Today, the U.S. Dept. of Housing and Urban Development (HUD) announced that it reached yet another settlement with a large national lender and two large builders for violating the Real Estate Settlement and Procedures Act (RESPA). One of RESPA’s functions is to protect consumers by prohibiting kickbacks in real estate that artificially increase the premiums consumers pay for title insurance or other costs related to purchasing a home. The settlement was for $1.6 Million. A drop in the bucket in a billion dollar real estate market.
Title insurance is big business and exceptionally lucrative. Real estate online news source, Inman news, reported earlier this year that in comparison to homeowners insurance or medical insurance where two-thirds or more of the premium actually goes to pays claims, title insurance claims are under 10% of premiums collected.
Title companies, builders, lenders and real estate brokers have been under scrutiny this year by HUD and several states (Washington, California, Colorado, New Mexico among others) due to the proliferation of setting up what are called captive reinsurance companies or other affiliated business fronts created to skim referral fees off the backs of consumers.
Earlier this year several of the most prominant title companies and parent companies that operate around the country and in our market have settled these alleged cases without admitting any wrong doing. Naturally.
It pays to shop and discern fees for title, escrow and lenders when buying AND selling a home.
Ethics in real estate. Is it an oxymoron?