MetLife Home Loans To Pay $123.5 Mln To Resolve Mortgage-Lending Allegations

(RTTNews) - MetLife Inc.'s (MET) MetLife Home Loans LLC has agreed to pay the United States $123.5 million to resolve allegations that MetLife Bank N.A. violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development's (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements, the U.S. Justice Department announced.

"MetLife Bank took advantage of the FHA insurance program by knowingly turning a blind eye to mortgage loans that did not meet basic underwriting requirements, and stuck the FHA and taxpayers with the bill when those mortgages defaulted," said U.S. Attorney John Walsh of the District of Colorado.

As part of the settlement, MetLife Home Loans LLC admitted to the following facts: From September 2008 through March 2012, it repeatedly certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements. MetLife Bank was aware that a substantial percentage of these loans were not eligible for FHA mortgage insurance due to its own internal quality control findings.

According to these findings, between January 2009 and August 2010, the portion of MetLife Bank loans containing the most serious category of deficiencies, which MetLife Bank called "material/significant," ranged from 25 percent to more than 60 percent.

These quality control findings were routinely shared with MetLife Bank's senior managers, including the chief executive officer and board of directors. While the overall "significant" error rate identified by MetLife Bank decreased in 2010 and 2011, during the same time period, MetLife Bank more frequently downgraded FHA loans from "significant" to "moderate." In one instance, a quality control employee wrote in an email discussing MetLife Bank's practice of downgrading its quality control findings: "Why say Significant when it feels so Good to say MODERATE."

Overall, between January 2009 and December 2011, MetLife Bank identified 1,097 FHA mortgage loans underwritten by MetLife Bank with a "significant" finding, but despite an obligation to self-report findings of material violations of FHA requirements, MetLife Bank only self-reported 321 mortgages to HUD. MetLife Bank's conduct caused FHA to insure hundreds of loans that were not eligible for insurance and, as a result, FHA suffered substantial losses when it later paid insurance claims on those loans.