Title Insurance Price Fixing, Other Fraud Costs Consumers Millions
Title insurance fraud became a growing problem during the housing boom, and now that the housing bubble has burst, the business practices of title insurance companies have come under increased scrutiny. Earlier this month, a title insurance fraud lawsuit was filed New York State, alleging that title insurers engaged in price fixing and kickback schemes in an attempt to enrich themselves. Title insurance fraud always results in consumers paying inflated prices, and the New York title insurance fraud lawsuit alleges that such practices have resulted in residents paying some of the highest title insurance premiums in the country.
Title insurance must be purchased for any type of real estate transaction, from home purchases to refinances. Title insurance is insurance against loss from defects in title to real property and from the invalidity or unenforceability of mortgage liens. Because most consumers don’t understand what they are buying, they often depend on their real estate agents or mortgage brokers to recommend the title insurance company that best suits their needs. What’s more, four companies - Fidelity National Title Group, a unit of Fidelity National Financial Inc.; First American Corp.; LandAmerica Financial Group Inc. and Stewart Title Insurance, a unit of Stewart Information Services Corp. – control 90% of the title insurance business in the United States. Title insurance rates in New York are set by an industry group, which submits them to state regulators for review.
The New York title insurance fraud lawsuit alleges that the four dominant firms illegally fixed prices in the state. The New York title insurance class action lawsuit also alleges that title insurance companies paid illegal kickbacks to individuals or firms so that they would recommend their services to consumers. Examinations of title insurers’ financial statements in the course of the lawsuit have revealed millions spent on gifts, auto expenses, and travel and entertainment expenses paid to real estate agents and mortgage brokers in return for referrals. The lawsuit also alleges that the rates submitted by the title insurance companies overcharged consumers because they concealed from regulators these referrals and kickback payments that make up much of the cost of a title policy.
New York is not the only state where title insurance companies have been receiving greater scrutiny. According to The Wall Street Journal, a report by the Government Accountability Office found that at least six states, including California, Colorado, Florida and New York, have targeted alleged kickbacks and payments by title insurers to agents and others. Since 2003, title insurers, their agents or affiliates have paid more than $100 million in fines, penalties and settlement money in cases brought by state and federal regulators.
The New York title insurance fraud lawsuit alleges that such business practices have costs consumers in that state millions. It is a fact that New Yorkers pay some of the highest rates in the nation for title insurance. According to The Wall Street Journal, consumers in the state paid $1.2 billion for title insurance in 2006, more than four times the $260 million paid in 1996.