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MetLife to pay $123.5 million in fraud probe at ex-lending unit

By Jing Cao

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(Bloomberg) — MetLife Inc., the largest U.S. life insurer, agreed to pay $123.5 million to resolve a U.S. probe into shoddy loans at a discontinued mortgage unit.

The operation originated loans that were insured by the Federal Housing Administration, even though they failed to meet government standards, the U.S. Department of Justice said in a statement Wednesday.

“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,” U.S. Attorney John Walsh of the District of Colorado said in the statement.

Chief Executive Officer Steven Kandarian has been working to resolve legal disputes tied to mortgage operations that MetLife exited years ago. By scaling back from banking, the New York-based company sought to limit oversight from the Federal Reserve while narrowing its focus to insurance.

“We fully cooperated with the DOJ’s investigation, are completely reserved for the settlement and are pleased to put this matter behind us,” John Calagna, a spokesman for the company, said in a statement.

The insurer slipped 29 cents to $51.10 at 12:55 p.m. in New York.