ASSEMBLY, No. 1186

STATE OF NEW JERSEY

212th LEGISLATURE

 

PRE-FILED FOR INTRODUCTION IN THE 2006 SESSION

 


 

Sponsored by:

Assemblyman STEVE CORODEMUS

District 11 (Monmouth)

 

 

 

 

SYNOPSIS

     Requires mortgage lenders to use certified mail to notify borrowers of mortgage transfers.

 

CURRENT VERSION OF TEXT

     Introduced Pending Technical Review by Legislative Counsel

  


An Act concerning the transfer of mortgage loans and amending P.L.1990, c.69 and P.L.1995, c.244.

 

     Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

     1.  Section 3 of P.L.1995, c.244 (C.2A:50-55) is amended to read as follows:

     3. As used in this act:

     "Deed in lieu of foreclosure" means a voluntary, knowing and uncoerced conveyance by the residential mortgage debtor to the residential mortgage lender of all claim, interest and estate in the property subject to the mortgage.  In order for a conveyance to be voluntary, the debtor shall have received notice of, and been fully apprised of the debtor's rights as specified in section 4 of this act.  For purposes of this act, "voluntarily surrendered" has the same meaning as "deed in lieu of foreclosure."

     "Effective date of transfer" means the date on which the mortgage payment of a residential mortgage debtor is first due to the lender pursuant to the sale, assignment or transfer of the servicing of a residential mortgage.

     "Immediate family" means the debtor, the debtor's spouse, or the mother, father, sister, brother or child of the debtor or debtor's spouse.

     "Non-residential mortgage" means a mortgage, security interest or the like which is not a residential mortgage.  If a mortgage document includes separate tracts or properties, those portions of the mortgage document covering the non-residential tracts or properties shall be a non-residential mortgage.

     "Obligation" means a promissory note, bond or other similar evidence of a duty to pay.

     "Office" means the Office of Foreclosure within the Administrative Office of the Courts.

     "Residential mortgage" means a mortgage, security interest or the like, in which the security is a residential property such as a house, real property or condominium, which is occupied, or is to be occupied, by the debtor, who is a natural person, or a member of the debtor's immediate family, as that person's residence.  This act shall apply to all residential mortgages wherever made, which have as their security such a residence in the State of New Jersey, provided that the real property which is the subject of the mortgage shall not have more than four dwelling units, one of which shall be, or is planned to be, occupied by the debtor or a member of the debtor's immediate family as the debtor's or member's residence at the time the loan is originated.

     "Residential mortgage debtor" or "debtor" means any person shown on the record of the residential mortgage lender as being obligated to pay the obligation secured by the residential mortgage.

     "Residential mortgage lender" or "lender" means any person, corporation, or other entity which makes or holds a residential mortgage, and any person, corporation or other entity to which such residential mortgage is assigned.

     "Selling servicing organization" means any person, corporation or other entity which sells, assigns or transfers the servicing of a residential mortgage.

(cf:  P.L.1995, c.244, s.3.)

 

     2.  Section 4 of P.L.1995, c.244 (C.2A:50-56) is amended to read as follows:

     4. a. Upon failure to perform any obligation of a residential mortgage by the residential mortgage debtor and before any residential mortgage lender may accelerate the maturity of any residential mortgage obligation and commence any foreclosure or other legal action to take possession of the residential property which is the subject of the mortgage, the residential mortgage lender shall give the residential mortgage debtor notice of such intention at least 30 days in advance of such action as provided in this section.

     b.    Notice of intention to take action as specified in subsection a. of this section shall be in writing, sent to the debtor by registered or certified mail, return receipt requested, at the debtor's last known address, and, if different, to the address of the property which is the subject of the residential mortgage.  The notice is deemed to have been effectuated on the date the notice is delivered in person or mailed to the party.

     c.     The written notice shall clearly and conspicuously state in a manner calculated to make the debtor aware of the situation:

     (1)   the particular obligation or real estate security interest;

     (2)   the nature of the default claimed;

     (3)   the right of the debtor to cure the default as provided in section 5 of this act;

     (4)   what performance, including what sum of money, if any, and interest, shall be tendered to cure the default as of the date specified under paragraph (5) of this subsection c.;

     (5)   the date by which the debtor shall cure the default to avoid initiation of foreclosure proceedings, which date shall not be less than 30 days after the date the notice is effective, and the name and address and phone number of a person to whom the payment or tender shall be made;

     (6)   that if the debtor does not cure the default by the date specified under paragraph (5) of this subsection c., the lender may take steps to terminate the debtor's ownership in the property by commencing a foreclosure suit in a court of competent jurisdiction;

