Bulletin: NY000548

IN AN EFFORT TO KEEP YOU FULLY ADVISED, STEWART TITLE INSURANCE COMPANY (STEWART) IS PROVIDING THIS ADVISORY BULLETIN.   THIS BULLETIN WILL PROVIDE GUIDANCE AND IS PRELIMINARY IN NATURE.  THE REGULATIONS HAVE NOT BEEN FINALIZED.  THIS BULLETIN REFERS TO THE PENDING REGULATIONS NOT THE FINAL REGULATIONS.  THE GUIDANCE PROVIDED IN THIS BULLETIN MAY CHANGE. 

The 2014 New York State Budget includes legislation that would require title insurance agents to be licensed by the State’s Department of Financial Services (DFS).  The legislation was passed on April 1, 2014 and will take effect on October 1, 2014.  The legislation will require title insurance agents to pay  licensing fees, pass an exam to become licensed and maintain continuing education requirements.  The legislation also strengthens enforcement and penalties for illegal inducements.    We recommend following the attached links to review the legislation:

New York State Land Title Association Title Agent Licensing

Final Legislation

New York State Land Title Association Comments

American Land Title Association Comments

Insurance Law Section 2102 prohibits any person or business entity from acting as an insurance producer in New York, including as a title insurance agent, without a license. Insurance Law Section 2101(y) defines “title insurance agent” as any authorized or acknowledged agent of a title insurance corporation, and any subagent or other representative of such an agent, who or which for commission, compensation, or any other thing of value, performs the following acts in conjunction with the issuance of a title insurance policy:

1: Sells or negotiates the sale of a title insurance policy;

2: Evaluates the insurability of title, based upon the performance or review of a title search; and

3: Performs one or more of the following functions:

A: Collects remits or disburses title insurance premiums, escrows or other related funds;

B: Prepares amends, marks up or delivers a title insurance commitment or certificate of title for the purposes of the issuance of a title insurance policy by a title insurance corporation;

C: Prepares, amends or delivers a title insurance policy on behalf of a title insurance corporation; or      

D: Negotiates the clearance of title exceptions in connection with the issuance of a title insurance policy.

This definition does NOT include any regular salaried officer or employee of an authorized title insurance corporation or of a licensed title insurance agent, who does not receive a commission or other compensation for services, when the commission or other compensation is directly dependent upon the amount of title insurance business done.

THUS FAR, HERE ARE THE STEPS YOU WILL NEED TO TAKE:

1)    File application by January 1, 2015

New York Insurance Law Section 2139 requires a Title Insurance Agent license of any person, firm, association or corporation acting as a title insurance agent of any authorized title insurance corporation. Each person, firm, association or corporation that files an application for a license as a title insurance agent on or before January 1, 2015 may act as such licensee without a license issued pursuant to Section 2139 of the Insurance Law until the Superintendent of Financial Serves has made a final determination on the application for such license. Title Insurance Agent licenses will be issued with an effective date of no earlier than September 29, 2014. 

LINK IS BELOW:

http://www.dfs.ny.gov/insurance/lic_title.htm

The link above will bring you to two different licensing applications individual and entity.  An applicant must submit a fully completed and signed application for a title insurance agent’s license, including all applicable attachments, and the licensing fee in accordance with the fee schedule. Please make checks payable to the “Superintendent of Financial Services.” Applicants should mail their applications to:

New York State Department of Financial Services
Licensing Bureau
One Commerce Plaza
Albany, NY 12257

Please note that licenses must be renewed every 2 years, and that 15 credit hours of continuing title education are required biennially. Attorneys are exempt from the education requirements.

2)    Take Pre-licensing course (if not exempt)

Applicants must complete a New York approved pre-licensing course and pass the New York State title insurance agent exam unless the applicant is exempt.

Presently, only one pre-licensing course is available*. Others are under development.  Applicants may submit their applications together with the appropriate fees and documentation.  Applicants will be notified when the course becomes available.  Applicants are encouraged to complete the course and take the examination within 30 days of receipt of the notification. NOTE: YOU MAY QUALIFY FOR A WAIVER OF THE PRE-LICENSING COURSE-SEE BELOW.

To register and reserve an examination date, contact Prometric, Inc. at 800-324-7147 or www.prometric.com/newyork/ins.

