First Horizon National Corp. (FHN) faces threats of a lawsuit for accepting kickbacks from mortgage insurance companies, according to a Memphis Business Journal report. However, the company has yet to receive any legal notice.
First Horizon has been accused of referring home loan clients to United Guaranty Residential Insurance Co., Republic Mortgage Insurance Co., Genworth Mortgage Insurance Corp., a unit of Genworth Financial Inc. (GNW) and Radian Guaranty Inc., a division of Radian Group Inc. (RDN). In return, the company accepted bribes for those referrals from the mortgage insurers through its home loan subsidiary unit, FT Reinsurance.
The proposed class action lawsuit was filed on May 31 in the federal district court in Philadelphia, according to the Business Journal, which cited a report by Law360. The lawsuit has been brought against First Horizon, First Tennessee Bank, First Horizon Home Loan Corp., FT Reinsurance Co., as well as against the four mortgage insurers. It involves a class period of January 1, 2004 to present.
Fraudulent practices in the mortgage market have largely considered responsible for the financial meltdown. In fact, several of Wall Street's biggest firms are facing increased litigations for their alleged misconduct. Moreover, post-financial crisis, regulators have intensified their scrutiny in the mortgage market and have come up with charges against them for such conduct.
Any lawsuit against First Horizon would not only consume time and drain out its hard earned money but also tarnish its image to some extent. As of now, we keep our fingers crossed and will continue keeping a tab on this issue.
First Horizon currently retains the Zacks #3 Rank, which translates to a short-term Hold rating. Considering the fundamentals, we also maintain a Neutral recommendation on the stock.
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