MetLife Inc. says its foray into reverse mortgages dovetails with its core retirement products, but it is taking care not to link the two businesses too closely.
The New York insurance and investment services company, which has been making residential loans since 2005 and started writing reverse mortgages last year, said Thursday that it had agreed to buy EverBank Financial Corp.'s reverse mortgage business to rapidly expand this activity.
Dan DeKeizer, a vice president and actuary for MetLife's retirement strategies group, said in an interview that reverse mortgages are "very consistent with our approach to the marketplace" because his company "is very focused on the retirement space … and around retirement income. When we look at income and at demographics, it's pretty obvious that many individuals will choose or need to use equity to fund retirement."
However, he said, MetLife sees reverse mortgages "as being a complementary product, not a combined product."
Hence, its reverse mortgage borrowers will not be permitted to use funds tapped through a reverse mortgage to fund annuities or other retirement investments MetLife sells, he said.
"This was something we were looking at pretty carefully," he said, "and we came to the conclusion that in many cases, perhaps most cases, that would not be a suitable transaction."
AARP and other groups have in the past warned senior citizens against using reverse mortgage proceeds for investment purposes, arguing in part that funds left untouched in a reverse mortgage account grow faster than in comparable retirement investments.
At a December hearing of the Senate Special Committee on Aging, Prescott Cole, a San Francisco lawyer, testified on behalf of the Coalition to End Elder Financial Abuse that it has "major concerns about unscrupulous sales agents promoting reverse mortgages in order to generate funding to purchase annuity products."
MetLife said it planned to put EverBank's Bloomfield, N.J., reverse lender under its $7.4 billion-asset national bank, based in Bridgewater, N.J.
Last year MetLife Bank entered the reverse mortgage business through a deal in which it leased the EverBank unit's technology platform.
Analysts said the acquisition is a way for MetLife to tap what has potential to become a flagship retirement product as more baby boomers stop working.
Kenneth Kehrer, the director of the Kehrer-Limra research and consulting firm in Princeton, N.J., said "reverse mortgages are one of the potentially sleeping giants in the new frontier of retirement income distribution."
Reverse mortgages are an ideal solution for financial services companies that he said are "scrambling to start thinking about retirement income distribution instead of retirement income accumulation" through products like variable annuities.
Michael White, the head of Michael White Associates LLC, a consulting firm in Radnor, Pa., said reverse mortgages "are simple tools by which MetLife and other [companies] can retain their assets and customer relationships and have an opportunity to add to their portfolio more techniques for meeting the oncoming onslaught of retiring baby boomers."
The $5.5 billion-asset EverBank, which is owned by the Jacksonville, Fla., private-equity firm Lovette Miller & Co., bought Bank of New York's interest in BNY Mortgage Co. in March 2007 and renamed the unit EverBank Reverse Mortgage LLC late last year.
MetLife did not say how much it would pay for the unit.
The deal is expected to close by July 31.
