Spitzer said to eye title insurers
Paper says the New York AG's office is looking at possible illegal rebates and referral fees.
NEW YORK (CNNMoney.com) - New York Attorney General Eliot Spitzer may have found a new industry to investigate, as a published report says state authorities are probing whether some of the nation's biggest title-insurance companies illegally paid secret rebates and referral fees that could have raised costs for those buying or refinancing a home.
The Wall Street Journal said the New York state authorities are in the late stages of the investigation, which follows probes in some other states. The paper did not estimate how much money borrowers might have been overcharged due to the practices.
Title insurance can cost anywhere from a few hundred dollars to hundreds of thousands for searches of title records to guarantee the property does not have any hidden owners, liens or other encumbrances. It is required by banks before they will issue a first mortgage on a property.
Title-insurance rates are set by some states, including New York, leaving consumers little room to bargain, according to the paper. It reports investigators in New York believe some title insurers misled the state into setting rates too high in order to fund questionable rebates for a few large customers.
The paper reports the office of New York AG as well as its insurance department are examining whether big title-insurance players, including First American Title Insurance Co., paid millions of dollars in premium rebates to large real-estate developers and national chain stores in recent years, these people say.
Investigators also are looking into whether insurers paid referral fees to the title agents, mortgage brokers and attorneys who delivered these clients, according to the report.
First American agreed to a settlement of a similar probe by Colorado officials to refund more than $20 million to consumers in and outside of the state, the paper reported, although the company didn't admit any wrongdoing.
Officials in California and Washington, D.C. also have probed the title-insurance sector in the past few years, according to the report.
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