New York State DFS Is Implementing Major Changes That Will Impact The Title Insurance Industry In New York, In A Big Way!
Regulation 206 (now in effect) and Regulation 208, soon to take effect, were said to be written in order to protect the residential real estate buying consumer in New York State! But protect them from what and/or who?
From de facto and effectively regressive taxation as some Long Island counties raise recording fees in an unreasonable fashion?
From property sellers somehow trying to pull a fast one or some title defect that may affect the buyers property rights? No, that’s not it…
According to a DFS Press Release dated October 17, 2017, protection from ‘UNSCRUPULOUS PRACTICES IN THE TITLE INSURANCE INDUSTRY’!
The DFS solution is to reduce title insurance premiums, significantly reduce the ability for title insurance companies to advertise or market themselves and change the way that title closers will be compensated. And there’s much more!
Imagine, however, what will still be permissible are political contributions.
The unintended consequence will likely be some number of title insurance businesses closing their doors along with all of the lost jobs.
In addition residential real estate buyers and mortgage refinancers may find closings delayed as title closers, many independent contractors, could potentially leave the business as their compensation is drastically cut.
Of course few will shed a tear for an industry that, while critical for the residential real estate buying public, is not very well understood.
But, while I can’t speak for anyone else in the title insurance business, must take a bit of offense at a blanket statement that paints all industry participants with the same broad brush.
As a reminder, here it is again…’UNSCRUPULOUS PRACTICES IN THE TITLE INSURANCE INDUSTRY’
Over the 10-years my firm has been in business we have made it a point to educate the consumer about the fact that ALL title insurance providers are not the same!
That said, are there some bad actors in the title insurance industry? Undoubtedly, in much the same way that there are bad apple attorney’s, doctors, plumbers…You get the idea.
But again, we and I’m sure other firms make it a point to try and hammer home the following points, namely…
- The consumer has the right to choose the title insurance provider,
- The consumer needs to check on the financial strength of the underwriter issuing the policy,
- The consumer needs to explore the claims experience of the title insurance provider as it varies between companies, and
- That the consumer needs to be aware of the fact that the non-title insurance premium fees can, and to this point, have varied widely between title insurance firms. We go on to advise that to make certain the consumer was not being charged too much, they should get a title bill from a second firm to use as comparison.
Unfortunately, returning to point #1 above, the fact-of-the-matter is that many consumers have nothing to do with title insurance until they pay for it at the closing.
The title insurance provider is often selected by the attorney or mortgage company and they, truth-be-told, are not the ones paying the bill.
In the past Hallmark Abstract Service has offered the consumer the following advice (‘In New York, Why Should You Care About Title Insurance?‘)…
…Question: What other purchase, whether insurance or otherwise, will you as a consumer take no active role in the selection process?
A new car, television, health insurance, life insurance or new set of golf clubs to name just a few will typically be purchased after some amount of consideration and thought given by the buyer.
So, in the case of what may be the largest financial transaction of someones life, why is the decision about the critical component of title insurance ceded to someone else?
That someone is typically the attorney (for a purchase) or mortgage broker (for a refinance) handling the transaction. This person, it is hoped, has the best interests of the client in mind. And in the vast majority of instances they most certainly do.
But consider this…In the world of title insurance there are a variety of underwriters with differing financial strength ratings, title insurance policy providers with claims experience that can and will vary from company to company and, finally, non- title insurance premium costs that can vary in the hundreds to even thousands of dollars across firms!
So what can the consumer do?
- If someone else is handling the title insurance arrangements, ask questions!
- a) Who is the underwriter and what are they rated?
- b) How many claims has the abstract company faced and what were the causes of the claims?
- c) And, are the non-title insurance premium fees fair?
- Are you being asked to pay more for the property survey than was charged by the surveyor? If so, why?
- Remember that in New York you have the right to choose your title insurance provider so if your attorney or mortgage provider insists on using their own, ask for a copy of the title bill and check it with another title company to make sure it is fair. If excess fee amounts are being charged, wouldn’t that cash be better off in the consumers pocket than in the pocket of the title company? If there is a significant difference between bills, find out why and if the explanation is not reasonable insist the fees be adjusted lower!*
Finally for a more complete explanation, read ‘New York Title Insurance: Always Compare Apples To Apples! (Chart)’!
New York State, through regulation, is taking the need and responsibility to ask these questions out of the consumers hands.
So while the new DFS Regulations 206 and 208 will get much press with sensational headlines from real estate publications along with other sources, understand that in the same way all attorney’s, doctor’s and plumbers are not made from the same ethical cloth, the same fact is true for title insurance providers!
DFS Regulations 206 and 208
DFS Regulations in their final form can be found at these links:
Regulation 208: http://www.dfs.ny.gov/insurance/r_finala/2017/rf208txt.pdf
Michael Haltman, President
Hallmark Abstract Service