     (7)   that if the lender takes the steps indicated pursuant to paragraph (6) of this subsection c., a debtor shall still have the right to cure the default pursuant to section 5 of this act, but that the debtor shall be responsible for the lender's court costs and attorneys' fees in an amount not to exceed that amount permitted pursuant to the Rules Governing the Courts of the State of New Jersey;

     (8)   the right, if any, of the debtor to transfer the real estate to another person subject to the security interest and that the transferee may have the right to cure the default as provided in this act, subject to the mortgage documents;

     (9)   that the debtor is advised to seek counsel from an attorney of the debtor's own choosing concerning the debtor's residential mortgage default situation, and that, if the debtor is unable to obtain an attorney, the debtor may communicate with the New Jersey State Bar Association or Lawyer Referral Service in the county in which the residential property securing the mortgage loan is located; and that, if the debtor is unable to afford an attorney, the debtor may communicate with the Legal Services Office in the county in which the property is located;

     (10) the possible availability of financial assistance for curing a default from programs operated by the State or federal government or nonprofit organizations, if any, as identified by the Commissioner of Banking and Insurance.  This requirement shall be satisfied by attaching a list of such programs promulgated by the commissioner; [and]

     (11) the name and address of the lender and the telephone number of a representative of the lender whom the debtor may contact if the debtor disagrees with the lender's assertion that a default has occurred or the correctness of the mortgage lender's calculation of the amount required to cure the default; and

     (12) if the servicing of the residential mortgage loan has been sold, assigned or transferred to the lender, a declaration that the selling servicing organization notified the debtor of the sale, assignment or transfer, by certified mail, return receipt requested, not less than 15 days prior to the effective date of transfer.

     d.    The notice of intention to foreclose required to be provided pursuant to this section shall not be required if the debtor has voluntarily surrendered the property which is the subject of the residential mortgage.

     e.     The duty of the lender under this section to serve notice of intention to foreclose is independent of any other duty to give notice under the common law, principles of equity, State or federal statute, or rule of court and of any other right or remedy the debtor may have as a result of the failure to give such notice.

     f.     Compliance with this section shall be set forth in the pleadings of any legal action referred to in this section.  If the plaintiff in any complaint seeking foreclosure of a residential mortgage alleges that the property subject to the residential mortgage has been abandoned or voluntarily surrendered, the plaintiff shall plead the specific facts upon which this allegation is based.

(cf.  P.L.2003, c.298, s.1)

 

     3.  Section 1 of P.L.1990, c.69 (C.17:16F-15) is amended to read as follows:

     1.  As used in this act:

     "Commissioner" means the Commissioner of Community Affairs.

     "Duplicate copy" means a duplicate of the original property tax bill which duplicate is generated by the collector of a taxing district.

     "Effective date of transfer" means the date on which the mortgage payment of a mortgagor is first due to the purchasing servicing organization pursuant to the sale, assignment or transfer of the servicing of a mortgage loan.

     "Mortgagee" means the holder of a mortgage loan.

     "Mortgage escrow account" or "escrow account" means an account which is part of a mortgage loan agreement, whether incorporated into the agreement or as part of a separately executed document, whereby: the mortgagor is obligated to make periodic payment to the mortgagee or his agent for taxes, insurance premiums, or other charges with respect to the real property which secures the mortgage loan; and the mortgagee or his agent is obligated to make payments for taxes, insurance premiums or other charges with respect to the real property which secures the mortgage loan.

     "Mortgage loan" means a loan made to a natural person or persons to whom credit is offered or extended primarily for personal, family or household purposes which is secured by a mortgage constituting a lien upon real property located in this State on which there is erected or to be erected a structure containing one, two, three, four, five or six dwelling units, a portion of which structure may be used for nonresidential purposes, in the making of which the mortgagee relies primarily upon the value of the mortgaged property.

     "Mortgagor" includes any person liable for the payment of a mortgage loan, and the owner of real property which secures the payment of a mortgage loan.

     "Original tax bill" means the property tax bill as originally prepared and mailed by the collector of a taxing district pursuant to subsection a. of R.S.54:4-64.

     "Property tax processing organization" means an organization which, under contract with a mortgagee or a servicing organization, collects and processes property tax information with respect to properties securing mortgage loans.

     "Purchasing servicing organization" means a person or entity to whom or which a mortgagee or a selling servicing organization sells, assigns or transfers the servicing of a mortgage loan.

