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Although insurance giant MetLife Inc. is contemplating bids for its banking and mortgage divisions, the company's warehouse lending unit is nearing the $1 billion mark in terms of commitments.
December 12 -
On Oct. 25 MetLife announced that the Federal Reserve had denied its request for approval of its capital distribution plan that included a dividend increase and resumption of stock repurchases. Likely it is a reflection of a prudent regulator. Rather than make an isolated determination on a single company, the Fed probably prefers to await results from its planned 2012 cross-institution analysis of the largest U.S. bank holding companies. MetLife's participation in that analysis underscores its systemic importance.
October 28
A little over three years ago insurance giant MetLife Inc. looked like a genius on home loans.
It stuck its toe in the mortgage banking pond by purchasing the production arm of First Horizon National Corp. and some of its mortgage servicing rights, and it kept adding to the business.
By early 2011 it could boast that it ranked 12th in originations and 10th in servicing. In short, it bought a well-respected franchise at the bottom of the market and had little in the way of "legacy" problems to contend with. Profits were decent, but not exceedingly so.
All clues point to Steven Kandarian, who was promoted to chief executive of the parent company in March. The general belief is that Kandarian looked at the risk and rewards of both banking and mortgages — not to mention the regulatory burdens — and concluded that MetLife could do better elsewhere.
Now it has to sell a mortgage banking franchise when investor demand is weak. What makes the decision even odder is that mortgage origination profit margins are the best they have been in years, though production volumes are low. Investment banking advisors generally agree that the easier part for MetLife will be selling the 250 or so retail and wholesale offices that belong to MetLife Home Loans, which is headquartered in Irving, Texas.
That's easier, not easy. It hardly means the MetLife production network will be sold at a premium. Good loan officers and account executives are always in demand, especially if they have strong ties to real estate agents and builders. But as one M&A specialist said: "I'd be surprised if they get any consideration." Translation: Who cares if production profit margins are high? Originations are tepid. Why pay up? If you need loan officers, just hire them.
Why pay up, indeed. At last check at least two firms — PNC Financial Services Group Inc. and American Express Co. — were kicking the tires of the MetLife unit. Both declined to comment for this column, as did MetLife.
As for the unit's $85 billion mortgage servicing rights portfolio, that is a different matter entirely. No one believes MetLife Home Loans will be sold in one piece. Production will be sold separately from servicing. And if the parent does not like the servicing-rights bids it may just outsource the whole business to someone like Nationstar Mortgage or Green Tree.
There are numerous problems with selling MSRs in today's market for the obvious reasons: uncertainty over the future of Fannie Mae and Freddie Mac, uncertainty on servicing compensation, a pending servicing settlement with the states, and the list goes on and on. As any veteran mortgage banker can attest: servicing contracts are no longer the liquid asset they once were. Blame the government-sponsored enterprises or Basel III — take your pick.
So, where does this leave MetLife Home Loans? In purgatory, probably. If PNC or American Express offer only a token amount for the production network, it is possible the insurer might change its mind and stay in the business.
And what about MetLife Bank? It only has one retail branch. Who wants a bank with only one branch unless you already have a bunch of branches and you need assets? But if the bank sells, who will fund the mortgage company?
