MetLife, Inc.’s (MET) subsidiary – MetLife Home Loans LLC – will shell out $123.5 million to the U.S. Department of Justice in order to resolve allegations of violations related to mortgage lending. The charges have been brought by the Federal Housing Administration (FHA).
MetLife Home Loans LLC has been accused of making the violations knowingly. The MetLife Inc. arm was aware that it was violating the False Claims Act from September 2008 to March 2012. However, it still went on originating and underwriting mortgage loans insured by the U.S. government, many of which did not meet federal underwriting requirements.
MetLife Home Loans, known as MetLife Bank during the time, had recognized that it had underwritten 1,097 FHA mortgage loans which violated the FHA requirements. However, the company reported only 321 out of the above-mentioned number to Housing and Urban Development’s (HUD). This irresponsible conduct resulted in substantial losses for FHA as it had to insure hundreds of loans ineligible for insurance and later pay insurance claims on those loans.
MetLife Inc., being aware of this, had already set aside fund for settlement and also fully cooperated with the investigation.
MetLife has been slapped with several lawsuits in the past. The settlement charges further add to the company’s expenses thereby adversely affecting margins. Lawsuits and related settlement charges not only affect the company financials, but also hamper the company goodwill, thereby weighing on investor sentiments.
Other asset managers like JPMorgan Chase & Co. (JPM), Citigroup Inc. (C), Deutsche Bank AG (DB) and Bank of America have also violated the FHA requirements and have been hit by similar compensation payments in the past.
Currently, MetLife, Inc carries a Zacks Rank #3 (Hold).
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