Cuomo Proposes to Slash Title Insurance Rates in New York

New York Governor Andrew Cuomo is tired of ancillary charges and markups. At the end of April, he announced a proposal that aims at eliminating them as well as restricting expenditures that title companies can give to affiliate partners in real estate.

Cuomo’s New Proposal and How It Would Affect Title Insurance Companies

Currently title companies are able to offer rewards and kickbacks for referrals from a real estate company or agent. Many title companies have affiliations with real estate companies, the sort of “affiliations” that make it worth their while to refer business to the title company.

These affiliations cost the homebuyer a lot of money for two reasons. The first is that they are misleading. The home buyer asks the agent s/he trusts for a referral to a title agency. S/he replies with a company. The home buyer assumes the referral is coming from past positive business experiences, not based on the potential for a kickback. Plus buyers are the ones (ultimately) paying for the referral fees and pricey dinners.

According to the administration the kickbacks and referrals are egregious. The Superintendent of Financial Services, Benjamin Lawsky, said, “Our investigation uncovered that title insurance companies paid for lavish meals and entertainment on the dime of consumers, which inflated premiums. These new reforms will help significantly reduce costs for homeowners by trimming the fat and making sure that New Yorkers get what they pay for in the title insurance industry.”

Cuomo added, “New Yorkers should not have to foot the bill for outrageous or improper expenses made by title companies just to refinance or close on their home. Our administration will not stand for that kind of abuse in the title insurance industry, and these new regulations will help ensure that New Yorkers are protected from unfair charges and get the most bang for their buck.”

What Does That Mean for Home Buyers and Refinancers?

The Department of Financial Services uncovered significantly inflated premiums on title insurance to cover these “affiliations.” The investigation found that some title companies marked up the premiums three and four times their cost to cover what they were handing out for referrals to secure business. The new program, along with broader reforms, is expected to cut costs up to 20% on new purchases and 60% on refinancing.

But will that spur on additional reforms across the country or stop at New York? We hope it will continue. These sorts of conflicts of interest are very costly and ultimately it’s the home buyers who pay the price literally and through a loss of confidence in the closing experience.

If you’re worried about over-inflated charges on your title insurance premiums, select an independent title company without affiliations. When your real estate broker refers you to Bay National Title Company, you can be assured it’s not because of costly dinners we’ve provided or a company preferred relationship. It’s based on good old customer service and a hard working team. But you don’t need a referral to select us. You have a choice in title companies. Exercise that choice today and call Bay National Title Company.