More than 60,000 new-home buyers in Michigan will share $27.5 million from the tentative settlement of a lawsuit filed by owners who claimed they were overcharged for title insurance, media reports said Saturday.
On Friday, a federal judge in Detroit tentatively approved the settlement, reports said. The settlement would provide $300 to $400 each to people who bought new homes between December 1998 and July 2005 and purchased title insurance from one of four companies, according to reports.
“This appears to be the beginning of the end of a rate structure that we believe repeatedly resulted in violations of federal law,” Birmingham lawyer Patrick Bruetsch told the Detroit Free Press Friday.
Bruetsch and Farmington Hills lawyer Jeffrey Yellen and Birmingham lawyer David Davis filed the class action in 2000 on behalf of four Detroit-area residents, reports said.
The title insurance industry came under an intense spotlight in 2005. Colorado’s Insurance Division in February investigated nine Colorado title insurers for alleged kickback schemes said to result in overcharges to consumers. The probe sparked dozens of investigations nationwide, in Florida, Washington, Hawaii, California, Oklahoma, Minnesota and Washington and other states.
But a lawyer for one of the title companies said title insurance for future new-home purchases will increase because of the suit, media reports said. Construction companies, which now lose a discount on title insurance, probably will pass their increased costs to consumers, Grand Rapids Lawyer William Holmes told the Free Press.
“The end result is that the rates likely will be higher than they used to be,” Holmes, who represents Chicago Title Insurance Co. of Missouri, told the Free Press.
Bruetsch countered that costs will become more competitive, allowing consumers to shop for builders who don’t pass along higher rates or who will negotiate a lower price, reports said.
The other insurance companies in the suit are Transnation Title Insurance Co. of Arizona, First American Title Insurance Co. of California and Lawyer’s Title Insurance Corp. of Virginia, according to reports. The four reportedly sell 84 percent of the title insurance in Michigan.
The suit alleged that the companies gave huge discounts to home builders, who are required to buy owner’s title insurance, and simultaneously raised the prices 62,500 buyers paid for loan title policies.
The problem came to light after Romeo Jergess bought a $175,000 home in Farmington Hills in May 1999. The suit said Transnation charged the builder $25 for an owner’s title policy and Jergess $721 for a mortgage insurance policy, according to reports.
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