Bulletin: NY000608

IN AN EFFORT TO KEEP YOU FULLY ADVISED, STEWART TITLE INSURANCE COMPANY (“STEWART”) IS PROVIDING THIS ADVISORY BULLETIN. THE NYS DEPARTMENT OF FINANCIAL SERVICES (“DFS”) HAS PROMULGATED REGULATIONS AFFECTING TITLE INSURANCE UNDERWRITERS AND AGENTS.  ALL LICENSED TITLE AGENTS ARE REQUIRED TO COMPLY WITH THIS REGULATION. 

This new regulation amends and supplements: 11 NYCRR 20 (Insurance Regulations 9, 18, & 29); 11 NYCRR 29 (Insurance Regulation 87); 22 NYCRR 30 (Insurance Regulation 194) 11 NYCRR 34 (Insurance Regulation 125) and creates new 11 NYCRR 35 (Insurance Regulation 206).  Please review the regulation text and the consolidated summary attached to this bulletin for the substantive amendments to the above stated existing regulations. 

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).  We refer you to Bulletin 548 for further guidance on Licensing. All New York licensed title agents are subject to, a must comply with, the amendments to existing regulations, as well as compliance with the new regulations. 

This amended Regulation 206 is effective on October 18, 2017.  Regulation 206 creates a new Part 35 (replacing prior versions of Part 35)   The Section is titled: TITLE INSURANCE AGENTS, AFFILIATED RELATIONSHIPS AND REQUIRED DISCLOSURES.  The regulation set forth the requirement associated with affiliated business relationships.

A new Part 35 (Insurance Regulation 206) is added to read as follows:

TITLE INSURANCE: TITLE INSURANCE AGENTS, AFFILIATED RELATIONSHIPS,
AND REQUIRED DISCLOSURES

Section 35.1 Definitions. For purposes of this Part:

(a)          Affiliated business means title insurance business that a title insurance agent or title insurance corporation generates from an affiliated person.

(b)          Affiliated person means an applicant for insurance or a person who acts as an agent, representative, attorney, or employee of the owner, lessee, or mortgagee, or of the prospective owner, lessee, or mortgagee of real property or any interest therein, or the applicant’s or other person’s spouse, when the person or spouse directly or indirectly:

(1)          owns or controls a title insurance agent;

(2)          owns at least five percent of a title insurance corporation’s securities or otherwise controls the title insurance corporation; or

(3)          is under common control with or is controlled by a title insurance agent or title insurance corporation.

(c)          Applicant for insurance or applicant means:

(1)          a person for whom the purchase or refinancing of the property that is the subject of the title insurance policy is financed, to whom a mortgage loan is made, or who owns or is purchasing the property or any interest therein,

(2)          any other insured or prospective insured; or

(3)          a person who is an attorney-in-fact for a person specified in paragraphs (1) or (2) of this subdivision.

(d)          Controls, including the terms “controlling”, “controlled by” and, “under common control with” shall have the meaning set forth in Insurance Law section 107(a)(16).

(e)          Core title services means:

(1)          Evaluating the insurability of title, based upon the performance or review of a title search;

(2)          Collecting, remitting or disbursing title insurance premiums, escrows or other related funds;

(3)          Preparing, amending, marking up and delivering a title insurance commitment or certificate of title for the purpose of the issuance of a title insurance policy by a title insurance corporation;

(4)          Preparing, amending or delivering a title insurance policy on behalf of a title insurance corporation; and

(5)          Clearing or negotiating the clearance of title exceptions, in connection with the issuance of a title insurance policy.

(f)            Person means an individual or other entity, including an estate or trust.

(g)          RESPA means the federal Real Estate Settlement Procedures Act of 1974, 12 U.S.C. section 2601 et seq., as amended, and Regulation X, 12 C.F.R. Part 1024 et seq., as amended.

(h)          Title insurance closer means any person who, for compensation or anything of value, represents a title insurance corporation or title insurance agent at a closing.

(i)            Title insurance agent shall have the meaning set forth in Insurance Law section 2101(y).

Section 35.2 Applications.

The forms of applications for licenses to act as a title insurance agent pursuant to Insurance Law section 2139 are prescribed as follows: individual and business entity.

Section 35.3 Change of contact information.

Every licensee shall notify the department of any change of business or residence address, telephone number, fax number, or email address within 30 days of the change.

Section 35.4 Insurance Law section 6409(d); affiliated business relationships; other prohibitions.

(a)          Pursuant to Insurance Law section 6409(d), no title insurance corporation, title insurance agent, or any other person acting for or on behalf of the corporation or agent, including an employee or independent contractor, shall offer or make, directly or indirectly, any rebate, or pay or give any consideration or valuable thing as an inducement or compensation for title insurance business, to any applicant, or to any person, firm, or corporation acting as agent, representative, attorney, or employee of the owner, lessee, mortgagee, or the prospective owner, lessee, or mortgagee of the real property or any interest therein, for which a title insurance policy is or may be issued and no such person shall receive, directly or indirectly, any rebate, consideration or valuable thing as an inducement or compensation for title insurance business.

