Banking Interpretations


April 18, 2003 

Re:  Restrictions on Tying 

Dear _________:   

Your April 9, 2003 letter to the Legal Division of the New York State Banking Department has been referred to me for response.  You have asked us if there are any restrictions on mortgage lenders insisting that they choose the abstract company who will search title.  The short answer is yes.   

Section 595-a(4) of the Banking Law restricts tying mortgage loans with certain insurance products and/or their providers.  Section 595-a(4)(a) prohibits all mortgage bankers, mortgage brokers and exempt organizations (defined to include any insurance company, banking organization, foreign banking corporation licensed to transact business in this state, federal savings bank, federal savings and loan association, federal credit union, or any bank, trust company, savings bank, savings and loan association or credit union organized under the laws of any other state, or any instrumentality created by the United States or any state with the power to make mortgage loans) from requiring, as a condition for the approval of a mortgage loan, the use of (i) a particular title insurance company, agency or agent or (ii) for any other type of insurance, the use of a particular insurer, agent or broker.  Section 595-a(4)(b) provides that certain types of enumerated entities which "operate in compliance with other provisions of subdivision eight of section fourteen-g of [the Banking Law] or paragraph two of subdivision (a) of section two thousand five hundred two of the [I]nsurance [L]aw shall be deemed to be in compliance with" §595-a(4).  The enumerated entities identified in this subsection are banks, trust companies, savings banks, savings and loan associations and national banks.   

I trust that this letter is responsive to your inquiry.   

Very truly yours,  

Jacquelyn A. Hart
Associate Counsel