Just this week Gov. Cuomo has released a new budget plan which provides for major cut backs to the NY title insurance rates. It’s no secret that NY Title Insurance charges are pretty daunting for a buyer or borrower seeking to purchase or refinance their home. Actually NY closing costs in general are the highest in the nation. Cuomo’s plan includes many items (including title insurance costs) which he will find it extremely difficult to create cuts with. Perhaps this grand plan is a mere publicity stunt for Cuomo who is surely attempting to curry favor with his constituents in order to win the coming election, but if his agenda passes the NY buyer can be looking at a dramatic drop in his/her closing costs. However is waging a battle with the NY Title Insurance world the best way to lower closing costs?
According to Bankrate.com NY closing costs were highest in the country for 2012. On a purchase 150k-250k the average transaction would yield 4-6k in closing costs, this is almost 20% higher then the US average.
The results in Cuomo’s plan would be an average of 20 percent savings in title insurance costs for new home buyers. However is this saving a realistic possibility? The fact is many states and their attorney generals or elected officials have tried to lower title insurance rates. The problem is quite simple –> One pays for NY Title Insurance one time. Its not like home owners insurance where a family pays a premium every year and the insurer continues to reap profits from the consumer. Its a one and done for the owners policy. With the risky nature of the insurance business its doubtful that the NY title insurance community could take a major hit to their revenue with out actually suffering major losses to the quality of and efficiency in the work product. Just sending a abstractor to the court house and creating a raw data search…then having a NY title insurance examiner proof the documentation and put it into a commitment form …. then having a clearance officer work with the parties to verify that all liens and violations have been cleared and/or paid off…. and finally the NY Title company works with counsel in closing the transaction, recording all documents in the county and issuing a final policy… all of this creates a costly, costly set of events. It’s as if Cuomo completely discounts what this work entails and how it gets done. There were complaints of costs being too high in both the DC Title Insurance and PA Title Insurance worlds recently … guess what happened… they went up further. Now I do not fundamentally disagree with Cuomo that costs are to high in NY, quite simply they are. There are few things that can be done and at the same time not really effect the industry or the quality of work that the consumer will have to rely upon.
1- Create a simultaneous policy. Hence, you purchase a property at $800,000 and mortgage it for $600,000. So long as you purchased title insurance as an owner the lenders policy only costs a small surcharge. (example- For NJ Title Insurance it is $25.00; for PA Title Insurance such lenders policy is free). In most states on a purchase transaction a buyer has the opportunity to purchase a simultaneous title insurance policy. When purchasing NY title insurance a buyer is faced with paying for both the owners title insurance as well as a charge for the lenders policy.
2- Make a cut to the ridiculous mortgage tax that borrowers pay when financing property. It is by far the highest tax in the country for such activity and the significant reason for the highest closing costs in the country.
As far as Cuomo’s proposed legislation that would require NY title insurance agents to be licensed, how could one not agree with such a proposal. To be honest it is unfathomable that this isn’t in place yet. We as a NY Title Insurance provider also provide title insurance in several other states. In the majority of our states we need to maintain a state license as well as file annual reports and possibly face an audit. Creating a licensing requirement and some sort of annual audit will most certainly weed out some of the dishonest and corrupt companies that roam the NY title insurance community and overcharge their consumers. It is amazing that the state has gone this far with out such requirement. Supposedly the licensing requirement would create a nice bit of revenue for the state, perhaps this revenue can be used to somehow reduce closing costs by lowering the mortgage tax like mentioned above?? Just an idea…. The licensing requirement would also likely lower closing costs for many as their NY title insurance agents who currently over charge with unneeded costs added to the closing statements would face more strict guidelines and monitoring.
Either way we look forward to seeing what the outcome is and continue to look forward to assist all of our clients with their real estate transactions with the utmost professionalism and expertise that they have come to expect from us. We take great pride in our work and believe that most other NY title insurance agents do as well. We hope certainly hope some measures are indeed changed but lets just be realistic about those changes…