To:The Local Bar Associations of NY
64 Broadway, 501 New York, NY 10006
Date:June 1, 2015
To:The local Bar Associations of NY
From: Robert Treuber, Executive Director, NYSLTA
Re:Department of Financial Services Reg. 208
Dear Sir or Madam:
We are writing to you to ask your Bar Association to demonstrate support in opposing, in its present form, the adoption of proposed 11 NYCRR 227, Insurance Regulation 208 (the “Regulations”).
We believe that the implementation of the Regulations will materially change the closing process with multiple unintended consequences ranging from increased costs to unavailability of title closers.
The New York State Land Title Association is seeking your support in asking the New York State Department of Financial Services (hereinafter “DFS”) to withdraw the proposed Regulations, and to submit comments of your own on the Regulations. We believe that the Regulations require further study, and that the DFS needs input from the New York State Land Title Association and the Bar on particular issues impacting current practices for real estate closings.
A copy of the proposed Regulations is attached. Pursuant to the State Administrative Procedures Act, the comment period expires June 22. We believe that the Bar and the title industry should work together with the DFS to craft reasonable and workable rules that will protect the consumer from abuses and overcharging while preserving the prudent business practices which benefit all. We have provided a modest sampling of language of the Regulations and how the Regulations would affect the real estate client and his or her attorney:
We direct your attention to Section 227.5, intended to limit some of the costs involved in a typical closing, which will have a direct impact on the traditional way real estate closings are conducted, and will in fact increase the costs of the consumer/client. For example:
- Regulation 227.5(d) states, “Every ancillary charge shall be reported on the HUD-1 Settlement Statement for closings that require the use of a HUD-1 form. If a closing does not require the use of a HUD-1 form, then every ancillary charge shall be reported on the closing statement or closing invoice.”
Requiring ancillary title charges to be individually disclosed on a HUD-1 settlement statement is contrary to the default instructions for preparing the HUD-1 form found in Appendix A to Part 1024, Regulation X, and will therefore result in confusion. Interference with the production of this lender’s counsel form is not only unfounded in a statute purporting to regulate title insurance providers, but will likely sow controversy over questions of liability for incorrect statements. Title agent and underwriters have no control over what is contained in the HUD-1. Furthermore, there is already an independent requirement for the disclosure of ancillary charges under the newly-enacted Insurance Law §2119(f). Finally, as you are likely aware, the HUD – 1 settlement form will be discontinued for almost all transactions in August of this year.
Regulation 227.5(c) states “Every title insurance corporation and title insurance agent shall prohibit its title insurance closers from accepting, in conjunction with the closing:
(1) any gratuity or additional payment by or on behalf of any insured in cash, check, or any other form; or
(2) any pick-up fee.”
The Governor, in the press release accompanying the release of the regulation, justified the regulation as it will prohibit “the payment of gratuities and pick-up fees to closers of real estate transactions, which add hundreds of dollar to consumers’ final closing bills.”
While a gratuity is, by nature, unnecessary to a transaction, it is traditionally suggested by the attorney, and a voluntary gesture should not be subject to proscription by regulation.
The pick-up fee is a fee for the service of relieving a seller’s attorney, or the borrower or his/her attorney in a refinance, from the obligation of arranging for the satisfaction of mortgages on the title. If an attorney must perform this task the increased time and liability will no doubt be reflected in the attorney’s fee. One alternative may be to arrange for a representative of the existing lender to attend the closing and deliver a satisfaction. The prohibitive cost of this procedure, however, which would have to be borne by the seller or refinancer, led to its abandonment years ago. An even less desirable alternative would involve issuing policies with an exception in Schedule B for the seller’s mortgage. In any of the aforementioned scenarios, the purchaser’s situation is not enhanced. An owner’s policy with a Schedule B exception for the predecessor’s mortgage is of little value to the insured.
We are also concerned with Section 227.2, which, though intended to curb illegal inducements and kickbacks, will alter the traditional professional relationship we have always enjoyed with the members of the Bar. For example, the title insurance industry will no longer be permitted to provide CLE programs for free or at discounted rates. That activity is prohibited by the proposed regulations and is deemed an illegal inducement. Likewise, the sweeping definition of, “inducement,” under the Regulation might also caste the providing of a speaker from the title industry to a bar-sponsored CLE program as an illicit rebate or an inducement. Additionally, attorneys in need of a venue for a closing may have to pay a separate market rate fee for the use of a conference room provided by a title insurance agents or title underwriter. Title insurance providers should not be prevented from sound business practices which better inform our partners or assist with transaction fulfillment, merely because in so doing these things may incidentally benefit the parties to the transaction. A reasonable amount of professional interaction should not be considered an illegal inducement.
Thank you for your attention and consideration. Please send any comments you may have to . For your convenience, we have enclosed a “sign on” letter, if you so choose, to voice your support of our position. We are also urging your Association to send letters to Superintendent Benjamin Lawsky and the Governor's Deputy Secretary George Haggerty and urge them NOT to enact this regulation as it is written.
Sincerely,
Robert Treuber