(b)          A title insurance agent or title insurance corporation, or affiliated person of the title insurance agent or title insurance corporation, shall not directly or indirectly refer title insurance business to another title insurance agent or title insurance corporation in return for that title insurance agent or title insurance corporation, or affiliated person of that title insurance agent or title insurance corporation, referring business directly or indirectly to the first title insurance agent, title insurance corporation or affiliated person. Any such arrangement shall be deemed to be intended to evade Insurance Law section 6409(d).

(c)          A title insurance agent or title insurance corporation shall not require an affiliated person to refer a specified amount of title insurance to the title insurance corporation or title insurance agent.

(d)          A title insurance agent or title insurance corporation shall not directly or indirectly provide compensation to an applicant for insurance or to any person acting as agent, representative, attorney, or employee of the owner, lessee, mortgagee, or the prospective owner, lessee, or mortgagee of the real property or any interest therein for which a title insurance policy is or may be issued, that refers title insurance business to the title insurance agent or title insurance corporation except that a title insurance agent or title insurance corporation may:

(1)          pay the fair market value for actual bona fide services rendered to the title insurance agent or title insurance corporation; and

(2)          provide a return on investment in the title insurance agent or title insurance corporation to the person provided that the return on investment is commensurate with that person’s ownership interest in the title insurance agent or title insurance corporation, is not related to the amount of title insurance business the person refers to the title insurance agent or title insurance corporation, and the payment does not otherwise violate Insurance Law section 6409 or RESPA.

(e)          A title insurance agent, title insurance corporation, or affiliated person shall not require an applicant for insurance, or any other person, firm, or corporation acting as agent, representative, attorney, or employee of the owner, lessee, mortgagee, or the prospective owner, lessee, or mortgagee of the real property or any interest therein for which a title insurance policy is or may be issued, to purchase any other goods or services from the title insurance agent, title insurance corporation or affiliated person as a condition to such applicant purchasing title insurance from the title insurance agent or title insurance corporation.

(1)          A title insurance agent, title insurance corporation, or affiliated person shall not require an applicant for insurance, or any other person, firm, or corporation acting as agent, representative, attorney, or employee of the owner, lessee, mortgagee, or the prospective owner, lessee, or mortgagee of the real property or any interest therein for which a title insurance policy is or may be issued, to obtain title insurance from the title insurance agent or title insurance corporation as a condition to purchasing any other goods or services from the title insurance agent, title insurance corporation or affiliated person.

(2)          A title insurance agent, title insurance corporation, or any other person acting on behalf of the title insurance agent or title insurance corporation shall provide its services to applicants for insurance in a fair and nondiscriminatory manner.

(f)           A title insurance agent or title insurance corporation that accepts affiliated business from an affiliated person shall:

(1)          Function separately and independently from the affiliated person, including being staffed by its own employees, provided, however, that, to the extent permissible under RESPA, the employees of a law firm that is licensed as a title agent may also provide the title agent services;

(2)          Engage in all or substantially all of the core title services with respect to the affiliated business; and

(3)          Make a good faith effort to obtain, and be open for, title insurance business from all sources and not business only from affiliated persons, including actively competing in the marketplace.

(g)          No title agent or title insurance corporation shall enter into an agreement or other arrangement, including a joint venture, with another person that circumvents Insurance Law section 6409(d).

(h)          Nothing in this section shall be deemed to limit the superintendent’s authority to enforce any violation of Insurance Law section 6409(d) or any other applicable laws or regulations.

Section 35.5 Referrals by affiliated persons and required disclosures.

(a)  Except as provided in subdivision (c) of this section, 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 shall obtain written acknowledgement of receipt from the applicant:

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

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

(3)          that any compensation or other thing of value paid by the title insurance agent or title insurance corporation to the affiliated person is based on that person’s financial or other interest in the title insurance agent or title insurance corporation and is not related to the amount of title insurance business that person refers to the title insurance agent or title insurance corporation; and that the payment of such compensation or other thing of value does not violate Insurance Law sections 2324 or 6409 or, if applicable, RESPA;

(4)          that the affiliated person is not required to refer a specified amount of title insurance business to the title insurance agent or title insurance corporation;

(5)          the amount or value of any compensation or other thing of value that the affiliated person expects to receive in connection with the services to be provided by the title insurance agent or title insurance corporation to which the applicant is being referred; provided, however, that if the amount or value of any compensation to be disclosed is not known at the time that the disclosure is required, then the affiliated person shall:

i.    describe the circumstances that may determine the receipt and amount or value of the compensation; and

ii.    provide a reasonable estimate of the amount or value, which may be stated as a range; and

iii.    whether the title insurance agent or title insurance corporation generates non-affiliated business from more than one source.

