CFPB Settles With Mortgage Insurer Over Alleged RESPA Violations

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On November 15, the CFPB announced a settlement with a mortgage insurer accused of paying illegal kickbacks to mortgage lenders in exchange for insurance referrals in violation of Section 8 of RESPA. The settlement resolves allegations that the company entered into captive reinsurance arrangements with lenders across the country pursuant to which the insurer at first ceded approximately 12% of its premiums per referral to lenders’ captive reinsurers, but over time ceded increasingly large percentages of its premiums—up to 40% for each referral—in exchange for lenders’ continued referral of customers.

The proposed consent order requires the company to pay $100,000 in penalties and subjects the company to regular and mandatory compliance reporting and monitoring for a period of four years. In addition, the company is enjoined from entering into or otherwise obtaining any new captive mortgage reinsurance arrangements for a period of ten years and, with respect to pre-existing arrangements, must forfeit any right to the funds not directly related to collecting on reinsurance claims.

The action follows several other RESPA enforcement actions announced earlier this year, including actions against four mortgage insurers.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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