United Guaranty Corporation
Documents in this case
Case summary
The CFPB filed complaints and proposed consent orders against four national mortgage insurance companies in order to stop improper kickbacks paid by mortgage insurers to mortgage lenders in exchange for business, which have been prevalent for more than 10 years. The proposed orders require the four mortgage insurers to pay more than $15 million in penalties to the CFPB.
Order ()
PDF of this document (15 pages)
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Case 1:13-cv-21189-KMW Document5 Entered on FLSD Docket 04/08/2013 Page 1 of 15
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA
CASE NO.: 1:13-ev-21189-KMW (Williams) CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff, Vv.
UNITED GUARANTY CORPORATION,
Defendant.
/
' FINAL CONSENT JUDGMENT AND ORDER
Plaintiff, the Consumer Financial Protection Bureau (“CFPB” or “Bureau’”), has filed a Complaint for Permanent Injunction and Other Relief (the “Complaint”), pursuant to Section 1054 of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. § 5564, and Sections 8 and 16 of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2607,
2614.
The Complaint alleges that defendant United Guaranty Corporation (“United Guaranty” or “Defendant”) has violated Section 8 of the Real Estate Settlement Procedures Act (“RESPA”),
12 U.S.C. § 2607.
The parties, by and through their respective counsel, have agreed to entry of this Proposed Final Consent Judgment and Order (“Order”) by this Court, without trial or
adjudication of any issue of fact or law, to settle and resolve all matters of dispute arising from
l
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the conduct alleged in the Complaint. Defendant waives all rights to seek judicial review or othem ise challenge or contest the validity of this Order, and Defendant waives any right that may arise under the Equal Access to Justice Act, 28 U.S.C. j 2412. Defendant has waived service of the Summ ons and Complaint.
The parties having requested the Court to enter this Order, it is therefore ORDERED, ADJUDGED, and DECREED as follows:
FINDINGS This Court has jurisdiction of the subject matter of this case and has jurisdiction over Defendant. Venue in this District is proper.
The Complaint states a claim upon which relief may be granted under Section 8 of RESPA, 12 U.S.C. j 2607, and Sections 1054 and 1055 of the CFPA, 12 U.S.C. jj 5564 and 5565.
The Bureau and United Guaranty stipulate and agree to entry of this Order, without trial or final adjudication of any issue of fact or law, to settle and resolve a11 matters in dispute arising from the conduct of the Defendant alleged in the Com plaint to the date of entry of this Order. This settlement does not settle or resolve any m atters not alleged in the Complaint. United Guaranty has consented to entry of this Order without adm itting or denying any of the allegations set forth in the Complaint.
The parties intend that this Order a) not be an adjudication of any fact or legal conclusion, and b) not have any preclusive effect in any other action or proceeding. By agreeing Case 1:13-cv-21189-KMW Document 5 Entered on FLSD Docket 04/08/2013 Page 2 of 15
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to the entry of this Order, United Guaranty is not making any evidentiary adm issions of liability for the specific practices alleged in the Complaint.
The relief provided in this Order is appropriate and available pursuant to Sections 1054 and 1055 of the CFPA, 12 U.S.C. jj 5564 and 5565, and Sections 8 and 16 of RESPA, 12 U.S.C. jj 2607 and 2614.
6.
Entry of this Order is in the public interest.
DEFINITIONS For the purpose of this Order:
Sçcaptive M ortgage Reinsurance Arrangem ent'' shall refer to any contract, agreem ent, or other business arrangem ent to which United Guaranty is or was a party, pursuant to which a Lender or Lender affiliate reinsures any portion of m ortgage insurance provided by United Guaranty on any federally related mortgage loan, as defined by RESPA and its implementing regulations, in exchange for a percentage of premium s paid for that mortgage insurance coverage, and any actions necessitated by, attendant or ancillary to the execution of such an agreement and its provisions, including but not limited to (1) the referral of borrowers to United Guaranty in connection with loans originated by Lenders, (2) the creation or operation of one or more Lender affiliates to provide reinsurance services to United Guaranty or other mortgage insurance providers, (3) the receipt by or through such Lender affiliate or affiliates of some portion of the premiums paid by borrowers to United Guaranty or other forms of payment in connection with such loans, and (4) any other services provided pursuant to such an agreement.
