The collapse of the housing boom is bringing harsh new scrutiny to the $17 billion title-insurance business, including allegations that insurers colluded illegally and paid kickbacks to agents or brokers to get business.In the latest legal challenge, an antitrust suit filed Feb. 1 in federal court in Brooklyn accuses the four firms that dominate title insurance nationwide of illegally fixing prices in New York state. Although insurance firms have limited immunity from antitrust claims because state regulators approve their rates, the suit accuses title firms of concealing improper costs underlying their rate requests.
The recent housing bust is putting the spotlight on what critics see as abusive practices across the housing industry. Mortgage brokers and lenders who pushed high-cost loans onto borrowers and appraisers who bent their estimates to ensure deals could go through are among those facing pressure to clean up their acts.
The New York suit, which seeks to represent all home buyers in the state, says consumers were forced to pay hundreds of millions of dollars in extra closing costs.
At least six states, including California, Colorado, Florida and New York, have targeted alleged kickbacks and payments by title insurers to agents and others. Since 2003, title insurers, their agents or affiliates have paid more than $100 million in fines, penalties and settlement money in cases brought by state and federal regulators, according to a 2007 report by the Government Accountability Office. The report also cited a lack of competition in most states.