Four private mortgage insurers hit with $15.4 million in fines
A federal consumer watchdog agency slapped four private mortgage insurers with $15.4 million in fines on Thursday, saying they were “key players” in an allegedly illegal kickback scheme with lenders for more than 10 years in exchange for continued business.
The U.S. Consumer Financial Protection Bureau’s proposed order was a way to crack down on a practice that was commonplace in the years leading up to the housing crash.
As a result, the CFPB asserts homeowners nationwide likely paid out more mortgage insurance than they otherwise should have. The penalties also highlight “how murky insurance transactions could be used to cover up payments of questionable intent,” according to The New York Times.[6]
The fines were issued against Genworth Mortgage Insurance Corp., United Guaranty Corp., Radian Guaranty Inc.[7] and Mortgage Guaranty Insurance Corp.[8], which neither denied or admitted to the allegations.
“Illegal kickbacks distort markets and can inflate the financial burden of home ownership for consumers,” Richard Cordray[9], the CFPB’s director, said in a statement Thursday[10]. “We believe these mortgage insurance companies funneled millions of dollars to mortgage lenders for well over a decade.”
The CFPB’s investigation centered around private mortgage insurance, which is required on top of a homeowner’s monthly mortgage payment if they borrowed more than 80 percent of the purchase price of their home through a conventional loan.
The four insurers were noted as key players in what used to be common practice leading up to the housing bust where mortgage insurance companies would pay kickbacks to mortgage lenders in the form of “captive reinsurance,” which is essentially insurance for insurance companies to cover their own risk.
Kristena Hansen covers residential and commercial real estate.
References
- ^ Kristena Hansen (feeds.bizjournals.com)
- ^ This email address is being protected from spambots. You need JavaScript enabled to view it. (feeds.bizjournals.com)
- ^ LinkedIn (www.linkedin.com)
- ^ Twitter (twitter.com)
- ^ Google+ (plus.google.com)
- ^ The New York Times. (dealbook.nytimes.com)
- ^ Radian Guaranty Inc. (www.bizjournals.com)
- ^ Mortgage Guaranty Insurance Corp. (www.bizjournals.com)
- ^ Richard Cordray (feeds.bizjournals.com)
- ^ said in a statement Thursday (www.consumerfinance.gov)