In a lawsuit filed by the Rehabilitator for a private mortgage insurance provider, the District Court found that the causes of action either failed to meet the Iqbal pleading standard, contained implausible allegations, or was barred by the protection of RESPA’s “safe harbor” provision and its four year statute of limitations.
The PMI program was described by the Court as follows: home purchasers seeking to borrow more than 80% of the home’s purchase price were able to do so if they purchased PMI to compensate the lender in case the borrower defaulted. “In order to protect themselves from losses due to defaults, insurance providers of PMI would purchase reinsurance in order to shift some of the risk of default. The PMI provider would pass on the reinsurance premium to the borrower in the form of a higher premium for the PMI. The PMI provider would split the premium with the reinsurer, which is called a ‘ceding payment’ in accordance with the risk assumed.”
With respect to the provisions of the PMI provider and the reinsurer, the Court found the provisions contained therein “say nothing which could give rise to a duty requiring [the reinsurer] to make any disclosures to the borrowers at all.” Furthermore, the Court found the Complaint did not allege “who the affected borrower was, the specific regulation violated, how it was violated, and most important, how [the PMI provider] was damaged.”