New York State DFS Regulations 206 And 208: Do They Help Or Hurt The Consumer?

Impact of NYS DFS Regulations 206 and 208

The comment period for proposed New York State Department of Financial Services (DFS) Regulations 206 and 208 is currently open until June 19, 2017!

Regulations 206 and 208, though proposed with the intended good intentions of protecting the consumer, would in the opinion of Hallmark Abstract Service actually have a negative impact if implemented…

We would therefore like to share the letter we wrote discussing our thoughts covering why many aspects of these proposals would in actuality be detrimental to the real property buying public as well as for those who may be refinancing a mortgage in New York State.

If, after reading this, you would like the contact information to comment yourself, simply let Hallmark Abstract Service President Michael Haltman know at mhaltman@hallmarkabstractllc.com.

New York State Regulations 206 and 208: Our Thoughts

I’d like to take the opportunity to present some of my thoughts concerning the proposed Regulations 206 and 208.

Please let me know if you have any thoughts or comments.

My name is Michael Haltman and I own Hallmark Abstract Service located in Jericho, New York.

I opened my firm in 2008 during the turmoil created by the financial crisis.

First let me acknowledge that the title insurance industry, as most if not all industries do, has its share of bad actors who do not comply with existing regulations and disclosures.

And while the proposed Regulations 206 and 208 as they are written will to some extent impact those bad actors, at the same time they will likely hurt the consumer while putting many title companies out of business.

Of course while legislation and regulations typically tend to achieve their intended results, there will also unfortunately tend to be unintended consequences that occur as well. In the case of Regulations 206 and 208, these unintended consequences will in my view be significant.

Affiliated Business Relationships (ABR) and Joint Venture Partnerships

Affiliated Business Relationships and Joint Venture Partnerships created between title companies and real estate companies, lenders, etc., will likely flourish in the future as Regulations 206 and 208 are written now.

So who will any expansion of this practice help and who will it hurt?

Of course some small segment of the title industry will be helped, but will this happen at the expense of the consumer, the very people that these regulations are supposed to help? In effect, it’s my opinion that the DFS will ultimately be picking title industry winners and losers!

In my view the number one casualty of these business relationships is the consumer who relies on the independence of the title insurance provider. It’s through this independence that any issue, even one that might prevent a transaction from being completed, is recognized and dealt with.

When a contractual relationship between various parties to a transaction exists (i.e. mortgage lender and title company), objectivity and due diligence may be clouded by the desire to close the deal.

The consumer will be impacted once again as a limited number of title industry players with ‘deep pockets’ create these ABR’s and JV’s, while smaller title companies unable to compete will be hurt and may ultimately be forced close. Less competition means less choice for the consumer and more potential that issues detrimental to their best interests will arise!

Finally, while ‘steering’ of business is also a net negative for the consumer, ABR’s and JV’s tend to reward such activity.

Marketing and Business Development Activities

When it comes to business development, I am hard-pressed to think of an industry, any industry, that prohibits companies from marketing their firms.

And while there should never be a quid pro quo connecting marketing and business, referring back to ABR’s and JV’s it’s the smaller title firms that are less known who will be hurt by the inability to market themselves and that, by extension, will hurt the consumer.

Lastly no firm should be passing its marketing expenses along to the consumer we are ultimately trying to protect.

Closer Compensation

Relating all of the proposed regulations back to consumer protection, in the case of title closer compensation it’s the consumer who will most definitely be hurt were the methodology changed in the way described.

Why is that?

If and when title closers become employees of title companies, they will be at the closing table representing said company. The attorney will likely need to take on greater responsibility translating into increased time spent on a deal resulting in the legal costs to the consumer having to rise.

Similarly if the bank needs to send its own representative to closings in order to ‘pick-up’ payoffs, the cost to close for the banks will rise, with those increases no doubt being passed along to the consumer.

If and when title companies need to carry the added expense of title closers on payroll, some will once again likely be forced to close leading to decreased competition, a net negative for the consumer.

Finally, the potential for fewer available closers can mean delays scheduling closings that can cost the consumer both time and money.

Conclusion

To conclude, I firmly believe in the attempt to weed out of the title industry bad actions and actors as they are both detrimental to the consumer as well as to the standing and viability of companies that do things the right way.

But, it’s also critical for any governing body to try and envision the potential unintended consequences that any legislation or regulation might cause, because ultimately the idea is not to hurt the very people you are trying to help, the consumer.

Michael Haltman, President
Hallmark Abstract Service

131 Jericho Turnpike, Suite 205
Jericho, New York 11753
(516) 741-4723

276 Fifth Avenue, Suite 704
New York, New York 10001
(646) 741-6101

www.TitleInsuranceNewYork.com
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Do you know everything that you need to know about the title insurance for your purchase of refinance?
  • Who is your underwriter?
  • What is the claims experience of your title insurance provider?
  • Do you know whether the non-title insurance premium fees you are paying are fair and reasonable?
If the answer to any of these questions was NO, please read…

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