SENATE, No. 1619

STATE OF NEW JERSEY

213th LEGISLATURE

 

INTRODUCED MAY 5, 2008

 


 

Sponsored by:

Senator KEVIN J. O'TOOLE

District 40 (Bergen, Essex and Passaic)

Senator BARBARA BUONO

District 18 (Middlesex)

 

 

 

 

SYNOPSIS

     Increases regulatory oversight and consumer protections concerning certain mortgage products, mortgage lending, and mortgage foreclosure practices.

 

CURRENT VERSION OF TEXT

     As introduced.

  


An Act concerning certain mortgages, amending and supplementing P.L.1996, c.157, and amending various parts of the statutory law.

 

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

 

     1.  Section 2 of P.L.1996, c.157 (C.17:11C-2) is amended to read as follows:

     2.    As used in this act:

     "Billing cycle" means the time interval between periodic billing dates.  A billing cycle shall be considered monthly if the closing date of the cycle is the same date each month or does not vary by more than four days from such date.

     "Borrower" means any person applying for a loan from a lender licensed under this act, whether or not the loan is granted, and any person who has actually obtained such a loan.

     "Closed-end loan" with respect to a secondary mortgage loan means a mortgage loan pursuant to which the licensee advances a specified amount of money and the borrower agrees to repay the principal and interest in substantially equal installments over a stated period of time, except that: (1) the amount of the final installment payment may be substantially greater than the previous installments if the term of the loan is at least 36 months, or under 36 months if the remaining term of the first mortgage loan is under 36 months; or (2) the amount of the installment payments may vary as a result of the change in the interest rate as permitted by this act. "Closed-end loan" with respect to a consumer loan means a loan which meets the requirements of section 35 of P.L.1996, c.157 (C.17:11C-35) and pursuant to which the licensee advances a specified amount of money and the borrower agrees to repay the principal and interest in substantially equal installments over a stated period of time.

     "Consumer loan business" means the business of making loans of money, credit, goods or things in action, which are to be used primarily for personal, family or household purposes, in the amount or value of $50,000 or less and charging, contracting for, or receiving a greater rate of interest, discount or consideration therefor than the lender would be permitted by law to charge if he were not a licensee hereunder, except as authorized by this act and without first obtaining a license from the commissioner.  Any person directly or indirectly engaging in the business of soliciting or taking applications for such loans of $50,000 or less, or in the business of negotiating or arranging or aiding the borrower or lender in procuring or making such loans of $50,000 or less, or in the business of buying, discounting or indorsing notes, or of furnishing, or procuring guarantee or security for compensation in amounts of $50,000 or less, shall be deemed to be engaging in the consumer loan business.

     "Commissioner" means the Commissioner of Banking and Insurance.

     "Consumer lender" means a person licensed, or a person who should be licensed, under this act to engage in the consumer loan business.

     "Consumer loan" means a loan of $50,000 or less made by a consumer lender, payable in one or more installments, pursuant to the terms of this act, and not a first mortgage loan or a secondary mortgage loan.

     "Controlling interest" means ownership, control or interest of 25% or more of the licensee or applicant.

     "Correspondent mortgage banker" means a mortgage banker who: (1) in the regular course of business, does not hold mortgage loans in its portfolio, or service mortgage loans, for more than 90 days; and (2) has shown to the department's satisfaction an ability to fund loans through warehouse agreements, table funding agreements or otherwise.

     "Department" means the Department of Banking and Insurance.

     "Depository institution" means a state or federally chartered bank, savings bank, savings and loan association, building and loan association or credit union, irrespective of whether the entity accepts deposits.

     "First mortgage loan" means any loan secured by a first mortgage on real property on a one to six family dwelling, a portion of which may be used for nonresidential purposes.

     "Licensee" means a person who is licensed under this act, or who should be so licensed.

     "Mortgage banker" means any person, not exempt under section 4 of this act and licensed pursuant to the provisions of this act, and any person who should be licensed pursuant to the provisions of this act, who for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly originates, acquires or negotiates first mortgage loans in the primary market.

