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CFPB Takes Action against Mortgage Insurer for Alleged Kickbacks




by:
Robert E. Bostrom
Greenberg Traurig, LLP - New York Office

Peter L. Cockrell
Greenberg Traurig, LLP - McLean Office

Brett M. Kitt
Greenberg Traurig, LLP - Washington Office

Gil Rudolph
Greenberg Traurig, LLP - McLean Office

J. Scott Sheehan
Greenberg Traurig, LLP - Houston Office

 
November 26, 2013

Previously published on November 21, 2013

On November 15th, the CFPB filed a complaint and a proposed consent order against Republic Mortgage Insurance Corporation, a private mortgage insurance company (RMIC).1 The complaint alleges that RMIC violated Section 8 of the Real Estate Settlement Procedures Act by paying illegal kickbacks to mortgage lenders in exchange for referrals of private mortgage insurance business from the lenders. The CFPB alleges that RMIC carried out this kickback scheme “by purchasing captive reinsurance that was essentially worthless but was designed to make a profit for the lenders.”

RMIC has agreed to the following as a part of the proposed settlement:

  • The proposed order prohibits RMIC 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. As pre-existing reinsurance arrangements come to a close, RMIC will forfeit any right to the funds not directly related to collecting on reinsurance claims. The proposed order will also prohibit RMIC from paying illegal kickbacks or otherwise violating the Real Estate Settlement Procedures Act.

  • RMIC will be subject to monitoring by the CFPB and required to make reports to the CFPB in order to ensure its compliance with the provisions of the order.

$100,000 in civil money penalties.

This action follows four similar actions announced by the CFPB earlier this year.2



1
The Complaint is available at http://www.consumerfinance.gov/f/201311&under;cfpb&under;complaint&under;RMIC.pdf. The Consent Order is available at http://www.consumerfinance.gov/f/201311&under;cfpb&under;consent-order&under;RMIC.pdf.

2 See here - http://www.consumerfinance.gov/newsroom/the-cfpb-takes-action-against-mortgage-insurers-to-end-kickbacks-to-lenders/  for a description of the CFPB’s prior actions.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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Robert E. Bostrom
Peter L. Cockrell
Brett M. Kitt
Gil Rudolph
J. Scott Sheehan
 
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