*Currently there is one approved title insurance agent pre-licensing course:

Provider New York Real Estate and Insurance Institute
1620 East 2nd Street
Brooklyn, NY 11230
Contact: Shobha Jammula (718)382-4332 or shobha@nyreii.com

You can claim an exemption from Pre-licensing course and exam if you are:

a)       An Admitted Attorney in good standing with the New York State Office of Court Administration.

Applicant must submit a certificate of good standing from the New York Office of Court Administration with their license application.

b)       Title Insurance Agent Experience

Applicant must demonstrate to the satisfaction of the Superintendent of Financial Services that the applicant has, without interruption, regularly and continuously performed the functions of title insurance agent as described above for at least 5 years.

Applicant must submit one or more completed Statement of Experience forms with the Licensing Application.

CONTACT YOUR AGENCY SERVICE REPRESENTATIVE FOR ASSISTANCE WITH THE AFFIRMATION IF YOU CANNOT COMPLETE ON YOUR OWN.

            The Statement of Experience is part of the License Application.

This “grandfather” option is only available through September 2015.

c)         Licensed Non-Resident Title Insurance Agent

Applicant is a resident of a state other than New York
Applicant has been licensed in that state within the last 90 days
Applicant is in good standing in that state as a title insurance producer
Applicant’s license information must be included in the National Producer Database; if not, then the applicant must submit a currently dated certification from the applicant’s state

3: Pass the Exam, once available.

4: Receive Appointment as an authorized Title Agent by Stewart

YOU OR YOUR ORGANIZATION WILL NEED A CERTIFICATE OF APPOINTMENT FROM STEWART TO RECEIVE A LICENSE.  WE WILL BE FILING OUR CERTIFICATES ON LINE ONCE YOU BEGIN THE LICENSING PROCESS.

NOW THAT YOU HAVE A LICENSE, WHAT NEEDS TO CHANGE?

THE LAW AND PROPOSED REGULATIONS REQUIRE DISCLOSURES:

1: AFFILIATED DISCLOSURE:

 An affiliated person is a person or entity who acts as a title insurance agent, representative, attorney, or employee of the owner, lessee, or mortgagee, or of the prospective owner, lessee of mortgagee of the real property or any interest therein and who or whose spouse also is a member, employee, or director of a title insurance title insurance agent, owns any interest in a title insurance agent, owns at least 5% of a title insurance corporation’s securities or controls the title insurance corporation or is a subsidiary or affiliate of any  title insurance agent.

An affiliated person that directly or indirectly refers an applicant for title insurance to a title insurance agent or title insurance corporation shall, at the time of making the referral, provide the following disclosures pursuant to Insurance Law section 2113(d) in a separate writing to the applicant and obtain written acknowledgment of receipt from the applicant:    

a)    That the affiliated person has a financial or other beneficial interest in the title insurance agent or title insurance corporation and is likely to receive a financial or other benefit as a result of the referral;

b)    That the applicant is not required to use the services of the title insurance agent or the title insurance corporation to which the applicant is being referred, and the applicant may shop around to determine whether the applicant is receiving the best service and the best rate for the title services;

c)    Unless the affiliated person is licensed as a title insurance agent, that any money or other thing of value directly or indirectly paid by the title insurance agent or title insurance corporation to the affiliated person is based on affiliated person’s financial interest in the title insurance agent, and is not related to the amount of title insurance business the person or entity refers to the title insurance agent or the title insurance corporation; and that payment of such money or other thing does not violate Insurance Law sections 2324 or 6409 or RESPA;

d)    That the affiliated person is not required to refer a specified amount of title insurance business;

e)    The amount or value of any compensation or other thing of value that the person or entity expects to receive in connection with the services to be provided by the title insurance agent or the title insurance corporation to which the party is being referred;

f)     An estimate of the cost or range of charges for the services of the title insurance agent or title insurance corporation, including, the title insurance premiums, fees and other charges;

g)    That the affiliated person is not the sole source of business for the title insurance agent or title insurance corporation, and that the title insurance agent or title insurance corporation has significant and multiple sources of business.

Exclusions:

a)    Where a licensed attorney represents an applicant in a real estate transaction and the applicant also retains the attorney as the title insurance agent, the attorney shall not be required to make the written disclosure but shall advise the applicant that the applicant is not required to use the attorney as a title insurance agent.

