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Feds investigate possible RESPA violations in Wisconsin

April 1, 2005

Title insurance program under scrutiny

Inman News

Federal authorities are reportedly investigating whether a title insurance company in Wisconsin violated an anti-kickback law.

Brian Sullivan, a spokesman for the U.S. Department of Housing and Urban Development, said he could not confirm whether the department is actively investigating a title company in Wisconsin, and Eileen Mallow, assistant deputy commissioner for the Office of the Commissioner of Insurance, also said she could not confirm an investigation.

The Milwaukee Journal Sentinel reported this week that representatives for several title insurance companies, including Chicago Title Insurance Co. and Wisconsin Title Insurance Co., have formally complained about the business practices of a competing title company, and have worked with HUD investigators. The title company that is reportedly under investigation was not named in the article.

The investigation relates to possible violations of anti-kickback provisions of the federal Real Estate Settlement Procedures Act, known in the real estate industry as RESPA.

Mallow said that the state did announce an action against a title insurer in October 2004 relating to violation of the state's administrative code.

Stewart Title Guaranty Company "was ordered to comply with (the state administrative code) and all conditions in the stipulation, which include additional training for new agents, limitations on commissions, and requiring agents to perform certain functions," according to a report. "This action was based on allegations of the Stewart Express program violating title insurance laws."

Stewart Title officials could not immediately be reached for comment about this state action, and the state insurance commissioners' office provided no further details about that action.

Rick Staff, general counsel for the Wisconsin Association of Realtors, said that some Realtors have participated in the Stewart Express program, which is a technology-driven platform. Staff said he's aware that "complaints have been generated by (Stewart's) competitors" about the Stewart Express program.

"There were folks who weren't satisfied with the (state) commissioner's opinion. The title folks complained to HUD -- and now HUD's determining what they think is necessary. HUD will give their guidance," Staff said.

The association has not issued any guidance to members about the Stewart Express program, Staff also said. "We don't have any role in recommending whether they participate."

Insurance commissioners in several other states are investigating whether title companies participated in sham affiliated business arrangements with real estate professionals, or funneled kickbacks to real estate agents, lenders and others through reinsurance entities.

Copyright 2005 Inman News

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