     "Replacement bill" means a property tax bill made or generated by a mortgagee, servicing organization or tax processing organization subject to the restrictions provided pursuant to subsection a. of section 5 of this act and regulations promulgated by the Commissioner of Community Affairs pursuant to subsection a. of section 5 of this act.                  "Selling servicing organization" means a person or entity who sells, assigns or transfers the servicing of a mortgage loan.

     "Servicing organization" means a mortgagee or an agent of the mortgagee, pursuant to a written agreement between the agent and the mortgagee, which is responsible for one or more mortgage escrow accounts.

     "Tax authorization form" means a form approved by the Commissioner of Community Affairs whereby the mortgagor authorizes the municipal tax collector to send the original municipal tax bill to the mortgagee or the mortgagee's servicing organization pursuant to R.S.54:4-64.

(cf:  P.L.1990, c.69, s.1) 

 

     4.  Section 3 of P.L.1990, c.69 (C.17:16F-17) is amended to read as follows:

     3.  If the servicing of a mortgage loan for which a mortgage escrow account has been established is sold, assigned or transferred to a purchasing servicing organization:

     a.  (Deleted by amendment, P.L.1997, c.33.)

     b.  The selling servicing organization shall notify the tax collector of the taxing district in which the mortgaged property is located of the sale, assignment or transfer not more than 45 days after the actual date of the sale, assignment or transfer or not less than 10 days before the date the next payment of property taxes is due, whichever is earlier.  The notification provided to the tax collector shall be on a form approved by the commissioner. The selling servicing organization shall also forward to the purchasing servicing organization the tax bill and stubs for the property securing the mortgage loan. 

     c.  The purchasing servicing organization shall issue corrected coupon or payment books, if such are used, not later than 20 days after the first mortgage escrow payment to the purchasing servicing organization is due.

     d.  The purchasing servicing organization shall notify the tax collector of the taxing district in which the mortgaged property is located of the sale, assignment or transfer of the servicing of the mortgage loan not later than 45 days after the actual date of the sale, assignment or transfer or not less than 10 days prior to the date the next payment of property taxes is due, whichever is earlier.  This notice shall include the purchasing servicing organization's procedure for responding to questions regarding a mortgage escrow account it manages. 

     e.  A mortgagee or servicing organization which has been authorized to receive the original tax bill from the tax collector of the taxing district in which the mortgagor's property is located pursuant to R.S.54:4-64, may request the tax collector to send the original tax bill to its property tax processing organization.  This request shall be made in writing on a form approved by the commissioner. 

     f.  The selling servicing organization shall notify the mortgagor of the sale, assignment or transfer of the servicing of the mortgage loan, by certified mail, return receipt requested, not less than 15 days prior to the effective date of transfer.

     For the purposes of this section, "the date the next payment of property taxes is due" means either the first day of February, May, August or November, as applicable, and shall not include any grace period.

     For the purposes of this section, the terms, "purchasing servicing organization" and "selling servicing organization" shall not include the Government National Mortgage Association, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Resolution Trust Corporation, or the Federal Deposit Insurance Corporation, if the assignment, sale, or transfer of the servicing of the mortgage loan is preceded by: 

     (1)  Termination of the contract for servicing the loan for cause;

     (2) Commencement of proceedings for bankruptcy of the servicer; or

     (3) Commencement of proceedings by the Federal Deposit Insurance Corporation or the Resolution Trust Corporation for conservatorship or receivership of the servicer, or an entity by which the servicer is owned or controlled.

(cf:  P.L.1997, c.33, s.14)

 

     5.  This act shall take effect on the 90th day following enactment, except that the requirement with respect to foreclosures contained in section 2 shall take effect 120 days following enactment.

 

 

STATEMENT

 

     This bill ensures that a mortgagor receives notice of a sale, assignment or transfer of a residential mortgage to a new lender so that the mortgagor can direct payments to the appropriate lender.

     The bill requires that under the "Fair Foreclosure Act," whenever a mortgage lender initiates a foreclosure or other legal action to take possession of residential real property and the lender purchased the mortgage from a previous lender - a "selling servicing organization"-  the lender must include a certain declaration in the notice of intention to foreclose. The declaration must state that the selling servicing organization notified the mortgagor of the sale, assignment or transfer by certified mail, return receipt requested, not less than 15 days prior to the effective date of the transfer.

     The bill also requires that whenever a lender sells, assigns or transfers the servicing of a mortgage loan for which an escrow account has been established, the lender must notify the mortgagor, by certified mail, return receipt requested, not less than 15 days before the effective date of the transfer.