PHHÂ Corp. and four of its subsidiaries are facing regulatory actions for allegedly operating an illegal mortgage insurance kickback scheme beginning nearly two decades ago.
PHH Mortgage Corp. and PHH Home Loans LLC are accused of receiving kickbacks in return for directing business to mortgage insurance companies.
The kickbacks were allegedly paid to PHH’s wholly owned subsidiaries Atrium Insurance Corp. and Atrium Reinsurance Corp. through reinsurance arrangements.
Such payments violate the Real Estate Settlement Procedures Act, or RESPA.
The Consumer Financial Protection Bureau said that an investigation it conducted found that PHHÂ operated the scheme from 1995 until 2009.
The regulator has reportedly filed an administrative action against PHH that seeks a civil fine, restitution for victims and a permanent injunction to prevent future violations.
According to the CFPB, PHHÂ allegedly received as much as 40 percent of mortgage insurance premiums — which amounted to hundreds of millions of dollars.
The bureau claims that some borrowers who did not purchase insurance from one of PHH’s kickback partners were charged more for their loans.
“PHH pressured mortgage insurers to ‘purchase’ its reinsurance with the understanding or agreement that the insurers would then receive borrower referrals from PHH,” the CFPB announcement said. “PHH continued to steer business to its mortgage insurance partners even when it knew the prices its partners charged were higher than competitors’ prices.”
Proceedings for an administrative forum have been initiated by the CFPB through the filing of a notice of charges. The notice is similar to a complaint that is filed in federal court.
The case will be tried by an administrative law judge from the CFPB’s Office of Administrative Adjudication. The judge will hold hearings and make a recommended decision.
PHHÂ can appeal the decision to the CFPBÂ director.
In November 2013, the CFPBÂ announced that it issued a consent order against Republic Mortgage Insurance Corp. over allegedly illegal kickbacks, while it reached settlements in April 2013 with Genworth Mortgage Insurance Corp., Mortgage Guaranty Insurance Corp., Radian Guaranty Inc. and United Guaranty Corp.
However, Fifth Third Bank in April won a dismissal of a federal lawsuit alleging RESPA violations tied to mortgage insurance kickbacks.
