December 19, 2017: After Regulation 208 Went Into Effect On December 18th, The Following Day NYSDFS Issued A Stay Expiring February 2, 2018 That Will Allow One Specific Activity Eradicated By The Regulation To Continue…
Candidly, of all the new directives in Regulation 208 that will impact title companies, a stay on this specific one is not the one I would have guessed.
And while done in moderation this activity is critical for business development, mandating that it stop immediately would not in my humble opinion create havoc in the real estate market!
DFS Statement Regarding 11 NYCRR 228
Given the important consumer protections and impact of the necessary reforms of the title insurance industry that DFS has implemented pursuant to Regulation 208, DFS recognizes that a longer implementation period may be necessary to ensure full compliance. Accordingly, DFS will commence enforcement of Section 228.2, Prohibition on Inducements for Future Title Insurance Business on February 1, 2018.
So what exactly does Section 228.2 say and why, specifically, was the implementation of this portion of Regulation 208 the only one delayed?
In other words what exactly is it about Section 228.2 that could, according to some politicians and industry lobbyists, destabilize the title insurance industry and result in a ‘series of unintended consequences causing higher costs for consumers while creating havoc in the real estate market’?
So, again, what exactly is it about Section 228.2 that could result in the turmoil described above?
Section 228.2 in essence ‘applies to a specific part of the new regulations that banned title companies from treating clients to meals, tickets, entertainment or gifts (including donations to charitable organizations).’ (Source)
Hmmm. So while it sounds as if Regulation 208, and specifically Section 228.2, could put a severe crimp in the ability of title insurance companies to market and develop business, will its implementation actually create havoc in the New York real estate market?
What Are Some Of The Other Limitations And Restrictions In Regulation 208 That ACTUALLY COULD Affect The Viability Of Some Title Insurance Providers?
Separate in Regulation 208 are requirements that stand a much better chance of hurting title companies, title closers and the financial viability of some to be going concerns in the future than Section 228.2.
- Specifically Regulation 208 caps what companies can charge for ancillary fees and other elements of title such as a survey. Some firms depended on these charges to provide extra income from a deal.
- Title closer compensation has been changed which will be an added expense borne by the title insurance or abstract company that the closer is representing. For some title providers the implementation of a plan for doing this could take more time.
- Finally, at some point during 2018, the title insurance premium that a consumer will be charged for a real estate purchase or a mortgage refinance will be reduced by an amount expected to be 5%.
These three issues in their entirety or separately have the potential to impact the bottom-line of companies in what could potentially be a significant way.
Don’t get me wrong. I appreciate the stay that will allow me to take a client or a prospect out for lunch until the end of January. This is basic business development and relationship building.
I would simply like clarification as to why it was solely Section 228.2, the one that allows for exorbitant gifts, luxury suites at area arenas and more, that was brought back into the mix.
The following statement was a comment I made after reading an article on the stay that appeared at The Real Deal…
Cynically it seems possible that political donations, incredibly still permitted under Regulation 208, may have had the intended lobbying impact by temporarily delaying the regulations full implementation until 2/1/18.
I’m not entirely clear about how being prohibited from taking people to a luxury suite at a Knicks game or Myrtle Beach to play golf (if that actually happens) would have the effect of increasing the cost to consumers, destabilize the title insurance industry or lead to havoc in the real estate market.
It sounds more like the DFS is giving itself the wiggle room to reverse some of the barriers to marketing imposed December 18th. If the marketing portion of the regulation were to be reversed or softened vis a vis excessive expenditures, that would simply tip the playing field back towards those title insurance firms who have deep marketing pockets.
Lunch with a client? That is reasonable! I guess we just have to wait and see.
Thoughts or comments? Please let me know.
Michael Haltman, President
Hallmark Abstract Service
(646) 741-6101, email@example.com
NYS Title Closer Compensation Information –
Prohibited Activities For NYS Title Insurance Companies –Google+