A class action lawsuit filed in U.S. District Court Wednesday, May 17, seeks to challenge the widely accepted belief that title insurance is an inevitable and unavoidable cost in the refinancing of any residential mortgage.The lawsuit alleges the defendant, First American Title Insurance Company, overcharged consumers who purchased title insurance in connection with a refinance transaction by not offering or failing to disclose the refinanced or discounted rate.
“Refinance transactions generally occur when there has been no change in ownership of a property and a short period of time has elapsed between the purchase of the original policy and the refinance transaction,” the lawsuit states. As a result title insurers spend far less time and money conducting a title search for a refinance policy. The lawsuit alleges that since at least the mid-1990s, the title insurance industry has overcharged individual homeowners hundreds of dollars for title insurance by failing to pass along “statutorily-mandated refinance rate discounts in connection with the residential refinance transactions.” Furthermore, “title insurance companies have so grossly inflated the cost of title insurance that they only pay out five to ten cents in claims for every dollar in premiums they collect.”“Unless the court issues an order declaring this practice to be illegal,” the members of the class will continued to be harmed, the lawsuit concludes. Joan Piazza, the plaintiff, and her mother refinanced an existing mortgage on their home in Bridgeport in Nov. 2003. At the closing Piazza was charged the standard rate, $445, for title insurance even though she qualified for the discounted rate. The Hartford law firm, Motley Rice LLC, that represents Piazza has asked the court to certify the case as a class action. In addition it has requested the court issue an injunction and notify in writing all residential consumers who pay title insurance premiums to First American Title Insurance Company and may qualify for a discounted refinance rate.