The CFPB Targets Mortgage Reinsurance Yet Again

The Consumer Financial Protection Bureau filed an administrative enforcement action against PHH Corporation, alleging a nearly 15-year “mortgage insurance kickback scheme” by its mortgage origination and reinsurance subsidiaries involving “hundreds of millions of dollars” in allegedly improper reinsurance fees. This action follows on the heels of the Bureau’s consent orders totaling $15.5 million with five mortgage insurers, settling allegations that the insurers’ agreements with mortgage originators violated the Real Estate Settlement Procedures Act (RESPA). How this new action might relate to those settlements remains to be seen. But statements by PHH indicate that this could be one of the first contested CFPB administrative actions.


In accordance with the CFPB’s rules governing administrative proceedings, the Notice of Charges will not be published until ten days after service. The CFPB’s January 29, 2014 press release alleges generally that PHH referred borrowers to mortgage insurers “partners.” “In exchange for this referral, these insurers purchased ‘reinsurance’ from PHH’s subsidiaries,” taking the reinsurance fees as kickbacks. The Bureau contends PHH (1) “pressured” mortgage insurers into participating in the scheme and (2) “steer[ed]” business toward the mortgage insurers “even when it knew the prices [they] charged were higher than competitors’ prices.” The press release does not distinguish between PHH and its subsidiaries, but states that the Bureau is bringing the complaint against the corporation, its residential mortgage origination subsidiaries and its subsidiaries Atrium Insurance Corporation and Atrium Reinsurance Corporation, defining the entities collectively as “PHH.”

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