SEATTLE – Today a group of consumers filed a series of class-action lawsuits against the nation's largest title and escrow companies, claiming they engaged in a series of schemes and deceptions designed to bilk customers out of millions of dollars in excessive fees, among other allegations.
The companies named in the suit are Fidelity National Title Company, First American Title Insurance Company (NYSE:FAF), Old Republic Title and Escrow, and Chicago Title Company. All four lawsuits allege the title and escrow companies violated sections of the Real Estate Settlement Procedures Act (RESPA) as well as consumer protection and various state laws.
In each lawsuit the companies are accused of charging consumers duplicate reconveyance fees while the actual reconveyance is done by the consumer's prior lender and charged to consumers in their loan pay-offs. In some cases, the title companies try to justify these charges as "tracking" fees to ensure the reconveyance is complete -- but these "tracking" fees are generally three times higher than the rates available for "reconveyance tracking" services.
The complaints allege that Fidelity charged as much as $140 for reconveying each prior loan, and over the past five years has engaged in this process across hundreds of thousands of transactions, 'reaping ill-gotten gains in excess of tens of millions of dollars.' The same allegations hold true for Old Republic and Chicago Title who charged $100 and $135 per prior loan for reconveyance services.
Reconveyance is the process of extinguishing a lender's lien or title to a property when the secured loan is paid off. When a consumer sells a home or refinances, title to the property must be reconveyed from the prior lender.
First American Title Insurance Company, a subsidiary of First American Corporation, based in Santa Ana, California, is accused of engaging in four separate schemes to reap profits from unsuspecting customers. The lawsuit against First American alleges an affiliate reconveyance scheme, captive reconveyance scheme, retained interest scheme and a wire fee scheme.
The lawsuit claims the company failed to disclose that it steers escrow customers to a sister company to "track" the reconveyance, and charges those customers nearly three times the rates that same affiliate charges independent escrow companies for the same service.
In one plaintiff's transaction First American charged a reconveyance/tracking fee of $113 that was paid to Northwest Post Closing Center, a business entity that does not exist according to the Washington and California Secretary of State databases.
"We believe these companies have been quietly and industriously bilking customers, hiding their scheme amid the torrent of paperwork that accompanies most real estate transactions," said Hagens Berman managing partner and lead attorney Steve Berman. "Escrow agents are supposed to look after the interests of their customers. Instead, they have acted like a fox in the hen house, increasing fees any way that they can."
The complaints also allege that both First American and Fidelity pooled customer's escrow funds in accounts and were rewarded by the banks that held the accounts. The companies received no-cost or discounted banking services, and were provided with large lines of credit tied to the escrow accounts with which they could make investments. The companies profited from the interest, earnings and banking services, all without disclosing it to customers.
Under the fiduciary duties of escrow providers and state law, without proper disclosures these monies belong to the escrow customers, not the title and escrow companies. The lawsuit goes on to claim the retained interest scheme did not result in any direct or indirect reduction of fees, nor did it provide any cost savings or other benefit to customers -- the motivations were strictly profit driven.
In addition, the First American lawsuit claims the company charges customers a wire fee for sending payments to and from banks. The company fails to disclose to customers that the banks waive or substantially discount these fees as a benefit of the retained interest scheme. Any wire fees actually paid are minimal in comparison to what is charged to the customer.
"The effect of these practices is widespread," said Berman. "If all the title companies are involved in these or similar practices, then likely over half of all residential real estate closings in the past five years will show some form of illegitimate fees being charged or collected by the title companies' escrow agents."
The lawsuits against the four companies were filed separately today in United States District Court in Seattle and San Francisco. The suits were filed by three different parties, though all are residents of Washington state.
All four defendants face charges of breach of contract relating to the escrow instructions and HUD-1, violations of the Real Estate Settlement Procedures Act (RESPA), unjust enrichment, breach of fiduciary and agency duties, and violations of state consumer protection statutes. All plaintiffs are seeking treble damages on behalf of the respective classes.
CONTACT: Steve Berman of Hagens Berman Sobol Shapiro,
+1-206-623-7292, Steve@hbsslaw.com ; or Mark Firmani of Firmani + Associates
Inc., +1-206-443-9357, Mark@firmani.com , for Hagens Berman Sobol Shapiro
Web site: http://www.hbsslaw.com/
SOURCE Hagens Berman Sobol Shapiro