MetLife Buys First Horizon’s Residential Mortgage Business

June 7, 2008

MetLife has announced the purchase of First Horizon’s residential mortgage business. The volatility of the market and risk involved has made First Horizon nervous and they felt their shareholders were better served by getting out of the business.

Conversely, indications coming out of MetLife is that we are near the bottom of the mortgage crisis. Like buying real estate, once the price of an asset comes down to a certain level, most of the risk is then removed. MetLife obviously thinks there are some solid assets in the deal and has the size to absorb some of the losses in order to recognize the larger gains.

Either that or they are the greater fool.

The purchase includes the home loan unit of First Horizon’s Tennessee Bank National Association outside of that state, with 230 offices in the U.S., the New York-based insurer said today in a statement. MetLife said it isn’t acquiring any subprime or Alt- A mortgages in the purchase. Terms weren’t disclosed.

MetLife is expanding its banking services after agreeing in April to buy a reverse mortgage specialist from Jacksonville, Florida-based EverBank Financial Corp. Life insurers including No. 2 Prudential Financial Inc. and Principal Financial Group Inc. reiterated last month their strategies of investing in mortgages even after the meltdown of the subprime home market prompted writedowns and stock drops. via Bloomberg.com