     "Mortgage broker" means any person, not exempt under section 4 of this act and licensed pursuant to the provisions of this act, and any person who should be licensed pursuant to the provisions of this act, who for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly negotiates, places or sells for others, or offers to negotiate, place or sell for others, first mortgage loans in the primary market.

     "Open-end loan" means a secondary mortgage loan made by a secondary lender or a consumer loan made by a consumer lender pursuant to a written agreement with the borrower whereby:

     (1)   The lender may permit the borrower to obtain advances of money from the secondary lender from time to time or the secondary lender may advance money on behalf of the borrower from time to time as directed by the borrower;

     (2)   The amount of each advance and permitted interest and charges are debited to the borrower's account and payments and other credits are credited to the same account;

     (3)   Interest is computed on the unpaid principal balance or balances of the account from time to time; and

     (4)   The borrower has the privilege of paying the account in full at any time or, if the account is not in default, in monthly installments of fixed or determinable amounts as provided in the agreement.

     "Person" means an individual, association, joint venture, partnership, limited partnership association, limited liability company, corporation, trust, or any other group of individuals however organized.

     "Primary market" means the market wherein first mortgage loans are originated between a lender and a borrower, whether or not through a mortgage broker or other conduit, and shall not include the sale or acquisition of a mortgage loan after a mortgage loan is closed.

     "Sales finance company" shall have the meaning ascribed to that term in section 1 of P.L.1960, c.40 (C.17:16C-1).

     "Secondary lender" means a person licensed, or a person who should be licensed, under this act to engage in the secondary mortgage loan business.

     "Secondary mortgage loan" means a loan made to an individual, association, joint venture, partnership, limited partnership association, limited liability company, trust, or any other group of individuals, however organized, except a corporation, which is secured in whole or in part by a lien upon any interest in real property, including but not limited to shares of stock in a cooperative corporation, created by a security agreement, including a mortgage, indenture, or any other similar instrument or document, which real property is subject to one or more prior mortgage liens and on which there is erected a structure containing one, two, three, four, five or six dwelling units, a portion of which structure may be used for nonresidential purposes, except that the following loans shall not be subject to the provisions of this act: (1) a loan which is to be repaid in 90 days or less; (2) a loan which is taken as security for a home repair contract executed in accordance with the provisions of the "Home Repair Financing Act," P.L.1960, c.41 (C.17:16C-62 et seq.); or (3) a loan which is the result of the private sale of a dwelling, if title to the dwelling is in the name of the seller and the seller has resided in that dwelling for at least one year, if the buyer is purchasing that dwelling for his own residence and, if the buyer, as part of the purchase price, executes a secondary mortgage in favor of the seller.

     "Secondary mortgage loan business" means advertising, causing to be advertised, soliciting, negotiating, offering to make or making a secondary mortgage loan in this State, whether directly or by any person acting for his benefit.

     "Solicitor" or “mortgage solicitor” means any natural person not licensed as a mortgage banker, correspondent mortgage banker or mortgage broker who is employed as a solicitor by one, and not more than one, licensee, who is subject to the direct supervision and control of that licensee, and who solicits, provides or accepts first mortgage loan applications, or assists borrowers in completing first mortgage loan applications, and whose compensation is in any way based on the dollar amount or volume of first mortgage loan applications, first mortgage loan closings or other first mortgage loan activity.

(cf: P.L.2001, c.294, s.1)

 

     2.  Section 3 of P.L.1996, c.157 (C.17:11C-3) is amended to read as follows:

     3.  a.  No person shall act as a mortgage banker [or], mortgage broker or mortgage solicitor, engage in the secondary mortgage loan business or engage in the consumer loan business without first obtaining a license under this act, except that a person licensed as a mortgage banker may act as a mortgage broker or mortgage solicitor, and a person licensed as a mortgage broker may act as a mortgage solicitor.

     b.  The department shall issue licenses under this act which specify whether a licensee may act as a mortgage banker [or], mortgage broker or mortgage solicitor, a secondary lender or a consumer lender.  A licensee may not engage in a licensed activity under the act unless the license issued by the department specifies that the licensee may engage in that licensed activity.

     c.  [No person shall act as a solicitor without first being registered with the department.] (Deleted by amendment, P.L.     , c.  ) (pending before the Legislature as this bill)

     d.  No corporation, partnership, association or any other entity shall be issued or hold a license as a mortgage banker or broker or secondary lender unless one officer or principal has an individual license of that same type sought or held.  The commissioner may, by regulation, require a licensed mortgage banker or broker to employ additional licensed individuals to properly supervise the licensee and its branch offices.  If the employed individual licensee allows his license to lapse or for some other reason is no longer affiliated with the employing licensee, the employing licensee shall notify the commissioner within [10] 5 days, and shall appoint another licensed individual within [90] 10 days or such longer period as permitted by the commissioner.