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Case 1:13-cv-21189-KMW Document5 Entered on FLSD Docket 04/08/2013 Page 4 of 15
B. The “Company” or “United Guaranty” means United Guaranty Corporation and its successors and assigns, by whatever names they might be known.
C. “Captive Trust” means any trust used in connection with a Captive Mortgage Reinsurance Arrangement to which United Guaranty is a party, including any accounts, funds, or property held in the name of such trust.
D. “Lender(s)” means any and all entities that offer or provide residential mortgage loans.
E. “Captive Reinsurer” means any Lender or affiliate thereof that reinsures mortgage insurance pursuant to a Captive Mortgage Reinsurance Arrangement.
ORDER
I. PROHIBITED CONDUCT
IT IS THEREFORE ORDERED THAT that United Guaranty, its affiliates, officers, agents, representatives, and employees, and all other persons or entities in active concert or participation with it who receive actual notice of this Order by personal service or otherwise, directly or through any corporation, subsidiary, division, or other device, are hereby permanently restrained and enjoined from:
A. Except as otherwise expressly provided herein, participating in any Captive Mortgage Reinsurance Arrangement (“Arrangement”) for a period of ten years from the date of entry of this Order, by:
1. Entering into any such new Arrangement;
2. Revising, or agreeing to revise, including by failing to object upon being given
notice, any existing Arrangement without the prior written consent of the Bureau,
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except that such consent shall not be necessary in the case of purely ministerial or clerical changes, provided that the Bureau is given a copy of all docum ents reflecting any such changes no fewer than thirty (30) days before they take effect; or Obtaining reinsurance from a Captive Reinsurer on any new m ortgage transactions after the date of entry of this Order.
Nothing in this Order shall be construed, however, as preventing the ceding of prem ium s on policies originated as of, and subject to Arrangements already in existence as of, the date of entry of this Order.
B.
Giving any thing of value to any person pursuant to an agreement that m ortgage insurance business shall be referred by such person to United Guaranty, in violation of Section 8 of RESPA, 12 U.S.C. j 2607, and its implementing regulations. Failing to comply with any provision of RESPA, 12 U.S.C. j 2601 et seq., and its implementing regulations.
IT IS FURTHER ORDERED THAT United Guaranty, its aftiliates, officers, agents, servants, representatives, and employees, and all persons in active concert or participation with it who receive actual notice of this Order by personal service or othem ise, will: Relinquish to the CFPB any and a11 rights possessed by United Guaranty to receive, claim , or utilize any funds held in any Captive Trust pursuant to any existing Captive M ortgage Reinsurance Arrangem ent, except for the purpose of reim bursing United Guaranty for reinsurmwe claims that have accnzed or will accrue under the term s of any Captive M ortgage Reinsurance Anungement; for the purpose of obtaining reinsurance credit against loss reserves; Case 1:13-cv-21189-KMW Document 5 Entered on FLSD Docket 04/08/2013 Page 5 of 15
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or for the purpose of paying United Guaranty ceding comm issions due under any such Arrangement in force as of the date of entry of this Order. IT IS FURTH ER ORDERED THAT United Guaranty, its officers, agents, servants, and employees, hereby waive any and a1l claims or defenses of United Guaranty to resist enforcem ent of or m onitoring for com pliance with this Order on the ground that the CFPB lacks authority to undertake such enforcement or monitoring.
II.
CIVIL M ONEY PENALTY IT IS FURTHER ORDERED that by reason of the alleged violations of law or regulations as set forth in the Complaint, and after taking into account the appropriateness of the penalty with respect to the financial resources and good faith of United Guaranty, the gravity of the conduct by United Guaranty, the severity of the risks to and losses of consum ers, the history of previous conduct by United Guaranty, and such other matters as justice may require, pursuant to section 1055(c) of the CFPA, 12 U.S.C. j 5565(c): United Guaranty shall pay a total civil money penalty of $4,500,000 to the CFPB within thirty (30) days after the date of entry of this Order, in accordance with section 1017(d) of the CFPA, 12 U.S.C. j 5497(*, as directed by the CFPB. United Guaranty shall pay such civil money penalty itself, and is prohibited from seeking or accepting indemnification from such paym ent from any third party. Case 1:13-cv-21189-KMW Document 5 Entered on FLSD Docket 04/08/2013 Page 6 of 15
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111.
