Title firm to refund $2 million

Settlement with Fountainhead calls for reimbursing 7,100 homeowners for overcharges

Baltimore & Region

November 18, 2005|By MATTHEW DOLAN | MATTHEW DOLAN,SUN REPORTER

More than 7,000 Maryland homeowners will receive checks averaging $265 for being overcharged during their closing settlements by a leading title company, according to an agreement filed in federal court.

The preliminary accord calls for the Columbia-based Fountainhead Title Group Corp., one of the state's largest title settlement companies, to pay $2 million in individual reimbursements to about 7,100 customers and shut down as many as 20 "affiliated businesses" accused of either charging homeowners for title work that was never done or double-billing them.

The settlement was signed Nov. 2 but still needs final approval from a U.S. District Court judge in Baltimore. Eligible customers will be notified by mail and could see checks as early as next year, according to one of the plaintiffs' attorneys.

According to court papers, the title company did not admit any wrongdoing. Attorneys for Fountainhead did not return phone calls for comment yesterday.

One of the attorneys for the plaintiffs in the class action lawsuit filed in 2003 praised the outcome, saying it serves as a warning to homebuyers.

"The lessons to be learned in this kind of matter are that homeowners need to ask about every part of their closing costs. They should also hire their own legal counsel to review these documents," said Phillip R. Robinson, an attorney with Civil Justice Inc., a Baltimore nonprofit public interest group that helped bring the suit against Fountainhead.

According to the complaint, settlement agreements included inflated, possibly bogus charges. The work was allegedly completed by "affiliated business arrangements," a legitimate industry practice of using subcontractors to complete different aspects involved in preparing the title. It is legal in Maryland but not in every state.

The plaintiffs in the Fountainhead case alleged that the title company violated the Real Estate Settlement Procedures Act. The law allows companies to set up affiliated business partnerships, but draws a line when it comes to paying partners when no services are rendered.

The allegations in the Maryland lawsuit are not unique. In July, First American Corp. agreed to pay $680,000 to settle a dispute with the Department of Housing and Urban Development over alleged kickbacks paid to sham real estate affiliates.

Similar problems have also cropped up in Colorado, according to a spokeswoman for the title industry. "We take a neutral position on affiliated businesses. Like anything, there are some people who are good at it and some people who are trying to advantage of consumers," Lorri Lee Ragan, American Land Title Association's director of communications, said yesterday.

In Maryland, Robinson said, title company "regulators are underfunded and overwhelmed with the number of complaints." A call to the Maryland Division of Occupational and Professional Licensing was not returned yesterday.

This month, the Fountainhead Title Group of Columbia and RGS Title of Oakton, Va., announced that they had merged to create RGS Fountainhead Settlement Services. The new firm is reportedly the largest independently owned real estate settlement service firm in the region, with 60 offices throughout the Mid-Atlantic. Fountainhead was founded in 1975 and RGS in 1988.

matthew.dolan@baltsun.com

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