(cf:  P.L.1996, c.157, s.3)

 

     3.  Section 4 of P.L.1996, c.157 (C.17:11C-4) is amended to read as follows:

     4.  The requirements of this act which apply to a mortgage banker, mortgage broker or mortgage solicitor shall not apply to:

     a.  Depository institutions and insurance companies; but subsidiaries and service corporations of these institutions or companies and employees thereof shall not be exempt.

     b.  A person making, acquiring or selling mortgage loans for private investment or gain and not in the regular course of business. Only a person not engaged in the financial services industry who makes one or two mortgage loans in a calendar year, or a person employed in the financial services industry who makes one or two private mortgage loans in a calendar year outside of his employment, shall qualify for this exemption.

     c.  An attorney at law of this State, not actively and principally engaged in the business of a mortgage banker or broker, when the attorney renders services in the course of his practice.

     d.  A person licensed as a real estate broker or salesperson pursuant to R.S.45:15-1 et seq., and not engaged in the business of a mortgage banker or broker.  Any person holding a license under this act as a mortgage banker or mortgage broker shall be exempt from the licensing and other requirements of R.S.45:15-1 et seq. in the performance of those functions authorized by this act.

     e.  Builders who secure mortgages  for their own construction or for sale of their own construction.

(cf:  P.L.1996, c.157, s.4)

 

     4.  Section 7 of P.L.1996, c.157 (C.17:11C-7) is amended to read as follows:

     7.    The commissioner shall issue a license under this act if the following conditions are met:

     a.     A written application for a new license or for a renewal of a license shall be submitted to the commissioner on the forms and in the manner, and accompanied by such evidence in support of the application, as required by this act and as may be prescribed by the commissioner, and shall be accompanied by the required fees.

     b.    An individual applicant for a new license shall qualify by examination, the content and form of which shall be approved by the commissioner.  The commissioner may designate an independent testing service to prepare and administer the examinations.  In addition, the commissioner by regulation may establish additional requirements for licensure as an individual, including education and experience.

     c.     If the commissioner finds that the financial responsibility, experience, character, and general fitness of the applicant for a new license or for a renewal of a license demonstrate that the business will be operated honestly, fairly, and efficiently within the purposes of this act, and if all other licensing requirements of this act and regulations promulgated by the commissioner are met, the commissioner shall issue the license of the type sought by the applicant.

     d.    A person holding a license under this act or as a sales finance company pursuant to the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.), who is in full compliance with this act, the "Retail Installment Sales Act of 1960," and the regulations promulgated thereunder, as applicable, may apply to the commissioner for a license to act as a mortgage banker [or], mortgage broker or mortgage solicitor, a secondary lender, a consumer lender or a sales finance company, or any combination of these capacities for which the person is not already licensed, by filing with the commissioner an abbreviated application containing the information which the commissioner deems necessary when considering whether to license that person for that specific activity, an application fee, and the necessary additional license fee.

     e.     (1) Any applicant for a license pursuant to this section and any officer, director, partner or owner of a controlling interest of a corporation or partnership filing for licensure shall submit to the commissioner the applicant’s name, address, fingerprints and written consent for a criminal history record background check to be performed.  The commissioner is authorized to exchange fingerprint data with and receive criminal history record information from the State Bureau of Identification in the Division of State Police and the Federal Bureau of Investigation consistent with applicable State and federal laws, rules and regulations, for the purposes of facilitating determinations concerning licensure eligibility.  The applicant shall bear the cost for the criminal history record background check, including all costs of administering and processing the check.  The Division of State Police shall promptly notify the commissioner in the event a current holder of a license or prospective applicant, who was the subject of a criminal history record background check pursuant to this section, is arrested for a crime or offense in this State after the date the background check was performed.

