New York State regulators have opened an investigation into the title insurance industry, seeking information from agencies across the state about how these firms operate, The Real Deal has learned.
The New York State Department of Financial Services has served at least 25 — but perhaps as many as 100 — title agents with subpoenas ordering them to produce documents, multiple sources within the industry said. The agency, which regulates financial and insurance firms throughout New York, served the subpoenas in two batches throughout February. (The New York Times previously noted that the DFS had sent out subpoenas.)
The subpoenas are seeking “detailed information” about title agencies’ corporate structure and fee schedules, as well as documents showing expenditures and other financing information, according to a title insurance source familiar with the situation.
Title insurance is a type of coverage typically purchased when buying a home that protects the buyer against potential errors or liens on the title, or ownership, of the property. Just as many mortgage brokers and lenders have suffered in the wake of the housing crisis, title insurers have also struggled with falling revenues and hurdles in evaluating titles on foreclosed homes.
The specific focus of the probe is not clear, and a spokesperson for DFS declined to comment on the investigation.
However, the source close to the situation speculated that it is connected to the recently-formed federal Consumer Financial Protection Bureau, which is taking a closer look into mortgage loans.
“[DFS] feels that this information is going to be helpful to them in determining how title agencies operate — what their expenses are and everything else,” the source said. “I’m assuming it’s for the purposes of consumer protection. They want to be sure that consumers aren’t being taken advantage of and what kind of costs and fees are involved.”