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$212.5M Settlement Reached in Consumer Banking Fraud Lawsuit against First Tennessee


This is a settlement for the Consumer and Financial Fraud lawsuit.

Santa Clara, CA: A $212.5M settlement has been reached ending a consumer banking fraud lawsuit brought by the US Attorney General an First Tennessee Bank NA, in which the federal government alleged the bank approved loans that failed to meet the government' requirements. The lawsuit also alleged violation of the False Claims Act.

According to a statement by Benjamin Mizer, principal deputy assistant U.S. attorney general, First Tennessee Bank N.A. was accused of originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development's Federal Housing Administration even though they didn't meet the program requirements.

The lawsuit alleged that between January 2006 and October 2008, First Tennessee, through its subsidiary First Horizon Home Loans Corporation (First Horizon), participated in the FHA insurance program as a Direct Endorsement Lender (DEL). As a DEL, First Tennessee had the authority to originate, underwrite and endorse mortgages for FHA insurance. If a DEL such as First Tennessee approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA' parent agency, for the losses resulting from the defaulted loan. Under the DEL program, neither the FHA nor HUD reviews a loan before it is endorsed for FHA insurance. DELs such as First Tennessee are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance, to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices and to self-report any deficient loans identified by their quality control program. In August 2008, First Tennessee sold First Horizon to MetLife Bank N.A. (MetLife), a wholly-owned subsidiary of MetLife Inc., which thereafter originated FHA-insured mortgages under the MetLife name. In February 2015, MetLife agreed to pay $123.5 million to resolve its False Claims Act liability arising from its FHA originations after it acquired First Horizon from First Tennessee.

The settlement resolves allegations that First Tennessee failed to comply with FHA origination, underwriting and quality control requirements. As part of the settlement, First Tennessee admitted to the following facts: From January 2006 through October 2008, it repeatedly certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements. Beginning in late 2007, First Tennessee significantly increased its FHA originations. The quality of First Tennessee' FHA underwriting significantly decreased during 2008 as its FHA lending increased. Beginning no later than early 2008, First Tennessee became aware that a substantial percentage of its FHA loans were not eligible for FHA mortgage insurance due to its own quality control findings. These findings were routinely shared with First Tennessee' senior managers. Despite internally acknowledging that hundreds of its FHA mortgages had material deficiencies, and despite its obligation to self-report findings of material violations of FHA requirements, First Tennessee failed to report even a single deficient mortgage to FHA. First Tennessee' conduct caused FHA to insure hundreds of loans that were not eligible for insurance and, as a result, FHA suffered substantial losses when it later paid insurance claims on those loans.

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Published on Jun-10-15


READER COMMENTS

Posted by

on
I finally lost my home of 16 years. MetLife refused to send modification documents many times as promised to Credit Counselors or by my own request. They would not call my residence but called my parents follow up number seven days a week for two years. The follow up number was for an insurance claim only. They finally sent me a work out package per Governor Harry Reid's office at the time with the incorrect phone number transposing one digit. I went through First Horizon prior to all this in which was told my phone number was incorrect and would need to fill out another work out package. Went through Nevada's Hardest Hit Funds three times with no answer. Foreclosure Mediation after being sold to JP Chase Morgan after 3 years modification requests, conventions, etc. Went to meditation again in 2015 after I had been scammed out of $5000 from a company claiming to be through HUD but my loan had been sold to Caliber Home Loans only a week and I was getting ready for surgery, a single mom now unemployed for a long time because my place of business sold and economy went bad. No one helped me regardless of when I made plenty of money to afford a lower payment. I was told by MetLife I had to be 6 months behind on payments vs the 1/2 of a payment I was short when I called for help with my loan. I had been through domestic abuse draining all of my resources. In 2016 I lost my house and everything in my house. I've been homeless ever since. I don't have my kids with me now because I can't take care of them with the housing market so high. I'm devastated. FHA could have helped me years prior but didn't. By the time the bugs were worked out of these programs I was buried. Nevada Legal Services and the State of Nevada haven't helped with the fraud or the predatory lending for me Not really qualifying for this loan. They avoided me knowing I had an FHA loan and I lived in a 10 year housing hotspot and still is the familial status of me being a single mom of three children under 18 years who had been through domestic violence. They discriminated against me, denied me, ignored me. They wanted my home. They ruined my life. I'm not sure I'll ever have a house let alone a place to live as I sit in my unregistered vehicle writing this.

Posted by

on
Hey Sandy...Call me and I need a number to reach these ppl. I got a notice about the check but never got the check.

Posted by

on
I would join in a class action against FHHL, Met-Life, et al. We are still trying to save our home, we have been trying to get a loan mod since 2010. All we have been doing is getting further in debt our loan is now $120,000 more than when we initiated loan, and we have paid $130,000. There are so many additional fees, miscalculated int., etc.... I have never been able to get any answers.
We are behind on our mortgage, I admit that, but we have been asking for help since 2010. If we would have been given a loan mod back then, we would've been fine.
I know the signature on our paperwork is a known robo signor, our loan number changed and on dated documents they have different account numbers. Please contact me to discuss our options.
I documented all correspondence, which will prove their neglect.

Posted by

on
I also lost my home in 2011 and also have paperwork showing the fraud and all the documented phone calls with the modification process. Who do I contact to file a class action lawsuit?

Posted by

on
Sandy Johnson I was a customer of First Horizon/First Tennessee and lost my home in 2011.I have paperwork with so much FRAUD proof on them,SEC evidence etc.Sold Our mortgage in a bundle to Met Life, confused who the server was. . Will file a class action against them.The statue of limitations on fraud is still open.

Posted by

on
They were doing this in 2001 also. Caused my Mother to lose her home. I think all of the people who read this should please file their own class action.

Posted by

on
They were predatory lenders in 2007. Approving people for loans based on credit scores instead of debt to income. SMH.

Posted by

on
I was a customer of First Horizon/First Tennessee and lost my house in 2010. Had I been not been offered what I call robo loan modifying, I could've stayed in my home. Any chance I can do anything about it or is it too late?

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