$2.4 million missing from title insurer

State investigators say 68 transactions were uncompleted

Mortgages, fees unpaid

Probe continues

officials expecting to find more debts


February 18, 2000|By Sean Somerville | Sean Somerville,SUN STAFF

More than $2.4 million held by Bankers Title Insurance Co. is unaccounted for, and a criminal investigation of the Towson title company has been launched, Maryland Insurance Commissioner Steven B. Larsen said yesterday.

Larsen said his office had identified 68 real estate transactions in which Bankers Title had failed to pay mortgages and other settlement costs.

"We're still trying to get our arms around exactly how much money has not been paid by Bankers Title that should have been paid," Larsen said. "It looks like a minimum of $2.4 million, but it could be significantly higher than that."

Larsen also said his agency's insurance fraud division, which includes representatives from the attorney general's office and the Maryland State Police, had begun a criminal probe.

The insurance administration won an emergency order in Baltimore Circuit Court last Friday suspending the license of the firm's principal agents, Edwin Kirby and J. Edwin Martin. The administration took Bankers Title over Monday after obtaining a second court order putting it into receivership.

An insurer with whom Bankers Title did business told the Maryland Insurance Administration about the shortage, the administration said. Since Friday, Tobie Jacobs, the MIA's chief enforcement officer, has been working with Bankers Title's underwriters to identify which property settlements were affected.

The 68 settlements with unpaid obligations occurred between December and mid-February. They were uncovered during a survey of Bankers Title settlements that reached back to August.

In 31 of the cases, the Towson-based title company failed to pay off the mortgages of home sellers, accounting for the missing $2.4 million. The typical problems are that a homebuyer might not have a legal ownership interest in his or her house, and a seller might still owe money on a previously sold house.

In the other 37 cases, the company failed to pay one or more of an assortment of other costs, from surveyors' fees to property taxes. The precise unpaid amount in those cases is not clear.

It's also not clear precisely how those unpaid amounts will be handled, said Tori Leonard, a spokeswoman with the Maryland Insurance Administration. Lenders require buyers to purchase title insurance for them. But homeowners can choose whether to buy title insurance for themselves.

Part of the responsibility of the companies that underwrite those policies is to conduct audits of companies like Bankers Title to detect escrow shortages. Bankers Title's underwriters include Commonwealth Land Title Insurance and Fidelity National Title Insurance Co.

Leonard said the Maryland Insurance Administration is researching whether it can require the insurers to pay the claims not only of those who bought the title insurance but those who didn't. "We're doing everything we can to make sure these companies do right by these homeowners," she said.

A person familiar with Bankers Title who spoke on the condition of anonymity said the fight to get the underwriters to pay claims of those without policies could be difficult and lengthy.

"It's going to be ugly," the person said.

Larsen said that the 68 cases represent a tally reached by the insurance administration so far. But he added that he would not rule out the possibility of other cases. "We just got into this three days ago," he said. "We have a process in place to determine what happened and when and how far it goes back."

The locations of the affected properties were not clear yesterday.

"We have not looked at anything geographically," Jacobs said. "We're working with case numbers and amounts of money."

Larsen said Kirby and Martin were cooperating with the investigation. He also said those notified of problems with their settlements have been "shocked and surprised."

But he declined to discuss other details of the case, saying it was a continuing investigation. "I'm not at this point going to get into what happened and who did what," Larsen said.

The source familiar with Bankers Title said the company would "advance" amounts held in escrow for property taxes and insurance to home sellers. Because those amounts are disbursed only after full payment, such "advances" misled sellers into thinking their mortgages had been paid off.

The source also said that Bankers Title would pay off a mortgage whenever it appeared that the nonpayment might be detected.

The Maryland Insurance Administration encourages people whose homes might be affected to call Sandee Castagna at 800-492-6116, Ext. 2340.

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