     (2) Within 60 days of the effective date of P.L.    , c.   (pending before the Legislature as this bill), any person registered as a mortgage solicitor shall submit to the commissioner the information required by this subsection for purposes of becoming licensed as a mortgage solicitor pursuant to the “New Jersey Licensed Lenders Act,” P.L.1996, c.157 (C.17:11C-1 et seq.).

(cf:  P.L.2003, c.199, s.10)


     5.  Section 8 of P.L.1996, c.157 (C.17:11C-8) is amended to read as follows:

     8. a. [Every] Except as provided in subsection c. of this section, every application for an initial license shall be accompanied by  a nonrefundable application fee as set forth in subsection d. of this section.  When the applicant at the same time seeks a license to engage in more than one activity, only one application fee may be charged.  With respect to a license fee imposed prior to the implementation of the assessment pursuant to P.L.2005, c.199 (C.17:1C-33 et al.), the license fee, as prescribed by the commissioner by regulation, shall be based on the number of the following activities in which the person is licensed to engage under this act or the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.): a mortgage banker or mortgage broker; a secondary lender; a consumer lender; or a sales finance company. The fee for a biennial license or a renewal thereof shall be set according to the following schedule:

     (1)   If the person is licensed to engage in one activity, the fee shall not be more than $3,000;

     (2)   If the person is licensed to engage in two activities, the fee shall not be more than $4,000;

     (3)   If the person is licensed to engage in three activities, the fee shall not be more than $5,000; and

     (4)   If the person is licensed to engage in all four activities, the fee shall not be more than $6,000.

     Upon implementation of the assessment pursuant to P.L.2005, c.199 (C.17:1C-33 et al.), a license fee shall no longer be imposed or collected by the commissioner pursuant to this section.  A license shall run from the date of issuance to the end of a term of not less than two years as set by the commissioner by regulation.

     b.    (Deleted by amendment, P.L.2007, c.81).

     c.     An applicant for a mortgage solicitor [registration pursuant to subsection c. of section 3 of P.L.1996, c.157 (C.17:11C-3)] license shall be subject to a nonrefundable mortgage solicitor [registration] licensing application fee [, not to exceed $100] as established by the commissioner by regulation, which fee shall not exceed $700.  A solicitor who changes his [registration] license to a different licensee shall be required to submit a new [registration] licensure application and to pay  another nonrefundable application fee.

     d.    [An] Except for an applicant for a mortgage solicitor license, each applicant shall pay to the commissioner at the time of the initial application for a license  a nonrefundable application fee not to exceed the amounts specified in this subsection:

     (1)   For an application for one activity, an application fee not to exceed $700;

     (2)   For an application for two activities, an application fee not to exceed $1,000;

     (3)   For an application for three activities, an application fee not to exceed $1,300; and

     (4)   For an application for four activities, an application fee not to exceed $1,600.

     e.     A licensee that seeks to add an additional activity to an existing license shall pay a fee not to exceed $300 per activity.

     f.     Fee amounts shall be prescribed by the commissioner by regulation.

(cf: P.L.2007, c.81, s.7)

 

     6.  Section 9 of P.L.1996, c.157 (C.17:11C-9) is amended to read as follows:

     9. a. A licensee, other than a mortgage solicitor, may maintain a branch office or offices.  The licensee shall license all branch offices in this State and all branch offices outside this State from which the licensee has direct contact with New Jersey consumers regarding origination or brokering.

     b.    The commissioner shall issue a branch office license if:

     (1)   The licensee has submitted a completed application form and a branch application fee  pursuant to the schedule provided in subsection d. of section 8 of P.L.1996, c.157 (C.17:11C-8);

     (2)   The application for the branch office demonstrates that the office is in a suitable location; and

     (3)   The application contains a certification that the office is covered by the surety bond.

     c.     (Deleted by amendment, P.L.2007, c.81).

