Investigation Into Title Insurance Scams Underway in New York

Previously, we reported on whether or not those seeking a Florida home loan should apply for title insurance. Was it a worthwhile investment? A rip off?

Now, New York Attorney General Eliot Spitzer is taking up the same cause. His office is investigating whether title insurers such as Fidelity National Financial Inc. paid improper rebates, allegations similar to those settled in Arizona and California last year.

Spitzer also issued subpoenas seeking information on agent compensation, Land- America Financial Group Inc. said in a November filing. New York regulators are in the late stages of their probe and may bring civil charges, the Wall Street Journal reported Thursday, citing people familiar with the investigation.

Other examples of title insurance fraud

This investigation follows the July settlement in California by three title insurers who agreed to pay $37.8 million to settle California Insurance Commissioner John Garamendi’s allegations that they drove up the cost of their product by paying kickbacks for client referrals.

In September, the Arizona Department of Insurance reached a $1 million settlement with LandAmerica over the insurer’s payouts to real estate-related firms in return for referrals of home buyers. Arizona also reached a $644,152 settlement with Florida-based Fidelity National Title Insurance Group. Neither company admitted wrongdoing.

In July, The Arizona Republic disclosed that two title companies, California-based First American Title Insurance Co. and Fidelity, were paying the brokerages or their executives up to 50 percent of the profits from insurance policies in exchange for referrals of home buyers. Payments to some of the real estate partners exceed $500,000 a year.

So, should you take out this insurance policy on your Florida home loan? There’s no definitive answer. It’s just an issue to keep in mind as you prepare for the mortgage process.