Three home builders — Shea Homes Inc., William Lyon Homes and Fulton Homes — have agreed to pay the Department of Housing and Urban Development $1.95 million to settle allegations they engaged in captive reinsurance.

The agreements include a $950,000 settlement with Shea Homes and its captive title reinsurance company Shea Financial Services Inc.; an $850,000 settlement with William Lyon Homes and its captive title reinsurance company Duxford Title Reinsurance Inc.; and a $150,000 settlement with Fulton Homes, an Arizona builder.

HUD said the home builders violated the Real Estate Settlement Procedures Act by using companies they owned or were affiliated with to “reinsure” title insurance policy. HUD officials say such arrangements are designed to generate referral fees and that reinsurance companies pay few or no claims.

“In HUD’s view, any captive title reinsurance arrangements in which payments are not bona fide and exceed the value of the reinsurance are a violation of RESPA,” regulators said in a statement.

The agreements follow a $1.6 million settlement HUD reached in July with two major home builders. CitiMortgage Inc. and its captive title reinsurance company Chesapeake Reinsurance agreed to a $650,000 settlement; M.D.C. Holdings Inc., some of its Richmond American Homes home-building subsidiaries and AHT Reinsurance agreed to pay a $675,000; and WL Homes, which does business as John Laing Homes, a California and Colorado builder, paid $305,000.

Colorado, California and other states have conducted their own investigations of the title insurance industry. Last month, the California Department of Insurance said it would seek $46.7 million in damages and penalties from Stewart Title Guaranty Co., which it accused of creating sham companies to provide unnecessary reinsurance agreements to 3,650 homeowners. Stewart Title denies the allegations.

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