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Archive for the ‘Antitrust’ Category

According to its borrowers’ class action complaint, Countrywide Financial Corp. (“Countrywide”) forces buyers who put less than 20% down on their homes to buy private mortgage insurance (“PMI”) through one of six providers chosen by Countrywide. The providers then allegedly requested Countrywide to “reinsure” the policies with Countrywide affiliate Balboa Reinsurance Co. (“Balboa”) under a “captive reinsurance arrangement.” This scheme allowed Countrywide to collect a portion of the PMI premium, which was essentially a kickback for the referrals. According to the borrowers, Balboa has collected more than $892 million in reinsurance premiums since 1999 and paid nothing toward insurance claims. The borrowers said the sham reinsurance led to higher premiums, but Countrywide alleged that the monthly premiums are set by the Pennsylvania Insurance Department and that providers cannot raise them. The borrowers countered that even if their rates did not change, Countrywide’s and Balboa’s actions still violated the antitrust protections of the Real Estate Settlement Procedures Act (“RESPA”).

The trial court dismissed the class action complaint for lack of standing. On appeal, the Third Circuit Court of Appeals reversed that decision. The court concluded that, under section 8 of RESPA, Congress created a private right of action that did not require an overcharge allegation. For the full story, click here.

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