As we have seen in the past week with the Core/Chelsea/Braafhart scandal, title insurance fraud is common enough to justify examining the causes and sources of difficulties in title transactions. One example occurs with "kickbacks." It has long been illegal for title insurance companies to provide "kickbacks" in exchange for business referrals. Despite this prohibition, this practice occurs regularly.
A new class action lawsuit in California makes "kickback" allegations against Fidelity National Title Insurance and six other major title insurance underwriters. The lawsuit alleges that real estate agents received payments from title insurance companies for selecting those insurance companies to close particular transactions. The real estate agents performed no additional work for those referrals.
Such referral fees are prohibited by the Real Estate Settlement Procedures Act (RESPA) in federally backed transactions. This lawsuit follows a $4.5 million settlement between HUD and Fidelity last year resulting from the same allegations.