By Thomas G. Wolfe, J.D.
As a result of its investigation, the New York State Department of Financial Services has proposed new regulations to provide stronger protections against “unscrupulous practices in the title insurance industry.” The NYDFS’s investigation revealed that title insurance companies and agents were spending “millions of dollars on inducements, which the industry has charged back to consumers as ‘marketing costs’.”
In a May 1, 2017, release, New York Governor Andrew Cuomo remarked, “The industry-wide practices uncovered by [the NYDFS] 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.” Similarly, NYDFS Superintendent Maria Vullo commented, “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.”
Proposed regulations. Under the first component of the NYDFS’s proposal, a newly created regulation would clearly prohibit inducements for future title insurance business, and would set forth restrictions as well as more detailed reporting and disclosure requirements pertaining to expenses, rate filings, expense allocations, and ancillary or other discretionary fees by title insurance companies and agents.
Likewise, the second component of the NYDFS’s proposal creates a new regulation and amends existing state regulations. In conjunction with certain provisions of the first component, the second component would require 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.
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