MetLife Home Loans LLC has agreed to pay the U.S. $123.5 million to resolve claims they violated the False Claims Act, by issuing Federal Housing Administration (FHA) loans insured by the U.S. Department of Housing and Development (HUD) they knew did not meet application requirements, according to a release from the Justice Department.
“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,” said Acting Assistant Attorney General Joyce R. Branda of the Justice Department’s Civil Division in the release. “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 admitted that from September 2008 through March 2012, it repeatedly certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements. The bank admitted it was aware that a substantial percentage of these loans were not eligible for FHA mortgage insurance due to its own internal quality control findings.
MetLife found 1,097 FHA loans that did not meet requirements through their own evaluation process, but only reported 321 of those mortgages to HUD, despite its obligation to self-report any violations. The 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. According to the report, one 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.”
“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,” U.S. Attorney John Walsh of the District of Colorado said. “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.”
The settlement was the result of a joint investigation conducted by HUD, the Civil Division and the U.S. Attorney’s Office for the District of Colorado.