Title Firm Ends ?Kickback' Agreements

Title Firm Ends ?Kickback' Agreements

By Daniel Hays

NU Online News Service, Feb. 16, 3 :06 p.m. EST?A major title insurance company has put an end to controversial reinsurance agreements?agreements that were seen as masking kickback payments, a Colorado official said yesterday.[@@]

Deputy Insurance Commissioner Erin Toll said she had received a letter from Fidelity National Title Insurance Company stating "they have terminated all their captive [insurance company] reinsurance treaties nationwide."

Ms. Toll said six of the Jacksonville, Fla. concern's companies that operate in Colorado were involved.

Requests for comment from Fidelity National were referred to the firm's marketing director, Dan Murphy, who did not immediately respond to messages that were left for him.

Ms. Toll had announced some months ago that she was investigating whether nine title companies, in order to secure home builder's business, were rewarding them with kickbacks disguised as high-priced reinsurance payments.

Fifteen reinsurance outlets were operated by the builders as captives based in Vermont and one in Hawaii, according to officials in Vermont and Colorado.

Title firms, according to Ms. Toll, shared 50 percent of their premiums with the reinsurers even though "essentially no reinsurance claims have been paid in five years." Builders buy title insurance for their home purchasers.

She said she would be informing HUD of the builders' activities as a violation of the Real Estate Settlements Procedures Act (RESPA).

According to Jim Maher, executive vice president with the American Land Title Association trade group, the organization has tried to get guidance on the legality of the reinsurance arrangements, but the U.S. Department of Housing and Urban Development had failed to provide it.

Colorado has not identified the companies being examined, but Mr. Maher said he suspected it involved the five largest national title insurance concerns--Fidelity National, First American, Land America, Steward Title and Old Republic?with various corporate subsidiaries.

A HUD spokesman, Brian Sullivan, has said "it would be a violation of RESPA if the insurance premiums being charged did not reflect the risk these companies were taking," adding that "any fee has to reflect the service that's being rendered."

Courts have been split on the issue of "upcharging" or "fee inflation," and Mr. Sullivan suggested that the issue might eventually need a ruling from the U.S. Supreme Court to settle the matter. HUD's historical stance, he said, is to examine "if the service or the risk matches the premium or fee charged to the consumer."