NOTIFICATION AND REPORTING REQUIREM ENTS A.
CIVIL INVESTIGATIVE DEM ANDS IT IS FURTHER ORDERED that, in connection with any Civil lnvestigative Demand ($tCID'') or subpoena issued in any investigation, enforcement action, or civil action of the Bureau related to or associated with the transactions or the occurrences that are the subject of the Complaint, United Guaranty shall respond on an expedited basis to any such CID or subpoena. B. DATA IT IS FURTHER ORDERED that, to facilitate consum er redress, United Guaranty shall provide the Bureau orits designated agent, within thirty (30) calendar days after receiving a written request by the Bureau or its designated agent, with a1l information reasonably required to administer payment of any funds pursuant to Section 1017(d) of the CFPA. United Guaranty shall provide a complete electronically stored data set in a compatible format (asreasonably determined by the Bureau or its agent). C. CO M PLIANCE M ONITO RING IT IS FURTH ER ORDERED that, for the purposes of m onitoring compliance with this Order'.
1. W ithin thirty (30) days of receipt of m itten notice from the CFPB, United Guaranty shall submit written reports, sworn to under penalty of perjtzry; produce documents for inspection and copying in the form and form at by which they are m aintained by United Guaranty; and m ake available a designated representative of United Guaranty to appear for deposition.
2. In addition, the CFPB is authorized to use any or a11 lawful m eans to m onitor compliance with this Order, including, but not limited to, obtaining docum ents, Case 1:13-cv-21189-KMW Document 5 Entered on FLSD Docket 04/08/2013 Page 7 of 15
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infonnation, answers to questions, or sworn testim ony from any person without further leave of the Court, and using any of the procedures available to the CFPB pursuant to the provisions of Section 1052 of the CFPA . 3. United Guaranty shall permit the CFPB to interview any employer, consultant, independent contractor, representative, agent, or em ployee who has agreed to such an interview, relating in any way to any conduct subject to this Order. The interview shall occur at a mutually agreeable tim e and place and the person interviewed m ay have counsel present upon their request. D. COM PLIANCE REPORTING IT IS FURTH ER ORDERED that for the purpose of assessing United Guaranty's compliance with this Order:
For a period of four (4) years from the date of entry of this Order, United Guaranty shall notify the CFPB of any changes in corporate stnlcture that m ay affect compliance obligations arising under this Order, including but not limited to a dissolution, assignment, sale, m erger, or other action that would result in the emergence of a successor entity', the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order, expressly to include, without limitation, the sale of private mortgage insurance', the filing of a bankruptcy petition; or a change in the corporate name or address, at least thirty (30) days prior to such change, provided that, with respect to any proposed change in the corporation about which United Guaranty learns less than thirty (30) days prior to the date such action is to take place, United Guaranty shall notify the CFPB as soon as it is practicable after obtaining such knowledge.
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One-htmdred eighty (180) days after the date of entry of this Order and annually on this date until such tim e as each and every one of the Captive Tnzsts are terminated, ended, or otherwise closed, United Guaranty shall provide a written report to the CFPB, sworn to under penalty of perjury, setting forth in detail the manner and form in which it has com plied and is complying with this Order since entry of this Order, or during the most recent annual period, as appropriate. This report shall include, but not be lim ited to:
a) The balance of a11 funds held in any Captive Trust; b) The amount of al1 payments, funds, or other disbursements received by United Guaranty during the preceding year (or, in the case of the first such report, six months) pursuant to any existing Captive Mortgage Reinsurance Arrangement for the purpose of reim bursement for reinsurance claim s; c) The amount of a11 payments, funds, or other disbursements that United Guaranty projects or anticipates it may claim within the subsequent year pursuant to any existing Captive M ortgage Reinsurance Arrangement for the purpose of reimbursem ent for reinsurance claim s', d) Confirmation that United Guaranty has exercised for the benefit of the CFPB any and all rights, if any, previously possessed by it under any Captive M ortgage Reinsurance Arrangem ent to obtain any other funds held within any Captive Trust, other than funds held within a Captive Trust for any purpose perm itted in Section l.D above, notified all parties to the Captive M ortgage Reinsurance Arrangement that it has relinquished any continuing rights over Case 1:13-cv-21189-KMW Document 5 Entered on FLSD Docket 04/08/2013 Page 9 of 15
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such funds to the CFPB, and the amount of any such funds obtained and delivered to the CFPB;
e) The nmount of all payments, funds, or other disbursement paid or ceded by United Guaranty pursuant to any existing Captive M ortgage Reinsurance Arrangem ent;
t) The amount of all payments, funds, or other disbursements that United Guaranty projects or anticipates it may pay or cede within the subsequent year pursuant to any existing Captive M ortgage Reinsurance Arrangem ent; g) Any changes required to be reported under subparagraph 1 of this Section; and h) A copy of each acknowledgement of receipt of this Order, obtained pursuant to Section V of this Order.
