Homebuyers are seeking class certification in a suit accusing
mortgage lender PHH Corp. of working with its captive reinsurer
Atrium Insurance Corp. to receive an unlawful cut of the premiums
its borrowers paid for private mortgage insurance.
The plaintiffs' complaint characterized the alleged scheme among
PHH Corp., PHH Home Loans, PHH Mortgage Corp., Atrium and insurers
who are not named in the suit as "a secretive conspiracy to
circumvent RESPA's prohibition against kickbacks and unearned
According to the complaint, buyers who purchase homes and put down
less than 20 percent as a down payment are typically required to
purchase private mortgage insurance to protect mortgage lenders in
the event that the buyer defaults. The suit says that the
homebuyers are not usually given the opportunity to select the
The RESPA bars mortgage lenders from accepting kickbacks for
referrals to private insurance for these policies and from
accepting any portion of fees that does not correspond to services
actually performed, but plaintiffs allege that PHH got around these
provisions through purported reinsurance arrangements.
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