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October 17, 2011

MetLife Exiting Mortgage Business: My Advice To Their Loan Agents

October 17, 2011

MetLife Exiting Mortgage Business: My Advice To Their Loan Agents

Last week MetLife said they’re exiting the mortgage business. It’s big news in the retail loan origination world, so I thought I’d share how it impacts me as a mortgage banker and offer some advice to MetLife loan agents.

This move is a bit surprising since MetLife didn’t make a major push in residential mortgages until 2008 then grew quickly: they funded about $9b in mortgages in the first half of 2011, and were America’s 12th largest mortgage lender with 1.5% market share according to data tracked by Inside Mortgage Finance.

Gap MetLife Will Leave
I’m a mortgage banker so I rely on my own bank to underwrite and fund almost 90% of loans originated by me and my San Francisco branches. But most of our non-bank volume in the past two years went to MetLife.

They’ve been an important and reliable partner on new homes lending.

This is when you work with builders and developers to fund units on newly built condo and other projects. For obvious reasons, many banks don’t want to take risk funding units on a brand new project with no sales stats to show yet.

MetLife assembled a team that understands this business, knows all Fannie and Freddie fine print, and knows how to pick the right projects and teams who are building, selling, and originating loans on those projects.

So it definitely leaves a gap in that line of business.

The good news is that, just like with BofA exiting mortgage bank lending, competitors are already lining up.

But the move (and BofA’s recent move) reminds me of the mindset I stuck to during the worst of the crisis. It’s a hard path but has served me well, so here it is.

Advice To Loan Agents
Loan agents who went to MetLife and other big banks since 2008 were seeking stability of a big name and shelter from a storm that’s been raging in our industry since 2007. Now they’re reexamining their options once again.

I offered musical solace for MetLife loan pros on Friday, but I wanted to offer something more serious today.

When every mortgage firm and person was in peak panic mode from August 2007 through early-2009, most loan agents made decisions based on product.

“I need product for my clients” was the overwhelming refrain during the credit crunch. Big banks were the obvious way to fill that void.

During that time, I took a different approach. While everyone was trying to lock up product, I was trying to lock up point of sale.

Products and pricing come and go. So my theory was if I had key institutional relationships, I’d have access to best products and pricing.

So while everyone was scrambling for product, I pinned down a lending partnership with one of the largest real estate brokerages in San Francisco and won the loyalty of influential builders.

It’s an oversimplification to say that in one sentence now. Obviously it was the result of many years of work.

But the point is this: controlling point of sale is the only thing that matters because, as hardworking MetLife loan agents know all to well right now, product can be taken from you on a moment’s notice. Relationships are something you can control.

If you control large institutional point of sale deals, it doesn’t matter where the product moves. You’ll get it.

So as the MetLifers contemplate a new life—either under a future owner of the existing operation or with a new firm all together—my humble advice is to focus on your relationships.

I know how hard our job has been for years now, and I offer my best wishes to all of you. Hope this helps.
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Sources:
MetLife SEC Filing
Inside Mortgage Finance
Bloomberg
WSJ