WASHINGTON (CN) - SunTrust Banks and subsidiaries steer homebuyers to mortgage insurance companies and take kickbacks from the insurers for it, a class action claims in Federal Court. The class claims the deals reap "millions of dollars in referral fees" for the bank, and "over time artificially inflate the cost of mortgage insurance."
The named plaintiffs, Archie and Violet Moses, say the scheme involves the bank and its subsidiaries referring borrowers to private mortgage insurance companies, in exchange for a portion of the borrowers' monthly premium payments.
SunTrust carries out the scheme "under the guise of so-called 'captive reinsurance,'" and never tells its customers that it is collecting "millions of dollars through its captive reinsurance arrangements, far in excess of the value of any services rendered as valued at the time of the transaction," according to the complaint.
"The terms and conditions of the private mortgage insurance, including the cost of the policy, are determined by the lender and the private mortgage insurance provider," the class claims. "Borrowers are not given an opportunity to negotiate with the private mortgage insurance insurer about the cost or to comparison shop for the best private mortgage insurance price."
The complaint claims that "the borrower typically is not even informed of the identity of the company providing the private mortgage insurance."
Named as defendants are SunTrust Banks Inc., SunTrust Bank, SunTrust Mortgage Inc., Twin Rivers Insurance Company, Twin Rivers II Inc., United Guaranty Residential Insurance Co., Genworth Financial Inc. and its mortgage insurance subsidiaries, Mortgage Guaranty Insurance Corp., PMI Mortgage Insurance Company, PMI Mortgage Assurance Company, The PMI Group Inc., Republic Mortgage Insurance Company, and Radian Guaranty Inc.
The class seeks compensatory and punitive damages for violations of the kickbacks and referral fees provisions of the Real Estate Settlement Procedures Act, violations of the Truth in Lending Act, the D.C. Consumer Protection Procedures Act, and for fraud and conspiracy. It is represented by Steven Skalet with Mehri & Skalet.
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