For a period of ten (10) years from the date of entry of this Order, beginning one year from the date of entry of this Order, and each year thereafter, United Guaranty shall certify in writing to the CFPB that, since the date of entry of this Order, United Guaranty has complied with subsection A of Section 1 of this Order. 4. For the purposes of this Order, United Guaranty shall, unless otherwise directed by the CFPB'S authorized representatives, m ail all written notification to the CFPB via Federal Express, to:
Consum er Financial Protection Bureau ATTENTION: Enforcem ent Director 1700 G Street NW W ashington, D.C. 20552 RE: CF## v. United Guaranty File No. 201 1-0024-02 Case 1:13-cv-21189-KMW Document 5 Entered on FLSD Docket 04/08/2013 Page 10 of 15
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lV.
RECORD-KKEPSNG PROVISION IT IS FURTHER ORDERED that, for a period of six (6) years from the date of entry of this Order, United Guaranty and its successors and assigns shall retain a1l records and docum ents necessary to dem onstrate full compliance with this Order, including but not limited to:
A.
obtained by United Guaranty following the date of this Order, or othenvise in force as of the date of this Order.
B.
Al1 copies of acknowledgem ents of receipt of this Order required by Al1 contracts retlecting reinsurance policies or arrangements sought or Section V, and all reports subm itted to the CFPB pursuant to Section 111. C.
All customer files, including any records of custom er com plaints, on accounts including Captive M ortgage Reinsurance Arrangements. D.
All records of any reinsurance claim s pursued by the Com pany under a Captive M ortgage Reinsurance Arrangement, the disposition of those claim s, and a complete accounting of all funds received by United Guaranty in connection with those claims.
V.
DISTRIBUTIO N OF OR DER IT IS FURTHER ORDERED that, during the ten (10) years after entry of this Order, United Guaranty shall deliver a copy of this Order to all principals, officers, and directors. United Guaranty must also deliver copies of this Order to a11 of its employees, agents, and representatives who had responsibilities or business duties relating to Captive M ortgage Reinsurance Arrangements. United Guaranty m ust also deliver copies of this Order to a1l of its employees, agents, or representatives who are engaged in or otherwise responsible for Case 1:13-cv-21189-KMW Document 5 Entered on FLSD Docket 04/08/2013 Page 11 of 15
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compliance with this Order. United Guaranty shall deliver this Order to current personnel within thirty (30) days after the date of service of this Order, and to new personnel or personnel whose responsibilities have changed to include duties covered by this Order, within thirty (30) days after the person assum es such position or responsibilities. United Guaranty must secure a signed and dated statement acknowledging receipt of this Order within thirty (30) days of delivery from a11 persons receiving a copy of this Order under this Section. Vl.
ACKNOW LEDGM ENT O F RECEIPT O F O RDER IT IS FURTHER ORDERED that United Guaranty, within thirty (30) days of receipt of this Order as entered by the Court, must subm it to the CFPB a duly sworn statem ent acknowledging receipt of this Order.
