ASSEMBLY, No. 1879

STATE OF NEW JERSEY

213th LEGISLATURE

 

INTRODUCED JANUARY 28, 2008

 


 

Sponsored by:

Assemblyman PATRICK J. DIEGNAN, JR.

District 18 (Middlesex)

Assemblyman RALPH R. CAPUTO

District 28 (Essex)

Assemblywoman CARIDAD RODRIGUEZ

District 33 (Hudson)

Assemblyman PAUL D. MORIARTY

District 4 (Camden and Gloucester)

Assemblyman JOSEPH VAS

District 19 (Middlesex)

Assemblyman RUBEN J. RAMOS, JR.

District 33 (Hudson)

 

 

 

 

SYNOPSIS

     Requires creditor to provide certain disclosures to borrower prior to residential mortgage loan closing.

 

CURRENT VERSION OF TEXT

     As introduced.

  


An Act concerning mortgage disclosures and amending P.L.2003, c.64.

 

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

 

     1.    Section 4 of P.L.2003, c.64 (C.46:10B-25) is amended to read as follows:

     4.    a. No creditor making a home loan shall finance, directly or indirectly, any credit life, credit disability, credit unemployment or credit property insurance, or any other life or health insurance, or any payments directly or indirectly for any debt cancellation or suspension agreement or contract, except that insurance premiums or debt cancellation or suspension fees calculated and paid on a monthly basis shall not be considered financed by the creditor.

     b.    (Deleted by amendment, P.L.2004, c.84).

     c.     No creditor shall recommend or encourage default on an existing loan or other debt prior to and in connection with the closing or planned closing of a home loan that refinances all or any portion of that existing loan or debt.

     d.    No creditor shall charge a late payment fee in relation to a home loan except according to the following rules:

     (1)  The late payment fee may not be in excess of 5% of the amount of the payment past due.

     (2)  The fee may only be assessed by a payment past due for 15 days or more.

     (3)  The fee may not be charged more than once with respect to a single late payment.  If a late payment fee is deducted from a payment made on the loan, and such deduction causes a subsequent default on a subsequent payment, no late payment fee may be imposed for such default.  If a late payment fee has been once imposed with respect to a particular late payment, no such fee shall be imposed with respect to any future payment which would have been timely and sufficient, but for the previous default.

     (4)  No fee shall be charged unless the creditor notifies the borrower within 45 days following the date the payment was due that a late payment fee has been imposed for a particular late payment.  No late payment fee may be collected from any borrower if the borrower informs the creditor that nonpayment of an installment is in dispute and presents proof of payment within 45 days of receipt of the creditor’s notice of the late fee.

     (5)  The creditor shall treat each and every payment as posted on the same date as it was received by the creditor, servicer, creditor’s agent, or at the address provided to the borrower by the creditor, servicer, or the creditor’s agent for making payments.

     e.     No home loan shall contain a provision that permits the creditor, in its sole discretion, to accelerate the indebtedness.  This provision does not prohibit acceleration of the loan in good faith due to the borrower’s failure to abide by the material terms of the loan.

     f.     No creditor shall charge a fee for informing or transmitting to any person the balance due to pay off a home loan or to provide a release upon prepayment.  Payoff balances shall be provided within seven business days after the request.

     g.  (1) No creditor shall make a home loan unless the creditor has delivered to the borrower, not less than seven days prior to the closing of the loan, a statement in writing, showing in clear and distinct terms the following items:

     (a) amount of the loan;

     (b) length of the loan;

     (c) final maturity date;

     (d) initial annual percentage interest rate;

     (e) amount of the initial monthly payment, including principal, interest, taxes, and insurance premiums, and the amount of this payment expressed as a percentage of the borrower’s annual gross income;

     (f) total points and fees to be paid.

     (2) If the home loan provides for the possibility of an increase in the annual percentage interest rate, the creditor shall also include on the statement the following items:

     (a) maximum possible annual percentage interest rate on the loan;

     (b) date the annual percentage interest rate could increase;

     (c) frequency with which the annual percentage interest rate and monthly payment could increase;

     (d) maximum possible amount of monthly principal and interest payment, based on a fully indexed rate, and the amount of this payment expressed as a percentage of the borrower’s annual gross income; and

     (e) maximum possible amount of monthly payment, including principal, interest, taxes, and insurance premiums, based on a fully indexed rate, and the amount of this payment expressed as a percentage of the borrower’s annual gross income.

     For the purposes of this subsection, “fully indexed rate” means the index rate prevailing at the time the home loan is originated, plus the margin that will apply after the expiration of an initial interest rate.

(cf: P.L.2004, c.84, s.3)

 

     2.    This act shall take effect on the 90th day following enactment.


STATEMENT

 

     This bill provides additional consumer protections for residential mortgage borrowers by requiring certain disclosures not less than seven days prior to closing with respect to “home loans” as defined in the “New Jersey Home Ownership Security Act of 2002,” P.L.2003, c.64 (C.46:10B-22 et seq.). Generally, home loans include almost all mortgages made by State-chartered lenders on residential property in the State. By requiring creditors to make these disclosures about home loans not less than seven days prior to the loan closing, the bill provides the borrower with an opportunity to carefully consider clearly presented information about the terms and conditions of the loan.

     The bill prohibits a creditor from making a home loan unless the creditor has delivered to the borrower, at least seven days prior to the closing of the loan, a statement in writing, showing in clear and distinct terms the following items: 

     (1) amount of the loan;

     (2) length of the loan;

     (3) final maturity date;

     (4) initial annual percentage interest rate;

     (5) amount of the initial monthly payment, including principal, interest, taxes, and insurance, and the amount of this payment expressed as a percentage of the borrower’s annual gross income; and

     (6) total points and fees to be paid.

     If the home loan provides for the possibility of an increase in the annual percentage interest rate, the creditor shall also include on the statement the following items:

     (1) maximum possible annual percentage interest rate;

     (2) date the annual percentage interest rate could increase;

     (3) frequency with which the annual percentage interest rate and monthly payment could increase;

     (4) maximum possible amount of monthly principal and interest payment, based on a fully indexed rate, and the amount of this payment expressed as a percentage of the borrower’s annual gross income; and

     (5) maximum possible amount of monthly payment, including principal, interest, taxes, and insurance premiums, based on a fully indexed rate, and the amount of this payment expressed as a percentage of the borrower’s annual gross income.