Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

News Now

Washington
Four Mortgage Insurers To Pay $154M In CFPB Penalties
WASHINGTON (4/5/13)--Four mortgage insurers have been ordered to stop alleged illegal payment schemes and to pay a combined $15.4 million in penalties under Consumer Financial Protection Bureau enforcement actions announced on Thursday.

The enforcement actions allege that Genworth Mortgage Insurance Corporation, United Guaranty Corporation, Radian Guaranty Inc., and Mortgage Guaranty Insurance Corporation provided payments to mortgage lenders by purchasing captive reinsurance.

The CFPB noted that many insurance companies purchase reinsurance to reduce their own risk if unexpectedly high mortgage losses occur. Mortgage lenders can set up subsidiaries to provide reinsurance for mortgage insurers, and reinsurance provided under these circumstances is known as captive reinsurance. "It is 'captive' because the lender both originates the loan and, through its own subsidiary, provides the reinsurance," the CFPB explained.

The captive reinsurance that these four mortgage insurance firms purchased was essentially worthless, but was designed to make a profit for the lenders, the CFPB reported in a press release.

These actions, which are violations of the Real Estate Settlement Procedures Act, helped mortgage insurance companies funnel millions of dollars to mortgage lenders "for well over a decade," CFPB Director Richard Cordray said. "Illegal kickbacks distort markets and can inflate the financial burden of homeownership for consumers," he added.

The four companies have agreed to the terms of the enforcement orders, and the orders must now be approved by the presiding judge of the United States District Court for the Southern District of Florida.

Under the orders, the four companies will not enter into any new captive mortgage reinsurance arrangements with affiliates of mortgage lenders, or obtain captive reinsurance on any new mortgages, for a 10-year period. The CFPB will also monitor the companies to ensure compliance with the terms of the orders.

For the full CFPB release, use the resource link.
Other Resources

CFPB Release
RSS





print
News Now LiveWire
Matz: Revised @TheNCUA #RBC rule for #creditunions 2 B unveiled 1/15/15, 90-day comment period to follow #newsnow http://t.co/qABhvghSTU
1 Day ago
Just announced: @TheNCUA board will consider a revised risk-based capital rule at its Jan 15 mtg. See #NewsNow Monday for more info.
1 Day ago
Nearing one-yr anniversary of data breach, @Target asks for class action suits to be dismissed via @BloombergNews http://t.co/kra6kupd35
1 Day ago
.@PeoplesTrustFCU has been recognized with the Juntos Avanzamos designation by @Cornerstone_CUL for its service to the Hispanic community
1 Day ago
#NewsNow: Rep. Hensarling names #HFSC subcommittee chairs. http://t.co/dXAMZdpn1p
1 Day ago