MetLife Home Loans, a mortgage finance company headquartered in Irving, Texas, has agreed to pay $123.5 million to settle claims of lending violations on government-backed mortgage loans committed by one of its subsidiaries under the False Claims Act, according to an announcement from the U.S. Department of Justice.
According to the Department of Justice, MetLife Bank, a New Jersey-based banking services company that merged with MetLife Home Loans in 2013, knowingly originated mortgage loans that were insured by the Federal Housing Administration (FHA) and the U.S. Department of Housing and Urban Development (HUD) that did not meet applicable requirements. MetLife Bank was, and MetLife Home Loans is, a subsidiary of New York-based holding company MetLife Inc.
"MetLife Bank’s improper FHA lending practices not only wasted taxpayer funds, but also inflicted harm on homeowners and the housing market that lasts to this day," Acting Assistant Attorney General Joyce R. Branda of the Justice Department’s Civil Division said. "As this settlement shows, we will continue to hold accountable financial institutions that elected to ignore the rules and to pursue their own financial interests at the expense of hardworking Americans."
MetLife Home Loans admitted as part of the settlement that it certified many FHA-insured mortgage loans that did not meet HUD's underwriting requirements during a three-and-a-half year period from September 2008 to March 2012, and that MetLife Bank was aware that a "substantial percentage" of these loans were not eligible for FHA mortgage insurance as determined by the bank's own quality control findings. Those quality control findings were routinely shared and known to MetLife Bank's senior managers.
MetLife Bank reportedly downgraded FHA loans from a "material/significant" deficiency rating to a "moderate" deficiency rating. Between January 2009 and December 2011, MetLife Bank's quality control process identified 1,097 mortgage loans the bank had underwritten that were rated as having "significant" deficiency, but the bank reported only 321 of those loans to HUD. According to the Department of Justice, the bank's actions resulted in FHA insuring hundreds of mortgage loans that were ineligible for FHA insurance – and as a result, when those loans defaulted, FHA suffered "substantial losses" when paying out insurance claims made by the mortgagees.
"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, which investigated the case jointly with HUD, the HUD Inspector General, and the Civil Division. "This settlement is part of our systematic, national effort to hold lenders accountable for irresponsible lending practices that not only harmed FHA, but also contributed to a catastrophic wave of home foreclosures across the country."