the case of Bank of America, Wells Fargo and MetLife, the gain from being in the business was not worth the regulatory pain,” he says. “I see it working to our advantage. If you are a company that has figured out a way to be profitable in this business and accept the extensive regulatory oversight… the net effect is that the players in the business who really focus exclusively on reverse mortgages are going to prosper even more as MetLife has left the business.”

Most say they are not surprised by the exit, as it follows similar paths taken by other corporate lenders including Bank of America and Wells Fargo, which left the business last year.

“There’s always a question about the capital markets and how they are going to respond,” Larsen says. “But I believe the investors like the product. They’ve been educated. This is the third time they’ve seen an exit and every time that part of the market has returned.”

Written by Elizabeth Ecker

The plan, which will allow originators to earn tracking stock based on their productivity over the next five years, will begin on May 1 under the name “President’s Club.”

“S1L has been working on this structure for quite some time, and we feel strongly that this plan will alter the competitive landscape for the top originators in the reverse mortgage industry,” said Torrey Larsen, president of Security One Lending.

“The structure and opportunity is compelling,” Larsen said. “We simply wanted to shift the mindset of the origination force from ‘renters’ of a company to ‘owners’ of a company.”

S1L will be distributing 30% of the division to qualifying loan officers during the next five years, with the first 10% being earned in the next 14 months, beginning May 15.

Those who have been with the company or who are employed now have the largest window of opportunity to earn the most stock under the plan, Security One explained.

“We believe this new structure is a game changer for the industry,” said Tyler Larsen, Security One CFO. “We have added both warehousing capacity and staffing support to fulfill this strategic growth plan. Many Originators are looking for a long-term home, and we wanted to demonstrate our commitment to them and this industry in a meaningful way.”

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Written by Elizabeth Ecker