Friends:

I have been watching this email chain grow.  There have certainly been some useful insights.  With new people paying attention, some for the first time, there has also been a lot of “rediscovery” of things others have looked at before.  Some of the commentary has been uncomfortable to see, knowing DFS, companies & NYSLTA are seeing it.  However, I think it has provided a representation of the state of closers as we approach next month.  Anxiety.  Frustration.  Fear.

We can all agree, we are facing difficult and challenging times.  DFS has precipitated a looming disaster and we have all been left to try and survive it.  Companies and closers, alike.   If there is any chance for ALL of us to weather this storm it will require ALL of us to bring to bear our very best efforts and ideas.   NYSLTA, underwriters, company owners and their employees, as well as closers are all facing this challenge.  Our problems are different and there are no ideal solutions arising that will fully satisfy everyone.  This regrettable fact has fed anxiety, eroded trust and hampered our universal need to find workable solutions.   There will be a title insurance industry after December 18.   We need to keep that in mind as we all aspire to remain part of it.  We must find ways to work together.

I have spoken to most of the companies for which I close.   This is an existential threat to small companies and the industry is struggling to find workable solutions under the regulations as they are now written.   I get no sense the companies I have spoken to have any interest in preventing closers from being able to make a living.  Many companies are trying to figure out how they will survive, themselves.   This is why I have been exploring solutions that would allow companies and closers to survive.

Until we are presented by companies with the policies and procedures they intend to proceed under beginning December 18, I believe it is premature to consider drastic action.   There are likely to be companies that, after sincere and difficult effort will present policies and procedures under which I (or we) may choose to close under.  I do not think it is prudent or responsible (to ourselves, those who depend upon us financially or to the industry in which we participate) to forego exploring any and all solutions to this crisis before undertaking a refusal to work.   The consequences of such an action are numerous and serious.   I have not seen any thoughtful discussion of these consequences and I believe such a discussion would be necessary before such action is undertaken.   I think our industry deserves that.

I am glad to see numerous closers have chosen to join NYSLTA.   As I have said before, our best opportunities to help shape industry policies that affect closers is to have a seat at the table.  However, if we wish to participate we must do so responsibly.   We must do our best to understand those issues which concern us, so as to make substantive contributions to the process of addressing them.  We must expect that of ourselves if we wish to be taken seriously addressing the issues we take seriously.   There are advantages to being members of NYSLTA.  Those who choose not to join NYSLTA choose not to afford themselves of them.   Those of us who join have undertaken a duty to participate responsibly.

I too, have chosen to contribute to the NYSLTA legal defense fund.  I have no reservations that the Association action will benefit closers.   I recognize we are not the only people adversely affected by the regulations and the ensuing action will challenge the regulations on numerous fronts and in a variety of ways.   I want to do my part.   I hope more closers join us.

These are my personal opinions.  I offer them as my contribution to the discussion.  I do so after serious reflection.   I intend to continue to work toward solutions that will allow us all to continue to make a living in this industry because I expect we will find ourselves operating under these frightful regulations come December 18.   I endeavor to make every word and effort count.  

Respectfully,

Jim Hunter

Independent Title Closer

Member, NYSLTA

Folks who called in to the conference line for Wednesday’s EC meeting encountered a 90+ minutes interruption due technical issues. NYSLTA appreciates the fast response and assistance from the tech staff at our host First American.

This report is not the official minutes of the meeting. It is a recap of the discussion about the new DFS regulations.

Call to order at 10:32 AM

President Rich Estrella:

Welcomes attendees and thanks everyone for joining today’s meeting

The regulations are the primary focus of today’s meeting. And the following are some of the issues we should be aware of and may be discussing

What do the regs say?

When and how will they be adopted?

Will NYSLTA be able to meet with DFS to discuss the Regulations?

How shall we respond to the DFS press release announcing the Regulations?

What impact will the State Comptroller’s audit of DFS have?

What assistance and support can we expect to receive from the Legislators?

How do the Underwriters plan to respond?

Is litigation an option? What will it cost and what are the odds of success?

What are the consequences of litigation?

