As the state’s chief financial watchdog plans to step down, he leaves to his successor a decision regarding new controversial regulations on the title insurance industry.
Benjamin Lawsky, superintendent of the state Department of Financial Services, announced earlier this week that he will leave Albany in late June, around the time the department will start considering “anti-Inducement” regulations Gov. Andrew Cuomo proposed to the title insurance industry last month.
Since fees in the title insurance business are so tightly regulated, firms rely on relationship-building to an even greater extent than those in other aspects of the real estate industry. The proposed rules would prohibit title insurance companies from making “payment of any consideration or valuable thing targeted to current or prospective customers” including tickets to sporting events and concerts, outings and vacations, parties and meals and drinks, to name a few.
The governor’s office said such expenses and kickbacks inflate title insurance closing costs up to 20 percent on new purchases and as much as 60 percent for refinancings.
“New Yorkers should not have to foot the bill for outrageous or improper expenses made by title companies just to refinance or close on their home,” Cuomo said in a statement.
The industry’s trade organization is opposing the regulations as written, saying they’re not specific enough to define which expenses are allowed and which are prohibited.
“It is a blunt and undefined list,” said Robert Treuber, executive director of the New York State Land Title Association, which represents 11 insurance companies and some 300 title agencies in the state. “I don’t know if buying someone a cup of coffee while discussing business is permitted or not permitted.”
Treuber said other states have clearer distinctions as to what practices constitute an inducement and which ones are considered typical and legitimate business expenses. While the industry supports reforms that will bring down costs, he said, the current proposal is unworkable.
“The association’s response has been that the regulation as it is written should not be adopted,” he said.
A spokesperson for the Department of Financial Services said the proposal is a working document and the department will consider public comments through June 22 as part of its normal administrative procedure.
“It’s put out for public comment and then adjustments are made,” the spokesperson said. “We want to make sure the consumers are protected.”