(cf: P.L.2007, c.81, s.8)

 

     7.  Section 18 of P.L.1996, c.157 (C.17:11C-18) is amended to read as follows:

     18. a.  The commissioner may refuse to issue and may revoke, suspend or refuse to renew a license or impose a penalty pursuant to this act [, or refuse to register or rescind or revoke a solicitor registration,] if the commissioner finds, after notice and an opportunity for a hearing in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) and any rules adopted thereunder, that any person, applicant for or holder of the license has:

     (1)  Violated any of the provisions of this act or any order, rule or regulation made or issued pursuant to this act;

     (2)  Withheld information or made a material misstatement in the application for the license;

     (3)  Been convicted of an offense involving breach of trust, moral turpitude or fraudulent or dishonest dealing, or had a final judgment entered against him in a civil action upon grounds of fraud, misrepresentation or deceit;

     (4)  Become insolvent, or failed to attain or maintain the required net worth;

     (5)  Demonstrated unworthiness, incompetence, bad faith or dishonesty in the transaction of business as a licensee; or

     (6)  Engaged in any other conduct which would be deemed by the commissioner to be the cause for denial of the license.

     b.  A license of a corporation, partnership, association or other entity may be suspended or revoked if any officer, director or member of the licensee has committed any act which would be cause for suspending or revoking a license issued to him as an individual.

     c.  If the license issued to an individual is revoked or suspended, the license issued to the partnership, association, corporation or other entity shall also be revoked or suspended by the commissioner, unless within the time fixed by the commissioner, in the case of a partnership, the connection therewith of the member whose license has been revoked shall be severed and that member's interest in the partnership and share in its activities brought to an end, or in the case of an association, corporation, or other entity, the offending officer or director shall be discharged and shall have no further participation in its activity.  Officers and directors of the corporation shall be required to fully divest themselves of all stock, bonds or other corporate holdings.

     d.  The department may suspend or revoke the entire license of a person whose license is suspended or revoked for only one of its authorized licensed activities.

     e.  Any licensee may surrender any license by delivering to the commissioner written notice that the license is surrendered, along with the license, but the surrender shall not affect the licensee's civil or criminal liability for an act committed prior to the surrender.

(cf:  P.L.1996, c.157, s.18)

 

     8.  Section 21 of P.L.1996, c.157 (C.17:11C-21) is amended to read as follows:

     21. a. A borrower shall not be required to purchase credit life or accident and health insurance or credit involuntary unemployment insurance in connection with a first mortgage loan, a secondary mortgage loan or a consumer loan.  If the borrower or borrowers consent thereto in writing, a licensee, other than a mortgage solicitor, may obtain or provide:

     (1)   Insurance on the life and on the health or disability, or both, of one borrower, and on the lives, health or disability of two borrowers pursuant to the provisions of N.J.S.17B:29-1 et seq.; and

     (2)   Credit involuntary unemployment insurance in accordance with forms and rates filed and approved by the commissioner pursuant to applicable regulations.

     b.    If a licensee obtains or provides any credit insurance for a borrower or borrowers pursuant to subsection a. of this section, a licensee may deduct from the principal of a loan and retain an amount equal to the premium lawfully charged by the insurance company.  The premium may be charged monthly in the case of an open-end loan or open-end consumer loan.  The amount so deducted and retained shall not be considered a prohibited charge or amount of any examination, service, brokerage, commission, expense, fee or bonus or other thing or otherwise.

     c.     If a borrower or borrowers obtain such insurance from or through a licensee pursuant to subsection a. of this section, the licensee shall show the amount of the charge for the insurance and cause to be delivered to the borrower or borrowers a copy of the policy, certificate or other evidence of that insurance when the loan is made.  Nothing in this act shall prohibit the licensee from collecting the premium or identifiable charge for insurance permitted by this section and from receiving and retaining any dividend, or any other gain or advantage resulting from that insurance.

     d.    A licensee may require a borrower to demonstrate that the property securing a first mortgage loan or secondary mortgage loan is insured against damage or loss due to fire and other perils, including those of extended coverage, for a term not to exceed the term of the loan and in an amount not to exceed the amount of the loan, together with the amount needed to satisfy all prior liens on that property.

     The licensee shall provide the borrower with the following written statement, to be printed in at least 10-point bold type:

NOTICE TO THE BORROWER

     YOU MAY BE REQUIRED TO PURCHASE PROPERTY INSURANCE AS A CONDITION OF RECEIVING THE LOAN.

