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.
“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