2: DISCLOSURE OF FEES:

a)    Good Faith Estimate

At the time of the application, the title insurance agent must provide to every applicant or the applicant’s attorney, a written good faith estimate of the premium on the policy or policies to be insured and include the breakdown of the following fees and costs:

i.      Filing fees
ii.    Recording charges
iii.   Closing costs
iv.   Any other ancillary or discretionary charges to be incurred
v.    Amount of commission or other compensation to be paid to title insurance agent by the title insurance corporation. (the amount of commission or split paid to title insurer)

>  All fees charged by the title insurance agent shall be in accordance with Insurance Law section 2119.
>  If no title insurance agent is used, then the title insurance corporation shall provide the notices.

b)    Publish Fees

Title insurance agent and title insurance corporation shall, on its website, make its range of charges for title services publicly available and accessible in a manner that permits a policyholder or potential applicant to independently determine the applicable charges.  If a title insurance agent does not have a website, then the title insurance agent shall post its range of charges for title services in its place of business and provide the range of charges to policyholders or potential applicants in a written document.

c)    Compensation

No title insurance agent may receive any compensation or fee, direct or indirect, for or on account of services performed in connection with the issuance of a title insurance policy, unless compensation is for the following:

i.      For ancillary services not encompassed in the rate of premium approved by the superintendent; and
ii.    Based upon a written memorandum signed by the party to be charged, specifying or clearly defining the amount of extent of such compensation to be charged for each ancillary service as well as the total or extent of the compensation to be charged.

>  A copy of the memorandum shall be retained by the licensee for no less than 3 years after services have been fully performed.
>  Legal services performed by a NY state licensed attorney who is also engaged as a title insurance agent shall not be considered ancillary services.

3: ISSUING A TITLE REPORT:

a)    Delivery of a title report

i.            A title report must be provided to the applicant’s attorney and the applicant, if requested or not represented by an attorney, at least 3 days prior to the scheduled date of closing.
ii.           If the title insurance agent is unable to comply with the above three day delivery, the title insurance agent must document or require documentation of the reasons for the delay.

b)    Disclosures within a title report:

i.           The report shall conspicuously display the following statement, or a statement containing substantially similar language, on the first page in bold type:

This report is not a title insurance policy.  Please read it carefully. The report may set forth exclusions under the title insurance policy and may not list all liens, defects, and encumbrances affecting title to the property. You should consider this information carefully.

ii.          Where an applicant seeks only a lender’s title insurance policy, title insurance agent shall provide to the applicant a separate written notice, signed by the applicant, at the time the title commitment is prepared and shall explain the following:

>  that a lender’s title insurance policy protects the mortgage lender, and does not provide title insurance protection to the applicant as owner of the property being purchased;
>  what a lender’s title insurance policy insures against and what an owner’s title insurance policy insures against; and
>  that the applicant may obtain an owner’s title insurance policy to protect the applicant’s interest as an owner, and provide the website address for the insurance corporation’s rate calculator or a toll-free telephone number the applicant or the applicant’s attorney may call for a premium quote.

iii.         If no title insurance agent is used, then the title insurance corporation shall provide the notices and obtain the applicant’s signature.

THE NATURE OF THE LANGUAGE REQUIRED ABOVE IS STILL BEING DEVELOPED BY STEWART. 

OTHER RECOMMENDED STATEMENTS IN YOUR TITLE REPORT AND APPLICATIONS

Stewart recommends you add the language in Section 403 (d) of the New York Insurance Law to your title reports and applications:

Section 403 (d) states:

(d) All applications for commercial insurance, individual, group or blanket accident and health insurance and all claim forms, except as provided for in subsection (e) of this section, shall contain a notice in a form approved by the superintendent that clearly states in substance the following:

"Any person who knowingly and with intent to defraud any insurance company or other person files an application for insurance or statement of claim containing any materially false information, or conceals for the purpose of misleading, information concerning any fact material thereto, commits a fraudulent insurance act, which is a crime, and shall also be subject to a civil penalty not to exceed five thousand dollars and the stated value of the claim for each such violation."

4: OTHER CONCERNS

CHANGES TO YOUR BANKING

The proposed regulations will require the licensed title agent to establish a fiduciary premium account.  The proposed regulations provide:

            1: Every title insurance agent is responsible as a fiduciary for funds received by such title agent.

            2: The title insurance agent who does not make immediate remittance to the Insurer shall hold the funds in such account.

            3: The title insurance agent may not make any withdrawals from said account except to make payment to the insurer, refund premium to assureds or transfer earned premium to an operating account.  Other permissible withdrawals:

A) Interest on account deposit (if principals have consented thereto in writing)

                    B) Commissions

                    C) Withdrawals of voluntary deposits intended to guarantee the adequacy of the account or to pay the premiums to the insurer which have been earned but not collected.

