Loan insurers fined millions for kickbacks
Radian to pay $3.75M of $15M industry settlement
Loan insurers fined millions for kickbacks
Joseph N. DiStefano
Radian Group Inc., Philadelphia, and three other home mortgage insurers have agreed to pay a total of $15 million to settle accusations they paid "improper kickbacks" to lenders to gain new business, in the years before the financial meltdown of 2008, according to a statement today by the government's Consumer Financial Protection Bureau. The settlement awaits approval by a federal judge in Florida.
The companies sell private mortgage insurance to borrowers who can't or won't scrape together at least a 20% down payment for a home. The insurance boosts homeownership costs, and helped mortgage lenders make loans to people who otherwise couldn't have afforded to buy a home during the property price inflation years of the 1990s and early 2000s. The insurers' complex financial arrangements covering the kickbacks were "worthless" to consumers and "inflated" their insurance costs, while boosting insurers' income, bureau director Richard Cordray said in the statement. Radian defended the payments and the practice of "reinsuring" its customers' mortgage insurance policies through firms controlled by lenders that gave Radian business. In a statement, President Teresa Bryce Bazemore said the practices had helped keep the company solvent during the late 2000s economic downturn, and were legal under federal Housing and Urban Development guidelines at the time. Still, the company agreed to pay $3.75 million and stop reinsuring policies so it could "eliminate distractions at an acceptable cost" and keep writing new policies. In New York Stock Exchange trading this morning, Radian traded at above $10 a share, near a three-year high, with little movement following the settlement.
Also settling with the government: Genworth Mortgage Insurance Corp., United Guaranty Corp., and Mortgage Guaranty Insurance Corp.
The bureau didn't say what lenders were working with the insurers receiving kickbacks.. Last year, mortgage lender PHH Corp., Mount Laurel, said it was being investigated by the bureau for its mortgage insurance practices. PHH said it believed it had followed the law.
So, what was their "net gain" on this crime, even with the small-percent fine (which is a deductible cost of business expense)? You have to figure they netted at least 150-250 million in excess profits, if historical percentages of "fines" were applied in this case.
As long as businesses can commit crimes with no consequences, and on the rare occasion when they are caught pay a little fine that does not impact their ability to continue their illegal activities, and NO CORPORATE BIG-WIG EVER goes to jail for their crimes, these little business glitches will continue to be an annoyance until there are absolutely no sanctions against them.
If people could commit crimes with the impunity of companies, we would be up in arms. But with unseen "others" running companies that do much more harm to people and society, corporate crime goes unpunished. I can guarantee that CEO Ibrahim has not been negatively impacted one little bit by the crimes HE AND HIS COMPANY committed.
Mission accomplished.— JeffJenk
