WASHINGTON (11/16/13)--Republic Mortgage Insurance Corp. (RMIC) has agreed to the terms of a proposed Consumer Financial Protection Bureau consent order and will stop providing illegal kickbacks to mortgage lenders in exchange for business, and pay $100,000 in penalties.
RMIC, which is based in Winston Salem, N.C., has reportedly entered into these arrangements to span more than 10 years, according to the bureau.
The CFPB filing against RMIC alleges that company violated federal consumer financial law by engaging in widespread kickback arrangements with lenders across the country. RMIC provided kickbacks to mortgage lenders by purchasing captive reinsurance that was essentially worthless but was designed to make a profit for the lenders, the bureau claimed. According to the CFPB, the kickbacks were in exchange for referrals of private mortgage insurance business from the lenders.
"Kickbacks for mortgage insurance referrals are illegal, and can drive up costs for consumers seeking to buy a home," said CFPB Director Richard Cordray.
Under the order, RMIC will not enter into any new captive mortgage reinsurance arrangements with affiliates of mortgage lenders, or obtain captive reinsurance on any new mortgages, for a 10-year period. The CFPB will also monitor the companies to ensure compliance with the terms of the orders.
The CFPB earlier this year ordered four mortgage insurers to stop similar illegal payment schemes, and to pay a combined $15.4 million in penalties.
For the full CFPB release, use the resource link.