Chicago Title fined $6 million
HOUSTON, Texas - Chicago Title Insurance Co. must pay $6.2 million in fines and revamp its corporate controls after state and federal investigations showed individuals profited by falsifying loan documents and rapidly reselling properties.
Chicago Title-Houston allegedly engaged in transactions where homes were bought and later sold, often in the same day, based on inflated property values, according to an order announced Monday by the Texas Department of Insurance.
In the transactions, discovered in the company's Katy office, banks would lend more than the property was worth.
Another investigation into the company's Clear Lake office found instances where portions of the proceeds from property sales were allegedly diverted to bank loan officers in the form of kickbacks.
The complaint said the company provided documentation that made those deals possible.
The department's action resulted from a joint investigation with the federal Office of the Comptroller of the Currency, the Department of Housing and Urban Development and the Office of Thrift Supervision. The federal agencies will share a $5 million penalty from Chicago Title. A $1.2 million fine was assessed by the state.
"The bottom line is that the consumer who will only rarely take out a mortgage loan must be protected from so-called experts who know how to play the system," Texas Insurance Commissioner Jos Montemayor said in a prepared statement.
In a separate action, the comptroller of the currency said it has reached agreements with two former bank officers involved in the loan schemes.
Tom Trammell, former senior vice president and private banking manager of Southwest Bank of Texas and of Whitney National, is permanently banned from the banking industry and will pay a $250,000 fine.
A second order imposes a lifetime ban on David Ranostaj from the banking industry. The former vice president and loan officer of both banks was assessed a $130,000 fine. The two have also agreed to pay restitution to the banks.
They could not be reached for comment late Monday.
Kevin Chiarello, chief compliance officer of Chicago Title, said that as a result of the settlement, the company faces no further enforcement action.
"We did not agree that any legal violations did occur, but we did agree to enhance our compliance controls," said Chiarello.
"Even before entering into the settlements, Chicago Title began taking steps to address the concerns raised by the agencies," Chiarello said.
It's unclear if Monday's action will translate into a widespread crackdown of title companies. The state would not comment on investigations in progress.
"We're hoping when this order becomes public and people find out, it will scare a lot of agents off and they'll be more careful of what they're doing out there," said TDI's York.
Chicago Title, one of the nation's largest settlement service providers, agreed to comply with certain real estate acts and regulations and to implement policies, procedures and compliance controls that govern real estate settlements in its branch offices. Fidelity National Financial acquired Chicago Title in March 2000.
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