Will Product Mix Change with Loss of Large Reverse Mortgage Lenders?

Most reverse mortgage competitors agree that MetLife’s exit from the business will turn out to not be such a bad thing in the long run. But the future may be less clear for one important segment of the market: the HECM Saver.

“Wells Fargo and MetLife were far and away the biggest originators of Savers,” says John Lunde, president and co-founder of Reverse Market Insight. “That’s going to be one of the things that is unknown right now,” he says. “MetLife definitely was leading the way, although some other companies have been active as well.”

While the Saver has never reached the 20% benchmark that was hoped for it when it launched via the Department of Housing and Urban Development in late 2010, it has shown climb in term of proportion of overall reverse mortgage volume from less than 5% in early 2011 to 7.02% in February, the latest month for which HUD data is available. In mid- to late-2011, that percentage reached and surpassed 9% for three consecutive months.

Chart: HECM Saver Market Share 2011

Tags: HECM Saver Market Share 2011

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In 2011, MetLife told RMD its Saver volume was around 20% of its business overall. Some originators have focused exclusively on the market, with others reporting that Saver adoption has recently picked up as borrowers use the credit line option as a short term solution for immediate financial needs.

Without the big banks in the market, pricing for the fixed rate Saver is likely to suffer, one originator told RMD.

“The issue right now I see is LIBORs and Savers, with most lenders having sold them through MetLife,” he said. “The products will be weak for a while coming at the worst timing.”

Other lenders will likely step in to fill the gap, Lunde predicts, although it will take a certain kind of lender to drive the market forward.

“If the Saver is going to continue to grow, there needs to be a company that has the right capability,” he says. “Not every company is well suited to offer the right economics on the Saver.”

As long as there is a lender—or lenders—to offer the right economics and allow for brokers to market Saver loans, the industry may not need a corporate giant to lead the market, however.  Recent interest from industry outsiders with the potential to spur growth could be a major factor.

“We’re past the point where we have to have a single lender leading the charge,” Lunde says. “On the academic side and in the financial planning community, hopefully that interest keeps going. That’s where a lot of future borrowers and growth comes from.

Written by Elizabeth Ecker

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  • MetLife was successful with Savers (I feel) because they offered consumers so many flavors to select from, and their pricing was superb.  It just made sense to use them.  Somebody else can be number one for the platform too, if they did the same.

  • In many instances the Adjustable Saver is the better product for the client.  The instinct of the borrowers though is often, “I want a fixed rate.”  My concern is that for some lenders, it will be too easy to say…”sure, I can get you a fixed no problem.”, and that they will not take the time to explain the benefits of each option.  I know that we have HUD counselors, but it really takes a conscientious loan officer to take the time to be sure the borrower is making the best choice for the borrower, not the lender. 

  • It would be very surprising if any lender could do what Wells and MetLife were doing because of their ability to hold Savers in their mortgage portfolios.  The loss could be as high as 180 Savers per month with the result that the trend could go down to 2,000 endorsements per year for the next few years.  

    Last fiscal year the total was almost 4,000 endorsements.  The total for this fiscal year could be around 3,100 since we are already at 1,998 endorsements for the first six months of this fiscal year..

  • Met did well with saver because they did not charge an origination fee
    even when someone had no mortgage.When they start paying us a modest fee for doing the same thats when the saver will bust out.
    Insurance companies pay for future earnings

    • Exactly!  MetLife was paying brokers a minimum rebate on Standard ARMs (which allowed them to lower Origination Fees), but it didn’t apply to Savers. 

      • Lance and Tom,

        Are you guys kidding?  

        It is because of MetLife’s ability to hold onto loans that its pricing structure was possible.  Without deep pockets, few can make this work without loss.  Every wholesale lender would have done what MetLife did if they had had the resources.

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