Why the title insurance industry remains on self-imposed party probation
Firms are trying to follow the rules for now to be on the safe side
They won’t be bringing clients to strip clubs. And they won’t be buying up luxury boxes at the Garden to gin up business. Not yet, anyway.
Despite a recent court ruling that reversed the state’s prohibition on wining-and-dining clients, the title insurance industry is taking it slow.
Several court reversals as to what title insurance brokers can and can’t do have created a confusing work environment, and multiple executives said their companies are choosing to play it safe and abide by the regulations for now in case they ultimately remain on the books.
Aaron Krantz, vice president of business development at Omni Title Agency, described the string of court rulings as “ping pong” and said the general feeling in the industry was one of caution. As far as Omni is concerned, the Department of Financial Service regulations are still the law, he said.
“We’re staying in compliance even though it’s supposedly out because we don’t know what’s next,” he said of the rules. “So we are acting as if they’re still enacted.”
Stephen Spedaliere, counsel for Statewide Abstract Corporation, said there was “cautious optimism” in the industry that the rules will stay annulled at the Appellate Division this time, but title insurance companies remain largely confused and cautious in the meantime. This is especially true given the possibility that, if the regulations are reinstated, DFS might revisit actions companies took that went against them when they were not being enforced, he said.
“Everybody is kind of trying to feel their way through until we know firmly what the rules are going to be,” he said.
At the beginning of 2018, the state’s Department of Financial Services imposed strict new regulations on the industry, banning the companies from their infamous wining and dining of clients in an attempt to stop them from overcharging consumers. The New York State Land Title Association filed a lawsuit against the rules soon after, and New York Supreme Court Judge Eileen Rakower annulled them all that summer.
But DFS quickly appealed Rakower’s decision, and at the beginning of 2019, the Appellate Division of the New York State Supreme Court reinstated most of the rules while remanding other parts of the case back to the lower court.
And then, in a somewhat surprising move, Rakower overturned the entire law again in August, writing that it violated the Constitution’s First and Fifth Amendments. DFS is appealing her ruling once again, meaning it could just be another few months before the rules get reinstated for a second time.
DFS did not respond to multiple requests for comment, and the NYSLTA declined to comment.
In the Appellate Court’s initial January ruling, it voided the restrictions that DFS had put on payments to closers as part of the new regulations. Jim Hunter, president of the New York State Closers Association, said their segment of the title insurance industry has remained stable since then, despite the uncertainty surrounding other aspects of the regulations.
They have not focused very much on the remaining aspects of the court battle, he said.
“We’re grateful as a class of professionals that the industry is treating us the way they treated us before the regulations went into effect,” he said, “and we don’t feel it’s our place to interject ourselves into what’s happening between them and DFS.”