The decision by MetLife to sell its forward mortgage operations came as a surprise to the reverse mortgage world as many wondered following the exits of Bank of America and Wells Fargo from the business, whether MetLife would be the next shoe to drop.
Not, so, say analysts following the decision announced Thursday, that MetLife would put its forward home mortgage loan business up for sale.
The decision came several months after MetLife said it was seeking a buyer for its bank, a move which it pursued due to increased regulation, it said at the time.
Upon the announcement regarding its “forward” mortgage business, the global insurance company said it would continue its reverse operations. While it didn’t specify as to the operational differences between the forward and reverse business channels, its statement expressed commitment to the business of which it now occupies the No. 1 spot. Analysts agree that MetLife is positioned to continue to gain from its reverse mortgage operations while the forward side of the business makes less sense for an insurance company.
“MetLife thinks that reverse mortgages are going to be an important instrument with regard to income distribution,” says Steven Schwartz, an analyst for Raymond James & Associates who follows MetLife. “That is an area that MetLife and many, many life insurers are targeting and see a big opportunity in helping people see that retirement funds they’ve built will last a lifetime.”
The reverse mortgage business and its alignment with MetLife’s broader insurance products is what makes MetLife different from the other reverse mortgage lenders that exited the business this year, with product mix being an essential component.
“The common thread between B of A, Financial Freedom, Wells Fargo, 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,” says John Lunde, co-founder and president of Reverse Market Insight. “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.”
For now, that means sticking with reverse mortgage products.
“I view that as validation of a viewpoint many of us have made over the years: reverse mortgages are less like forward mortgages than they are like life insurance,” Lunde says. “At least so far, Metlife seems to agree with that sentiment.”
It is an area where MetLift wants to continue doing business, Schwartz says. “Lifetime income is an area where the life insurance industry is very well suited.”
Written by Elizabeth Ecker