The Washington, D.C., attorney general’s office reached a settlement with a title insurance company it had accused of giving kickbacks to real estate agents in exchange for referrals, two months after inking a similar deal with four other title firms.
Universal Title agreed to pay $500,000 to settle Attorney General Brian Schwalb’s claim that the company used financial incentives to convince agents to steer clients in their direction, Schwalb said in a statement. Agents were offered discounted ownership interests in spinoff companies affiliated with Universal, the settlement agreement said, and Universal created the spinoffs for the purpose of encouraging referrals.
“Universal’s secretive conduct prevented District residents from making fully informed decisions about how to spend their hard-earned money when making one of the most significant investments they’ll ever make — buying a home,” Schwalb said in the statement.
Universal Title has denied any illegal activity, saying it settled the claims to avoid the cost of fighting the charges.
Buying title insurance is a common step in the process of buying a home to protect the homeowner from any competing legal claims on the property that may exist. Most lenders require borrowers to have title coverage.
While it’s common for real estate agents to offer clients suggestions on title insurance companies, any compensation from title companies for referrals is prohibited in the District because it can lead to a loss of business for competitors, according to Schwalb’s statement. Illegal compensation can also hurt consumers through inflated closing costs and fees, Schwalb said.
Other settlements
Four other title companies agreed in August to pay the District $3.2 million to settle similar allegations against them. Those companies are Allied Title & Escrow, KVS Title, Modern Settlements and Union Settlements.
David Mason, chief executive officer of Alexandria, Virginia-based Universal, said in an email that Schwalb’s office had changed a longstanding interpretation of the law “to shut down and fine legitimate businesses.”
In a statement, the company denied that real estate agents had received discounted ownership shares in exchange for referrals or that agents had steered customers toward Universal.
“We emphatically deny any illegal activity, but the prohibitive costs and time considerations that come with defending ourselves have driven us to settle,” according to the statement.
As part of the settlement, Universal agreed to stop giving real estate agents compensation for referrals and either end its title insurance business in the nation’s capital or divest agents of their ownership interests in the spinoff firms.