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August 07, 2012 at 10:49 AM
The Consumer Financial Protection Agency is conducting a broad investigation into mortgage insurers’ business practices amid allegations of illegal kickbacks to bankers in order to gain access to customers in need of private mortgage insurance.
In most cases, private mortgage insurance is required when borrowers can’t afford the 20 percent down payment needed for a conventional home loan.
The allegations of wrongdoing center around possible violations of the Real Estate Settlement Procedures Act, which bars a lender from steering a borrower to a particular mortgage insurer with whom the lender has a business relationship.
Minnesota regulators initiated the probe, alleging that mortgage insurers paid banks fees to win business, in violation of RESPA.
The fledgling consumer protection agency was created by the Dodd-Frank financial services reform law, and has assumed responsibility for enforcement of RESPA from the federal Department of Housing and Urban Development.
