MetLife Inc. (MET), the insurer seeking an exit from banking to limit U.S. regulation, was penalized $3.2 million by the Federal Reserve for lapses tied to the servicing of loans and handling of foreclosures.
MetLife is among companies scrutinized by U.S. authorities including the Fed and Justice Department for abusive foreclosure practices stemming from the collapse of the housing bubble. Five larger home lenders, including Bank of America Corp., reached a $25 billion deal this year with states and the U.S. to end a probe, while reviews continued for smaller lenders.
Steven Kandarian, the chief executive officer of New York- based MetLife, has stopped initiating residential mortgages and struck a deal to sell deposits to General Electric Co. (GE) as part of a plan to depart banking. The Office of the Comptroller of the Currency, another regulator, said in a June 20 letter that the company would retain bank status until it addressed mortgage deficiencies.
“The Board is taking action against MetLife at this time in light of MetLife’s publicly announced decision to sell its subsidiary bank’s deposit-taking operations,” the Fed said in an e-mailed statement today. “The Board continues to believe that monetary sanctions in the remaining cases are appropriate and plans to announce monetary penalties against those organizations.”
MetLife advanced 2.6 percent to $34.31 at 4:15 p.m. in New York. Kandarian’s firm has climbed 10 percent this year, beating the 4.7 percent gain of the 24-company KBW Insurance Index. Chris Breslin, a company spokesman, said MetLife is “pleased to put this matter with the Federal Reserve behind us.”
MetLife generates most of its U.S. profit from insurance operations, which are overseen by state regulators. The company’s size and its banking status subjected the insurer to Fed oversight of its capital plans along with the country’s biggest lenders, like Bank of America and JPMorgan Chase & Co.
The Fed has rejected Kandarian’s plans for dividend increases and share buybacks at MetLife, the largest U.S. life insurer. No. 2 Prudential Financial Inc., which isn’t subject to the same Fed oversight, has lifted its dividend and announced buybacks in the past two years.
Kandarian said last week he couldn’t speculate when the banking exit might be completed. His March forecast for a departure by the end of June proved premature.
“I know that investors are eager for a resolution of this issue but the timing is outside of MetLife’s control,” he said in an Aug. 2 conference call.
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