A group of title insurance companies settled with the District of Columbia after allegedly providing kickbacks to real estate agents to steer clients their way.
D.C. Attorney General Brian Schwalb announced the investigation and outcome tied to four title companies on Thursday, the Wall Street Journal reported. The companies paid a total of $3.3 million to settle civil claims, all denying any wrongdoing in the process.
Title insurance is an inescapable part of the homebuying process. When homeowners take out mortgages, they are required by lenders to pay for insurance to protect against unanticipated costs, tacking fees on to the closing for a home. Outside of commissions — another part of the homebuying process under intense scrutiny — title insurance is often the second-highest closing fee for consumers.
Schwalb alleges his office’s investigation found four companies offered real estate agents payments for customer referrals, with one company going as far as to reward participating agents with yacht parties. Schwalb’s office claims the companies offered discounted investment opportunities where agents could receive a share of title and settlement profits for referrals.
The companies named were Allied Title, KVS Title, Modern Settlements and Union Settlements. Modern allegedly offered ownership interests in partnerships without any upfront money from agents.
“These four companies violated the most fundamental principles of a free and fair marketplace: they hid information from consumers, limited their choices, and hurt other businesses that play by the rules,” Schwalb stated. The investigation is set to continue.
The title insurance industry could be in for an upheaval as the Biden administration puts its foot on the scale to revamp the housing market. Fannie Mae is looking to start testing a program where low risk mortgage refinancings wouldn’t require title insurance.
In the spring, the Consumer Financial Protection Bureau proposed having lenders pay for title insurance, rather than homebuyers.
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