More than 7,000 Maryland homeowners will receive checks averaging $265 for alleged overcharging during their closing settlements by a leading title company, according to an agreement filed in federal court, the Baltimore Sun reported today.

The preliminary accord calls for the Columbia, Md.-based Fountainhead Title Group Corp., one of the state’s largest title settlement companies, to pay $2 million in individual reimbursements to about 7,100 customers and shut down as many as 20 “affiliated businesses” accused of either charging homeowners for title work that was never done or double-billing them, the Sun reported.

The settlement was signed Nov. 2 but still needs final approval from a U.S. District Court judge in Baltimore, reports said. Eligible customers will be notified by mail and could get checks as early as next year, one of the plaintiffs’ attorneys told the Sun.

According to court papers, the title company did not admit any wrongdoing, accounts said.

Affiliated business arrangements, or ABAs, such as the one targeted in this suit have come under national scrutiny in the wake of investigations into title insurance industry referral practices.

The Colorado Division of Insurance announced this week that it has shut down 11 “sham” title insurance agencies, which the division charges were created as vehicles to channel kickbacks to mortgage brokers. In early July, First American Title agreed to pay $680,000 in a settlement with the Department of Housing and Urban Development over a probe of alleged kickbacks involving such business partnerships.

ABAs are partnerships between real estate entities such as title insurance companies, mortgage lenders and real estate brokerages. The arrangements are legal under the Real Estate Settlement Procedures Act, as long as certain guidelines are followed, such as disclosing the relationships to consumers. RESPA regulates referrals and other practices in the real estate closing process.

One of the attorneys for the plaintiffs in the Maryland class action lawsuit filed in 2003 praised the outcome to the Sun, saying it serves as a warning to home buyers.

“The lessons to be learned in this kind of matter are that homeowners need to ask about every part of their closing costs. They should also hire their own legal counsel to review these documents,” Phillip R. Robinson, an attorney with Civil Justice Inc., a Baltimore nonprofit public interest group, told the Sun.

According to the complaint, settlement agreements included inflated, possibly bogus charges, accounts said. The work was allegedly completed by “affiliated business arrangements,” a legitimate industry practice of using subcontractors to complete different aspects involved in preparing the title, accounts said.

The plaintiffs in the Fountainhead case alleged that the title company violated RESPA, according to accounts. The law allows companies to set up affiliated business partnerships, but draws a line when it comes to paying partners when no services are rendered.

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Send tips or a Letter to the Editor to janis@inman.com or call (510) 658-9252, ext. 140.

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