With MetLife’s New Reverse Mortgage Underwriting, Are Brokers Taking Business Elsewhere?

With MetLife’s new underwriting requirements for reverse mortgage loans, will brokers begin to take their business elsewhere?

Some say yes, the process of qualifying a borrower under the MetLift guidelines is too much trouble. Asking not to be named because of their business relationships with lenders, several brokers told RMD about the impact the new underwriting is having on their business.

The new process by MetLife, implemented this week, will conduct an assessment of a borrower’s cash flow, credit history and principal limit usage (PLU). It’s a process that for some originators, especially those who work exclusively in the business of reverse mortgages and not in the “forward” world, where originators are accustomed to gathering documentation for loan qualification, might be daunting.

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“Frankly, I really don’t want to deal with the hassle of qualifying people under MetLife’s guidelines,” one broker told RMD. “Unless their rates are the best, I don’t see any reason to do business with them unless other lenders are about the same.”

Others who have done business with MetLife in the past say they will begin to qualify the brokers they can under the new guidelines, but that it will be a case-by-case process.

“We’re going to give MetLife first crack… but if they don’t qualify we’re going to qualify them under [another lender],” another broker said. He said he will qualify borrowers upfront and work with MetLife before any fees are exchanged between broker and borrower. “There will be some that we will price to other lenders off the bat, but if someone is borderline, [we may look to] compensating factors.”

Other brokers told RMD they are in “wait and see” mode until the underwriting has settled in and there are loans in process that adhere to the new standard.

The extra work to qualify borrowers, will trickle down the originators, but also to MetLife’s internal team of underwriters, who will continue to underwrite all third-party brokered loans.

MetLife told RMD upon its announcement of the changes that it was adding resources to handle the questions and new processes.

“On the forward side, what experienced originators do is gather the information during the application process and start to determine if someone is well inside the box and well outside the box,” Craig Corn, MetLife VP and reverse mortgage head told RMD at the time. “If you’re outside, you may need a lot more work.” That additional work could consider what the industry has deemed “compensating factors.” It’s a process that will take some getting used to, Corn said.

There will definitely be a learning curve, one of the brokers said. “This is going to be difficult for many loan officers and loan processors to deal with, especially those without traditional mortgage experience, because borrower qualifying and loan processing will be much more difficult, and more similar to traditional loans.”

Written by Elizabeth Ecker

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  • Those who deal with the less affluent, whether seasoned in forward loans or not, will find the additional work avoidable whenever possible if other lenders available to them have lower standards.  All other things being equal, where a loan is brokered, the issue will become simple:  is the compensation sufficiently greater than other brokering opportunities to justify the additional work?

    Some argue about differences between financial assessment underwriting creating a “prime and subprime” HECM market but will that be the case?  In the forward market there was not just a difference in underwriting but products as well.  In  regard to product differences, the reverse mortgage marketplace is nothing like the the forward market.  If a difference in interest rates, MIP or other terms develops, then that argument becomes relevant.

  • I have no doubt whatsoever, that differences in origination fees and interest rates will follow differences in underwriting.  It’s only a matter of time.

    • Since such differences have existed for some time, how will anyone indentify when underwriting differences alone have caused them?  It is very doubtful if the gap between reverse mortgages will ever reach the depths that it did in the forward industry. 

      Time will tell.  

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