MetLife Looks to Sell Forward Mortgage Business, Reverse Remains

NewImageTop reverse mortgage producer MetLife Inc. is seeking a buyer for its forward business, but remains committed to its reverse mortgage lending operations.

“We plan to continue our reverse mortgage origination operations, but as a public company, we continuously evaluate all of our businesses based on market conditions and the regulatory environment,” said David Hammerstrom, a spokesman for MetLife.

MetLife announced in July that it was looking for a buyer for its bank, which includes savings accounts certificates of deposit and money market accounts. At the time, it cited increasing banking regulations as a reason for the decision.

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The announcement to sell its forward mortgage business noted the company’s core focus on global insurance and employee benefits.

“We determined that remaining in the forward mortgage business would require the company to expend a tremendous amount of resources to effectively compete in and profitably grow the business in today’s uncertain marketplace and regulatory environment,” Hammerstrom said. “Doing so would divert these resources away from MetLife’s primary focus on its global insurance and employee benefits businesses.”

The reverse mortgage business will remain.

“[The] reverse mortgage business has operating and capital characteristics that are different from the forward mortgage business,” he said.

MetLife is the No. 1 provider of reverse mortgages in the U.S., now occupying the top position following the exits of Wells Fargo and Bank of America from the business. It began originating mortgages in 2008 through its MetLife Home Loans division and originated 3,879 reverse mortgages in 2010.

Written by Elizabeth Ecker

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  • On July 21, the party line was per RMD:  “However, MetLife says it plans on continuing to offer residential mortgages through its MetLife Home Loans business.”  Today it is:  “…MetLife Inc. is seeking a buyer for its forward business, but remains committed to its reverse mortgage lending operations.”

    What’s next?  “Anything is for sale at the right price?”  Does this remind anyone else about the pattern at Wells Fargo and its wholesale group?

    What will the new line be about the 100 plus year company?  2012 is shaping up as an interesting year.

  • While the “capital and operating characteristics” of reverse mortgage may be different, it is not a core product of a giant insurance company. I wouldn’t be surprise if they sell their reverse mortgage business soon.

  • If anyone was wondering what the impact of Dodd-Frank, plus the OCC punishing big banks/servicers was going to be, need to look no further. Bank of America has been the poster boy of what this administration wants to accomplish, and consumers will suffer greatly from all this over-regulation.

    I am not sure how many employees at MetLife will lose their jobs because of this recent decision, but it has to be in the thousands.

    In the famous words of Rick Santelli, “Are you listening President Obama?”

  • One can only speculate that the increased regulation and oversight that continues to be pushed down their throats by regulators (most of it rushed and poorly thought out) played a very big part in their decision to put the bank up for sale, as well as this decision.

    I wonder if anyone will take the angle when reporting on this that one of the top 10 forward originators in the country is exiting this business because regulations have pushed it to the point where it is no longer “worth it” to continue operations? 

    Keep in mind, we’re not talking about some fly-by-night subprime operation pushing no doc/stated income loans.  MetLife was lucky enough to avoid all of that mess by staying out of that area of the business.  It’s a sad state of affairs (and possibly the rule of unintended consequences) that you drive a good company out of a business due to over-reaction by regulators.

  • Great comments from everyone on this topic today. Obama’s regulations continue to drive capital away from housing finance just when the opposite is needed.  He clearly has disdain for banks and mortgage companies, even though their participation is (and always has been) critical to our economic health and the American dream of home ownership, and this disdain continues to divide and damage the country. Oddly, he appears determined to destroy America (or he is so incompetent that he doesn’t realize what he’s doing).  I wouldn’t be surprised if ML exits the RM business too.

  • Wow, that is an announcement! It is bad for the overall employment market, which I am very sorry to see. However, this is a huge shot in the arm psychologically for the reverse mortgage industry.

    After BOA and Wells going out, major concerns have been lurking in the offices of many banks and lenders considering entering the reverse mortgage arena as well as expanding present operations. We may see some positive moves on the part of lenders to to re-consider their previous decisions.

    John A. Smaldone

  • The common thread between BofA, FF, Wells, and now the Metlife announcement is that each is choosing to pare back ‘ancillary’ lines of business in favor of focusing on their core opportunities.  For the first three that meant banks keeping forward and getting out of reverse.  Metlife, as an insurance company, is getting rid of its bank and forward while keeping reverse.

