DOJ Catch Of The Week -- MetLife Home Loans

By the C|C Whistleblower Lawyer Team

This week’s Department of Justice “catch of the week” goes to MetLife Home Loans LLC, a wholly-owned subsidiary of MetLife Inc.  On Wednesday, the Texas-based mortgage finance company agreed to pay $123.5 million to resolve allegations it violated the False Claims Act.  Specifically, the government charged that MetLife Bank knowingly originated and underwrote mortgage loans insured by the Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements.  MetLife Bank was a banking services company which in 2013 merged into MetLife Home Loans.  See DOJ Press Release.

As part of the settlement, MetLife admitted to the following facts:

• From September 2008 through March 2012, MetLife 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.

• 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.

According to acting Chief of the DOJ’s Civil Division Joyce R. Branda, “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.”  U.S. Attorney John Walsh of the District of Colorado echoed this strong condemnation of MetLife’s conduct: “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, . . . contribut[ing] to a catastrophic wave of home foreclosures across the country.”

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