            4: Except as set forth above a title agent shall not co-mingle any funds received or collected as a title agent with his/her or its own funds or with funds held by him/her or it in any other capacity for which they are held in a fiduciary capacity. 

CHANGES TO BOOKKEEPING

            The proposed regulations also require extensive bookkeeping and record keeping responsibilities.  Stewart will provide a follow-up Bulletin on the necessary/recommended accounting practices.  

Questions and Answers:

The above description of the current status of the licensing bill and regulations will probably create more questions than answers at this point.  Thus far, here are some of the more frequently asked questions.  Also see the New York State Land Title Association Questions and Answers attached to the Bulletin.  We encourage you to participate in the land title association. 

1: Most commissioned salespeople, who are either title agent or underwriter employees, receive a percentage of the premium as a commission:  Do they need a license and should their commission be disclosed? 

Answer: If a commissioned sales person is not acting as title insurance agent, i.e. as a pure salesperson-they do not meet the definition of a title insurance agent as defined in section 2101(y)1. Referring to Section 2113, you cannot pay a commission to anyone for ACTING AS A TITLE AGENT, EXCEPT to a licensed agent.

2113. Title insurance agent commissions; disclosure.

(a) No  insurer doing business in this state, and no agent or other representative thereof, shall pay any commission or other compensation to any person, firm, association or corporation for acting as a title insurance agent in this state, except to a licensed title insurance agent.

The NYSLTA has taken the following position:  Since a “pure” salesperson is not “acting as a title insurance agent” as defined in § 2101(y)(1)(a) there is no prohibition from paying them a commission under Section 2113(A). Requiring a title agent to perform A, B and C in order to obtain a license was designed to prevent sham agencies.  If an agent conforms to the entire licensing law and regulation it should be able to pay a “commission” to a pure salesperson.  A WORD OF CAUTION, if the pure sales person crosses over into the agents’ function they could have a problem. 

2: Do title agent employees who are issued individual licenses need to obtain a certificate of appointment from an underwriter in order to earn a commission?

            Answer: Yes

3: If the DFS revokes a license will the underwriters who have issued a certificate of appointment be notified by the Department?

Answer: We think yes, since the license will be revoked on the DFS web site.  Note: the DFS will list the Agents’ license on its web site and will be accessible to the public. 

4: The DFS has sent to Stewart a letter, wherein Stewart had to commit to paying the retaliatory fee for its agents.  The Agent’s licensing application appears to require the agent to pay the retaliatory fee as part of the agent’s application.  Who is primarily liable for the retaliatory fee, the agent or the underwriter?

Answer: Agent is responsible and must pay.  Underwriter has agreed to pay in the event Agent refuses to pay or goes out of business. 

5: Must a certificate of appointment be filed by the underwriter before the agent license application is approved? 

Answer: We believe application must be made before a certificate of appointment is filed.  Stewart will receive notice that an agent has requested a license.  We suggest sending a copy of your licensing application to us.   

6: If Stewart cancels me as an agent, will Stewart notify the DFS?

Answer: Yes, we are required to not only notify the DFS, but also provide them with the circumstances surrounding the termination. 

7:  How does an Examining Counsel get appointed?

Answer: Stewart will appoint its contractually bound Examining Counsel.  The Examining Counsel should apply for a license. 

8; What if I don’t get a license or don’t comply with the law and discloser?

Answer: The legislation prohibits selling title insurance or performing any of the functions of a title agent unless you are licensed except in the circumstance of a PURE sales person.  The law also prohibits a title insurance agent from paying a commission to any party unless that party is a licensed New York title agent and requires disclosures where a person, agent, attorney, employee of the lender or of the prospective insured owns any interest in a title insurance agent.  In addition, the legislation expands Section 6409(d) of the insurance law, which prohibits the rebating of a premium as an inducement for the title insurance.  Section 6409 (d) will now include additional penalties for both the payer and the payee.  Accordingly, you could suffer penalties as prescribed in 6409D of the insurance law. 

Please also take a moment to review New York State Land Title Association Q&A regarding agent licensing. LINK.

For on-line viewing of this and other bulletins, log onto www.stewart.com/new-york.

Attachments:  New York State Land Title Association Title Agent Licensing; Final Legislation; New York State Land Title Association Comments; American Land Title Association Comments; DFS Instructions and Application; Prometric;