The CFPB took action on Wednesday against PHH Corp. and its affiliates, alleging that the mortgage company harmed consumers with a mortgage insurance kickback scheme that began in the 1990s.
The CFPB is seeking a fine, permanent injunction to prohibit future violations and victim restitution from PHH Corp. and subsidiaries PHH Mortgage Corp., PHH Home Loans, Atrium Insurance Corp. and Atrium Reinsurance Corp.
Mortgage insurance is generally required on loans when homeowners borrow more than 80 percent of their home’s value, thereby protecting the lender against the risk of default. The Real Estate Settlement Procedures Act prohibits kickbacks that the CFPB said inflate costs and increase the cost of mortgage settlement services.
According to the CFPB, its investigation revealed that when PHH originated mortgages, it allegedly referred consumers with partner mortgage insurers in exchange for the purchase of reinsurance from PHH’s subsidiaries.
The CFPB said PHH received as much as 40 percent of the premiums paid to mortgage insurers over the 15 years the alleged scheme ran. The regulator also said PHH charged more money for loans to consumers who opted not to purchase mortgage insurance.