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April 04, 2013

4 mortgage insurers to pay CFPB $15.4 million

April 5, 2013 – Four mortgage insurance companies are named in consent orders issued by the CFPB over improper kickbacks to mortgage lenders, and they will pay an aggregate $15.4 million in penalties to the bureau.

The CFPB says the firms have been engaged in the improper practices for more than 10 years, including during the lead-up to the housing finance crisis. "Illegal kickbacks distort markets and can inflate the financial burden of homeownership for consumers," said CFPB Director Richard Cordray.

The bureau said it believes the named insurers provided kickbacks to mortgage lenders by purchasing captive reinsurance "that was essentially worthless but was designed to make a profit for the lenders."

The four companies are Genworth Mortgage Insurance Corporation, United Guaranty Corporation, Radian Guaranty Inc. and Mortgage Guaranty Insurance Corporation.

Under the consent orders, the firms:

  • are 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 10 years;
  • will pay an aggregate $15.4 million in penalties;
  • will be subject to monitoring by the CFPB and required to make reports to the CFPB in order to ensure their compliance with the provisions of the orders.

The Office of Inspector General at the Department of Housing and Urban Development initiated the investigation of reinsurance practices. In July 2011, HUD's authority over the investigation transferred to the CFPB and HUD has assisted the bureau on this matter since then.

The proposed consent orders have been signed by the CFPB and the named companies.