New Title Insurance Regulations Could Prove Devastating
Bob Treuber | January 2018
In October 2017, the New York Department of Financial Services (DFS) announced its new regulations for the Title Insurance industry.
In a statement to the press, the DFS proclaimed that the new regulations would change the face of home ownership in New York by lowering rates and making the process more efficient.
We agree with DFS that it will change the face of home ownership in New York, but not in a good way.
The home market experts all agree that the new regulations will cost jobs and force small businesses to close while forcing consumers to pay more and to deal with less experienced people at their home closing.
So, What do the Regulations Do?
Among other things, the regulations call for changes that disrupt the economic stability of the title insurance business model:
• Loss of payment for non-title insurance services like bankruptcy searches, patriot searches and municipal record searches.
• Prohibiting compensation to independent closers for non-financial service functions.
• A 5% insurance premium cut, one of many such reductions in the last decade.
The regulations also call for, basically, a complete ban on marketing for folks in the title insurance industry.
We’ve all heard the DFS proclaim that title insurance employees spend their days in strip clubs then pass the cost to consumers, and, it claims, that is one reason behind the new regulations.
If any title insurance professional does that, it’s wrong.
We admit there are some bad apples who should be handled by the DFS and the consumer protection agencies that have enforcement power.
But, under the new guidelines, buying someone a 99-cent coffee is illegal.
What other industry faces such a regulation? The answer is simple: none.
The question then remains: what result will these regulations have on the Great State of New York? That answer is simple as well: a devastating result.
For consumers, a closing could actually cost more because non-insurance services will be done by attorneys at a greater cost to the consumer, with fewer people, their tasks (searches) will end up in the hands of other folks like law firms who will charge more.
Faced with rising operating costs and reduced revenue, small local title agents will cut staff or close up shop. Losing the people with vital local experience will create delays and complicate the agent’s role of curing title problems.
The volume will be absorbed by large agencies and multi-state title companies. That means less competition and a loss of jobs in the local economy.
And, in the worst possible scenario for a homeowner, it could mean a delayed closing and a lost interest rate because there would be fewer title insurance professionals to serve the same number of closings.
For the title insurance business, it means job losses and the end of many mom and pop businesses who have been in business for generations.
Businesses just won’t be able to survive economically.
At a time when the housing market is on edge thanks, in part, to uncertainty in Washington, does the DFS really want to play havoc with the housing industry?
NYSLTA has long worked to serve the interests of consumers. We understand the goals of DFS, but introducing this regulation without understanding the consequences of a complex real estate finance market will hurt New Yorkers, not help them.
Editor’s Note: The opinions of the author do not necessarily reflect the views of the Hudson Gateway Association of Realtors, Inc.