WASHINGTON – The CFPB has filed an administrative proceeding against New Jersey-based PHH Corp. and certain subsidiaries, alleging that the firm has participated in a mortgage insurance kickback scheme.
The filing is against PHH Corp. and residential mortgage origination subsidiaries PHH Mortgage Corp. and PHH Home Loans LLC, and PHH's wholly owned subsidiaries, Atrium Insurance Corp. and Atrium Reinsurance Corp.
The CFPB has charged that once mortgages were originated, PHH referred consumers to mortgage insurers with which it partnered. These insurers would then purchase "reinsurance" from PHH's subsidiaries. While reinsurance is meant to protect mortgage insurers from losses, the CFPB said PHH took the reinsurance fees as kickbacks. This is a violation of the Real Estate Settlement and Procedures Act (RESPA).
The CFPB said this PHH scheme resulted in consumers paying more in mortgage insurance premiums. PHH received as much as 40% of these premiums, resulting in millions of dollars in kickbacks, according to the CFPB. PHH also allegedly overcharged borrowers that did not buy mortgage insurance from one of its kickback partners.
The bureau in the administrative proceeding is seeking a civil fine, a permanent injunction to prevent future violations, and victim restitution.
The CFPB in 2013 settled with five mortgage insurers that took part in similar schemes. The bureau noted that the PHH proceeding is not a finding, or a ruling that the defendants have actually violated the law.
The CFPB’s media advisory is available here.