VII. RELEASE The CFPB releases and discharges United Guaranty, and its affliates, directors, officers, agents, servants and em ployees from a11 potential liability that has been or m ight have been asserted by the CFPB based on the captive m ortgage reinsurance practices described in the Complaint, to the extent such practices occurred prior to the entry of this Order. N otwithstanding the foregoing, the practices alleged in the Com plaint m ay be utilized by the CFPB in future enforcement actions against United Guaranty and its affiliates, including, without lim itation, to establish a pattern or practice of violations or the continuation of a pattern or practice of violations, or to calculate the am ount of any penalty. This release shall not preclude or affect any right of the CFPB to detennine and ensure compliance with the term s and provisions of this Order, or to seek penalties for any violations thereof. Case 1:13-cv-21189-KMW Document 5 Entered on FLSD Docket 04/08/2013 Page 12 of 15
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Vill. RETENTION OF JURISDICTION
IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for
purposes of construction, modification, and enforcement of this Order.
IX. FINAL JUDGMENT AND ORDER
The parties hereby consent to the terms and conditions of this Order as set forth above
and consent to the entry thereof.
IT IS DONE AND ORDERED this Seay of be , | , 2013 in Chambers in
la.———_ , Florida.
AN
UNITED $TATES DISTRICT JUDGE
Conformed Copies to:
All Parties
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Case 1:13-cv-21189-KMW Document5 Entered on FLSD Docket 04/08/2013 Page 14 of 15
THE UNDERSIGNED HEREBY CONSENT TO ENTRY OF THIS ORDER
On behalf of Plaintiff Consumer Financial Protection Bureau
Kent Markus Enforcement Director
a, Gordon (Special Florida Bar Number #A5501854)
Kimberly J. Ravener Navid Vazire
Crystal Sumner Attorneys for Plaintiff
Consumer Financial Protection Bureau 1700 G Street, NW
Washington, DC 20552 (202)435-7357
DATED April 4, 2013.
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Case 1:13-cv-21189-KMW Document5 Entered on FLSD Docket 04/08/2013 Page 15 of 15
THE UNDERSIGNED HEREBY CONSENT TO ENTRY OF THIS ORDER
On behalf of Defendant United Guaranty
Pm Nod
Brian M@Gould 7 Chief Operating Officer United Guaranty Corporation
DATED 3f: 2/ 2013.
JZ
Wildam A-Burck
Attorney for Defendant United Guaranty Corporation
DATED 2/19 , 2013.
Complaint ()
PDF of this document (10 pages)
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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA
CASE NO.: _________
CONSUMER FINANCIAL PROTECTION BUREAU,
Plaintiff,
v.
UNITED GUARANTY CORPORATION,
Defendant.
/
COMPLAINT FOR PERMANENT INJUNCTION AND OTHER RELIEF
Plaintiff, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”), alleges: 1.
The Bureau brings this action under Section 1054 of the Consumer Financial Protection Act of 2010, Pub. L. No. 111-203, Title X, § 1054, 124 Stat. 1376, 2028-29 (2010) (“CFPA”), codified at 12 U.S.C. § 5564, and Sections 8 and 16 of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2607 and 2614, to obtain civil money penalties and permanent injunctive relief, for Defendant’s acts or practices in violation of Section 8 of RESPA, 12 U.S.C. § 2607.
2.
Section 8 of RESPA prohibits: (1) the payment and acceptance of any fee, kickback, or thing of value in exchange for referring a consumer to a real estate settlement service provider, and (2) the giving or accepting of any portion, split, or percentage of a charge for a real estate settlement service other than for services actually performed (that is, unearned fees).
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3.
This enforcement action is brought to remedy the unlawful acts and practices by Defendant of entering into agreements pursuant to which illegal kickback payments or unearned fees, disguised as reinsurance premiums, were paid by Defendant to the captive reinsurance affiliates (“captive reinsurers”) of entities offering or providing residential mortgage loans (“lenders”) in exchange for the referral of private mortgage insurance business from the lenders. JURISDICTION AND VENUE 4.
This Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331, 1337(a), 1345, and 1355 and 12 U.S.C. §§ 2614 and 5565(a).
5.
Venue is proper in this district under 28 U.S.C. § 1391, and 12 U.S.C. § 2614, 12 U.S.C. § 5564(f).
PARTIES 6.
The CFPB is an independent agency of the United States Government created by statute. 12 U.S.C. § 5481 et seq. Section 1061(b)(7) of the CFPA, 12 U.S.C. § 5581(b)(7), transfers to the Bureau all consumer protection functions originally granted to the Secretary of the Department of Housing and Urban Development (“HUD”) relating to the enforcement of RESPA, and Section 1098(7) of the CFPA amended Section 8(d)(4) of RESPA to authorize the Bureau to bring actions to enjoin violations of Section 8. 7.
