Case: United States v. First Tennessee Bank N.A.
Issue: First Tennessee Bank, N.A. (First Tennessee) admitted to originating and underwriting loans that were not eligible for Federal Housing Administration (FHA) insurance.
Case Summary: First Tennessee admitted to knowingly originating and underwriting loans that did not meet the standards under the FHA’s insurance program and agreed to pay $212.5 million to settle the DOJ’s False Claims Act (FCA) allegations.
According to the DOJ, First Horizon Home Loans Corp. (First Horizon), an endorsed lender under FHA’s insurance program and subsidiary of First Tennessee, certified that its mortgages complied with the FHA’s strict quality-control standards despite internally acknowledging that a “substantial percentage” of its FHA mortgages had deficiencies.
Under the terms of the settlement, First Tennessee agreed to pay $212.5 million and admit to repeatedly certifying substandard mortgage loans that “caused FHA to insure hundreds of loans that were not eligible for insurance and resulted in substantial losses when it later paid insurance claims on those loans.”
Bottom Line: MetLife Bank N.A., which acquired First Horizon in August 2008, agreed to separately pay $123.5 million in February 2015 to settle the DOJ’s FCA allegations in connection with the loans underlying the settlement with First Tennessee.