MetLife Forced to Suspend Financial Assessment as Others Fail to Follow

Since industry discussions in October set the bar for lenders to implement a financial assessment for reverse mortgage borrowers, MetLife has been the only major lender to formally introduce and launch such a policy. Now, effective today, the company has announced it has suspended those financial assessment guidelines, citing consumer confusion and the lack of industry buy-in.

“MetLife Home Loans instituted a financial-assessment model for originating HECMs in November 2011. However, other lenders have not begun such assessments, creating confusion in the marketplace for consumers,” a MetLife spokesman told RMD in a statement. “Therefore, even as it continues to support industry efforts, and works with the FHA to formalize industry-wide financial assessment rules and regulations, effective today MetLife Home Loans has suspended the use of its financial-assessment models.”

The company implemented its policy following guidance released by the National Reverse Mortgage Lenders Association as well as statements from Department of Housing and Urban Development officials that such an assessment was fair game for lenders. Acting Housing Commissioner Carol Galante also encouraged the use of financial assessment saying it was a “good idea” before NRMLA conference attendees in October. Yet MetLife stood as the only lender to act at the time.

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“In October 2011, the Federal Housing Administration issued guidance that reverse mortgage lenders could consider the financial capacity and credit assessment of HECM  applicants. At that time, many in the reverse-mortgage lending industry, including MetLife Home Loans, were in significant discussions on how best to implement financial assessment of HECM applicants,” the MetLife spokesman said.

Since implementing the new policy, which considers a borrower’s income and credit in order to qualify, brokers have reported they have brought business elsewhere because many borrowers could not qualify under the new guidelines. Industry estimates have placed that proportion of borrowers at between 10% and 30%.

Other lenders have stated they are developing financial assessment guidelines but have not stated a time frame for their release. HUD has also said it is developing a rule, but that the process takes many months and the final release date is uncertain.

“MetLife Home Loans continues to strongly believe that developing a sound financial assessment process will further the stated goals of the HECM program, and make the program stronger and more attractive to the maximum number of potential senior borrowers,” the company spokesman said.

The company is expected to provide more information to industry partners during a conference call Wednesday.

Written by Elizabeth Ecker

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  • Modification would have been one thing but suspension is another.  To see MetLife so radically change positions in less than 3 months does not add any confidence to the leadership which should be found in the number one lender in the industry.

    This makes MetLife look desperate.  How ridiculous!!  I understand the only dish being served at the MetLife cafeteria for its reverse mortgage division decision makers is crow.

    Who knows what MetLife will pull next?

  • >>saying it was a “good idea” before NRMLA conference attendees in
    October. Yet MetLife stood as the only lender to act at the time.

    It was a good idea then, and it’s a good idea now, no disagreement there.  But the model was poorly designed – unreasonable.  It’s nice to see Urban requesting input from their customers, as they design theirs.  They’re approaching it right.

  • In a very small and competitive market, this re-appraisal was overdue.It will take a common home equity assessment (HEA) standard from HUD, a mandatory contingency set-aside for T&I, and thoughtful and consistent enforcement of existing rules to address the T&I problem. 

  • In a very small and competitive market, this re-appraisal was overdue.It will take a common home equity assessment (HEA) standard from HUD, a mandatory contingency set-aside for T&I, and thoughtful and consistent enforcement of existing rules to address the T&I problem. 

  • I personally doubt if other lenders not adopting MetLife’s financial assessment guidelines created confusion in the marketplace. In fact several lenders implemented FA guidelines although different than Met’s for some or all products.

    What Met’s FA implementation did create was a competitive landscape in the free market. It seems their is a push for FHA & HUD to mandate some minimum standards of financial assessment. That is to be expected but an industry or all lenders cannot adopt the specific guidelines of one lender. Until then individual lender risk tolerance, investors and the secondary market will drive lender specific financial assessment policy. Please, let’s not see a push for overly specific nor overreaching guidelines by HUD/FHA in order to “level” the playing field. Let the free market decide and also have minimum standards to reduce future T&I defaults.

  • This is a very difficult spot to be in.

    If I were to paraphrase, Met has said “Well, we created an unlevel playing field that cost us a ton of business. so let’s revert to our old position because getting business is better than getting better business. And we sure can’t take this loss of TPO files”.

    Or even worse, “Well, bring us back that marginal business because we need it regardless as sales are sufferring”. A PR nightmare huh.

    Underwriting HECM Borrower Fitness is a matter of common sense. 4506T and tax returns don’t give you an accurate picture of a seniors cash flow. They only tell you what was reported. Every senior household has contributions from children, part time jobs that are tax eempt, and other such issues. I believe that Met’s program and the one currently proposed by Urban, was suggested by a typical forward mortgage compliance person with no real understanding of how we work in the seniormarketplace.

    A good HECM underwriter will look to establish some evidence of cash flow, not income, and will look to insure that there is enough of that cash flow left to cover taxes and insurance. He does not need more rules to make him look in the wrong closets, so to speak. He just needs to use page 5 of the 1009 to document what he did look at, and explain his interpretation and judgment.

  • I personally doubt if other lenders not adopting MetLife’s financial assessment guidelines created confusion in the marketplace. In fact several lenders implemented FA guidelines although different than Met’s for some or all products.

    What Met’s FA implementation did create was a competitive landscape in the free market. It seems their is a push for FHA & HUD to mandate some minimum standards of financial assessment. That is to be expected but an industry or all lenders cannot adopt the specific guidelines of one lender. Until then individual lender risk tolerance, investors and the secondary market will drive lender specific financial assessment policy. Please, let’s not see a push for overly specific nor overreaching guidelines by HUD/FHA in order to “level” the playing field. Let the free market decide and also have minimum standards to reduce future T&I defaults.

  • As mentioned previously, what MetLife has demonstrated in a matter of just a few months is poor leadership as the so-called “reverse mortgage leader” and poor judgement with their unnecessary haste in attempting to be a trail blazer for the reverse mortgage community. It seems that the winds of change were unaccounted for, and their blaze has come back to burn them.  What they will bounce back with will be interesting to see. 

  • Wow, this is for sure the topic of the hour. Was Met Life’s management wrong and made poor decisions or were they reacting to what they felt HUD was going to implement if other lenders did not take their urging?I feel a bit different than everyone else. I see this as an initial move by Met life’s management to strike first, set the stage and guidelines that maybe HUD would eventually adopt. Met life was wrong, it back fired on them!    I think Met Life did not have a choice, they had to suspend the FA program. They had to suspend it and take the time reevaluate their position as well as the market place. 

    The entire situation of T&I created this environment. The FA program thus far has not solved the problem. As I have been saying over and over, we need to look very deep into the program of establishing an “Escrow Account” for seniors. Create the old coupon book for them. Our seniors can budget their money monthly a lot easier than once a year getting hit with a whopper of a payment! Go to the market place, ask a senior what their opinion is?This is my opinion for what ever it is worth. Have a great day all.John A. Smaldone

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