Years after abandoning the mortgage business, MetLife Inc. is paying more than $100 million to resolve false claims allegations on government-insured loans.
The New York-based company originated residential loans through subsidiary MetLife Bank, N.A., and MetLife Home Loans LLC, which it acquired from First Horizon National Corp. in 2008.
But by July 2011,
plans were announced to sell the bank, while plans to sell the mortgage unit were disclosed three months later.
A deal was reached for
GE Capital Financial Inc. to acquire most of MetLife Bank’s depository business. That acquisition completed in January 2013.
But no buyer was found for MetLife Home Loans, and operations were discontinued in 2012.
The banking shell was merged into MetLife Home Loans in June 2013 as the bank abandoned its bank-holding company status.
Now, MetLife has agreed to pay $123.5 million to resolve allegations that the bank violated the False Claims Act, according to an announcement from the U.S. Attorneys Office for the District of Colorado.
The settlement follows a two-year investigation by HUD’s Office of Inspector General.
The Justice Department claims that MetLife Bank, a direct endorsement FHA lender, knowingly originated loans insured by the Federal Housing Administration even though they didn’t meet FHA guidelines.
The violations allegedly took place from September 2008 until March 2012.
According to the government, although the company’s quality control findings indicated a substantial share of its FHA originations weren’t eligible for the program, it
repeatedly certified the loans for FHA insurance.
While FHA loans deemed by MetLife as having a “material/significant” deficiency was between 25 percent and 60 percent up until August 2010, the company began in 2010 frequently downgrading the deficiency level 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,'” the announcement stated.
Of 1,097 FHA loans identified as having significant deficiencies, MetLife self-reported just 321 to the Department of Housing and Urban Development even though it was obligated to report all the loans.
As a result, hundreds of loans were endorsed by FHA that shouldn’t have been — causing “substantial losses” when claims were later paid on the loans.
“We appreciate that MetLife Bank has accepted responsibility for its actions and is settling with the government,” HUD General Counsel Helen Kanovsky said in the statement.
