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Press Release

October 17, 2017

Contact: Richard Loconte, 212-709-1691

DFS ANNOUNCES FINAL REGULATIONS TO COMBAT UNSCRUPULOUS PRACTICES IN THE TITLE INSURANCE INDUSTRY

Final Regulations Crack Down on Business Gifts, Limit Ancillary Fees and Encourage Independence from Affiliates

Financial Services Superintendent Maria T. Vullo today announced that the Department of Financial Services (DFS) has adopted two new regulations to protect New Yorkers and crack down on unscrupulous practices in the title insurance industry.  These new final regulations, which are the culmination of significant efforts by DFS to reform the title insurance industry, began after a DFS investigation that revealed that title insurance companies and agents have spent millions of dollars on inducements that the industry has charged back to consumers as "marketing costs."

“These regulations end the widespread practice of using meals and entertainment as inducement for title insurance business,” said Superintendent Vullo.  “New Yorkers can now rest assured that they will know exactly what they are paying for during the closing process and that they will pay only their fair closing costs.”

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 DFS investigation that found improper marketing expenses were being provided to attorneys and real estate agents and others who order title insurance on behalf of their clients, following which DFS commenced significant efforts to reform the industry.  These efforts include licensing of title insurance agents and reductions in rates for refinancing transactions.

The final regulations, which supersede emergency regulations DFS issued earlier to address questionable 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; and
  • 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 new rules adopted by DFS today take into consideration comments submitted during the comment period for the proposed regulations published in May 2017, as well as from earlier comment periods.

A copy of the final regulations can be found here and here.

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