Archive

Go to:

October 2017
SMTWTFS
1234567
891011121314
15161718192021
22232425262728
293031
< Sep Nov >
Leaguer Email Subscription

You are not currently subscribed. Click Subscribe below to receive the Leaguer email.

CFPB Takes Action against Mortgage Insurers to End Kickbacks to Lenders
Friday, April 5, 2013 6:40 AM

The Consumer Financial Protection Bureau (CFPB) yesterday announced four enforcement actions to end what the agency believes to be improper kickbacks paid by mortgage insurers to mortgage lenders in exchange for business. The CFPB filed complaints and proposed consent orders against four national mortgage insurance companies in order to stop these practices, which have been prevalent for more than 10 years. The proposed orders require the four mortgage insurers to pay more than $15 million in penalties to the CFPB.

“Illegal kickbacks distort markets and can inflate the financial burden of homeownership for consumers,” said CFPB Director Richard Cordray. “We believe these mortgage insurance companies funneled millions of dollars to mortgage lenders for well over a decade. The orders announced today put an end to these types of arrangements and require these insurers to pay more than $15 million in penalties for violating the law.”

The CFPB alleges that four mortgage insurance companies violated federal consumer financial law by engaging in widespread kickback arrangements with lenders across the country. The CFPB believes the mortgage insurers named in today’s enforcement actions provided kickbacks to mortgage lenders by purchasing captive reinsurance that was essentially worthless but was designed to make a profit for the lenders.

The four companies named in yesterday’s actions are Genworth Mortgage Insurance Corporation, United Guaranty Corporation, Radian Guaranty Inc., and Mortgage Guaranty Insurance Corporation. In exchange for kickbacks, these mortgage insurers received lucrative business referrals from lenders. These types of kickbacks were a common practice in the years leading up to the financial crisis. These four companies were key players during that time.


In accordance with the proposed settlement, the four mortgage insurance companies have agreed to change their practices and pay fines to the CFPB. Specifically, they have agreed to the following:

  • End the practice: If entered by the court, the proposed orders will prevent these four mortgage insurers from engaging in this practice going forward. The mortgage insurers are prohibited from entering into any new captive mortgage reinsurance arrangements with affiliates of mortgage lenders, and from obtaining captive reinsurance on any new mortgages, for a period of ten years. As pre-existing reinsurance arrangements come to a close, the mortgage insurers will forfeit any right to the funds not directly related to collecting on reinsurance claims. The mortgage insurers will also be prohibited from paying illegal kickbacks or otherwise violating the Real Estate Settlement Procedures Act. Any violation of these prohibitions could result in additional fines.
  • Payment of more than $15 million in penalties: The four mortgage insurers will pay the CFPB a total of $15.4 million in penalties. The amount of the penalties reflects a number of factors, including each mortgage insurers’ finances, the pervasiveness of its conduct, its relative culpability, and its cooperation with the Bureau.
  • Compliance monitoring and reporting: These companies will be subject to monitoring by the CFPB and required to make reports to the CFPB in order to ensure their compliance with the provisions of the orders.
  • The Office of Inspector General at the Department of Housing and Urban Development (HUD) initiated this investigation of reinsurance practices, and in July 2011, HUD’s authority over the investigation transferred to the CFPB. Since then, HUD has given the CFPB valuable assistance in this matter.

The proposed consent orders have been signed by the CFPB and the named companies. The full text of each of the proposed Consent Orders is available online.