The Officers, the Government Regulation Committee, the PR Committee, our lobbyist and our communications consultants have been meeting to look at all aspects of the regulations.  We are in the process of gathering information. 

We have 60 days before Regulation 208 takes effect. So let’s not act on impulse and understand the consequences of our decisions.

 Title Section Report – President Estrella

Noted that the Title Section spoke a few days earlier to discuss a press release and the need for the Underwriters to seek direction from their corporate offices as to the direction they should proceed.

Government Regulations Committee (Chair- Jean Partridge; Vice Chair-Judy Lanahan):

NOTE – The GR Committee is developing a bulletin comparing emergency reg 206 and the newly published reg 206. It will be issued in a few days, after thorough review by all members of the committee. The following comments are non-comprehensive highlights offered during the meeting.

Regulation 206

As of today, October 18, regulation 206 is in effect. There are a number of differences from the emergency regulation 206, which we have been operating under for three years.  The GR Committee is going to issue a memo comparing the two versions.

DFS now says the common practice of a clearance account or exchange account is acceptable and permissible. The prohibition on co-mingling of funds stands.

The DFS does not believe agents “remit” to the UW. The DFS believe the agents portion of the premium is a commission.

Affiliated businesses and joint ventures are required to provide all core title services as a distinct business entity. The requirement of “multiple and significant” source of business is removed. The attorney exemption is retained.  Affiliated businesses and joint ventures must compete for clients in the open marketplace.

The agent and/or Underwriter liability for Closer actions was reiterated.

Regulation 208

The DFS’s stated purpose of the regulation is to “protect the consumer and the public welfare. The Department claims agent expenses cause the premium rate to be needlessly excessive.

Special attention should be given to the definitions section 228.1.

Applicant is defined as the fee insured or owner or purchasers of the property. The real estate attorney is not the applicant.

Escrow is only a fee collateral to pay a lien. Agents may charge $50 per escrow. They may be unbundled.  An escrow is not a disbursement or down payment.

Residential real property is a 1-4 unit dwelling, coop or condo. Vacant land, hotel, motel and mixed use property is not deemed residential.

Section 228.2 has major changes. It contains a listing of permissible and prohibited expenditures for marketing and entertainment. Reference to section 6409d, wherein anything of value is deemed an inducement, including instance where there is no quid pro quo.

Comment was made here about bills entered into the legislature in the 2017 session by Sen. Seward and Assembly member Cahill, S6704 and A8467, which clarifies the legislature’s intent in 6409d and counters the DFS re-interpretation.

Part 228.2 (b) is the list of prohibited activities, part (c) is the permitted activities. The Association is seeking clarification from DFS on several items which are confusing and inconsistent.

Section 228.3 requires a re-statement of data for the previous six years, excluding expensed newly defined as prohibited, for th purpose of rate calculation.  In lieu, the Underwriter may reduce premium rates 5% across the board. This must be completed by June 2018.

A number of comments at this time questioned TIRSA’s role. Ms. Shapiro of AmTrust, formerly Executive Director of TISA, explained per statute rates must be based on statistical analysis of data. Furthermore, title agent expenses are not a factor in the rate calculation.

Section 228.5 seeks to bring charges for ancillary services under DFS control. The limits apply only to residential properties.  It was clarified that “200%” means a cost to applicant of twice the original expense, not an incremental charge of 200% in addition to the original expense.

Problems in the text of the regulation were noted in reference to certain municipals charged directly by the government body or not meeting the definition of a search or a recording.

This section also cites restrictions on compensation to Closers. The collection of a payoff or pick-up fee must be disclosed to the applicant three days in advance by the agent and appear on the invoice.  Pick-up fees must be reasonable and consistent.

Gratuities to Closers are prohibited and they may not accept payment from the applicant either directly or indirectly.

Title Section Report – President Estrella

Noted the Title Section had met a few days earlier and agreed they needed to seek direction from corporate as soon as possible.

Agent Section Report – Chair Giliotti

Characterized the regulations in disparaging terms. He urged the Members to use the 60 days before 208 is in effect to “figure this out” and noted 208 contradicts itself and contradicts the TIRSA rate manual.

