With the sudden exit of MetLife from the reverse mortgage business, announced last week, the remaining players in the market are already gearing up to make the most of the opportunity that remains. The overall sentiment is positive from a competition standpoint, but the void MetLife leaves in other ways will not be easy to fill, they say.
“This is one more opportunity for us to continue to grow,” Richard Mandell, CEO of One Reverse Mortgage told RMD. “We’re excited. There are no negatives for us.”
MetLife announced to its employees and business partners on Thursday that it would be winding down its reverse mortgage origination platforms, and has agreed to sell its servicing operations to Texas-based Nationstar Mortgage, which also recently bought the rights to Bank of America’s reverse mortgage servicing.
Some remaining lenders expressed surprise in light of the decision, but most are seeing it as a chance to hire top talent and increase market share.
One Reverse recently announced expansion plans including a new San Diego office to house some of its retail operations and welcomes the chance to grow its team further.
“We view this as an opportunity for some of those who are not working with MetLife any more. We have a system for licensing and have since we started the company under Quicken Loans,” Mandell says.
MetLife, which stood as the largest lender in terms of volume, employed 500 people in its reverse mortgage department. While the opportunity presented to other lenders is seen as a positive from a growth standpoint, most agree, the news is not all good.
“I think it’s a two edged sword,” says Torrey Larsen, president and CEO of S1L. “The positive is the opportunity for us to expand retail and wholesale. We’re excited to add quality originators and managers and we are committed to the space.”
However, the overall reaction to the exit will take time, Larsen says.
“The bigger concern is whether the current players have the bandwidth to absorb that amount of volume,” he says. “Most other players are restricted by their own financing vehicles. Can all that volume that MetLife has had be absorbed? That is a question mark.”
The reasoning MetLife provided for the exit, including a heightened regulatory climate, could also be seen as a challenge, or as an opportunity, says John Mitchell, CEO and founder of Austin, Texas-based Reverse Mortgage USA.
“In the case of Bank of America, Wells Fargo and MetLife, the gain from being in the business was not worth the regulatory pain,” he says. “I see it working to our advantage. If you are a company that has figured out a way to be profitable in this business and accept the extensive regulatory oversight… the net effect is that the players in the business who really focus exclusively on reverse mortgages are going to prosper even more as MetLife has left the business.”
Most say they are not surprised by the exit, as it follows similar paths taken by other corporate lenders including Bank of America and Wells Fargo, which left the business last year.
“There’s always a question about the capital markets and how they are going to respond,” Larsen says. “But I believe the investors like the product. They’ve been educated. This is the third time they’ve seen an exit and every time that part of the market has returned.”
Written by Elizabeth Ecker