The CFPB is authorized to initiate federal district court proceedings, by its own attorneys, to enjoin violations of RESPA and to secure such legal and equitable relief as may be appropriate in each case. 12 U.S.C. § 2607(d)(4); 12 U.S.C. §§ 5564(a) and 5565. 8.
The CFPB is also authorized to collect civil money penalties, as set forth in 12 U.S.C. §§ 5565(a) and (c), and to recover its costs in connection with prosecuting an action, 12 U.S.C. § 5565(b).
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9.
Defendant United Guaranty Corporation (“United Guaranty”) is a North Carolina corporation with its principal place of business in Greensboro, North Carolina. United Guaranty transacts or has transacted business in this district and throughout the United States. At times material to this Complaint, United Guaranty engaged in the business of selling private mortgage insurance and ceded premiums to lenders in exchange for purported “reinsurance.” FACTS The Private Mortgage Insurance Industry 10.
Private mortgage insurance is issued by a mortgage insurance provider. Typically, the lender selects and designates the mortgage insurance provider that will provide the mortgage insurance at the time of the loan origination. As a result, consumers usually have no effective choice in this referral.
11.
In the event of a borrower default, the mortgage insurance policy covers a specified percentage of losses the lender may face in connection with a foreclosure of the loan. 12.
Prior to the 2008 financial crisis, mortgage insurance was a very profitable business for Defendant. As a result, Defendant highly valued its selection by a lender to provide mortgage insurance for loan transactions originated by the lender. 13.
Beginning in the mid-1990’s, many lenders established their own wholly-owned subsidiaries to serve as captive reinsurers providing purported reinsurance to Defendant and others. These captive reinsurers purported to provide a layer of reinsurance coverage primarily or exclusively for the mortgage insurance on the affiliated lender’s mortgage loans. 14.
Defendant entered into captive mortgage reinsurance arrangements (“captive arrangements”) with lenders. Under each of these arrangements, Defendant agreed to cede a certain percentage of a referred borrower’s premiums back to the referring lender through the
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lender’s wholly-owned subsidiary, the captive reinsurer, purportedly in exchange for reinsurance coverage.
15.
Defendant entered into captive arrangements with many of the more than one hundred captive reinsurers, including those affiliated with virtually every major lender participating in the U.S. housing market.
Kickback Payments Made for Referrals 16.
Defendant’s premiums ceded to lenders’ captive reinsurers were kickback payments, paid in exchange for referring customers. 17.
The “reinsurance” provided by the lenders’ captive reinsurers was of little if any value because the projected value of the reinsurance to Defendant was far less than the premiums Defendant expected to cede.
18.
Defendant advocated the use of captive arrangements to encourage lenders to use its services. Ceding a percentage of premiums to lenders through captive reinsurers encouraged those lenders to refer mortgage insurance business to Defendant. 19.
These arrangements obligated Defendant to split its profits with lenders, but simultaneously enabled Defendant to increase or maintain its market share. 20.
When it first participated in captive arrangements, Defendant ceded approximately 12% of its premiums per referral to lenders’ captive reinsurers. Over time, Defendant ceded increasingly large percentages of its premiums to captive reinsurers in exchange for lenders’ continued referral of customers to Defendant, until the amount ceded was as high as 40% for each referral. With each change in ceding percentage, the reinsurance structure changed, purportedly to provide greater coverage.
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VIOLATIONS OF RESPA 21.
Section 8(a) of RESPA prohibits any person from giving or accepting “any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.” 12 U.S.C. § 2607(a). 22.
Section 8(b) of RESPA prohibits the giving and acceptance of “any portion, split, or percentage” of any charge made or received for a settlement service other than for services actually performed in connection with a transaction involving a federally related mortgage loan. 12 U.S.C. § 2607(b).
23.
Defendant is a provider of settlement services subject to the requirements of, and is a “person” under, Section 8 of RESPA. See 12 U.S.C. § 2602. 24.
Mortgage insurance constitutes “business incident to or a part of a real estate settlement service” within the meaning of Section 8 of RESPA. 12 C.F.R. § 1024.2(b). 25.
