February 15, 2019
Advantage Title: Industry Bulletin 2019-01
DFS Regulation 208
As you may be aware, the title industry has been involved in litigation with the New York State Department of Financial Services (“DFS”) since last year regarding Regulation 208, Title Insurance Rates, Expenses and Charges (“Regulation 208”). Please read below to see the current status of Regulation 208.
- In October 2017, the DFS published Regulation 208 which became effective on December 18, 2017. Regulation 208 can be accessed here.
- In February 2018, the New York State Land Title Association (“NYSLTA”) filed suit against the DFS challenging Regulation 208 in the Supreme Court (“Trial Court”) under the caption New York State Land Title Association, Inc. et al v. The New York State Department of Financial Services and Maria Vullo in her official capacity as Superintendent of the New York State Department of Financial Services.
- On July 5, 2018, the Trial Court ruled in favor of the NYSLTA, invalidating Regulation 208 in its entirety. The DFS filed a Notice of Appeal with the Appellate Division, First Department (“Appellate Court”), on July 6, 2018.
- On January 15, 2019, the Appellate Division, First Department rendered a decision (the “Decision”) which can be accessed here. This Decision reversed the majority of the Order of the Trial Court.
It is important that we advise you of the impact of the pertinent reinstated portions of Regulation 208 and those portions that remain annulled by the terms of the Decision.
Section 228.2 drastically impacts the marketing activities of title companies. Section 228.2 contains both a non-exhaustive list of enumerated marketing activities prohibited under Regulation 208 and a non-exhaustive list of enumerated marketing activities permitted under Regulation 208.
The Appellate Court agreed with the Trial Court and the subsections of Section 228.5 concerning title closers remain annulled. As a result, it is permissible for both “in-house” a/k/a “staff” and independent closers to receive a “pick up” fee as well as other compensation such as a gratuity for services rendered directly from any party involved in the transaction.
Ancillary fees are fees not covered by the title premium collected at closing. Section 228.5 imposes caps on ancillary fees on transactions involving residential real property. Portions of Section 228.5 have been reinstated by the terms of the Decision while other subsections remain annulled in accordance with the Decision. Please note, Regulation 208 requires that “no title insurance corporation” or “title insurance agent…shall provide… non-title services without a charge” and “that the amounts charged to like insureds or potential insureds are fair and nondiscriminatory.” As a result, it is not only illegal to waive ancillary fees for any transaction or client but the amounts charged for a service must also be identical irrespective of the transaction or client.
As a result of the Decision and in compliance with Regulation 208, the underwriter members of the Title Insurance Rate Service Association, Inc. (“TIRSA”) authorized TIRSA to file new rates (“Rate Filing”) that reflect a 5% decrease on all base premium rates. The Rate Filing was submitted to the DFS on January 24, 2019 and approved by the DFS on February 7, 2019. As a result, the base rates will be reduced by 5% for all types of title policies issued for closings occurring on or after February 15, 2019. Please note, the rate reduction only affects base rates and does not impact endorsements issued in connection with any title policy.
We will provide updates upon the occurrence of any future developments. Advantage Title remains committed to being an industry leader and providing the highest level of service to its clients. If you have any questions, please contact Drew Steigler, Chief Underwriting Counsel at 631.424.6100.