Title insurer pays for blowing whistle on rivals

[question everything]

Friday, February 25, 2005
Title insurer pays for blowing whistle on rivals
First American to refund millions after alerting state to suspected kickbacks.

By JAMES B. KELLEHER and ANDREW GALVIN
The Orange County Register

(snip)


But by drawing attention to title-insurance pricing, First American has prompted a fresh examination of its little-understood industry, which makes hundreds of millions of dollars a year charging homeowners for aproduct that lenders demand for their own protection - to make sure property ownership rights are unassailable.

What's more, consumer advocates hope the increased scrutiny of the industry will open the way for new competitors to enter the highly automated, highly regulated market with innovative products that could result in steep reductions in premiums.

(snip)

The visit was prompted by a development that First American considered alarming. As First America describes the situation, its rivals, facing declining title sales because of the drop in mortgage-refinancing activity, had come up with a new sales tactic.

They had begun approaching real estate brokers, who were experiencing a slowdown of their own because of the cooling of the property market, with an offer they couldn't refuse: If you steer homebuyers to our title company, we'll split the premiums with you.

(snip)

Garamendi got to work. And this week, after more than four months of investigating, he announced what he called a major enforcement action against Fidelity and LandAmerica for "paying kickbacks" to Realtors and others that forced "consumers to pay far too much for their version of the American dream." LandAmerica and Fidelity immediately vowed to stop the practice, which they continued to insist was legal and caused no harm to consumers.

(snip)

http://www.ocregister.com/ocr/2005/02/25/sections/business/business/article_420442.php

[AngryAmish]

1. Many lawyers do this also

They become a "title agent" and they get a check, not at closing, undisclosed to their client. Kinda smells.

[sinkingfeeling]

2. Yea, and I had to file a lawsuit against First American when the

title company screwed up. Went to refinance my home in 2001 and found that the title was messed up when the title company included the legal description of the house & it's 3/4 acre on the deed for a separately defined 1.3 acre parcel. That little mess-up caused the mortgage company to be the secondary lien holder!! Title company had to be forced into getting the people holding $10K for 5 years for the lot to give up their lien against the $500k property. I lost the locked-in refinancing rate so had to hire lawyer and filed suit. It was only then that First American settled, although they held the title insurance on both.

[question everything]

3. What a mess!!

One thing that I wished I have paid attention. We refinanced in 2001, 2002 and 2003 and had to pay title insurance in both 2001 and 2002. I should not have in 2002, especially as it was with the same lender - Wells Fargo. Things don't change much in one or two years or, at least, title search need not be that comprehensive.