MetLife to Stop Purchase of Broker-Sourced Correspondent Reverse Mortgages

Beginning in January 2012, MetLife will no longer purchase reverse mortgage loans from correspondent lenders that source their loans indirectly through mortgage brokers, a company spokesman confirmed Thursday in an email to RMD.

The largest reverse mortgage lender in the industry, following the exits of other large bank lenders in 2011, currently sources reverse mortgages through its retail channel, wholesale channel and by purchasing directly-sourced closed loans in its correspondent channel.

Those loans sourced by brokers through correspondent lenders—or “fourth-party” loans—the company will no longer accept.

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“We feel that the ability to control for quality presents challenges as degrees of separation increase,” the spokesman said. “As such, we have begun notifying our correspondents that we will no longer purchase these types of transactions beginning in the new year.”

MetLife was the first lender to implement a financial assessment of reverse mortgage borrowers that considers their income and credit history in order to prevent default on property charges including tax and insurance. The financial assessment was implemented in November, across all of MetLife’s business channels.

While many brokers have told RMD that they are continuing to wait and see if other lenders implement such changes, others have said they will take business elsewhere, due to the increase in time and steps it takes to qualify borrowers under MetLife’s assessment.

Written by Elizabeth Ecker

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  • And so the speculation grows.  Will MetLife stay in the industry or are we about to see another major reverse mortgage lender cut all ties?

    The game begins.

    • Couldn’t be further from the truth.  What this means is that we MLwill not purchase loans from Correspondent Lenders that are selling them loans that were originated from brokers or third party originators.  Correspondent, Retail and Wholesale are all slamming.  This also ensure ML’s trade is A+ compared to the A or A- for those companies not doing FA.  Closing times have not been impacted either as implied in the article.

      • tabarry,

        Truth?  I labeled my comment “speculation” and a “game.”  My, I must have a touched a real nerve and may have struck much closer to the truth than I imagined!!!

        Your comment lacks more truth than my comment!!  

        Please offer one shred of evidence that this will “ensure ML’s trade is A+ compared to the A or A- for those companies not doing FA.”  Do you any historical evidence to offer that says MetLife Bank has experienced any kind of higher rating due to its financial assessment standard, period?  (Can you show any evidence that MetLife has ever had even one HECM endorsed?  You do not seem to realize that MetLife does not originate any reverse mortgages; MetLife Bank does.  Truth??)  

        I have historical evidence which shows that withdrawal from the market in any area is a reasonable indicator that a major reverse mortgage lender is considering withdrawal from all. My evidence is Financial Freedom and Wells Fargo.  Yet I clearly labeled my comment as speculation.  You call your comment truth when it is speculation with no historical evidence to prove its “truth.”  By the way, the reverse mortgage operations of Wells Fargo, Financial Freedom, or Bank of America at their respective peaks have “slammed” the operations of MetLife Bank at any time in its entire history.  So why do you bring up “slamming;” oh, by the way they are all out of our industry today.  

        Slamming??  We have yet to see any evidence about how “slamming” the MetLife Bank business will be in any area once its financial assessment policy is reflected in its production numbers.  We have yet to have one full month of production in which financial assessment has been applied, period.  Your claim for now is full of hot air and that is it!!!

        Let’s face it, your standard of truth is more speculative than my acknowledged speculation.  

        Your comment is nothing but bluff full of speculation, hot air, and false claims.  I have no words to describe my contempt for your idea of truth and how an action will “ensure” ANYTHING which lacks historical evidence to prove its merit!!!!

      • Critic,

        Contempt?  Full of hot air?  False claims?
        Wow!!  It has been awhile since I have seen anyone get your anger so riled.

        Maybe this person touched more of your nerve than you touched of that person’s.
         
        BUT this comment is not meant to diminish from what you said.  I was just surprised by how you said it.

  • I agree, it is just a matter of time before they start to cut off all correspondent business altogether. With the extreme measures they took with their version of financial assessment. Then couple this move to limit business even further. They are just telegraphing the fact they just don’t won’t to be in the business.

    • GreatTx007,

      It is my guess they will keep some correspondents long-term, IF they stay in the business.  

      I agree with those who believe that MetLife Bank is cherry picking.  

      Who can blame MetLife for forcing MetLife Bank to that policy?  After all MetLife understands risk even if MetLife Bank does not.

  • They keep restricting the volume down various avenues. Indicating they don’t want to be in the business and are slowly cutting things off. OR they just want the flawless loans and much reduced volume? Only 2012 will tell.

    • wealthone,

      Viability?  Quality over quantity?  Really?

      Here the issue is not the quality of the HECMs originated; it is who originated it.

      This is plain and simple profit and risk assessment based on the need to reallocate limited resources.  The reason for the assessment is MetLife has to allocate more underwriting time in enforcing its financial assessment policy in so called “underwriting lite.”  Unless its underwriting ranks increase substantially, it needs to reallocate limited resources which will produce the greatest reward for the time invested.

