Judge Shoots Down Title Insurance Reforms

Pole dancers of New York, rejoice! State Supreme Court Judge Eileen Rakower has ruled that regulations enacted earlier this year by the Department of Financial Services (DFS) went too far in prohibiting trips to strip clubs and other “ordinary marketing and entertainment expenses” by the state’s title insurers, the Real Deal reports.

The regulations, which met with stiff resistance from the title insurance lobby and numerous state legislators, were designed to prevent title insurers from entertaining potential clients at pricey restaurants, sporting events and strip clubs – and then passing those costs on to homebuyers in the form of fees at closings. The rules also prohibited tips for closers, who rely on such funds for most of their income. 

Most homebuyers purchase title insurance – sometimes for thousands of dollars – to make sure there are no liens on the property and they’ll have clear claim to the title once they plunk down their cash. Title insurers customarily entertain homebuyers’ mortgage brokers, lawyers and real-estate agents in order to win their clients’ business. 

The title insurance industry appeared relieved by the judge’s decision. “I think for the industry this is a vindication that what they’ve been doing all along is both necessary and proper,” said Terrence Oved, chair of law firm Oved & Oved’s real estate and transaction department. “It’ll be business as usual.” 

Maria Vullo, superintendent of DFS, has indicated that the agency plans to appeal Judge Rakower’s decision. At a hearing in January, Vullo said “there is no place” for companies to win business on the basis of who “can lavish the most expensive gifts, throw the best parties, hand out the best seats to sporting events, or socialize with referral sources at strip clubs.” And, she added, DFS isn’t just going after a few bad actors. “It is a widespread practice of the industry,” she said. “The fact that everyone does it doesn’t make it legal.” 

Judge Rakower, in siding with the title insurance industry, disagreed.