January 17, 2020
Advantage Title: Industry Bulletin 2020-01
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 February 2018 regarding Regulation 208, Title Insurance Rates, Expenses and Charges (“Regulation 208”). On December 26, 2019, the Appellate Division, First Department (“Appellate Court”) ruled in favor of the DFS, reversing the most recent Supreme Court decision and reinstating the majority of Regulation 208. A copy of the Appellate Court’s opinion (“Decision”) can be found here.
AS A RESULT OF THE DECISION, THE MAJORITY OF REGULATION 208 IS CURRENTLY IN EFFECT.
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. A redlined version of Regulation 208 reflecting current compliance obligations can be found here.
Section 228.2 is in effect and 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. Some of the prohibited activities are meals and beverages; entertainment of any kind (e.g. sporting events, concerts etc.) and outings of any kind (e.g. golf, trips etc.).
Failure to comply with Section 228.2 is a violation of Insurance Law Section 6409(d) which can result in penalties imposed on both the giver and the receiver.
Subsections of Section 228.5 concerning title closers remain annulled. As a result, it is still 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 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. Some subsections of Section 228.5 concerning ancillary fees have been annulled while other subsections remain unaffected by the Decision. The redlined portions of Section 228.5 denote the annulled subsections.
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.