ALBANY — A state lawmaker has an idea he says could save homeowners some of their hard-earned cash.
Sen. Brad Hoylman (D-Manhattan) is introducing legislation to establish a state-run title insurance agency that he believes will cut homebuyers’ closing costs and rein in an unregulated industry.
“To the average consumer, it looks like a racket,” Hoylman told the Daily News.
Title insurance protects buyers and lenders if there is a legal issue over who owns a property. Such claims could come from heirs of deceased property owners, if errors are found in public records, or if unknown liens or easements are discovered.
Title insurance premiums — included in real estate closing costs — can run to thousands of dollars. Critics claim there’s little use for the fees in the age of computers and modern record keeping.
The title insurance industry, dominated by a handful of companies, has taken heat over questionable kickbacks doled out to real estate professionals and passing the cost on to consumers.
A state investigation started in 2012 found that insurers spent millions on meals, sporting events and at strip clubs as they sought business from real estate agents and attorneys. The extravagance was billed to homebuyers in premiums as marketing costs.
Hoylman’s bill would create a task force to “examine and make recommendations upon the establishment of a public title insurance carrier.”
“I think the state can do a better job and for less money,” Hoylman said.
Previous efforts to regulate the industry have stalled in Albany amid fierce opposition and legal challenges from the New York State Land Title Association.
A judge this summer struck down regulations imposed by the state Department of Financial Services meant to prevent companies from passing certain business expenses on to consumers. The Senate earlier this year failed to pass legislation that would have aided the department in expanding its oversight of the title insurance business.
Iowa is now the only state with a state-owned and run title insurance company, established in the 1940s. Title insurance in the Corn State is often hundreds of dollars less than in places like New York.
“We have among the highest rates in the nation. Iowa has among the lowest,” Hoylman said. “What’s wrong with this picture? I think it is because we have allowed the private title insurers to run amok over consumers.”
Robert Treuber, the executive vice-president of the New York State Land Title Association, argued that if the Iowa system was implemented in New York it would lead to higher costs to consumers because of legal and other fees.
“It is so important to be clear about the negative consequences of a proposed government-run title insurance which would include: massive private sector job loss, tens of millions of lost premium tax revenue, a huge cost for the state to create its own system including reserves, and the government would be liable for problems with homes ownership across the state,” he told The News.
