Two Title Insurers Agree to Pay Fines

Fidelity National Financial Inc. and First American Corp., the nation’s No. 1 and No. 2 title insurers, will each pay a $2-million fine and cut their rates to settle New York Atty. Gen. Eliot Spitzer’s allegations that they made improper payments to real estate developers.

The insurers drove up rates for homeowners by providing developers free or discounted insurance in other states in exchange for client referrals in New York, Spitzer said in a statement Tuesday. Fidelity National, based in Jacksonville, Fla., and First American, based in Santa Ana, agreed to end the practices, Spitzer said.

“This settlement should greatly benefit New York home buyers who for too long have paid too much for their title insurance,” Spitzer said.

The companies will reduce their premium rates by 15%, Spitzer said. Neither company admitted nor denied the allegations.

The two companies, along with the No. 3 title insurer, Richmond, Va.-based LandAmerica Financial Group Inc., agreed to pay $37.8 million last year to settle allegations from California regulators that they paid kickbacks to developers for business.

Title insurance protects home buyers from claims against their ownership of a property. Most banks require it before agreeing to issue a mortgage. The New York rate cut would apply to homes that sell for $1 million or less.

“We are pleased that the New York attorney general found no pattern or practice of any wrongdoing on the part of our company,” said Fidelity National General Counsel Peter Sadowski in a statement.

Shares of Fidelity National’s majority-owned subsidiary, Fidelity National Title Group, climbed $1.27, or 6.1%, to $22.18.

“I was anticipating more money,” said Geoffrey Dunn, an analyst at Keefe, Bruyette & Woods in Hartford, Conn. “That’s where the relief came from for investors.”

Shares of First American rose 19 cents to $40.60.

“This agreement provides clarification and better enforcement of state regulations,” the company said in a statement. The fines and rate reductions won’t have a material effect on earnings, the statement said.