United Guaranty, Genworth Under CFPB’s Civil Investigative Demand

Recently, the newly formed Consumer Financial Protection Bureau (CFPB) assumed responsibility for violations of the Real Estate Settlement Procedures Act from HUD, and assumed HUD's aforementioned ongoing investigation. This ongoing investigation includes AIG’s United Guaranty Corp. (UGC). In June 2012, the CFPB issued a Civil Investigative Demand (CID) to UGC and other mortgage insurers, requesting documents and answers to written questions.

AIG’s SEC filing states “On July 24, 2012, the CFPB issued a letter to UGC agreeing to toll the deadlines associated with the CID pending discussions that could resolve the investigation. UGC has received a proposed consent order from the Minnesota Commissioner of Commerce (the MN Commissioner) which alleges that UGC violated the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act and other state and federal laws in connection with its practices with captive reinsurance companies owned by lenders. UGC is currently engaged in discussions with the MN Commissioner with respect to the terms of the proposed consent order.”

AIG goes on to say UGC cannot predict if or when a consent order may be entered into and if entered into, what the terms of the final consent order will be. UGC is also currently subject to civil litigation relating to its placement of reinsurance with captives owned by lenders, and may be subject to additional litigation relating to the conduct of such business from time to time in the ordinary course.

Among the other insurers is Genworth Financial. In its recent SEC filing it said, “As previously disclosed, in December 2011, one of our U.S. mortgage insurance subsidiaries received a subpoena from the United States Department of Housing and Urban Development, Office of the Inspector General with respect to reinsurance arrangements, including captive reinsurance transactions. That subpoena was withdrawn subsequent to our subsidiary’s receipt of an information request from the Consumer Financial Protection Bureau (“CFPB”) in January 2012, relating to the same subject matter. The CFPB further sent to our subsidiary a Civil Investigative Demand dated June 20, 2012 (the “CFPB Demand”) seeking production of specified documents and responses to questions set forth in the CFPB Demand. We intend to cooperate with the CFPB as appropriate in connection with the CFPB Demand.”

According to news outlets, MGIC Investment Corp. and PHH Corp. are others under CFPB’s watchful eyes.