(b)          Except as provided in subdivision (c) of this section, the title insurance agent or title insurance corporation to which a referral is made shall be responsible for ensuring that the applicant receives all disclosures that are required hereunder.

(c)          A title insurance agent that represents an applicant in another capacity, including as an attorney, shall not be subject to the disclosure requirements set forth in subdivision (a) of this section, but shall advise the applicant that the applicant is not required to use the person as a title insurance agent.

Section 35.6 Disclosure of fees and other charges. (Note: See the attached suggested disclosure form attached to this bulletin)

(a)          Every title insurance corporation shall publish on its website its range of charges for title insurance and any ancillary or other discretionary fees for services related to the title transaction that are not otherwise included in the rate of premium approved by the superintendent. The range of charges and fees shall be publicly available and accessible in a manner that permits an applicant or potential applicant to independently determine the applicable charges.

(b)          Every title insurance agent shall conspicuously post at its place of business and on its website, if it has one, its fees for services performed in connection with the issuance of a title insurance policy. The title insurance agent shall also provide a copy of the fees to an applicant or potential applicant in a written document. Pursuant to Insurance Law section 2119(f), a title insurance agent may charge a service fee only for ancillary services not encompassed in the rate of premium approved by the superintendent and provided that the fees are based upon a written memorandum in accordance with such section and section 20.6 of this Title.

(c)          At or prior to the time of closing, a title insurance agent shall provide to the applicant, or the applicant’s representative, a list of the applicant’s actual title insurance costs, including the title insurance premium, any discretionary or ancillary fees, and any other separately identifiable service charge. If no title insurance agent is used, then the title insurance corporation shall provide the information.

Section 35.7 Other disclosures to applicants.

(a)          With respect to a real property or chattels real title insurance policy, a title insurance agent shall furnish a title insurance report to the applicant and the applicant’s representative at least three days prior to the scheduled date of closing; provided, however, that if an applicant is represented by an attorney, then a title insurance agent shall furnish a title insurance report to the applicant’s attorney unless the applicant also requests the title insurance report, in which case the title insurance agent shall furnish the report to both the applicant and the applicant’s attorney.

(b)          If a title insurance agent is unable to deliver a title insurance report at least three days prior to closing, then the title insurance agent shall document or require documentation of the reasons for the delay.

(c)          The report shall display conspicuously 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.

1.    With respect to a personal property title insurance policy, a title insurance corporation shall furnish the applicant and the applicant’s representative, at least three days prior to policy issuance, with a written confirmation of the proposed coverage, including any non-standard policy provisions; provided, however, that if an applicant is represented by an attorney, then a title insurance corporation shall furnish written confirmation of the proposed coverage to the applicant’s attorney unless the applicant also requests the written confirmation, in which case the title insurance corporation shall furnish the written confirmation to both the applicant and the applicant’s attorney.

2.    Except with respect to a refinancing application or where the applicant is represented by an attorney, if an applicant is seeking only a lender’s title insurance policy, a title insurance agent shall provide to the applicant a separate written notice, which shall be signed by the applicant, at the time the title commitment or title report is prepared, and which shall explain:

a.    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;

b.    the risks a lender’s title insurance policy insures against and the risks an owner’s title insurance policy insures against; and

c.    that the applicant may obtain an owner’s title insurance policy to protect the applicant’s interest as an owner, and shall provide the website address for the title insurance corporation’s rate calculator or a toll-free telephone number the applicant or the applicant’s attorney may call for a premium quote from the title insurance corporation.

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

Section 35.8 Use of title insurance closer by title insurance agent and title insurance corporation.

(a)          When a title insurance corporation engages or retains a title insurance closer at a closing, the title insurance corporation shall exercise due diligence to ensure that the title closer is competent and trustworthy; provided, however, that if the title insurance agent engages the title insurance closer, then the title insurance agent shall exercise such due diligence.

(b)          The title insurance agent or title insurance corporation that engages or retains the title insurance closer shall be responsible for the title insurance closer’s acts with respect to the issuance of a title insurance policy.

Section 35.9 Record retention.

Every title insurance agent shall retain any notice or disclosure that is provided pursuant to this Part in accordance with the requirements set forth in Part 20.4 of this Title (Insurance Regulation 29-A) and this Part

In the event you have any questions, please call the Stewart Title Insurance Company – New York legal Department at (212) 922-0050.

Forms: Disclosure Statement

Attachments: State Register Rule Making Activities; DFS NYCRR Amendments and Reg 206; DFS Reg 208