Consumer Financial Protection Bureau Holds Mortgage Insurers Liable for $15.4 Million

As I finish up this week’s blogs focusing on the efforts of the Consumer Financial protection Bureau
(“CFPB”) I want to discuss a situation relating to the mortgage
industry that the Bureau was faced with and how it enforced its
policy.  Earlier this month the CFPB announced its final
decision in its effort to cease mortgage lenders from receiving
improper kickbacks from insurers in exchange for their
business.  The CFPB filed complaints against four separate
mortgage insurance companies in an effort to cease this conduct
which was believed to be prevalent over the past ten
years. 

The complaint alleged that four insurance companies, Genworth
Mortgage Insurance Corporation, United Guaranty Corporation, Radian
Guaranty, Inc. and Mortgage Guaranty Insurance Corporation received
business referrals from lenders in exchange for kickbacks. 
The CFPB stated that these types of kickbacks were common practice
in the years leading up to the financial crisis of the mortgage and
banking industry.

As part of the settlement, the four mortgage insurance companies
have agreed to no longer issue kickbacks to the lenders and will
pay the agreed upon penalty of $15.4 million.  Should these
companies be caught engaging in this conduct they will be subject
to additional fines.  Furthermore, the CFPB is requiring the
insurance companies to be closely monitored to ensure compliance
and must submit reports showing their conformity. 

The way the mortgage industry is set up, consumers are usually
required to carry mortgage insurance on a loan greater than 80% of
the value of the home.  The purpose of this insurance is to
protect the lender from the risk of the consumer defaulting on the
loan.  In an economy when interest rates were extremely low,
consumers were failing to put more than the standard 20% down on a
home and thus forced to take out mortgage insurance to cover their
costs.  Making a large monthly mortgage payment created
financial strain on many consumers.  When you combine a large
mortgage payment with a monthly insurance premium that was inflated
due to illegal kickbacks, it put consumers and our economy at an
extreme disadvantage.  The CFPB saw an opportunity to protect
consumers and our struggling economy and intervened. 

If you feel your rights have been violated as a consumer,
contact SmithMarco P.C. for a free
case review.