Suit Claims Title Insurers Paid Kickbacks; Trade Group Cites Lawyer, Broker Pressure
A lawsuit filed against four title insurance companies claims they colluded and paid illegal kickbacks to agents and brokers without disclosing the improper costs in state rate requests. But a spokesman for the industry says the scrutiny should instead be on brokers and lawyers who pressure the insurers for kickbacks.
The suit, filed in federal court in Brooklyn on behalf of New York home buyers, says the payments cost consumers hundreds of millions of dollars in extra closing costs, the Wall Street Journal reports. The plaintiffs claim the concealment of kickbacks removes the limited antitrust protection given to the companies because of state regulation of insurance rates.
Regulators told the newspaper that state and federal regulations bar most referral fees, but compensation agreements that fall into a gray area seek to skirt the bans.
Edward Miller, a spokesman for the American Land Title Association, told the newspaper that kickbacks “are illegal, and we think anyone who violates that should be prosecuted.” At the same time, he said, “we’re not just dangling it out there—title companies get pressured [by brokers and lawyers], and they should be looked at too.”
The law firm representing the plaintiffs is Constantine Cannon, which secured $3 billion for retailers in 2003 to settle an antitrust suit against Visa and MasterCard.
Fifty-eight state and federal investigations have examined illegal payments by the title industry, according to a 2007 report by the U.S. Government Accountability Office, the Los Angeles Times reports. A California investigation found that title insurers had treated real estate agents, builders and lenders to tickets to sporting events and concerts featuring musicians such as Elton John and Velvet Revolver.
Mortgage News Daily describes one type of agreement allegedly used to funnel money to home builders that offer loans to buyers. It involves the title insurer paying premiums to a reinsurer, which in turn returns a portion of the premiums to the home builder.