The home loans originated by lenders and referred to Defendant are “federally related mortgage loans” as defined in 12 U.S.C. § 2602(1) and 12 C.F.R. § 1024.2(b). 26.
In the course and conduct of making these home loans, lenders routinely referred many consumers to Defendant for mortgage insurance. 27.
Many of these referrals of mortgage insurance business were made pursuant to agreements between Defendant and lenders which provided that Defendant would cede a portion of their mortgage insurance premiums to the referring lender’s captive reinsurer. These agreements are reflected by, among other things, written reinsurance and trust agreements, other written communications between and within lenders and Defendant, and by Defendant’s and lenders’ pattern, practice, and course of conduct.
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28.
Each ceding payment by Defendant to the captive reinsurers is a “thing of value” that has been given to a lender’s captive.
29.
Each such ceding payment: (a) was not and is not for services actually furnished or performed, or (b) grossly exceeded or exceeds the value of any such services. 30.
Each such ceding payment by Defendant was and is made in consideration of lenders’ continued referral of mortgage insurance business to Defendant. 31.
Each such ceding payment therefore was and is an illegal kickback in violation of Section 8(a) of RESPA, 12 U.S.C. § 2607(a), for which Defendant is liable. 32.
Each ceding payment paid by Defendant and accepted by a lender through its captive reinsurer is a portion, split, or percentage of the private mortgage insurance premiums paid by consumers who are lenders’ customers.
33.
Defendant gave and lenders accepted a portion, split, or percentage of charges received by Defendant for the rendering of business incident to a real estate settlement service other than for services actually performed, in violation of Section 8(b) of RESPA, 12 U.S.C. § 2607(b), for which Defendant is liable.
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THIS COURT’S POWER TO GRANT RELIEF 34.
Sections 8 and 16 of RESPA, 12 U.S.C. §§ 2607(d)(4) and 2614, and Section 1055 of the CFPA, 12 U.S.C. § 5565, empower this Court to grant injunctive relief to halt and redress violations of Section 8 of RESPA in actions brought by the Bureau. The Court, in the exercise of its equitable power, may award ancillary relief, including rescission of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies, to prevent and remedy any violation of Section 8 of RESPA in actions brought by the Bureau. 35.
Further, Section 1055 of the CFPA, 12 U.S.C. § 5565, empowers this Court to award civil money penalties, payment of damages or other monetary relief, public notification regarding the violation, limits on the activities or functions of the person, and the CFPB’s costs of prosecuting the action, in addition to the equitable remedies described above. PRAYER FOR RELIEF 36.
Wherefore, Plaintiff CFPB, pursuant to Sections 8 and 16 of RESPA, 12 U.S.C. §§ 2607 and 2614, Section 1055 of the CFPA, 12 U.S.C. § 5565, and the Court’s own equitable powers, requests that the Court:
A.
Enter a permanent injunction to prevent and restrain future violations of Section 8 of RESPA; and B.
Award civil money penalties for Defendant’s violations of Section 8 of RESPA.
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DATED: April 4, 2013
Respectfully submitted,
Kent Markus Enforcement Director
s/Donald R. Gordon
Donald R. Gordon (Special Florida Bar No. A5501854) Kimberly J. Ravener Navid Vazire Crystal Sumner Enforcement Attorneys Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552 Telephone: (202) 435-7357 Facsimile: (202) 435-7722 e-mail: [email protected]
Attorneys for Plaintiff
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Certificate of Service
I certify that a true and correct copy of the foregoing Complaint was served by U.S. Mail and email on April 4, 2013 on all counsel or parties of record on the service list.
s/Donald R. Gordon
Donald R. Gordon
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SERVICE LIST
Case No.: ______________
United States District Court, Southern District of Florida
Sara F. Millard, Esq.
Senior Vice President & Deputy General Counsel United Guaranty Corporation 230 N. Elm Street Greensboro, NC 27401 Telephone: (336) 412-0858 Email: [email protected]
William Burck, Esq.
Quinn Emanuel Urquhart & Sullivan, LLP 1299 Pennsylvania Ave. NW, Suite 825 Telephone: (202) 538-8000 Email: [email protected]
Attorneys for Defendant