The CFPB took action last week against Republic Mortgage Insurance Corp., which allegedly paid illegal kickbacks to mortgage lenders in exchange for business referrals.
In its filing, the CFPB alleges that RMIC violated federal law by engaging in kickback arrangements with lenders across the country that involved purchasing captive reinsurance that was virtually worthless but could generate profit for lenders. The kickbacks were provided in exchange for referrals of private mortgage insurance business.
“Kickbacks for mortgage insurance referrals are illegal, and can drive up costs for consumers seeking to buy a home,” CFPB Director Richard Cordray said. “The order announced today will put an end to this practice and require RMIC to pay a $100,000 penalty for violating the law.”
The company is currently under supervision by the North Carolina Department of Insurance to help RMIC resolve insurance claim obligations through a court-approved plan.
RMIC has agreed to end the practice, and the order prohibits it from entering into any new reinsurance arrangements with lender affiliates and from obtaining captive reinsurance on any new mortgages for 10 years.
The company will also be subject to CFPB supervision and will be required to report to the watchdog agency to ensure their compliance with the order’s provisions.