The New York Department of Financial Services has adopted two regulations affecting the title insurance industry.
The department said an investigation revealed that title insurers and agents spent "millions of dollars" on inducements that the industry charged back to consumers as "marketing costs." The investigation found that improper marketing expenses were being provided to attorneys, real estate agents and others who order title insurance on behalf of clients. The department then started efforts to reform the industry, which include licensing of title insurance agents and reductions in rates for refinancing transactions.
The first final regulation clarifies rules regarding marketing expenses, including meals and entertainment and ancillary fees that title agents or insurers may charge the insured at closing. The second regulation requires title insurance companies or agents that generate part of their business from affiliates to function separately and independently from any affiliate and be open for business from other sources.
The final rules 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 guidelines for expenses that are not permitted. They also provide a nonexclusive list of prohibited expenditures and a list of permitted expenditures.
The regulations also require title insurers 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 thus reduce rates charged to consumers. The regulations also limit the ancillary fees and expenses that may be charged to consumers for residential closings.