Memphis bank First Horizon has been accused by two borrowers of putting up fees in its captive reinsurance programme.
The lawsuit claims First Horizon’s scheme sent $46.3 million in kickbacks to First Horizon National Corp., owner of First Tennessee Bank, between 2004 and 2011.
Saydei Barlee and Barry Broome allege the bank and four insurers schemed to disguise the kick backs as part of the regular mortgage insurance they paid on their home loans.
The suit follows a US Department of Housing and Urban Development investigation, which asserted large US banks took $6 billion in captive reinsurance kickbacks during the millennium.
First Horizon staffed 250 mortgage offices and 30 wholesale production centers in 41 states before selling most of its mortgage business in August 2008 to MetLife Bank. It now has 4900 employees.
Bank of America and Wells Fargo and recently settled similar class-action lawsuits, with First Horizon spokesman Jack Bradley saying: “From what we understand, this action is similar to suits already filed against many other banks. Although we sold our mortgage business in 2008, First Horizon has always acted in a responsible and fair manner, and we remain committed to the highest standards of business ethics and legal compliance.”