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Regulatory Pressure From Dodd-Frank Act Forces MetLife to Sell Off Bank

ericp
Jul 21, 2011

MetLife Inc. has announced that it is exploring the sale of MetLife Bank NA’s depository business, which includes savings accounts, certificates of deposit and money market accounts. The company plans to continue offering residential mortgages through its MetLife Home Loans division. The company decided that a bank holding company structure is no longer appropriate. MetLife was considered a target among insurers to be designated as a "systemically important financial institution" and face further scrutiny from the Federal Reserve and regulations such as the Dodd-Frank Act. MetLife Bank had total assets of $15.6 billion, including $9.3 billion in deposits as of March 31, 2011. “MetLife Bank represented just two percent of MetLife Inc.’s first quarter 2011 operating earnings, and we do not believe it is appropriate for the overwhelming majority of our business to be governed by regulations written for banking institutions,” said Steven A. Kandarian, president and chief executive officer of MetLife Inc. “In a highly competitive global insurance marketplace, it is imperative that MetLife be able to operate on a level playing field with other insurance companies.” MetLife Bank began in 2001 by offering retail savings products via the Internet. The bank’s MetLife Home Loans division launched in May of 2008 following the acquisition of the reverse mortgage business of EverBank LLC, and certain mortgage assets of First Horizon Home Loans from First Tennessee Bank. "We are pursuing a sale of our depository operations and in the future will concentrate on our mortgage banking businesses (including forward and reverse mortgage origination, servicing and warehouse lending). MetLife Home Loans will remain a part of the MetLife enterprise," said an internal company memo obtained by National Mortgage Professional Magazine.  In the memo, the company contends that it is committed to growth strategies in all of its mortgage banking businesses, including focusing on the continued success of its jumbo mortgage products. "The mortgage business often provides access to the bulk of a person's wealth and, therefore, is a natural part of financial and retirement planning," continued the memo. "In addition, the mortgage product provides a natural hedge to the insurance business and a diversified entry point to customer acquisition." Since the sale of MetLife's banking division will require the company to relinquish its bank charter, the licensing of loan originators (LOs), and in some states, fulfillment and loss mitigation employees, will be required. Over the next six to 12 months, MetLife plans to license each of its LOs. "The elephant in the room here is the fact that all of MetLife’s LOs will now have to become licensed," said Eric Tishaw, chief operating officer of Hazel Green, Ala.-based Hometown Lenders. "A significant portion of MetLife's recent growth has come from entire branch networks and producers making lateral moves from competitors in an effort to make a move to a company where licensing would not be required, obviously to avoid the hassles of becoming licensed (and the fear of failing!). Those producers that MetLife are able to both retain and get licensed will no doubt be re-evaluating their compensation levels and comparing that to what they could get elsewhere working for a smaller lender, who will be able to offer them relief from big-bank red tape and who will give them more flexibility, more products and greater autonomy." "Maybe this will get Capitol Hill to listen and join the dialog about finding a more middle of the road stance on mortgage regulation," noted one industry insider. "If the government wants to see private money return to the market and slowly do away with the government-sponsored enterprises (GSEs), then chasing MetLife off isn’t the way to do it!"
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