Final Civil Action - MetLife Home Loans, LLC, Settled Allegations of Failing To Comply With HUD's Federal Housing Administration Loan Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2015-03-27.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                        U.S. DEPARTMENT OF
                                       HOUSING AND URBAN DEVELOPMENT
                                                OFFICE OF INSPECTOR GENERAL

                                                      March 27, 2015

                                                                                                     MEMORANDUM NO:

TO:                 Dane M. Narode
                    Associate General Counsel, Office of Program Enforcement, CACC

FROM:               Kimberly Randall
                    Director, Joint Civil Fraud Division, GAW

SUBJECT:            Final Civil Action: MetLife Home Loans, LLC, Settled Allegations of Failing To
                    Comply With HUD’s Federal Housing Administration Loan Requirements


The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General
(OIG), assisted the U.S. Department of Justice, Washington, DC, and the U.S. Attorney’s Office,
District of Colorado, in the civil investigation of MetLife Bank, N.A. MetLife had its principal
place of business in Convent Station, NJ. 1


The Federal Housing Administration (FHA) is a component of HUD. It provides mortgage
insurance for a person to purchase or refinance a principal residence. The mortgage loan is
funded by a lending institution, such as a mortgage company or bank, and the mortgage is
insured by FHA.

HUD’s direct endorsement program authorizes private-sector mortgage lenders to approve
mortgage loans for FHA insurance. Lenders approved for the program must follow various FHA

    As of August 30, 2013, MetLife Bank, N.A., merged into MetLife Home Loans, LLC, with MetLife Home Loans,
    LLC, as the surviving entity. MetLife Home Loans, LLC, has its principal place of business in Irving, TX, and is a
    wholly owned subsidiary of MetLife, Inc., a holding company headquartered in New York, NY.

                                                            Joint Civil Fraud Division
                                             400 State Avenue, Suite 501, Kansas City, KS 66101
                                       Visit the Office of Inspector General Web site at www.hudoig.gov.
requirements, including providing annual and per loan certifications that the lender complied
with these requirements when underwriting and approving loans for FHA insurance.

MetLife became an FHA-approved direct endorsement lender on April 5, 2007. As a direct
endorsement lender, MetLife was authorized by HUD to originate and underwrite mortgage
loans on HUD’s behalf, including determining a borrower’s creditworthiness and whether the
proposed loan met all applicable requirements. When a borrower defaults on an FHA-insured
loan underwritten and endorsed by a direct endorsement lender, such as MetLife, the lender (or
its representative) has the option of submitting a claim to HUD to compensate the lender for any
loss sustained as a result of the default. Therefore, once a mortgage loan is endorsed for FHA
insurance, HUD insures the risk of the borrower defaulting on that mortgage, which is realized if
an insurance claim is submitted.

                                     RESULTS OF INVESTIGATION

On February 25, 2015, MetLife entered into a settlement agreement with the Federal
Government to pay $123.5 million to avoid the delay, uncertainty, inconvenience, and expense
of lengthy litigation of certain civil claims the Government contended that it had against
MetLife. As part of the settlement, MetLife agreed that it engaged in certain conduct in
connection with its origination; underwriting; quality control; self-reporting of loans with
unacceptable risk, fraud, or other serious violations; certification of compliance with program
requirements; and endorsement of certain single-family residential mortgage loans insured by
FHA. 2

As a result of MetLife’s conduct, HUD insured hundreds of loans approved by MetLife that were
not eligible for FHA mortgage insurance under the direct endorsement program and that HUD-
FHA would not otherwise have insured. HUD incurred substantial losses when it paid insurance
claims on the loans covered by the settlement agreement.

Of the total settlement, FHA will receive about $60.3 million, and other Federal entities will
receive the remaining $63.2 million.


We recommend that HUD’s Office of General Counsel, Office of Program Enforcement,

1A.        Allow HUD OIG to record the $60,258,955 settlement portion in HUD’s Audit
           Resolution and Corrective Action Tracking System as an ineligible cost.

    Loans covered in the settlement agreement included loans insured by FHA between September 1, 2008, and March
    31, 2012, that resulted in claims submitted to HUD on or before August 25, 2014, excluding home equity
    conversion mortgages under 12 U.S.C. (United States Code) 1715z-20 and streamline refinances under 12 U.S.C.