Tag Archives: MetLife

MetLife Exits Reverse Mortgages

30 Apr

Last Friday’s news reports were full of the sudden revelation: MetLife Home Loans will no longer offer reverse mortgages.  The reasons given range from the capital markets to regulatory issues.

How it affects borrowers:  Nationstar Mortgage will take over servicing existing loans.  Loans in the pipeline have until June 1, 2012 to fund.  These loans had to have been registered by midnight of May 26th.  All other loans will have to be submitted to other lenders.  LOs:  check with your account reps to see if they will accept applications already signed on MetLife forms (many will).

How it affects brokers:  just like when Bank of America and Wells Fargo left the reverse business, LOs will have to place their loans with another lender.  There will likely be a slowdown, because of the huge volume of loans that MetLife was processing.  These loans will all have to find homes somewhere else – good news for these other lenders, though there will be challenges in keeping up with the volume at first.

REVERSE MORTGAGE AND THE 4506-T

5 Jan

We wonder how many of our Reverse Mortgage partners are transplants from the forward/traditional mortgage world?  Do you say ten-oh-three when you really mean ten-oh-nine?  Or were you born into the mortgage industry as a reverse originator?

Yesterday, RMD asked “Is Forward Experience Becoming More Valuable to Reverse Mortgage Lenders?”

Reverse mortgages have traditionally required different skills to originate, but changes made to the program are making them increasingly similar to forward mortgage products.

One change comes in the form of the use of a financial assessment by MetLife that works to prevent tax and insurance defaults by examining a borrower’s credit history and income.

With other lenders and the Department of Housing and Urban Development expected to release their own guidelines, originators will need more experience in compiling documents and verifying income and credit history. The loan process is beginning to mirror that of a conventional 30-year fixed refinance.

“Underwriting certainly becomes more like forward because of financial capacity underwriting,” says John Lunde, president and co-founder of Reverse Market Insight, referring to the recent implementation of a borrower financial assessment by MetLife. “But the biggest difference is the client and all the differences that brings up.”.

The origination of reverse mortgages has also shifted with the decline of retail giants, Helm says.

“It used to be the majority of the [reverse] loans were generated through retail establishments, and that’s changed,” he says. “Now it’s more knocking on doors, just like the forward business has been all along.”

But the similarities and experience may be more important to some parts of the process than others, and what differentiates the forward business from the reverse business at the end of the day will always be the borrower, Lunde says.

“There are a lot more differences than similarities because of whom we’re dealing with,” he says.

The New Financial Assessment for Reverse Mortgage Borrowers

15 Nov

Reverse mortgage lenders are beginning to require senior borrowers to qualify for loans by proving that they have enough money to continue paying property taxes, home insurance premiums, and other home upkeep expenses. MetLife is the first reverse-mortgage lender to implement a financial assessment requirement, effective November 14, 2011. Other lenders say they are developing similar requirements, and the FHA supports the companies’ efforts.

While the HECM program requires consumer counseling to make sure seniors understand the loan, there are no income or wealth requirements that seniors must fulfill to qualify. All they need is substantial equity in their home. Lenders use the value of the home as collateral and pay out differing portions of the owner’s equity in the home, depending on the borrower’s age and other variables.

In addition to receiving cash, the borrower is freed from ever needing to make another mortgage payment and may remain in the home as long as he or she can.  Even if all their equity has been used up over time, borrowers may stay in the home and not be required to make future loan payments. Because HECMs are “non-recourse” loans, borrowers or their families can walk away from homes with a negative loan balance and face no financial repayment obligations.

Without any financial means requirements for the loans, many older borrowers have found themselves unable to afford to continue paying property taxes and home insurance premiums. Failure to make these payments is grounds for foreclosure, and as many as 25,000 HECM borrowers have been estimated to be in technical default on their loans. Private lenders and the FHA have been working for roughly two years to develop a plan to respond to this problem, but an agency spokesman says “we’re not there yet,” and admits that it has proven to be a very difficult issue to resolve.

By requiring financial assessments of new borrowers, lenders are trying to eliminate such problems with future borrowers. The first company to implement the standard is MetLife, which began using the new rules on November 14.

The MetLife assessment process will evaluate a borrower’s income from Social Security and other sources, how much money they are likely to earn on their retirement assets, and the equity funds they can draw down from the HECM loan they’re applying to obtain. Spending needs will also be reviewed, including remaining housing expenses. This cash flow analysis will then be able to provide MetLife with a good idea of the borrower’s suitability for a HECM loan.  The income analysis will be expanded to include projected earnings on an applicant’s financial assets and the HECM funds themselves that would be provided if the loan is approved.

LOs have been provided with training Webinars and calculators to use to determine a borrower’s suitability for a HECM loan under the MetLife qualification guidelines, and can probably expect to see similar training offered by other lenders in the near future.