NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS
Title Guaranty Fund Guidelines Adopted: The Title Insurance Task Force met at the NAIC Spring National Meeting in Phoenix, Arizona and adopted the “Title Insurance Guaranty Association-Title Insurance Consumer Protection Fund Guideline” after receiving a report from Title Insurance Guaranty Fund Working Group noting that no comments were received on the exposure draft of the guidelines by the March 20 deadline. The guidelines were also adopted following votes of the Receivership and Insolvency Task Force and Property and Casualty Insurance Committee. The guidelines are now posted on the NAIC’s website and available for legislators and policy makers to consider as a template for the establishment of a state title insurance guaranty association. Unlike certain model laws however, adoption of the guidelines is not an NAIC accreditation requirement.
Proposed New Rule on Escrow Disbursements: The Florida Department of Financial Services recently published a Notice of Proposed Rule Development concerning escrow disbursements by title insurance agents. The proposed rule addresses the forthcoming changes to the mortgage closing process under the Consumer Financial Protection Board’s new RESPA-TILA regulations and specifically, the Closing Disclosure form that will be in use on August 1, 2015. National industry groups and state regulators have expressed concerns that the new form provides inadequate and potentially misleading information regarding the cost of title insurance. The proposed rule (i) provides consumers with an explanation regarding the true cost for the title insurance policy they are purchasing as well as showing the exact amount of premium paid, as apportioned between parties, (ii) authorizes the title insurance agency to hold and disburse the funds being held in the agency’s escrow account to fund the transaction, (iii) requires the settlement agent to certify that the escrowed funds are being disbursed consistent with the disclosure provided to all the parties and as the lender has instructed the funds to be paid, and (iv) incorporates by reference new “Florida Insurance Premium Disclosure & Settlement Agent Certification Form”, to be effective in August. The department has scheduled a workshop on April 20 to hear comments on the proposed rule.
Report Foreshadows New Regulations Affecting Third Party Service Providers: The New York State Department of Financial Services recently released a report entitled “Update on Cyber Security in the Banking Sector: Third Party Service Providers”. The report is the result of an October, 2014 survey of 40 banking organizations regulated by the department, and found potential cyber security vulnerabilities with banks' third-party vendors. Banks rely on third-party vendors for a broad-range of services and often have access to a financial institution’s information technology systems, providing a potential point of entry for hackers. As a result of the report’s findings, the department is now considering regulations establishing cyber security requirements for financial institutions that would apply to their relationships with third-party service providers, including potential measures related to the representations and warranties banks receive about the cyber security protections those providers have in place. These regulations could have a significant impact on third party service providers, including the title industry.
Legislation Introduced to Create Title Insurance Commission: Senate bill no. 210 has been introduced, which creates the Title Insurance Commission in the Division of Insurance (part of the Department of Regulatory Agencies) to: (i) propose, advise, and recommend rules, subject to approval by the Commissioner of Insurance, for the implementation and administration of the business of title insurance, (ii) propose, advise, and recommend bulletins and position statements concerning any title insurance-related subject for issuance by the commissioner, (iii) conduct administrative hearings related to the licensing of applicants, the conduct of a title licensee, continuing education program approval, and to advise the commissioner, (iv) recommend disciplinary actions following the investigation of a complaint by the commissioner, and (v) propose rules to the commissioner for establishing a licensing examination. The commission, as proposed, will not participate in rate regulation. The commission would consist of seven members, appointed by the Governor of Colorado. No more than one commission member may be appointed from a single company or an affiliate or subsidiary of that company. Terms would be initially staggered so that approximately half the commission serves two-year terms, and the remainder and each appointment thereafter serve four-year terms. The governor must fill vacancies on the board and may remove any member for misconduct, neglect of duty, or incompetence. SB 210 has been referred to the Business, Labor and Technology Committee.