MetLife Inc., (NYSE:MET) the largest life insurance company in the U.S., announced its exit from the originating forward residential mortgages business. With this, the company will no longer accept new loan applications for forward mortgages but will continue to originate reverse mortgages. MetLife Home Loans, the mortgage division of MetLife, will continue to service its current mortgage customers. [1] MetLife expects to incur $90-$100 million in costs related to its exit from the business over the next year. Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM) and Citigroup (NYSE:C) are the top mortgage lenders.
We have a $36 Trefis price estimate for MetLife, which is about the same as the current market price.
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The move to exit the forward mortgage business is consistent with MetLife’s plan to cease being a bank-holding company and thereby avoid unnecessary oversight of the Federal Reserve. In October of last year, MetLife said it was exploring the sale of this business. It had also agreed to sell its bank deposits worth $7.5 billion to GE Capital and was exploring the sale of remaining custodial deposits of $3 billion.
The sale of its forward mortgage business will not have any significant impact on Metlife’s financial performance as the company’s entire retail banking business, including mortgages, represents under 2% of its 2011 operating earnings, as of September 30.
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Notes:- MetLife Exits Forward Mortgage Business, Press Release, MetLife, Jan 10, 2012 [↩]
