Mortgage borrowers who wondered why they were forced to buy insurance from certain companies and why it was so expensive, don’t have to wonder any longer.
The Consumer Financial Protection Bureau (CFPB) says it believes improper kickbacks were paid by mortgage insurers to mortgage lenders in exchange for business. And the CFPB suggest they’ve been doing it for 10 years. Now as the result of a settlement four insurers will pay more than $15 million in penalties to the CFPB.
Who has to buy mortgage insurance?
Buyers who put down less than 20 percent are generally asked to buy insurance, which protects the lender in case the buyer defaults. But the lender usually picks the insurer.
The buyer pays the insurance bill every month. The CFPB says, “…it also adds to the cost of monthly payments for borrowers who have little equity in their homes.
As such, mortgage insurance can be especially harmful when its cost is inflated by illegal kickbacks. Increasing the burden on borrowers who already have little equity increases the risk that they will default on their mortgages.”
The four companies are: Genworth Mortgage Insurance Corporation, United Guaranty Corporation, Radian Guaranty Inc., and Mortgage Guaranty Insurance Corporation.