-Radian settles with US Consumer Financial Protection Bureau.
BANKING AND CREDIT NEWS-April 5, 2013--Radian settles with US Consumer Financial Protection Bureau(C)2013 M2 COMMUNICATIONS http://www.m2.com
5 April 2013 -- US insurer Radian Group Inc's (NYSE: RDN) Radian Guaranty Inc mortgage insurance subsidiary said that it has reached a settlement agreement with the US Consumer Financial Protection Bureau to resolve a previously disclosed federal investigation of the company's participation in captive reinsurance arrangements.
As part of this settlement, Radian agreed not to enter into new captive reinsurance arrangements for a period of ten years and to pay a civil penalty of USD 3.75m.
Radian said it has not entered into any new captive reinsurance arrangements since 2007.
In the past, Radian and other private mortgage insurers entered into captive arrangements under which affiliates of mortgage lenders reinsured a portion of the risk originated by the lenders in return for a portion of the mortgage insurance premiums that would have been paid to the firm.
Radian said it relied on long-standing, written guidance from the US Department of Housing and Urban Development in structuring these captive reinsurance agreements and on analyses and opinions of reputable actuarial firms that the terms of Radian's reinsurance agreements met HUD's standards.
During the high-claim years that followed the most recent economic downturn, captive arrangements have proven to represent a critical component of the company's loss mitigation strategy, effectively serving as designed to protect our capital position during a period of stressed losses.
As of December 31, 2012, Radian Guaranty said it had received total cash reinsurance recoveries from these captive reinsurance arrangements of approximately USD 750m.
Since 2008, HUD has been pursuing an investigation into the captive reinsurance arrangements of private mortgage insurers, including Radian, to determine whether these arrangements constituted an unlawful payment under the federal Real Estate Settlement Procedures Act (RESPA).
This investigation was transferred to the CFPB in 2011 by the enactment of the Dodd-Frank legislation. The recent settlement agreement will conclude the CFPB's investigation with respect to Radian without the CFPB making any findings of wrongdoing in its investigation or in the settlement, Radian said.
Radian Group provides private mortgage insurance and related risk mitigation products and services to mortgage lenders nationwide through its principal operating subsidiary, Radian Guaranty Inc.
Find out more at www.radian.biz.
1 USD = 0.660895 GBP
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|Publication:||M2 Banking & Credit News (BCN)|
|Date:||Apr 5, 2013|
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