The head of the House Financial Services Committee has written a letter to the Comptroller General requesting that theGovernment Accountability Office investigate the title insurance industry, Inman News has learned.
Michael Oxley, chair of the House Financial Services Committee, asked that the GAO examine and issue a report on the title insurance industry. The GAO, commonly called the investigative arm of Congress or the congressional watchdog, is independent and nonpartisan.
“The Financial Services Committee is concerned about recent investigations by state regulators revealing that title companies have made payment for referrals to developers, mortgage lenders, and real estate agents in violation of the Real Estate Settlement Procedures Act (RESPA),” Oxley said in a letter posted on the Financial Services Committee’s Web site.
The title insurance industry came under an intense spotlight in 2005. 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 and Washington and other states.
In his letter, Oxley asked that the GAO analyze the title insurance market to determine what factors impact the price of the product, including the associated claims, title search, overhead and marketing costs, and to determine the number of title insurers, their market share, how the product is marketed and sold, the extent to which title insurance is a nationwide business, and to what extent consumers benefit from a competitive title insurance marketplace.
He also asked the GAO to examine the relationship between title insurers, real estate agents, lenders and home builders for anti-competitive practices and investigate potential barriers to entry in the market.
“Other investigations have revealed abuses of reinsurance agreements that have forced title companies to pay millions of dollars in settlements, and have uncovered anti-competitive practices within the title industry,” Oxley said.
An official from the American Land Title Association said the trade organization welcomed the investigation.
“We welcome this fact-finding mission by the GAO about the title insurance industry,” said Jim Maher, executive vice president of ALTA.
“Because of the complexity of our business, and the fact that rules and regulations vary by state, there has been a lot of confusion in the marketplace leading to misinformation and misunderstanding,” Maher said.
“We see this as an opportunity to help clear up the confusion that exists, and to foster a better understanding about title insurance and the value it provides. We are cooperating fully with the GAO to ensure a proper and informed evaluation, and look forward to participating in this important process,” Maher said.
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 this month as a network of sham title agencies set up to pay kickbacks to lenders and other real estate providers.
This month, 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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