The New York Department of Financial Services (NYDFS) and the Superintendent of Financial Services Benjamin M. Lawsky should be commended for addressing a long neglected consumer issue that deals with the licensing of title agents and agencies. The DFS’s concern with the lack of regulation and control over a profession that is responsible for the transference of property, the payment of funds and the proper recording of the transaction is well placed. Even though the majority of the independent settlement service providers conducted their transaction in a professional manner the bad “actors” detracted from these individuals and continued to engage freely in the excessive abuses that led to the enacting of Chapter 57 of the New York Laws of 2014.
Regulation 206 seeks to address the paramount issue of referral business to an entity that has been founded with the sole purposes of becoming an additional profit center for the participants and/ or stockholders and no apparent benefit for the consumer. As most states have a specific formula to address this issue not all states have a consistent approach regarding enforcement. In either case stipulating a specific percentage of outside business must be reasonable and enforceable. The regulation must be clear and not ambiguous with parameters that make sense for both the independent title professional and the real estate industry. The regulation must be written so as to eliminate loopholes and prevent jurisdictional disputes in enforcement.
RESPRO, a national nonprofit trade organization for “one stop shopping” advocates have voiced opposition to the inclusion of the specific percentage of multiple source of business. One stop shopping has become an acronym for consumer steering in a real estate transaction which leads to abuses to the consumer and allows for all involved in the transaction to benefit financially both directly and indirectly. All but the consumer who is subject to higher title insurance premiums due to the fee splitting, alleged housing fixture upgrades and other alleged items of value.
Since Ms. Johnson refers to the three stipulations prohibiting referral fees and fee splitting she does not provide the type of disclosures provided and when in the transaction are they given to the consumer. What Ms. Johnson also does not discuss is the lack of clear lines between the consumer and the provider and their ability to maintain a fiduciary relationship with the consumer during the transaction. As in all real estate transaction the title agent and settlement service provider must maintain strict confidentiality on behalf of the consumer and should not have any relationship with the referral source that would impact negatively on the transaction. In so far as one stop shopping, which originated in a super market, there must be alternative sources/selections that must be provided. This selection process is provided in a super market as they do not carry one brand and the consumer is allowed to select for service, quality and satisfaction. This unfortunately may not exist in an affiliated relationship.
I strongly encourage the office of DFS to continue to press for realistic percentages of referral vs outside business sources that would contribute to eliminating reverse competition, renewed selection of services by the consumer and a repudiation of unfair business practices in the industry that have plagued New York real estate transaction in the past.
The National Association of Independent Land Title Agents, its affiliates and partners applaud the office of Superintendent of Financial Services Benjamin M. Lawsky and the office of Governor Cuomo for their strong advocacy for both the licensed independent settlement service provider and the consumer of the State of New York of which they serve. We stand ready and prepared to assist and contribute to the positive ongoing dialogue between the respective participants. In this vein we may be able to return the positive image once enjoyed by the title agent/settlement service provider and renewed confidence from the consumer.