     IF PROPERTY INSURANCE IS REQUIRED, YOU MAY SECURE INSURANCE FROM A COMPANY OR AGENT OF YOUR OWN CHOOSING.

     e.     Incident to a consumer loan, a licensee may make available, insurance covering direct or indirect damage or loss, by fire or other perils, including those of extended coverage, to the personal property of the borrower all or part of which is security for the loan. The insurance shall be for an amount and term not to exceed the total amount of payments and term of the loan.

     The licensee shall provide the borrower with the following written statement, to be printed in at least 10-point bold type:

NOTICE TO THE BORROWER

YOU ARE NOT REQUIRED TO PURCHASE PERSONAL PROPERTY INSURANCE AS A CONDITION OF RECEIVING THE CONSUMER LOAN.  IF YOU DESIRE PERSONAL PROPERTY INSURANCE YOU MAY SECURE INSURANCE FROM A COMPANY OR AGENT OF YOUR OWN CHOOSING.

(cf: P.L.1999, c.250, s.2)


     9.  Section 22 of P.L.1996, c.157 (C.17:11C-22) is amended to read as follows:

     22.  a.  No person shall use the word "mortgage" or similar words in any advertising, signs, letterheads, cards, or like matter which tend to represent that the person arranges first mortgage loans unless that person is licensed to act as a mortgage banker or mortgage broker under this act, or is exempt from licensing under section 4 of this act.  No person licensed under this act shall be granted a license in a name containing such words as "insured," "bonded," "guaranteed," "secured" and the like.  Notwithstanding the provisions of section 18 of P.L.1948, c.67 (C.17:9A-18) or any other law to the contrary, a person licensed under this act to act as a mortgage banker [or], mortgage broker or mortgage solicitor may use the terms "mortgage banker" [or], "mortgage broker," or “mortgage solicitor,” respectively, as part of the licensee's name.

     b.    No mortgage banker or mortgage broker shall, in connection with or incidental to the making of a first mortgage loan, require or permit the mortgage instrument or bond or note to be signed by a party to the transaction if the instrument contains any blank spaces to be filled in after it has been signed, except blank spaces relating to recording.

     c.     No mortgage banker or mortgage broker shall charge or exact directly or indirectly from the mortgagor or any other person fees, commissions or charges not authorized by this act.

     d.    No person shall receive any commission, bonus or fee in connection with arranging or originating a first mortgage loan for a borrower unless that person is licensed or exempt from licensure as a mortgage banker or mortgage broker, except that a [registered] licensed mortgage solicitor may receive a commission, bonus, or fee from his employer.

     e.     No person or licensee authorized to act as a mortgage banker or mortgage broker shall pay any commission, bonus or fee to any person not licensed or not exempt under the provisions of this act in connection with arranging for or originating a mortgage loan for a borrower, except that a [registered] licensed mortgage solicitor may be paid a bonus, commission or fee by his employer.

     f.     No person shall obtain or attempt to obtain a license by fraud or misrepresentation.

     g.     No mortgage banker or mortgage broker shall misrepresent, circumvent, or conceal the nature of any material particular of any transaction to which the mortgage banker or broker is a party.

     h.     No mortgage banker or mortgage broker shall fail to disburse funds in accordance with the mortgage banker's or broker's agreements, unless otherwise ordered by the commissioner or a court of this State or of the United States.

     i.      No mortgage banker or mortgage broker shall fail without good cause to account or deliver to any person any personal property, money, fund, deposit, check, draft, mortgage, document or thing of value, which is not the mortgage banker's or broker's property, or which the mortgage banker or broker is not in law or equity entitled to retain under the circumstances, at the time which has been agreed upon, or is required by law or, in the absence of a fixed time, upon demand of the person entitled to such accounting and delivery.

     j.     No person or licensee shall fail to place in escrow, immediately upon receipt, any money, fund, deposit, check or draft entrusted to him by any person dealing with him as a mortgage banker or mortgage broker, in a manner approved by the commissioner, or to deposit the funds in a trust or escrow account maintained by him with a financial institution the deposits of which are insured by the Federal Deposit Insurance Corporation or [the Federal Savings and Loan Insurance Corporation] its successor, wherein the funds shall be kept until the disbursement thereof is properly authorized.

