Title Insurance Kickback Case Ends in $1 Million Settlement Deal

Sierra Pacific Mortgage Co. will pay $990,000, plus up to $280,000 in legal fees, to resolve racketeering claims over an alleged scheme to refer mortgage borrowers to a title insurer that gouged them and kicked back some of its excess profits, according to a federal court filing in Baltimore.

Each of the approximately 307 homeowners ripped off by the conspiracy would get about $3,200 out of the settlement, the lead plaintiffs say in a motion seeking preliminary approval for the deal from Judge George Levi Russell III.

That recovery would provide a “substantial benefit,” given that “in most instances this award is many times more than the kickbacks paid” or “the increased costs resulting” from them, according to the settlement motion.

“Like all complex commercial cases and class actions, this case was not without its associated risks,” the filing says. “While class counsel firmly believe this case is strong, no case is full-proof.”

If approved, the agreement would end litigation in the U.S. District Court for the District of Maryland over kickback allegations involving Sierra Pacific and All-Star Title Inc., which isn’t named as a defendant.

The proposed class action, filed in 2019, is one of several alleging violations of the Racketeer Influenced and Corrupt Organizations Act and the Real Estate Settlement Procedures Act by mortgage providers taking kickbacks from All-Star.

Each of the lawsuits accuses a residential lender of referring customers to All-Star, which was allegedly able to charge an inflated rate for title settlement services thanks to the steady source of customers.

Russell initially dismissed the claims against Sierra Pacific in March 2020, saying its “payments to All Star fall squarely within” RESPA’s “safe harbor” provisions because they were for services rendered.

But he vacated that decision in January, admitting he’d fundamentally misunderstood the allegations, including the direction of the alleged kickbacks. It’s plausible those weren’t “bona fide” payments for “goods or facilities actually furnished or for services actually performed,” the judge said.

Smith, Gildea & Schmidt LLC and Joseph, Greenwald & Laake PA are co-counsel for the homeowners. Sierra Pacific is represented by Weiner Brodsky Kider PC.

The case is Walls v. Sierra Pac. Mortg. Co., D. Md., No. 19-cv-595, motion for preliminary settlement approval filed 8/10/21.