Alert November 26, 2013

CFPB Settles with Mortgage Insurance Company for Violations of RESPA

The CFPB announced it had entered into a consent order with a mortgage insurance company following the CFPB’s filing of a complaint in the United States District Court for the Southern District of Florida against the company for allegedly making illegal kickback payments or unearned fees, disguised as reinsurance premiums, in violation of Section 8 of RESPA. Section 8 generally prohibits receiving kickbacks, fees, or anything of value in exchange for referring a consumer to a real estate settlement service provider or the sharing of real estate settlement service fees for reasons other than for services actually performed. According to the complaint, the mortgage insurance company entered into captive mortgage reinsurance arrangements with lenders in which fees were paid, in increasing percentages over time up to 40% of the premium, to captive reinsurers that were wholly-owned subsidiaries of the lenders in exchange for reinsurance that was far less in value than the payments made to the captive reinsurers. The terms of consent order require the mortgage insurance company to (1) relinquish to the CFPB any rights it has under any captive mortgage reinsurance arrangement, with limited exceptions, (2) pay a civil money penalty of $100,000 to the CFPB, and (3) submit to compliance monitoring and reporting.