Insurance Issues
Citigroup Inc. and Wells Fargo & Co. are among the companies the California Department of Insurance has targeted in its investigation of an alleged kickback scheme involving title reinsurance.
The main targets of the investigation, which Commissioner John Garamendi announced Tuesday, are the title insurers Fidelity National Financial Inc. and LandAmerica Financial Group Inc. Mr. Garamendi says the premiums the two insurers ceded to real estate agents, builders, and lenders amounted to illegal payments for referrals.
He has accused the two insurers of overcharging hundreds of millions of dollars on premiums, and he has asked Gov. Arnold Schwarzenegger to call upon the appropriate regulators to investigate.
A Wells spokeswoman, Heather Scrow, wrote in an e-mail, "We do not use any title underwriter on an exclusive basis, nor do we have any contractual provisions guaranteeing any future business for any title underwriter. We believe the title reinsurance agreements we have in place comply with state law and with the Real Estate Settlement Procedures Act."
A Citi spokeswoman said she could not immediately comment.
LandAmerica, of Richmond, Va., fired back Wednesday by calling the commissioner's statements "untrue and misleading."
Michelle Gluck, LandAmerica's general counsel, said in a press release, "While we cannot speak for the arrangements of our competitors, LandAmerica's captive reinsurance arrangements have not resulted in any injury to consumers."
The probe was announced a day after Colorado announced a consent agreement in which First American Title Insurance Co. of Santa Ana, Calif., agreed to repay consumers $24 million that the state says they lost through similar arrangements.
Mr. Garamendi issued subpoenas requiring Fidelity National and LandAmerica to produce documents and executives to appear at a public hearing in April.
He also said two real estate brokerages, Re/Max International Inc. and a unit of Century 21 Real Estate Corp., took part in the alleged scheme.
LandAmerica and Fidelity National said they were cooperating with Mr. Garamendi's department. Fidelity National, of Jacksonville, Fla., said Wednesday that it has terminated all captive reinsurance treaties across the country. LandAmerica said it has ended the practice in Colorado, whose insurance department said last month it would sanction nine insurers (which it did not name) for alleged illegal kickbacks.
Probes are also being conducted in Washington, and the National Association of Insurance Commissioners is looking into the issue.
Criimi for Sale?
Criimi Mae Inc. has hired Citigroup Global Markets Inc. to help the Rockville, Md. commercial mortgage company review a possible sale of the company.
On Wednesday, Criimi said several potential buyers have expressed interest, including Brascan Real Estate Financial One LLC, a unit of Criimi's largest shareholder, Brascan Real Estate Financial Partners LLC.
Criimi said it would make no further announcements in connection with the potential sale until a deal is reached or abandoned. A spokesman, James Pastore, said it "has no defined timeline" for a potential sale or the review of other strategic alternatives.
Last year Criimi, which emerged from bankruptcy in 2001, announced a plan to reinvent itself as an originator. Currently it holds the subordinated B-pieces of commercial mortgage securitizations and acts as the special servicer for such securitizations.
Mr. Pastore said Criimi has not started originating loans. He would not say if it intended to abandon the idea, except to say it "has continued to look at the origination plan."
In interviews last year, Mark R. Jarrell, Criimi's president and chief operating officer, said originating loans would give it more time to analyze each property than the month that B-piece buyers normally have. The strategy would also let Criimi avoid bidding for higher-risk bonds in the secondary market, avoid middlemen, and let it capture more of the profits from lending, he said at the time.
Criimi reported a third-quarter net loss of $9.3 million, or 60 cents per diluted share, compared to a net loss of $7.4 million a year earlier. It is scheduled to report its fourth-quarter results next month.
Applications Drop
The Mortgage Bankers Association said Wednesday that its market composite index of loan applications in the week that ended Feb. 18 fell 0.6% on a seasonally adjusted basis from the previous week, to 727.9.
The component index of purchase loan applications fell 1.3%, to 417.8. The refinancing application index rose 0.1%, to 2,532.
According to the MBA, the percentage of applications that were for refinancings fell 60 basis points, to 49.3%. The adjustable-rate mortgage application percentage remained at 30.7%.
More Audit Time
AmNet Mortgage Inc. said Wednesday that it has postponed its fourth-quarter earnings release and conference call until March 9.
The San Diego company, which was scheduled to report earnings Wednesday, said it rescheduled to give its auditor, PricewaterhouseCoopers, "more time to complete yearend audit work."
AmNet is the parent of the wholesale home lender American Mortgage Network.
