Title Insurance Sector Scrutinized, NY Sues Four Big Companies
The latest sector to be affected by the collapse of the housing boom is the $17-billion Title insurance business. Closes scrutiny of the sector is underway, including allegations that insurers colluded illegally and paid kickbacks to agents or brokers to get business.
An antitrust suit filed Feb. 1 in federal court in Brooklyn accuses the four firms that dominate title insurance nationwide of illegally fixing prices in New York state. Although insurance firms have limited immunity from antitrust claims because state regulators approve their rates, the suit accuses title firms of concealing improper costs underlying their rate requests.
The recent housing bust is putting the spotlight on what critics see as abusive practices across the housing industry. Mortgage brokers and lenders who pushed high-cost loans onto borrowers and appraisers who bent their estimates to ensure deals could go through are among those facing pressure to clean up their acts.
The New York suit, which seeks to represent all home buyers in the state, says consumers were forced to pay hundreds of millions of dollars in extra closing costs.It names the four big firms that control nearly 90% of the market: 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. Shares in all four parent companies are traded on the New York Stock Exchange. The four firms typically sell their policies through nationwide networks of independent agents and affiliates.
The suit says rates in New York are among the highest in the nation, and that New Yorkers paid $1.2 billion for title insurance in 2006, more than four times the $260 million paid in 1996.
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, according to a 2007 report by the Government Accountability Office. The report also cited a lack of competition in most states.
"We're seeing widespread abuses in this industry, and more states are beginning to take action," said Woody Girion, deputy insurance commissioner in California.
Source: Source: Wall Street Journal | Published on February 12, 2008
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