The Consumer Financial Protection Bureau (CFPB) is fining Republic Mortgage Insurance Corporation (RMIC) for allegedly paying illegal kickbacks to mortgage lenders in exchange for business.
In a press release, the CFPB says the practices that RMIC allegedly engaged in ‘have been prevalent for more than 10 years.’ However, it is unclear whether the CFPB is referring specifically to the company or the mortgage insurance industry in general.
In April, the CFPB brought similar actions against four other mortgage insurers, including Genworth Mortgage Insurance Corp., Mortgage Guaranty Insurance Corp., Radian Guaranty Inc. and United Guaranty Corp.
In its complaint, the CFPB alleges that RMIC violated federal consumer financial law by engaging in widespread kickback arrangements with lenders across the country.
The bureau alleges that RMIC provided kickbacks to lenders by purchasing captive reinsurance that was essentially worthless but was designed to make a profit for the lenders. The kickbacks were in exchange for referrals of private mortgage insurance business from the lenders, the CFPB says.
According to the release, RMIC is currently under administrative supervision with the North Carolina Department of Insurance to help it resolve its outstanding insurance claim obligations through a court-approved corrective plan.
As per the CFPB's consent order, RMIC is 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.
RMIC will forfeit any right to the funds coming from pre-existing reinsurance arrangements, not directly related to collecting on reinsurance claims, once those arrangements come to a close.
In addition, RMIC will be subject to monitoring by the CFPB and required to make reports to the CFPB in order to ensure it remains in compliance with the provisions of the order, which has been filed with the U.S. District Court for the Southern District of Florida.
To read the full consent order, click here.
To read the full complaint click here.