New York’s attorney general and insurance department are investigating national title insurance companies for suspected illegal kickbacks, the insurance department confirmed today.
The two are probing whether title insurers illegally paid millions of dollars in premium rebates to real estate developers and national chain stores, as well as referral fees to title agents, mortgage brokers and attorneys who delivered clients, confirmed Michael Barry, spokesman for the New York State Insurance Department.
“We expect to wrap up the investigation in a few months,” said Barry.
In concert with New York Attorney General Eliot Spitzer, the department is investigating companies including First American Title Insurance Co., Fidelity National Title Group, LandAmerica Financial Group Inc. and Stewart Title Insurance Co., the New York state underwriter for Stewart Information Services Corp., Barry confirmed.
Investigators in New York believe some title insurance companies misled the state into setting rates too high in order to fund questionable rebates for a few large companies, Barry confirmed.
“We (the insurance department) have open exams of some of the larger title insurers domiciled in New York,” Barry said. “We have examiners on site at those title insurers. That has enabled us to have a free flow of information in looking into their market conduct and their financial transactions.”
As part of the investigation, Attorney General Spitzer has issued subpoenas to the companies under investigation, Barry said.
The title insurance industry came under an intense spotlight last year after Colorado’s Insurance Division in February 2005 investigated nine Colorado title insurers for alleged kickback schemes said to result in overcharges to consumers. The probe sparked dozens of investigations nationwide, in Florida, Washington, Hawaii, California, Oklahoma, Minnesota, Washington and other states.
Most recently, Michael Oxley, R-Ohio, chair of the House Financial Services Committee, has asked that watchdog agency the Government Accountability Office investigate the title insurance industry.
Stewart Title today confirmed that the company had responded to a subpoena in the New York investigation.
“Stewart Title Insurance Co. (STIC) has submitted papers in response to a subpoena by the New York attorney general’s office,” a spokeswoman for the company told Inman News.
“Nothing the New York authorities have told STIC indicates they have a problem with STIC. Our source is John Welling, president of Stewart Title Insurance Co., the New York state underwriter for Stewart Information Services Corp.,” the spokeswoman said.
Lloyd Osgood, of LandAmerica Financial Group, said: “It’s simply an ongoing process and as they are seeking information, we are responding. The attorney general’s office is in the discovery process at this state, so we just respond to questions as they come in. We are cooperating fully and are committed to working with regulators and elected officials who have questions about our business.”
Officials at the New York attorney general’s office, Fidelity National and First American could not be reached immediately for comment.
Fidelity National Financial and First American Title Insurance Co. last November agreed to pay a total of $22.7 million to consumers in final settlement agreements with California’s insurance commissioner, John Garamendi, over alleged rebate activities that violate the Real Estate Settlement Procedures Act and some state laws.
Investigations and punishments have continued into 2006, with a probe of affiliated real estate partnerships in Colorado uncovering what officials described as a network of sham title agencies set up to pay kickbacks to lenders and other real estate providers.
In February, the state of California hit a California title company with an accusation seeking $14 million in civil penalties for alleged kickbacks.
At that time, Garamendi said illegal rebates in the title insurance industry “cost policyholders more by snuffing out competition and inflating premiums.”
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