New Coalition Calls Government-Run Title Option ‘Repugnant’
March 4, 2010
Representing a broad coalition of legal, real estate, consumer and free market leadership throughout the state, the New York Taxpayers for Economic Justice today announced its formation, spurred by a proposal to create a state-run title insurance bureaucracy subsidized by the taxpayer.
Steven Day, senior vice president for the Fidelity National Title Group, speaking for the coalition stated, said the proposal would endanger an entire industry, throw thousands of people out of work and place under a new and costly state bureaucracy the ability of men and women, corporations and investors to go to a real estate closing in a timely and efficient manner.
“This scheme is based on a fundamentally flawed understanding of the economics that drive title insurance and ignores the agents, underwriters, searchers, closers and attorneys who spend hours to determine title is valid before anyone invests a dime,” he said. “Also ignored in this proposal is the role the industry plays in defending against fraud and the indemnification against loss or damage. This plan is repugnant to every taxpayer who believes in the strength of the private sector and wants less government and lower taxes."
The American Land Title Association issued a press release in December 2009 contended that hasty efforts in New York to create a government-run title insurer and displace the private sector in the real estate closing process would not produce the results asserted by proponents.
“Stable land title agents and insurers understand the volatility of the real estate market, planning for a business cycle that includes years of revenue loss, such as the industry has experienced in this current recession,” stated Kurt Pfotenhauer, CEO of the American Land Title Association. “It is dangerous for a state government to look to a highly cyclical industry to fund critical infrastructure needs such as roads and bridges. What will the state do when their state-run title insurer needs money from the state instead of providing funding for key projects?”
Adam Leitman Bailey, a real estate attorney and chair of the New York City Bar's Taskforce on Public Option Title Insurance, stated, "In an attempt to ensure that one of the pillars of American financial stability, the transfer of real estate, continues to be stable and unfettered, the City Bar's task force is working to defeat these dangerous bills."
Cliff Sondock, of the Land Use Institute, called the proposal the “poster child of big government running amuck.” He said the idea of eliminating thousands of jobs in private business and creating another state agency is chilling.
“A state run title insurance industry would leave the New York real estate market substantially less competitive than other states, reducing residential and commercial property values across New York,” Sondock said. “This proposal is so profoundly wrong that when the taxpayer understands the full implications they will hold those responsible, accountable."
Desmond Ryan, executive director of the Association for a Better Long Island (ABLI), observed, "This proposal is being put forward based on false assumptions and fundamental fictions. In an effort to find new dollars to counter the deficit, the strategy is for government to compete with and effectively displace an efficient, ethical, consumer driven insurance industry and replace it with a state bureaucracy. It is beyond belief and suggests that, if allowed to proceed, a variety of other industries regulated by the State of New York may also be at risk of tax supported government enterprise becoming a competitor."
A proposal to create a state run "Title Guarantee Department" would see Albany appoint seven directors who in turn would appoint a treasurer and then hire "officers and agents as it may require."
Day further stated that independent projections suggest that the basis of the state's decision to create a state bureaucracy is ominously flawed. "As anyone can tell you, real estate works in cycles and they are looking at the "boom years" of real estate closings and concluding they have stumbled onto the pot of gold. They aren't looking at when real estate falls off the table, and once you create a government bureaucracy, it will be indifferent to swings in the market. The taxpayer will be on the hook for the cost of supporting this enterprise when its source of revenue evaporates," he said.
The group is launching a state wide grass roots program that seeks to connect with every taxpayer regarding this proposal, its costly implications to their pocketbook, the loss of private sector jobs and the impact it will have on real estate closings throughout New York.
"If this proposal is allowed to proceed, we should all be very, very scared," concluded Sondock. "It will set a precedent for dismantling perfectly viable private sectors of the economy and creating a government agency of muck, mire and mayhem."