Washington, D.C. – In a letter sent late last week, the Consumer Federation of America (CFA) has asked the United States Department of Justice to stop the merger of Fidelity National Financial with Stewart Information Services. “Fidelity is the largest insurer of title insurance in the nation and Stewart is the fourth largest,” said J. Robert Hunter, CFA’s Director of Insurance and former Federal Insurance Administrator and Texas Insurance Commissioner. “The combined entity would control almost half of the title insurance market and make an over concentrated, excessively priced market even more expensive and abusive to American home buyers.”

CFA pointed out that DOJ’s Horizontal Merger Guidelines make clear that this merger is problematic. The guidelines explain that any increase in market concentration – as measured by the Herfindahl-Hirschman Index (“HHI”) – “of more than 200 points will be presumed to be likely to enhance market power.” Fidelity’s acquisition of Stewart would increase the index by more than 750 points.

Title insurance is not only a highly concentrated market, it is beset by the practice of “reverse competition,” wherein title insurers ignore the consumers who buy their products and, instead, market to real estate professionals – real estate agents, mortgage lenders, mortgage brokers, attorneys, homebuilders – who can often steer consumers to a particular title agent or title insurer. The insurers, in turn, often richly compensates the professional for the referral.  Huge kickbacks, expensive gifts, and other inducements from the insurers to real estate professionals raise the price of title insurance to absurdly high levels.  CFA notes, for instance, a $500,000 title policy that sells for $2,700 in New York sells for only $110 in Iowa, where the market has been reformed.

CFA sent a copy of the letter to every state insurance commissioner, asking state regulators to review the merger and the abusive pricing results of reverse competition in the title insurance market generally.

Click here to download the letter and the calculation of the HHI-impact of the merger.

Contact: J. Robert Hunter, 703-528-0062; Doug Heller, 310-480-4170