HUD 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. MetLife became an approved direct endorsement lender under HUD’s Federal Housing Administration (FHA) program on April 5, 2007. The direct endorsement program authorizes private-sector mortgage lenders to approve mortgage loans for FHA insurance. Lenders approved for the program must follow various FHA requirements. When a borrower defaults on an FHA-insured loan underwritten and endorsed by a direct endorsement lender, 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.
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. 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 of $123.5 million, FHA will receive about $60.3 million, and other Federal entities will receive the remaining $63.2 million.