Rhetorically queried the attendees on options: meet with DFS and seek changes; pursue Senate and Assembly Insurance Committees to hold hearings; seek legislation; litigate; file TRO; article 78 proceeding.

Speculated one-third of Closers and one-third of agents could be put out of business.

Sentiment of the Agent Section is to support Underwriters against DFS.

Comments from Scott Wexler, NYSLTA Lobbyist:

Noted that he has identified Deputy Superintendent Cassandra Lentchner as “go to” person for follow-up questions and clarifications. Also, he is pursuing the DFS issued “Full Assessment of Public Comments.

Public relations and Advocacy – Noted any news stories that come out following the DFS news release are not significant to the legislative process. Strategic messages that shape the public perception of the NYSLTA are helpful.

A meeting with Superintend Vullo can be accomplished but the value of the meeting depends on what the goal of the meeting is. It is possible to be professional and aggressive without being nasty.

The Seward/Cahill bills address 6409d only. A senate hearing can be a useful tactic by putting pressure on DFS, give them less wiggle room and to set the stage for legislation.  If NYSLTA had a legislative solution, we would have good (not great) support.

The value of litigation is as a tactic that supports a legislative solution.

Communications consultant Rich Bamberger

He stressed the short-term issue of responding to the DFS regs versus the long term solution of shifting the perception of the title industry in New York.

Next steps

NYSLTA is going to organize Town Hall meetings in early November for Members.

“Explainer” bulletins will be issued by the Government Regulations Committee

Options for litigation will be explored pending responses from the underwriters.

The Department of Financial Services has posted the final regulations on their web site at:

http://www.dfs.ny.gov/insurance/r_finala/rfinal17.htm

These regulations are also in the Government Regulations File Library on this site.

Regulation 206 takes effect on October 18; regulation 208 takes effect on December 18.

The NYSLTA Government Regulations Committee is studying the regulations and will present a preliminary report next week.  Simultaneously, the corporate counsel at the Underwriters are preparing their assessment and guidance for their agents.

This Association is also exploring Town Hall type meetings in a few weeks time to assist with the understanding and adaptation to the new regulatory environment.

On Monday, June 16, 2017 the NYSLTA submitted formal comments to the NY Department of Financial Services via email.

The letters are attached to this blog post.

The content of the letters was approved by the Executive Committee.

The effort to product these comment letters was a led by the Government Regulations Committee with support from the Officers.

A Message to NYSLTA Members and all NY State Title Insurance Professionals

Two weeks ago, the NYS Department of Financial Services (DFS) introduced two new proposed regulations covering our industry.

This letter is a report on what your Association has done to date and our planned next steps.

We are analyzing the regulations for their impact on the title industry and the real estate marketplace.

We have created an action plan and a time line for our response.

The proposed regulations would affect almost every aspect of the business of title insurance, from when you first market to a client to when you close a file and remit the premium

    Requires underwriters to take an immediate 5% rate reduction on all polices or instead restate their data for the preceding six years

    Limits charges for ancillary services

    Prohibits all marketing and advertising activities including, but not limited to CLE’s, sporting events, meals and even giving away a ballpoint pen

    Eases regulation of joint ventures and controlled businesses, much less strictly than RESPA

    Changes significantly the compensation of closers, including elimination of “pick-ups” and gratuities

    Changes the closing process and the accounting/remitting processes in both Zone1 and Zone2

We strongly encourage you to click on the links below and thoroughly read the regulations for yourself.

The Officers, the Executive Committee, the Government Regulations Committee, Association Staff, our lobbyists and our communication firm are focused on the challenges posed by the regulations.

We have until June 19 to submit comments to the DFS. We recommend that you study the regulations and determine how they will affect your business.

There is an important role for the Members and your voices are needed to accomplish our goals.

We are developing ways for you to express your opinions so as to have the most impact. Stay in contact with the Association and spread the word to your staff, your clients and other real estate professionals.

By misunderstanding how the title insurance industry operates, the DFS has proposed regulations that will not serve the consumer but will impede the real estate marketplace and inflict irreplaceable damage to the livelihood of thousands of people.

A very great deal is at stake here.