RESPA KICKBACKS: CFPB GOES AFTER LENDER FOR MORTGAGE INSURANCE KICKBACK ARRANGEMENT

The Consumer Financial Protection Bureau announced they initiated an administrative proceeding against mortgage lender PHH Corporation on Thursday, Jan. 30, 2014. The CFPB alleges that PHH originated consumer mortgages it steered consumers to certain mortgage insurance companies it partnered with because PHH was incentivized with reinsurance kickback fees which violated the Real Estate Settlement Procedures Act (RESPA). The CFPB believes consumers wound up paying higher mortgage insurance premiums because of the arrangement. The CFPB believes PHH violated Section 8 of RESPA (12 U.S.C. ยง2607).

The CFPB filed the administrative proceeding against New Jersey-based PHH Corporation and its residential origination subsidiaries, PHH Mortgage Corporation and PHH Home Loans, LLC, and PHH’s wholly-owned subsidiaries, Atrium Insurance Corporation and Atrium Reinsurance Corporation. The CFPB investigation picked up this investigation from the US Department of Housing and Urban Development (HUD) who began investigating this practice in July of 2011.

The CFPB has been very active in its enforcement of captive mortgage reinsurance business models as HUD was with captive reinsurance title insurers business models in the mid-2000’s. Previous CFPB investigations involving mortgage insurance reinsurance models included actions against United Guaranty Corp., Genworth Mortgage Insurance Corp., Radian Guaranty Inc., and Mortgage Guaranty Insurance Corporation. The CFPB now appears to be shifting their enforcement actions against lenders who may have received money from these companies.