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.
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