Lenders See MetLife Reverse Mortgage Exit As Opportunity, Two-Edged Sword

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.

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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

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  • Yet endorsement volume continues to shrink.  

    During its time in the industry (starting in October 2007), MetLife has endorsed less than 22,000 HECMs which is less than 3% of the over 750,000 HECM endorsements made since 1989.  For fiscal 2009 alone, Wells Fargo had 18,997 endorsements.  The largest fiscal year of endorsements, MetLife has ever had was last fiscal year with 8,523; that was less than 12% of total HECM production for that fiscal year.  

    It is very feasible that lost volume for fiscal 2013 could exceed MetLife endorsement volume during this fiscal year.  So while many lenders could see their market share rise during next fiscal year, unlike this fiscal year, total endorsement volume for the Top Ten lenders could drop.

    MetLife was the industry leader by default.  The same will be true of the new leader.  The question is who will lead us out of the production loss our industry continues to experience.  I am not interested in who will be the next MetLife but rather who will be the next Wells Fargo and Bank of America?

  • Cynic – good analysis.

    I also like to point to the failure of the Saver as an example of how the news gets manipulated. By my last count I think Met was well over half of the very small nationwide production of this product. Yet last week I remember someone blogging that they sure hoped the Saver could make it because it was so important. To who? certainly not most of our clients.

    I also really must wonder if the person quoted above as “having accepted the excessive regulatory oversight” has ever been subjected to a HUD audit.

    Anyone who has had to go though one of these things, with HUDs complete lack of accountability for the errors they make, would never cite accepting excessive regulatory involvement as a key to profitability.

    Soon we might all be required to maintain a side office for our “in house” government employee regulator. Think I’m kidding?

    With B of A, Wells, and Met gone, they have a ton of free time to work on you and I.

    I’ve had enough “change” for a lifetime.

  • I predicted the exit of Met months ago in this very forum…and was immediately scoffed at (you know who you are). Strangely, I can’t recall anyone backing my position at that time.
    And once again we have the vultures who are left lamenting that, for the size of their bellies, they can’t immediately consume all that volume that will now be their’s.
    Have you learned nothing from the past? Met, like Financial Freedom and BofA and Wells before it, will remove their volume with their exit. There is no volume waiting for you. Returning to the vulture theme, they killed elephants while you can take down a sick hummingbird, on a good day.
    Who will be number 1 now? No one, that’s who. Numbers 20 and below will just trade places from time to time. 19 and above are gone, as is their volume. 
    The Saver is a dud because there is little equity. The timing for this product was perfect, perfectly poor. Clients will only consider the Saver when they have reached their cash need. Now they struggle to reach their goal at all, even with the full payout. And we wonder why GM failed with the Volt. Do you suppose HUD runs them too?

    • roxie1,

      You are funny.

      I remember you were adamant that total endorsements would be less than 36,000 for the fiscal year.  Well 7 months into it, we are not there yet but we are at over 33,000.  While there is some risk in saying it, we will be over 36,000 by the end of May 2012 with 4 months to go until fiscal year end.  It looks as if we will end up around 50% greater than you predicted.

      Sure we lost something when we lost Wells and B of A but somehow a portion of their production was picked up by the rest of the industry.  Whether or not our endorsement volume will continue shrinking next fiscal year at the same pace it is for this fiscal year is open to question.  But the ongoing decline this fiscal year was generally expected with or without the Big Two but in my eyes would have been less if they were still here.  

      While I do not remember what you said about MetLife when, nonetheless despite what their management reassured us, they are now gone except for the wrap up.  Will that impact endorsement volume for the rest of this fiscal year?  Not much based on the four month rule of thumb.  BUT next fiscal year we will feel the loss right away.  Worse, the impact on penetrating the world of financial planners will be slowed.  Saver endorsement production will go down.

      It is always fun to see what you will say next.  Please do not be offended if we do not always agree.

  • To Cynic,
    Gee, I guess you do know who you are.
    When you were a little kid, you probably believed everything the adults told you, so the Met Life news must have crushed you.
    I might as well tell you now that there is no Santa or Tooth Fairy. I’m not sure you’re ready for the truth about Global Warming.
    Yes, I was right about Met leaving. And in the same submission, I believe that I predicted closings averaging 3000/month in calendar year 2012 (I don’t deal with fiscal years).
    I was absolutely right in the direction of closings (down sharply), but maybe a little early. The true influence of the giants that have left the RM market takes months longer than your 4 months estimate.  The demand they create can influence potential buyers for years.
    If interest rates continue low, 3000 closings a month will seem high.
    Only the forward mortgage guys can navigate these waters and they are picking off more potential RM clients every day.
    I wouldn’t leave my day job for  better pay at NRMLA any time soon.

    • roxie1,

      Is the reason why you cannot think in terms of fiscal years because you swallowed the theory of global warming?  That would ruin anyone to new and progressive ideas.  You probably think the impact to the environment is better because of hybrid cars as well.  

      You are not actually going to tell me that Santa, fairy tales, and Al Gore inventing the Internet are not true?  I bet you will tell me that Al and Tipper divorced despite the movie Love Story being about them.  You mean Love Story was not even about them.  My confidence in life is shaken.

      I am so old I remember the global freezing rage.  My relatives met the Roman Legions painted in blue back when Thor, Zeus, Hercules, Achilles, and Ulysses were all the rage.

      Well, I have no idea how you calculated the endorsement level would be less than 36,000 for this calendar year or the folks at the NRMLA convention came up with 100,000 for next calendar year.  I am sure all of the calculations were somehow tied to the science found in global warming.

      As to MetLife, congratulations (I guess).  But what is odd, I do not remember you predicting the date of their departure.  It really did take three seconds for me to completely recover when I read the announcement on CNBC; by the end of the three seconds, I was on the phone firming up my relationship with the MetLife originator who was looking to join my operations because he was afraid that MetLife would desert him by leaving the industry (some of us hedge our bets).  Why it took that long, must be due to my firm beliefs in Santa and the tooth fairy.

      Have a great weekend.      

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