Gov't consumer watchdog fines 4 mortgage insurers
WASHINGTON (AP) — The government's consumer finance watchdog agency said Thursday that it has ordered four national mortgage insurers to pay $15.4 million combined to resolve claims that the companies paid millions in kickbacks to mortgage lenders for more than a decade.
The Consumer Financial Protection Bureau filed complaints and proposed consent orders against Genworth U.S. Mortgage Insurance., United Guaranty Corp., Radian Guaranty Inc., and Mortgage Guaranty Insurance Corp.
The agency asserts that the companies received lucrative business referrals from lenders. In return, the insurers bought reinsurance that was essentially worthless but designed to make a profit for the lenders.
The types of kickbacks were common practice in the years leading up to the 2008 financial crisis, the agency said.
"Illegal kickbacks distort markets and can inflate the financial burden of homeownership for consumers," Richard Cordray, director of the CFPB, said in a statement.
MGIC Investment Corp., parent company of Mortgage Guaranty, said the settlement was in the best interests of the company and its customers. It also stressed that the transactions caused no harm to any borrower, noting that MGIC's premium rates were not based on, or affected by, the reinsurance policies.
MGIC's portion of the settlement is $2.7 million. The company also agreed not to enter into new captive reinsurance agreements or reinsure any new loans for 10 years.
In a separate statement, Radian Group Inc. subsidiary Radian Guaranty said it had agreed to pay $3.8 million in penalties to the CFPB to eliminate distractions at an acceptable cost so that it could continue offering mortgage insurance. It also asserted that its reinsurance arrangements did not harm consumers.
Radian remains among several mortgage insurers subject to an investigation by the Minnesota Department of Commerce relating to their captive reinsurance arrangements. In addition, the company is facing private lawsuits over the reinsurance agreements.
Genworth, a unit of Genworth Financial Inc., agreed to pay $4.5 million and to also refrain from engaging in certain reinsurance arrangements for a 10-year period.
"Genworth USMI agreed to settle this review so we can focus our resources on working with customers to help borrowers responsibly achieve and maintain homeownership, and to resolve the uncertainties inherent in such a review and any possible resulting litigation," said Rohit Gupta, USMI's president and chief executive.
The company plans to book the settlement in its first quarter and does not expect it will have a significant impact on its financial results.
United Guaranty agreed to pay $4.5 million. An after-hours call to American International Group Inc., parent of United Guaranty, was not immediately returned.
Shares in AIG added 6 cents to $37.75 in after-market trading after ending the regular session down 15 cents at $37.69.
MGIC shares ended regular trading unchanged at $4.87. The stock rose 5 cents to $4.90 in extended trading.
Radian shares gained 37 cents, or 3.8 percent, to $10.22 during regular trading. The stock dipped 2 cents to $10.20 in after-hours trading.
Shares of Genworth Financial gained 5 cents to $9.49 in regular trading and tacked on 2 cents in extended trading.