MetLife Eliminates Origination and Servicing Fee, Trend Begins

201003251657.jpg MetLife Bank announced a new pricing option available through both its retail and wholesale channels for its fixed rate reverse mortgage product to make thousands more dollars available to borrowers at a lower cost.

This new pricing option, which applies to the HECM fixed product will eliminate the origination fee and servicing fee, meaning that borrowers could receive additional loan proceeds ranging from $3,500 to $10,000, or more said MetLife.

“This pricing option will allow seniors who desire to take their loan proceeds in an up-front lump sum to unlock even more of their equity to fund their retirement,” said Craig Corn, vice president at MetLife Bank in charge of the bank’s reverse mortgage business. “These additional proceeds can go further to help them to pay off existing debts, meet basic needs, cover unexpected expenses, adapt their home to their current needs, or whatever else they feel is appropriate.”

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MetLife Bank will continue to make other options available to applicants, including variable rates and lines of credit, but for those who choose a fixed-rate lump-sum HECM, there will be no origination or monthly servicing fee said the bank.

Through its wholesale channel, correspondents will have access to the fixed rate at 5.56% with no servicing fee and a “limited origination fee” starting March 29th said the company in a message to brokers. Additionally, MetLife is offering correspondents the option of a fixed rate at 5.49% with a $20 servicing fee.

While both Security One Lending and Genworth recently eliminated their servicing fee for the HECM fixed product, MetLife is taking it a step further by eliminating the origination fee and offering an even lower rate. Our sources tell us that all lenders are currently selling their no servicing fee HECM fixed product to MetLife, so I’m sure this will start a trend of others eliminating their origination fee to remain competitive.

This is all great news for the borrower, lets just hope the secondary market execution stays where it’s so it will continue.

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  • It has been rumored and confirmed that MetLife is promising that total comp to brokers will remain substantially unchanged. Stimulus of that nature is very welcome.

    Beyond that, it was said by some seminar attendees that apps are down a whomping 50%. Again the question becomes, we have seen statistics on this website that HUD has issued — called applications. Those numbers do not coincide with a 50% reduction in origination apps since 10/1/2009. So the question once again becomes are the HUD numbers apps for endorsement rather than origination loan apps?

    • Why would you be concerned with revenue to a company that operates as a broker, but not be concerned with revenue paid to companies that operate under a different structure? That makes no sense. Controls over upfront fees charged to HECM borrowers are good, but other than that we should let free markets operate.

      • Lance,

        Your comment almost sounds like you view MetLife as a government entity (or monopoly) controlling the market. MetLife is part of the free market and so is the announcement.

        The announcement and seminar were directed at brokers, not Full Eagle entities which sell closed loans to MetLife. Are you speaking of yet a different structure, such as a net branch or branch?

        Isn't your company a Mini Eagle? Aren't you a broker on MetLife deals?

        Please elaborate. It seems I unintentionally stepped on your toes and if so, I apologize. I, for one, very much appreciate your input and point of view even if you and I do not always see eye-to-eye.

      • No worries Mr. Critic, whoever you are. I appreciate your point of view too. The secondary market is paying up for fixed HECMs (whether originated on a retail, correspondent, or brokered basis). Brokers on wholesale deals incur the greatest cost and do the greatest amount of work, therefore they deserve their fair share of the pie and should be allowed to partipate in the gains just as their wholesale lenders do. This allows brokers to lower upfront costs to borrowers and bring value to the marketplace.

  • Financial Freedom rolled out a no origination fee for it's retail channel on March 18th. I think that was a mild market test before taking the next step for wholesale. Great to see the product innovation finally since there is so much margin on the secondary market right now. However, we cannot just talk the consumer into all the proceeds with the Fixed only. We must do a thorough job of offering the variable rate option for a balanced RM presentation. LTV's will improve with this move… great!

  • At first glance this might seem great. But the only use for this product is to qualify those borrowers who are short. Be warned that widespread use of this limited (zero) origination fee product will eventually lead to the death of the small to medium sized originator. Don’t let lenders like MetLife put us all out of business. Fight back by selling products that are fair to all and that keep originators profitable.

    Do the math and see your average fee will drop and it probably won’t be made up in volume. Many Loan Officers will use this as a crutch because it’s easy to sell. If we collectively train the consumer that origination fees aren’t necessary the market will listen. What happens when YSP drops? Lenders will change their products again. But borrowers won’t forget we taught them origination fees aren’t “necessary” and Loan Officers will spend a lot of time selling to get them back.

  • I am always a fan of improvements that benefit the consumer and we've been talking about competition driving down costs for years. This move is pretty significant and I am wondering if we are maybe too short term oriented in our decision making.

    Will the unprecedented premiums driving this origination fee dump continue? The Fed is halting its MBS purchase program wednesday and is already discussing when and to what extent it will raise short term rates. Can we really expect to see total compensation from premium only to last over any extended period?

    Once we get the media, consumers, advocate groups on the “no fee” bandwagon, I think it would be hard to back track if premiums do fall back to normal levels. The major retailers of this product would end up with a significant advantage over brokers in a “no fee, low premium” environment. Is this their intention?

    For today, I agree this is very good for the consumer, but I am rather concerned about the broker in this case. Since 100% of our income is earned at origination, maybe we should be in charge of our revenue, not our wholesale lender (and their retail components).

  • Please excuse the negative slant, but this from the same folks who brought us the HECM 100 some years ago. While that too seemed to be good for the consumer at that time, we all know how that worked out.

    In my view, this is short-term thinking which may cause some of the same problems we had with the HECM 100. Sure hope I'm wrong.

  • This is a very positive step in the ever evolving world of reverse mortgages.
    Giving the client more benefits and reducing the costs is exactly what we need right now!
    Go get’em Snoopy!

  • As the industry migrates to zero origination advertising, are those in lower home value markets getting a bit anxious? I would assume most of the advertising won't include a disclaimer that says “only for homes valued X thousand or higher”. That could lead to negative press and lawsuits.

    I guess I'm saying, if you're an originator in a part of the country with $100K – $150K homes, are you going to be comfortable with revenue per loan of $1,500 – $2,500? If you aren't and you continue to charge origination fees, will your borrowers get through counseling without being told that they can find a lender that doesn't?

  • As a possible borrower of a HECM, my concern is the unknown (to me) comparison of ten years down the road. What is owed on full take-out of say $200,000, vs monthly draws of $1,500. I don't know the math, but bet the early savings on no origination fee and no monthly service fee are lost in about the fifth year or so. I would love an answer.
    thank you. Mary Pat

    • Absolutely not. $ 0.00 origination & no monthly service fee – means just that. Your loan can not change once you close. Especially if you are in a fixed product – then of course, NOTHING changes. v.s. if you had a Line of Credit, then your rate would adjust.

    • Absolutely not. $ 0.00 origination & no monthly service fee – means just that. Your loan can not change once you close. Especially if you are in a fixed product – then of course, NOTHING changes. v.s. if you had a Line of Credit, then your rate would adjust.

  • As a possible borrower of a HECM, my concern is the unknown (to me) comparison of ten years down the road. What is owed on full take-out of say $200,000, vs monthly draws of $1,500. I don’t know the math, but bet the early savings on no origination fee and no monthly service fee are lost in about the fifth year or so. I would love an answer.rnthank you. Mary Pat

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