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48 | Th e M Rep o RT O r i g i nat i O n S e r v i c i n g a na ly t i c S S e c O n da r y m a r k e t SERVICING the latest kicking the kickbacks The CFpB moves to investigate kickbacks at phh. t he Consumer Finan- cial Protection Bureau (CFPB) launched an ad- ministrative proceeding against PHH Corporation and its subsidiaries over an alleged mort- gage insurance kickback scheme dating as far back as 1995. Named in the bureau's action are PHH; its residential mortgage origination subsidiaries, PHH Mortgage Corporation and PHH Home Loans LLC; and its wholly owned subsidiaries, Atrium Insurance Corporation and Atrium Reinsurance Corporation. In its filing, the CFPB charges PHH with using mortgage rein- surance arrangements to "solicit and collect illegal kickback pay- ments and unearned fees" through its subsidiaries, Atrium Insurance and Atrium Reinsurance. In re- turn, PHH is said to have referred business to participating insurers. By allegedly accepting reinsur- ance fees as kickbacks, the CFPB says PHH violated the Real Estate Settlement Procedures Act (RESPA). PHH also stands accused of charging more money for loans to consumers who did not buy mort- gage insurance from its supposed kickback partners. In addition, the agency says PHH steered business to its partners "even when it knew the prices its partners charged were higher than competitors' prices." The bureau says the arrange- ments lasted nearly 15 years, continuing into at least 2009. Over the course of that time, the CFPB alleges PHH "set up a sys- tem whereby it received as much as 40 percent of the premiums that consumers paid to mortgage insurers, collecting hundreds of millions of dollars in kickbacks." Through its filing, the CFPB is seeking a civil fine, a permanent injunction to prevent future viola- tions, and victim restitution. While the Notice of Charges initiates proceedings—similar to a court-filed complaint—it is "not a finding or ruling that [PHH] have actually violated the law," the bureau clarified. In a statement issued in response to the charges, PHH maintains the com- pany and its subsid- iaries have complied with RESPA and other laws related to its business and said it will "vigorously defend" itself against the allegations. "We believe the CFPB's allega- tions grossly mischaracterize the legitimate business activities of our mortgage reinsurance subsidiaries, Atrium Insurance Corporation and Atrium Reinsurance Corporation," PHH said in its statement. "Such subsidiaries assumed significant risks, paid substantial claims, and we believe complied with ap- plicable statutory and regulatory requirements in existence during the period that such subsidiar- ies were engaged in the mortgage reinsurance business." risky Business Target, Neiman Marcus, and Michael's aren't the only ones at risk for financial breaches. a s companies like Target and Michaels Stores continue to take a drubbing over high-profile data breaches, a report from cybersecurity firm HALOCK Security Labs sug- gests mortgage lenders may not be doing enough to protect ap- plicants' sensitive financial data. After investigating practices at 63 lenders of varying size, HALOCK found more than 45 companies (70 percent) permitted applicants to send personal and financial infor- mation—including tax documents and W-2s—through unencrypted email attachments. That group includes eight of the top 11 U.S. lenders, HALOCK reports. Furthermore, the firm says nearly 70 percent of surveyed lend- ers encourage faxing sensitive data. More than 40 percent of surveyed companies provided a postal mail option, while only 12 percent of- fered a secure email portal. When asked why a secure email portal was not offered, HALOCK said one of the most common replies was that it had to do with what the customer was "most comfortable with." Said one former lender: "Oftentimes it was easier to have my clients send documents like W-2s through email because every- one has access to an email account. Most of us didn't want to take the time to explain what a secure portal was and how to use it." "While these responses suggest that lenders prioritize their custom- ers' ease-of-use over their security, they also suggest an unawareness that their customers are losing con- fidence in their banks' commitment to customer privacy," HALOCK said in its report. The company points to a study published by the Ponemon Institute in October in which 65 percent of surveyed consumers disagreed with the statement, "My bank is committed to ensur- ing the privacy of my personal information is protected." "[A]s the public becomes more demanding of their banks to ensure privacy and security, it's no longer feasible to rely on unsecure email for the transfer of financial documents," said Terry Kurzynski, senior partner at HALOCK. "Any type of weak link in a system involving sensi- tive information exposes people to unnecessary risk. It takes months to recover from an iden- tity theft and minutes to log into a secure portal. Do the math." "We believe the CFpB's allegations grossly mischaracterize the legitimate business activities of our mortgage reinsurance subsidiaries." —PHH statement.