    That strikes me as validation on a comment many of us have made over the years: reverse mortgages are less like forward mortgages than they are like life insurance.  At least so far, Metlife seems to agree with that sentiment.

  • It is interesting how different people view the situation at MetLife Bank.  Like Bank of America, MetLife Bank has been extensively involved in all phases of our industry.  Its departure at this particular juncture could cause disruption for many.  How unsettling this time must be for those who came from Bank of America and Wells to find refuge at MetLife Bank. 
     
    While a matter of opinion, leveraged investing is a controversial concept at best.  Trying to white wash it as a way to recover from a bad market or to avoid spending down pensions is hardly universally accepted no matter who is backing the concept.  It was bad when recommended by a now defunct electronic media reverse mortgage lender in the SF Bay area and certainly has not grown better with time.  It took until this week for the stock markets to recover from the losses incurred during this calendar year; even a CD pays better than that.
     
    However, freeing up liquid assets held in reserve for short-term emergencies without even touching the available credit line until the need arises is an excellent concept for more affluent seniors.  It allows for investing in higher earning assets with no leveraging at all.  As to how it can be taken advantage of by MetLife for use by both their reverse mortgage lending and insurance products areas without violating technical cross-selling rules could prove a little challenging but it certainly does not violate the spirit of the cross-selling laws.  No doubt this strategy coming from within the CFP community is a significant reason for MetLife to keep its reverse mortgage operations in place.
     
    A HECM is a government insured mortgage.  Other than discounted cash flow concepts, its similarity to life insurance escapes me.  Some may want to argue about concepts regarding life expectancy but the mortality tables utilized in our industry are foreign to those utilized by actuaries in the life insurance community.  Our tables are not current, are unisex and totally ignore joint and survivor concepts.  While tenure payouts utilize an annuity payout structure, it is totally different from the idea upon which annuity payments are generally determined.  Life expectancy has nothing to do with the HECM tenure payout computation; age 100 does.  Unlike annuity payments or life insurance payouts, HECM payouts increase corresponding debt and can be taxable in foreclosure or short pay.  Finally, life insurance can be sold to a third party by the policy owner; there is nothing comparable for a HECM payout recipient.

    • The HECM LTV tables and tenure payment structures bear little resemblance to actuarial tables, but the assets created from a HECM (servicing rights, HMBS participations, etc.) are valued with a methodology based in part on actuarial principles familiar to life insurance companies.

      I would agree the business looks less like life insurance from the loan officer or origination company perspective, but from a company servicing and issuing securities or anyone buying HMBS participations there is much more than a passing resemblance.

      • Mr. Lunde,
         
        Now I see why you state what you do.  The following is my meager understanding of issues in the secondary market.  Since entering the industry my primary focus has been and remains on origination and the structure of the HECM as it impacts borrowers, not lenders or servicers.
         
        One approach to valuing assets is by using discounted cash flows based on specific time frames.  Sometimes that time frame is life expectancy.  In those situations mortality tables come into play as they do in determining Principal Limit Factor Tables.
         
        The HECM mortality tables used by FHA are unisex, single life, and old.  Those used in the life insurance industry are not unisex, they include joint and survivor concepts, and they are based on the most recent mortality information available to the company.  With HECMs there is no analysis for the health of the participant as there is for the insured with life insurance.
         
        Tenure payouts are based on annuitizing a specified amount over the rounded “HECM age” of the youngest borrower as of the date tenure payments will start until that borrower reaches age 100.  There is generally a minimum period currently 5 years.  The interest rate used is the total of the expected interest rate plus the annual MIP rate.
         
        When it comes to HMBS participation, it would seem rather than life expectancies, the point where the balance due reaches 98% of the maximum claim amount would come into play since that would be the normal time of purchase of the related HECM by the servicer particularly when it comes to fixed rate HECMs.  As to how the value of an adjustable rate HECM is determined, I have little idea what assumptions and methodology is specifically employed.  Obviously with the market paying premiums, the interest rate utilized by the investment community in valuing HECMs is lower than those reflected in the expected interest rates used in the internal HECM computations.

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