NU Online News Service, Aug. 7, 1:31 p.m.EDT

The Consumer Financial Protection Agency is conducting a broadinvestigation into mortgage insurers' business practices amidallegations of illegal kickbacks to bankers in order to gain accessto customers in need of private mortgage insurance.

In most cases, private mortgage insurance is required whenborrowers can't afford the 20 percent down payment needed for aconventional home loan.

The allegations of wrongdoing center around possible violationsof the Real Estate Settlement Procedures Act, which bars a lenderfrom steering a borrower to a particular mortgage insurer with whomthe lender has a business relationship.

Minnesota regulators initiated the probe, alleging thatmortgage insurers paid banks fees to win business, in violation ofRESPA.

The fledgling consumer protection agency was created by theDodd-Frank financial services reform law, and has assumedresponsibility for enforcement of RESPA from the federal Departmentof Housing and Urban Development.

Companies confirming the investigation through securitiesfilings include American International Group, MGIC InvestmentCorp., and Genworth Financial.

In its quarterly earnings report filing Friday, AIG also saidits subsidiary, United Guaranty Corp., is negotiating a proposedconsent order with the Minnesota Commissioner of Commerce.

The order deals with allegations that UGC violated RESPA, theFair Credit Reporting Act and other state and federal laws “inconnection with its practices with captive reinsurance companiesowned by lenders,” according to the filing.

It adds, “UGC cannot predict if or when a consent order may beentered into or, if entered into, what the terms of the finalconsent order will be.”

In its filing, Genworth said that it intends to “vigorouslydefend such actions.”