Republic Mortgage Insurance Corp. (RMIC), a unit of Old Republic International (ORI), faces a complaint and enforcement action from the Consumer Financial Protection Bureau in which the regulator accuses the insurer of paying kickbacks to mortgage lenders in exchange for insurance business.
The CFPB announced the action Friday, saying it proposes a $100,000 penalty against RMIC. The complaint follows a slew of similar enforcement probes filed against other mortgage insurers by the CFPB.
"Kickbacks for mortgage insurance referrals are illegal, and can drive up costs for consumers seeking to buy a home," said CFPB Director Richard Cordray. "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 CFPB claims RMIC gave lenders kickbacks by buying captive reinsurance from them in exchange for private MI business referrals.
RMIC, a subsidiary of Old Republic, has experienced a rough few years after falling under the supervision of its chief regulator, the North Carolina Department of Insurance. The firm has been trying to deal with outstanding insurance claims through a corrective plan to get the mortgage insurance guaranty unit up and running at full speed again.
The enforcement action proposed for RMIC by the CFPB forces the firm to stop the alleged practices going forward, which essentially prevents RMIC from entering new captive reinsurance arrangements for affiliated lenders and from obtaining captive reinsurance on new mortgages for a period up to ten years. The firm also will be subject to additional CFPB monitoring and will be required to make periodic reports to the agency.
The consent order was filed with the United States District Court for the Southern District of Florida.
The news arrives a month after Old Republic, RMIC’s parent firm, announced an ambitious recapitalization plan for its mortgage guaranty unit.
Just two years ago, Old Republic was forced to announce that its flagship mortgage guaranty insurance unit was operating on a waiver of minimum capital requirements — a waiver granted by its chief insurance regulator.
At the time, the firm’s mortgage guaranty subsidiary, RMIC Companies Inc. (RMIC), was forced to stop writing new business and told it could no longer pay more than 50% of any claims under any insurance policy it had issued.
RMIC is not the first mortgage insurer to face CFPB action.
Back in April, the CFPB reached a deal with four major mortgage insurers - Genworth Mortgage Insurance Corp. (GNW), United Guaranty Corp., Radian Guaranty Inc. (RDN) and Mortgage Guaranty Insurance Corp (MTG). The regulator reached a settlement requiring the firms to pay a total of $15 million in penalties for allegedly giving kickbacks to lenders in exchange for insurance business.