GAO: further study of title insurance industry needed

Valuation Insights & Perspectives, Spring, 2006

The market and practices of the title insurance industry are worthy of further study following federal and state investigations identifying potentially illegal activities such as kickbacks, according to a report by the Government Accountability Office issued April 24.

"The investigations alleged instances of real estate agents, mortgage brokers, and lenders receiving referral fees or other inducements in return for steering business to title insurers or agents, activities that may have violated federal or state anti-kickback laws," the GAO report said.

House Financial Services Committee Chairman Michael Oxley, R-Ohio, requested the report on January 24, following state and federal investigations into the kickback schemes in the industry. "The Financial Services Committee is concerned about recent investigations by state regulators revealing that title companies have made payments for referrals to developers, mortgage lenders, and real estate agents in violation of the Real Estate Settlement Procedures Act," Oxley said in his request. "Other investigations have revealed abuses of reinsurance agreements that have forced title companies to pay millions of dollars in settlement, and have uncovered anti-competitive practices within the title industry."

In response to Oxley's request, the GAO is studying the title insurance industry, including pricing, competition, the size of the market, the roles of market participants, and how they are regulated, the GAO report said.

The full GAO report, titled "Title Insurance: Preliminary Views and Issues for Further Study," is available at http://financialservices.house.gov/media/pdf/gao042406.pdf.>

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