The Consumer Financial Protection Bureau took action today against a mortgage insurer for allegedly paying kickbacks to lenders in exchange for business.
The Consumer Financial Protection Bureau took action today against a mortgage insurer for allegedly paying kickbacks to lenders in exchange for business. The action marks the latest attempt by the CFPB to crack down on kickbacks, which it claims have been prevalent in the industry for more than 10 years.
Republic Mortgage Insurance Company (RMIC) had been paying kickbacks to lenders for years, the CFPB alleged. Under a proposed consent order, RMIC has agreed to pay a fine and put an end to the practice.
“Kickbacks for mortgage insurance referrals are illegal, and can drive up costs for consumers seeking to buy a home,” said CFPB Director Richard Cordray. “The order announced today will put an end to this practice and require RMIC to pay a $100,000 penalty for violating the law.”
The CFPB alleges that RMIC provided kickbacks to mortgage lenders by purchasing captive reinsurance “that was essentially worthless but designed to make a profit for the lenders.” According to the CFPB’s complaint, RMIC entered into kickback arrangements with more than 100 captive reinsurers, “including those affiliated with virtually every major lender participating in the U.S. housing market.”
Under the consent order, RMIC will be prohibited from entering into any new captive mortgage reinsurance arrangements with affiliates of lenders or obtaining captive reinsurance on any new mortgages for 10 years. As already-existing reinsurance arrangements end, the company will forfeit any right to funds “not directly related to collecting on reinsurance claims.” RMIC will also be subject to CFPB monitoring and will have to make regular compliance reports to the agency.
This isn’t the first time the company has been in hot water. It’s currently under administrative supervision by the North Carolina Department of Insurance after the state found the company’s finances “in such a condition as to render the continuation of its business hazardous to the public or to holders of its policies or certificates of insurance,” according to a report by the state’s commissioner of insurance.
Nor is it the first time the CFPB has gone after mortgage insurers for kickback schemes. In April the agency obtained a consent order assessing more than $15 million in penalties against four companies that allegedly engaged in similar practices.