MetLife Inc., the life insurer that's eliminating most of the 4,300 jobs at its mortgage unit and selling deposits to reduce federal oversight, is finding it harder to escape risk from home loans, Bloomberg reported.

The loan-servicing operation is bracing itself for fines from the Federal Reserve tied to foreclosure practices and may face penalties from other regulators, according to the New York- based insurer's annual report. Fitch Ratings Ltd. said last month that MetLife used dubious appraisals for mortgages that were packaged into a bond sale, the type of underwriting flaw that investors may cite to demand that a company repurchase the debt.

MetLife CEO Steven Kandarian is seeking to exit what the company called a "small, little bank" after the unit subjected the insurer to oversight from federal regulators who twice rejected his plan for a dividend increase. MetLife continues to bear repurchase risk tied to about $60 billion in mortgages issued starting in 2008, even as Kandarian focuses on expanding life insurance sales in Asia and Latin America.

Insurers "tend to be conservative and they don't like unknowns and I don't blame them," said Terry Wakefield, a mortgage industry consultant in Mequon, Wis., who helped start a home lending unit for a Prudential Financial Inc. predecessor. "MetLife found themselves in a position that they never anticipated when they got into the business."

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