The US Consumer Financial Protection Bureau (CFPB) has imposed a monetary penalty of $100,000 on Republic Mortgage Insurance Corporation (RMIC) for allegedly paying illegal kickbacks to mortgage lenders in exchange for business.
In a complaint filed with the United States District Court for the Southern District of Florida, the consumer protection agency alleged that the insurer purchased worthless captive reinsurance, in order to fetch a profit for mortgage lenders in exchange for referrals.
Under the proposed settlement, the insurer will cease such illegal practices, which have been running for more than ten years, besides paying $100,000 in penalty.
In accordance with deal, RMIC will not enter into any new captive mortgage reinsurance arrangements with affiliates of mortgage lenders, and from obtaining captive reinsurance on any new mortgages, for a period of ten years.
Furthermore, the proposed settlement will also prevent RMIC from paying illegal kickbacks or otherwise violating the Real Estate Settlement Procedures Act.
Commenting on the action taken against the underwriter, CFPB director Richard Cordray said, "Kickbacks for mortgage insurance referrals are illegal, and can drive up costs for consumers seeking to buy a home."
"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 will require to make reports to the CFPB in order to ensure their compliance with the provisions of the order.
This year, the CFPB took similar actions against four mortgage insurers and imposed fines worth a total of $15.4m.