     k.    If a mortgage banker or mortgage broker provides loan proceeds to a closing agent for the purpose of closing and settling a mortgage transaction the mortgage banker or mortgage broker shall not fail: (1) to present a certified check, cashier's check, teller's check or bank check for the proceeds of the first mortgage loan; (2) to arrange an electronic fund transfer for the proceeds of the loan; or (3) to provide for payment by cash to the closing agent at a reasonable time and place prior to the time of the mortgage closing transaction.  The closing agent shall deposit the loan proceeds in a trust or escrow account, which shall not be commingled with the agent's own funds, and shall disburse the loan proceeds upon the closing or settlement in accordance with the settlement documents. Nothing contained in this subsection k. shall  require a mortgage banker or mortgage broker to utilize a closing agent, nor prevent the mortgage banker or mortgage broker from directly disbursing loan proceeds from the account of the mortgage banker or mortgage broker to the mortgagor and other persons entitled to receive disbursements from the settlement if a closing agent is not used. Nothing contained in this subsection k. shall prevent the person or licensee from assessing a reasonable charge as set forth by regulation by the commissioner to reflect the additional cost to the person or licensee for the issuance of a certified, cashier's, teller's or bank check or for arranging an electronic fund transfer.  That reasonable charge shall be fully disclosed at application or at or prior to the issuance of the loan commitment.  A "bank check" means a negotiable instrument drawn by a state or federally chartered bank, savings bank or savings and loan association on itself or on its account in another state or federally chartered bank, savings bank or savings and loan association doing business in this State.  A "teller's check" means a draft drawn by a bank on another bank, or payable at or through a bank.

(cf:  P.L.1997, c.290, s.1)

     10.  Section 23 of P.L.1996, c.157 (C.17:11C-23) is amended to read as follows:

     23.  a. Notwithstanding the provisions of any other law, a person licensed as a mortgage banker or correspondent mortgage banker, incidental to the origination, processing and closing of a mortgage loan transaction, shall have the right to charge only the following fees:  (1) credit report fee; (2) appraisal fee; (3) application fee; (4) commitment fee; (5) warehouse fee; (6) fees necessary to reimburse the mortgage banker for charges imposed by third parties; and (7) discount points.

     The commissioner shall, by regulation, have the authority to determine the reasonableness of the fees set forth in this subsection.  In establishing regulations concerning warehouse fees as permitted by paragraph (5) of this subsection, the commissioner shall consider the coupon rate of the mortgage loan, the applicable prime lending rate, and the length of time the mortgage loan can reasonably be expected to be held for sale.

     b.    Notwithstanding the provisions of any other law, a person licensed as a mortgage broker, incidental to the brokering of a first mortgage loan transaction, shall have the right to charge only the following fees: (1) application fee; and (2) discount points.

     c.     No person licensed as a mortgage banker, correspondent mortgage banker or mortgage broker may charge any fee either not expressly authorized by this section or authorized by the commissioner by regulation.

(cf: P.L.1999, c.250, s.3)

 

     11.  Section 43 of P.L.1996, c.157 (C.17:11C-43) is amended to read as follows:

     43.  A licensee, other than a mortgage solicitor, shall annually file a report with the commissioner which shall set forth such information as the commissioner shall require concerning the business conducted as a licensee during the preceding calendar year.  The report shall be under oath and in a form and within the time specified by the commissioner by regulation. 

     A licensee that fails to make and file its annual report in the form and within the time provided in this section shall be subject to a penalty of not more than $100 for each day's failure, and the commissioner may revoke or suspend its authority to do business in this State. The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).  A warrant may issue in lieu of a summons.

