Investors “Wait and See” Following MetLife Reverse Mortgage Exit

Lenders are scurrying to increase hiring efforts and grab market share in the wake of the announcement Thursday by MetLife that it would be putting the brakes on its reverse mortgage operations.

How investors will respond is a question that remains.

Those in the HMBS market say there has been no real reaction yet, but that lender exits of the past have taken time to settle in.

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“Investors don’t seem too concerned, but most have yet to put any money to work since Thursday’s announcement,” says Jeff Traister, managing director for Cantor Fitzgerald.

“In the past, when other potentially negative news stories hit the tapes, the reaction was always initially lackluster. But, over the next weeks, prices dropped, sometimes dramatically, then rebounded with even more strength than before. MetLife might be a bit different as they were the last household name and they were often the pricing benchmark for other trades,” he says.

There also may be some upside for the issuers that remain in the market, says Mike Kent, president of mortgage lending for Reverse Mortgage Solutions.

“The departure of MetLife is a real opportunity for the remaining issuers as it apply’ s to the absorption of that market share,” he says.

In the long run, however, investors have seen several large companies depart from the business and this exit is not likely to deter them. With increased regulatory pressures on banks in particular, many companies have struggled, with MetLife being no exception. Prior to its reverse mortgage exit, the company sold off its banking operations and wound down its forward mortgage lending arm.

“Investors understand why they got out and don’t view it as a negative for the industry long term,” Traister says.

Kent agrees that while the short term reaction is less certain, there is not likely to be a long term effect due to the exit.

“As of today there is a wait and see feeling in the secondary market,” he says. “I do not anticipate any kind of long term erosion of price due to Met’s departure.”

More prevalent at this point in time, are concerns about the volume impact the MetLife exit could have. With a down year and projections placing annual reverse mortgage volume in the neighborhood of 60,000 loans, the volume issue is significant regardless of which companies are coming or going.

On the other hand, HMBS pools still perform the same from a cash flow perspective, Traister says.

“Whatever is the fallout, in a month this will be water under the bridge and most investors won’t really care.”

Written by Elizabeth Ecker

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  • While the loss of MetLife could become a problem, much worse could be the continued shrinking in endorsement numbers.  When we finally hit bottom will we be thought of as little more than a novelty item by the investment community?  

  • We will see a drop in endorsements, it is almost certain. However, I feel we will see in time a steady increase in endorsements and a stronger market.

    Those that are in the industry now and those getting into it are striving to build a strong foundational base. If they are smart and play their cards right, they will do what they can to keep the good people they bring aboard.

    There are many good people available today, we don’t want to lose these people, we hope they will stay in the industry. We need to offer good comp programs and incentives and they will stay with us!

    John A. Smaldone

  • I have no idea why this should be a shock to anyone. After the announcement of pubicly traded companies having to double indemnify their loans that they sold; and MetLife’s exit from the mortgages on the foward side as well as the unfortunate tradgedy associated with Financial Assessment of clients and the resultant mass migration of the top producers from Met, poor Snoopy was a pretty sad puppy. If investors are shocked by this I’d be very very surprised. It is investors who predicted this in the first place and will likely go on business as usual. Companies who have risen to the top of late with very good business models and hiring the very best people from the changes are the winners. Clients and loan officers I trust will be better for it. Those who lost their jobs, I am very sorry but I trust they will find warmer waters in these companies with better pay and benefits. 

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