The Consumer Financial Protection Bureau took action Friday against a mortgage insurance company that allegedly paid illegal kickbacks to mortgage lenders in exchange for business.
Republic Mortgage Insurance Corporation must pay a $100,000 penalty to the CFPB as part of a proposed settlement it has agreed to, and has also been ordered to discontinue these practices, which the bureau says have been prevalent for more than 10 years.
“Kickbacks for mortgage insurance referrals are illegal, and can drive up costs for consumers seeking to buy a home,” said CFPB Director Richard Cordray in a statement. “The order announced today will put an end to this practice and require RMIC to pay a $100,000 penalty for violating the law.”
RMIC violated federal consumer financial law by engaging in widespread kickback arrangements with lenders across the country, the CFPB said in its complaint filing. RMIC provided kickbacks to mortgage lenders by purchasing captive reinsurance that was “essentially worthless,” the CFPB alleges, but was designed to make a profit for the lenders. Kickbacks were then offered in exchange for referrals of private mortgage insurance business from the lenders.
The company in question is currently under the North Carolina Department of Insurance’s administrative supervision to help it resolve its outstanding claim obligations through a a court-approved corrective plan.
RMIC will also now be subject to monitoring by the CFPB and is required to make reports to the bureau that ensure it’s in compliance with the proposed settlement.
The proposed consent order can be accessed here.
Written by Alyssa Gerace