Rigged appraisals, lax underwriting and toxic loans may dominate the headlines, but they are hardly the only issues causing problems in residential real estate.The federal government and state regulators are targeting other housing-related misdeeds that can cost consumers big money, especially involving alleged under-the-table kickbacks among builders, real estate brokers, loan officers, mortgage bankers and title insurers. Buyers and sellers are rarely aware of the cash changing hands and thus are paying needlessly higher prices for services.
In a little-publicized series of legal moves in the past five weeks, regulators have reached settlements with six major home builders and one of the largest title insurers in the country. Under the settlement terms, the firms have agreed to pay the government a total of $6.4 million while denying that they committed any illegal acts.
The largest settlement was announced Nov. 16. First American Title Insurance agreed to shut down 84 "affiliated partnerships" formed in Florida with real estate brokers, mortgage brokers, banks and home builders. Federal and state investigators charged that while the affiliates claimed to be title companies, they were actually referral conduits that performed few, if any, title services. Officials said they existed primarily to steer lucrative title insurance business to First American, which split consumers' insurance premiums with participating "partners."