New York Releases New Regulations Targeting Title Insurance

October 24, 2017

The New York Department of Financial Services (DFS) adopted two new regulations for the title insurance industry that clarify rules for marketing expenses and address affiliated business arrangements.

The first final regulation clarifies rules about marketing expenses including meals and entertainment, and ancillary fees that title agents or title insurers may charge the insured at closing.  The second final 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 be open for business from other sources.

The New York State Land Title Association provided input to DFS as it created the new regulations, but said “regrettably, the end product does not serve the people of New York State, despite its good intentions.”

“In fact, we believe these regulations will have major fallout for the title insurance industry, and therefore, consumers, other real estate professionals, and the real estate industry as a whole,” the NYSLTA reported in a release. “We believe the new regulations will force small, local title insurance companies to close, costing jobs and making the market ripe for take-over by multi-state conglomerates, thereby reducing the options available to consumers.”

While the DFS believes the regulations will help “consumers know what they are paying for during the closing process,” the NYSLTA disagrees with the assertion that consumers will benefit. The bulk of all the closing costs incurred—state, county, and local fees and taxes—remain unchanged, NYSLTA said in its release.  In Nassau County alone, a homeowner is required to pay nearly $900 to record a deed. Without reductions in these local fees and taxes, the DFS cannot provide consumers with substantial savings.

“We understand and appreciate what DFS is trying to accomplish with these regulations, but disagree with the assertion that there will be any real benefit to consumers,” NYSLTA said.  The title industry is continuing to study the regulations and looks forward to engaging the DFS in future discussions regarding some of the elements of the regulations, including its interpretations.”

Here’s an overview of the final regulations, which supersede emergency regulations DFS issued earlier to address title industry practices:

  • Clarify that the New York anti-inducement statute is not limited to situations in which there is a direct quid pro quo for business, and establishes clear guidelines of expenses that are not permitted. The final regulation provides a non-exclusive list of prohibited expenditures as well as a list of permitted expenditures.
  • Require title insurance companies to submit new rate applications to establish rates to be charged in the future that exclude all expenses deemed to be prohibited under this regulation, and thereby reduce the rates charged to consumers.
  • Limit the ancillary fees and expenses that may be charged consumers for residential closings.
  • Require a title insurance agent or corporation that accepts business from an affiliated person to function separately and independently from the affiliate, including being staffed by its own employees.
  • Engage in all or substantially all of the core title services with respect to the affiliated business, and that core title services include the clearance of title exceptions.
  • Clarify that making a good faith effort to obtain, and be open for, title insurance business from all sources and not business only from affiliated persons, includes actively competing in the marketplace.

The regulation addressing marketing rules provide a list of prohibited expenditures, as well as a list of permitted ones. The prohibited expenditures include:

  • Meals and beverages unless otherwise authorized under sub-division (c) of this section
  • entertainment, including tickets to sporting events, concerts, shows or artistic performances
  • gifts, including cash, gift cards, gift certificates, or other items with a specific monetary face value
  • outings, including vacations, holidays, golf, ski, fishing, and other sport outings, gambling trips, shopping trips, or trips to recreational areas, including country clubs
  • parties, including cocktail parties and holiday parties, open houses
  • providing assistance with business expenses of another person, including but not limited to rent, employee salaries, advertising, furniture, office supplies, telephones, telecommunications, computers and other electronic devices and business equipment, or automobiles, or leasing, renting, operating, or maintaining any of such items, for use by other than a title insurance corporation or title insurance agent
  • use of premises, unless a fair rental fee is charged that is equal to the market value in the premises’ geographical area
  • paying the fees or charges of any professional representing an insured as part of a real estate transaction, such as an attorney, engineer, appraiser or surveyor, or paying rent or all or any part of the salary or other compensation of any employee or officer of any current or prospective customer
  • providing or offering to provide non-title services, without a charge that is commensurate with the actual cost thereof

According to the regulation, the following expenses shall be permissible “provided that they are without regard to insured status or conditioned directly or indirectly on the referral of title business, and offered with no expectation of, or obligation imposed upon, to refer, apply for or purchase insurance. In addition, any expenses incurred pursuant to this subsection must be reasonable and customary, and not lavish or excessive”:

  • Advertising or marketing in any publication, or media, at market rates
  • Advertising and promotional items of a de minumus value that include a permanently affixed logo of a title insurance agent or title insurance corporation
  • Promotional or marketing events including complementary food and beverages that are open to and attended by the general public
  • Continuing legal education events including complementary food and beverages that are open to any member of the legal profession
  • Complementary attendance offered by a title insurance corporation, title insurance agent as a host of a marketing or promotional event, including food and beverages available to all attendees so long as (a) title insurance business is discussed for a substantial portion of the event including a presentation of title insurance products and services, (b) such events are not offered on a regular basis or as a regular occurrence, and (c) at least 25 diverse individuals from different organizations not affiliated with the host attend or were, in good faith, invited to attend in person
  • Charitable contributions made by negotiable instrument made payable only to the charitable organization in the name of the title insurance corporation or title insurance agent
  • Political contributions

The regulation prohibits title companies from including the prohibited marketing expenses when responding to the state’s data call. Title companies are expected to report expenditures made for meals and beverages, entertainment, gifts, outings, parties, sponsorships, seminars and continuing education, charitable contributions and political contributions as a separate line items in supplemental expense schedules to the expense schedules submitted annually to the department’s statistical agent.

Contact ALTA at 202-296-3671 or