Stewart Title Guaranty Co. agreed to settle California kickback charges as more than 100 other state and federal investigations proceed into secret payments for consumer referrals in the $43 billion U.S. home-settlement business.

Stewart, the fourth-biggest U.S. title insurer, will pay $1 million to the California Insurance Department to settle charges it illegally paid builders and lenders for steering business its way, the agency said in a statement.

California regulators alleged last September that Stewart funneled $500,000, or as much as 50 percent of its premiums, through shell companies to builders and lenders in exchange for referrals from 1998 to 2006. The insurer passed on the cost of the payments to 3,908 homeowners in higher home-closing expenses, the regulators said.

"These illegal rebate schemes damage the trust of consumers and drive up the cost of purchasing a home," said California Insurance Commissioner Steve Poizner.

California had been seeking as much as $42 million in penalties. The insurer, a unit of Houston-based Stewart Information Services Corp., didn't admit wrongdoing, according to insurance department spokeswoman Molly DeFrank. Stewart spokeswoman C.J. Yeoman didn't respond to a request for comment.

The real estate industry faces about 160 kickback probes by the U.S. Department of Housing and Urban Development and inquiries by states including Texas, New York and Florida, regulators said.


"Regulators are finally recognizing that things have been rotten for some time," Steve Parton, general counsel of the Florida Office of Insurance Regulation, said in an interview. "Illicit payments have become too much the norm of the industry."

The questionable payments typically have been made in cash, meals, trips and sports tickets, regulators said. In the state of Washington, the title-insurance industry "is rife with practices gone haywire," including $1,500 Super Bowl parties, $900 dinners, and $13,000 convention parties for Realtors and lenders, an October report by the state insurance commissioner said.

"What's one man's kickback is another man's marketing approach," said Jim Maher, executive vice president of the American Land Title Association, which represents the title insurance industry. "The overwhelming percentage of transactions are done entirely above board."

Maher faulted federal and state laws for being "absolutely vague." Pressure for questionable payments often originates with Realtors and brokers rather than title insurers. "It's tough to deal with someone who has their hand held out," he said.

Hundreds of thousands of home buyers have had their closing costs inflated by hundreds of dollars apiece in recent years, said Paul Hanson, chief examiner of the Minnesota Commerce Department, and Colorado's top real estate regulator, Erin Toll, both of whom have led multistate kickback probes.

The investigations are putting pressure on the government to more tightly regulate the home-buying sector. The federal housing department is preparing new rules aimed at lowering consumers' home-settlement costs and making information clearer, spokesman Brian Sullivan said. More than a half-dozen states, including California, Texas, New York and Florida, are reviewing their settlement rules and industry prices, insurers' filings with the government show.

HUD is conducting about 160 probes, a substantial increase over recent years, including eight or nine with various states, Sullivan said.

"There's more illegal activity now," said U.S. Housing and Urban Development Secretary Alphonso Jackson. "We believe it's at an all-time level."

In the California case, Stewart was accused of making illicit payments to Lennar Corp., the biggest U.S. homebuilder, and Wells Fargo & Co., the second-largest U.S. home lender, who were not accused of wrongdoing.

Findings about their dealings with Stewart have been referred to other state and federal agencies for further investigation, DeFrank said.

"We don't believe there was anything improper in Lennar's arrangements with Stewart Title," Lennar spokesman Glenn Bunting said in an e-mail. Wells Fargo spokesman Kevin Waetke declined to comment.

Investigations since 2005 have targeted the four largest title insurers, whose job it is to guarantee clear ownership of a property. The insurers, who control almost 90 percent of the U.S. market, have paid a total of $78 million in settlements in the past 21/2 years, according to a review of dozens of cases.

The insurers haven't acknowledged wrongdoing in any of the 18 or so cases they have settled so far.

There were 6.5 million home sales in the United States last year, with average closing costs, including lender fees, of about $6,717 a home, National Association of Realtors spokesman Walter Maloney said, citing informal estimates.