Proposed New York Regulations Crack Down on Title Insurance Industry

New York Governor Andrew M. Cuomo has announced two new proposed regulations to protect New Yorkers and crack down on unscrupulous practices in the title insurance industry.

These new protections were drafted following an investigation by the state Department of Financial Services (DFS) that revealed title insurance companies and agents have spent millions of dollars on inducements, which the industry has charged back to consumers as “marketing costs.”

“These new protections will help ensure New Yorkers aren’t forced to shoulder outrageous and exorbitant expenses while pursuing the American Dream of home ownership,” Governor Cuomo said in a statement published in a DFS press release. “The industry-wide practices uncovered by Department of Financial Services were nothing short of shocking, and these reforms will help ensure prospective homeowners will be charged their fair share of title insurance fees and not a penny more.”

Gov. Andrew Cuomo

The first proposed regulation clarifies the rules about expenses such as meals and entertainment and ancillary fees that title agents or title insurers may charge. The second proposed regulation requires title insurance companies or agents that generate a portion of their business from affiliates to function separately and independently from any affiliate and obtain business from other sources.

“For far too long, meals and entertainment have been used as inducement for title insurance business,” Superintendent Maria T. Vullo said in a statement published in the release.These practices must stop. DFS will protect consumers from unfair practices in the title insurance industry. Many New Yorkers who buy or refinance a home have been footing the bill without explanation for excessive fees that contribute to high closing costs. This action lets title insurers and agents know that these unscrupulous practices stop now.”

DFS investigators found that under the guise of “marketing expenses,” meals, entertainment, gifts, and vacations have been provided to attorneys and real estate professionals who order title insurance on behalf of their clients in exchange for referring business to the title insurance company or agent.

Maria T. Vullo

Since the DFS investigation, DFS proposed earlier versions of both of these regulations and adopted emergency regulations, currently in effect, to address certain of these questionable practices and protect New York consumers. The emergency regulations also address issues relating to the fiduciary duties of agents and brokers, and will be in effect until the final adoption of these regulations. Once final regulations are adopted, the emergency regulations currently in effect will no longer apply.

The proposed regulations would:

Source: New York State Department of Financial Services