      The vast majority of HECMs MetLife receives from all sources have the minimum required quality they need but when resources become limited, one will refocus limited resources to where profits can be maximized.  The purchase of closed loans does not appear to be that source in the eyes of MetLife.  But if some closed loans can be processed profitably then it makes sense to look at sources when not all current loans can be reviewed as needed.  So in the final step quality arises as the issue but only as to what sources produce the most quality loans.  That is profit and risk analysis, not quality in and of itself.

       

      • Isn’t the notion of who originated the EXACT same as the quality notion I mentioned, hell if they wanted otherwise they’d let any damn fool originate these.  You’re arguing just for the sake of arguing.  Save your words for helping others.

      • wealthone,

        The risk with closed TIP originated loans from another lender could be much larger than with the lender itself.  For example, ABC TIP broker is affiliated with both MetLife Bank and LMN lender.  On loans that ABC believes MetLife Bank will reject, it goes to LMN.  LMN in turn sells its closed loans to both RMS and MetLife.  One day MetLife notices that LMN is selling them a HECM originated by ABC.  What does that say to MetLife Bank?  What additional burdens and risks does the ABC transaction place on MetLife as the HMBS issuer?
         
        Then let us say GHI, a TIP, which has been affiliated with MetLife Bank, drops out and starts brokering through LMN.  Now all of a sudden MetLife Bank starts seeing closed GHI mortgages coming through LMN.  The question is why?  Is it because LMN accepts a lower standard on marketing and other activities supervised by LMN?  What if MetLife Bank had cut GHI loose because of bad marketing practices?  What additional inquiries does MetLife Bank have to make, if any, into the adequacy of the TIP supervision activities of LMN overall not just those related to GHI?  Can MetLife Bank selectively choose to accept some TIP loans from another lender but not other TIP loans of that same lender?  To what other mortgage and even discrimination laws does that potentially expose MetLife Bank?
         
        Rather than being concerned about risks beyond the loan itself, why not just get rid of these unknown risks with low profit margins where the additional financial assessment underwriting light is now coming into play and simply force more TIPs to become affiliated with MetLife Bank directly?  Direct brokering profit is higher and the risks can be more controlled and better mitigated by MetLife Bank.  Even if lenders move to other HMBS issuers, how much profit has MetLife lost? 
         
        You may feel this is a quality issue but I believe it is more risk mitigation and profit motivated.

        Moving on….

  • This has been a very interesting discussion back and forth. I do agree 100% with both the Cynic and the Critic. They make very good arguments on their positions.I feel we are seeing the demise of the broker but ML’s reasons are exactly what the Cynic has said! Met Life is not fooling anyone, they want to slow down their production, for now that is.

    The future hold’s Cards that none of us truly understand. The next 6 months in our industry should give us all a lot of insight as to what to expect. I feel our senior’s will suffer the most in the long run!John A. Smaldone

  • I should tune in more often!
     Met Life Bank will soon be out of the RM business for a whole bunch of reasons. Here are some of the best. First, without the big banks out front dealing with the government, Met is on the cutting edge and everyone knows you’re only going to bleed a lot there. The new underwriting policy they came up with is already inviting criticism that it may be unfair or unequal, even before the media finds some “victims”.  Secondly, did we all forget about coming foreclosures on existing insurance and tax defaulters? Maybe Met can cross-sell with a commercial featuring some of their loan clients being tossed out of their homes while giving thanks for their Met Life annuity. Third, it is easier to sell against the RM than to sell them. A 15 year mortgage goes for 3.5% or less and private MIP is a steal compared to the inflated FHA rates. The best RM market was always the financially challenged, but no more. As they cull only the best for RMs, they make comparison shopping possible and well worth it. Fourth, and most important, is that Met Life (and the big banks) simply don’t need the grief that comes with selling this product, relative to the small profit.

    • roxie1,

      MetLife is selling its MetLife Bank operations.  Why announce that it will keep its reverse mortgage operations if it simply wants out of the reverse mortgage business?  If you believe that the MetLife Bank selling price will be higher without the reverse mortgage operations, why didn’t MetLife just dump all reverse mortgage origination operations back at the time of the sale announcement?

      No, this seems to have to do with a revised business plan which fundamentally is more in tune with the basic reasons MetLife got involved in our industry.  If they can cherry pick the more affluent, why not?  FHA/HUD has seemingly sanctioned it by not issuing guidelines for financial assessment underwriting but saying that lenders have had the right to do it since the inception of the HECM program. 

      Just like the former Big Three, MetLife could walk away any time it wants.  So far at least it has shown by its new policies that it wants to stake out a particular piece of the HECM endorsement pie.  Unlike other lenders, it may not be interested in being Number One for many reasons including the one you state.

      Time will tell where MetLife reverse mortgage operations are headed. 

  • Per Mr. Mark Miller, MetLife Bank (“MB”) is allegedly doing 85% of its retail business in Savers.  (See http://registeredrep.com/newsletters/retirement/how_reverse_mortgages_can_help_your_older_clients_1208/index.html?imw=Y )

    Considering the retail strategy presented by Mr. Miller, the MB financial assessment underwriting, and the elimination of “fourth-party loans” in its closed loan purchase program as described in the article above, MB is positioning itself to achieve its goals.

    While many of us wish things were different, it is very understandable the position MB is taking.  The Saver production MB has achieved is helpful to the entire industry.

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