MetLife, as we commonly name it, is Metropolitan Life Insurance Company (MET, Financial). It is known to be among the largest providers of insurance, annuities and employee benefits programs. It is one of the Fortune 500 companies, and it has been awarded best managed insurance company by Forbes three times consecutively; still there has been fraudulent activity identified with MetLife Home Loans.
“MetLife Home Loans LLC has agreed to pay the United States $123.5 million to resolve alleged Federal Housing Administration (FHA) mortgage lending violations. They intentionally violated the False Claims Act by originating and underwriting the mortgage loans insured by the US department of Housing and Urban Development (HUD) and Federal Housing Administration. They did not meet the pre-requisites of application guidelines by FHA” read the press release issued by the legal authorities.
The basis of settlement
MetLife identified over 1,000 FHA mortgage loans underwritten by MetLife Bank with multiple loop holes. Irrespective of significant loop holes, alarm was not raised to report false claims. The internal MetLife audit team reported only 321 mortgages to HUD. This resulted in forced insurance by FHA to the loans which did not abide by the set guidelines and were not eligible for insurance and, which caused FHA to suffer substantial losses. It compelled FHA to pay insurance claims on those loans.
MetLife Home Loans, formerly known as MetLife Bank was aware of the violation through its own quality assurance team. It continued to deteriorate, its most guarded FHA loans. It was presented to FHA with fewer defects in order to let it go through.
"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," said Acting Assistant Attorney General Joyce R. Branda of the Justice Department's Civil Division.
MetLife Bank is said to be taking advantage of FHA insurance programs. They deliberately kept their eyes closed toward the mortgage loans that did not meet their basic underwriting criteria. They realized the fault only when the number of defaulters over the home loans drastically increased. The settlement was the collective effort of the bank and government entities to hold private investors accountable for unethical lending practices. This may safeguard FHA and could save several foreclosure proceedings across the country.
The direct endorsement lenders are also held responsible for the fraudulent wave. DEL has an authority to originate, underwrite and certify home loans for FHA insurance. FHA does not review these documents collected to underwrite and close the loan before it is endorse for FHA insurance. Result of which is defaults and losses bore by FHA just because program rules were not followed to qualify mortgages for FHA insurance. The settlement was the result of a joint investigation conducted by HUD, HUD OIG, the Civil Division and the U.S. Attorney’s Office for the District of Colorado.
Our understanding
Is the pressure to compete in the market in terms of number of loans closed too high? Or the rising interest rates may impact the pricing levels of risk- bearing investments. Is it also impacting the level of product sale in the market? A report said these actions are taken to maintain downward pressure on long term interest rates and support mortgage market to achieve the profit benchmark. This will take them toward the scope of loss mitigation
Are achievements also responsible for rose bar of the performances. In the economic headwinds, it is imperative for companies like MetLife stay focused on the swift execution of their strategies with utmost honesty. A more sensible approach would be to identify and regulate the proper functioning of the institution.
