Countrywide, BOA, Met Life and a 123 million dollar fine
The US Attorney in Colorado announced the agreement recently stating that MetLife Bank approved loans for borrowers who did not comply nor qualify under government rules and regs for federally backed mortgages.
Basically, the allegation is that Met LifeBank approved borrowers who did not qualify for FHA loans and put those loans into the FHA insurance program expecting HUD to pay the banks should those loans go into default. If a loan certified for FHA insurance defaults, the holder of the loan may submit an insurance claim to the FHA for the losses resulting from the defaulted loan.
The US Attorney stated "MetLife Bank took advantage of the (Federal Housing Administration) 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,"
"MetLife Bank took advantage of the (Federal Housing Administration) 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," the US Attorney stated.
MetLife Bank, Walsh said, was among many banksc ountry whose irresponsible lending practices contributed to a "catastrophic wave of home foreclosures across the country."
MetLife Bank, which was headquartered in Bridgewater, N.J., merged in June 2013 into MetLife Home Loans, an Irving, Texas, mortgage finance company. It had been a "Direct Endorsement Lender" in the FHA's insurance program.
"MetLife Bank's improper FHA lending practices not only wasted taxpayer funds but also inflicted harm on homeowners and the housing market that lasts to this day," said acting assistant attorney general Joyce R. Branda of the Justice Department's civil division.
From September 2008 through March 2012, MetLife Bank repeatedly certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements.
Between 2009 and August 2010, up to 60 percent of the loans administered by MetLife Bank had "the most serious deficiencies," the news release says. MetLife Bank's senior managers, including the CEO and board of directors, were aware of the troubling statistics, according to the release.
EDITORIAL:
(Opinions expressed herein are editorial in nature and based on opinion summarized from factual events and in no way is based on the case and facts cited above)
It is important to remember history is the indicator here. There once was a giant banker in California called "Countrywide" that was feared by its' competitors because they set up branches everywhere, gave their employees the ability to approve mortgages and were a monster origination firm.
Met Life, an insurance company, decided to get into the mortgage business. That makes sense because insurance companies buy mortgages as an investment to get interest payments to pay out on life insurance premiums, using the proceeds of life insurance payments from the insured.
This was done by before in the late 80's and early 90's when various well known insurance companies opened up mortgage bankers. It was a way to get mortgages for investments at a lower price point that buying them through retail channels after those loans are funded, sold, bundled and ready to go.
So, when Countrywide stumbled, Bank of America (BOA) took them over. BOA did so at the behest of the US Government in its' attempt to stop the financial meltdown, however BOA stated that they were very interested in using the Countrywide origination software platform and making that the BOA way. The Countrywide software was called "CLUES" and it was powerful in it's day. It was a front end and back end IT magical system that integrated so many moving parts of the mortgage process that it made originating and closing a loan almost seamless. BOA saw value in that.
However, BOA found out what everyone in the mortgage business who did not work at Countrywide knew. Countrywide valued quantity and profit to such a degree that the used car salespeople of the mortgage world went to Countrywide to get bigger commission and in turn brought more business because they cut corners (broke the law in many cases) and their Realtors (R) did not care "so long as the deal closed" - cutting out the reputable professional loan officers who made sure that their loans complied with the credit policies of the product their borrower was applying. Those loan officers lost business, were shut out and moved to other industries because the wild west Countrywide loan officers were eating their dinner, desert and leaving no crumbs.
BOA quickly found out they had quite a few bad apple loan originators when they took over Countrywide. To their credit they quickly made adjustments in pay, systems, and other areas to stop the wild cowboy atmosphere at Countrywide. To BOA's shame, the countrywide CLUES system was good. The Countrywide loan officers were known as used car salespeople by their competitors at Banks, Bankers and Brokers who were true professionals.
So, the former Countrywide loan officers became unhappy with the "constraints" that BOA was placing on them after their freedom at Countrywide to make $200,000.00 dollars a year in commissions for taking a mortgage application.
So they left.
Where did they all go?
The vast majority went to............MetLife. And MetLife kept them on until regulatory changes came along and Met Life had to transition to a Bank in order to keep some of the loan officers who could not be licensed. Why? Because Sen Warren, in one of the only good things that she did, established the National Mortgage Licensing System (NMLS) that set standards and required that people who originated loans be licensed. To get licensed they had to go through a background check, a credit check and take courses and pass tests. Many of the former Countrywide, former BOA loan officers could not pass the background test, let alone pass the tests
Sen Warren, who is anti banking as they come, is not as bright as her liberal mob pit fans think. She was part of the group that set up the Consumer Financial Protection Bureau (CFPB) that set up the NMLS and requirements.
Guess what the CFPB and the NMLS do?
That is right, they said that if you worked for a Mortgage Broker or a Mortgage Banker you had to be licensed through the NMLS, have a background, take the courses and pass the tests
But.....yes....it is true as ridiculous as it sounds ----- they exempted banks from this requirement. So, banks simply had to sponsor their mortgage loan officers in the NMLS system and give them an NMLS number. To the consumer, a bank loan officer had an NMLS number. A Mortgage Banker Loan Officer had an NMLS number. So, there was no difference to the consumer.
In reality, the bank loan officer had no professional requirement to get that NMLS number. It was as simple as entering their name and clicking a button for the bank loan officers.
So, Met Life for many reasons, but also because they did not want to lose those high producing loan officers, applied and became a Bank. Now, Met Life Bank no longer required the cowboy high commission loan officers who brought in a lot of business because they were sloppy, uneducated and had little moral and ethics driving their production. Just the desire to earn six figures a year. And, this was just fine.
What was the result? Met life Bank had a lot of Countrywide loan officers opening Met Life Bank branches in every town in the United States. High producing Managers would bring flocks of loyal loan officers with them to open up Met Life Bank branches that just did mortgages. This brought in loans.
It also brought in poorly originated, poorly underwritten and most likely non-compliant loans into Met life.
So, Met Life exited and closed. The Met Life loan officers then moved onward and split up. Some left the business because it was clear to them that there was no safe harbor anymore to do business they way they were used to doing it. Others, found lenders licensed as banks where they could continue onward. Others who were able to pass the NMLS licensing requirements went to mortgage bankers and brought with them a lot of business - so much to the mortgage banker that today there are many mortgage bankers out there making a lot of money from the ex Countrywide, BOA, Met Life loan officers that they now are doing what Met Life and Countrywide did - -sit back and let those loan officers take control of their operations and systems. And that will lead to the same fate as Countrywide, the same fate as Met life. Only BOA was smart enough to say "good bye, it's our way or the highway" to this group of originators
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