(cf: P.L.2007, c.81, s.10)

 

     12.  Section 13 of P.L.2005, c.199 (C.17:1C-45) is amended to read as follows:

     13. a. Notwithstanding any law or regulation to the contrary, a regulated entity paying the amounts assessed to it in statements of the assessment made pursuant to section 3 of this act shall be exempt from all fees or charges imposed by the division pursuant to any other provision of law or regulation, except for:

     (1)   charter fees;

     (2)   application fees for licenses;

     (3)   mortgage solicitor [registration] licensing application fees;

     (4)   fees for entry by a foreign depository institution whether from another state of the United States or from another country into New Jersey for branch, trust or other activities;

     (5)   fees charged under the "Governmental Unit Deposit Protection Act," P.L.1970, c.236 (C.17:9-41 et seq.);

     (6)   fees charged any entity not chartered, licensed or registered by this State, including but not limited to activities conducted by foreign banks pursuant to section 316 of P.L.1948, c.47 (C.17:9A-316) or foreign associations pursuant to section 214 of P.L.1963, c.144 (C.17:12B-214); and

     (7)   fees charged qualified corporations authorized pursuant to section 213 of P.L.1948, c.67 (C.17:9A-213) to perform either registrar and transfer agent activities or activities permitted for qualified educational institutions.

     b.    Nothing in this section shall exempt a regulated entity from paying any fine or penalty imposed by the commissioner for a violation of a statute or regulation.

     c.     Except as provided in paragraph (1) of subsection d. of section 7 of the "New Jersey Home Ownership Security Act of 2002," P.L.2003, c.64 (C.46:10B-28), all fees, charges, fines and penalties as described in subsections a. and b. of this subsection shall be remitted to the State Treasurer for deposit into the General Fund, and those fees, charges, fines and penalties shall not be part of the assessment funding mechanism or considered in the calculation pursuant to section 15 of this act.

(cf: P.L.2005, c.199, s.13)

 

     13.  (New section) Commencing February 1, 2009, an applicant for licensure as a mortgage solicitor, including any applicant currently registered as a mortgage solicitor, shall demonstrate to the commissioner that he has satisfactorily completed not less than 24 hours of live classroom instruction in a course or program of study approved by the commissioner that consists of the following:

     a. Four hours of instruction concerning State and federal mortgage lending laws;

     b.  Two hours of instruction concerning the New Jersey consumer fraud act, P.L.1960, c.39 (C.56:8-1 et seq.), as it applies to licensees;

     c.  Four hours of instruction concerning the loan application process;

     d. Two hours of instruction concerning the underwriting process;

     e.  Two hours of instruction concerning the secondary market for mortgage loans;

     f.  Four hours of instruction concerning the loan closing process;

     g.  Two hours of instruction covering basic mortgage financing concepts and terms; and

     h. Four hours of instruction concerning the ethical responsibilities of a licensee, including but not limited to, consumer confidentiality and counseling.

 

     14.  Section 1 of P.L.1979, c. 16 (C.17:16G-1) is amended to read as follows:

     1.    As used in this act,

     a.     "Nonprofit social service agency" or "nonprofit consumer credit counseling agency" means any corporation duly organized under Title 15 of the Revised Statutes or Title 15A of the New Jersey Statutes, no part of the assets, income or profit of which is distributable to, or enures to the benefit of its members, directors or officers, except to the extent permitted under this act, and which is engaged in debt adjustment.

     b.    "Credit counseling" means any guidance or educational program or advice offered by a nonprofit social service agency or nonprofit consumer credit counseling agency for the purpose of fostering the responsible use of credit and debt management.

     c.     (1) "Debt adjuster" means a person who either (a) acts or offers to act for a consideration as an intermediary between a debtor and his creditors for the purpose of paying off, settling, compounding, or [otherwise] altering the terms of payment of any debts of the debtor, or (b) who, to that end, receives money or other property from the debtor, or on behalf of the debtor, for payment to, or distribution among, the creditors of the debtor.

     (2)   The following persons shall not be deemed debt adjusters: (a) an attorney-at-law of this State who is not principally engaged as a debt adjuster; (b) a person who is a regular, full-time employee of a debtor, and who acts as an adjuster of his employer's debts; (c) a person acting pursuant to any order or judgment of court, or pursuant to authority conferred by any law of this State or the United States; (d) a person who is a creditor of the debtor, or an agent of one or more creditors of the debtor, and whose services in adjusting the debtor's debts are rendered without cost to the debtor; [or] (e) a person who, at the request of a debtor, arranges for or makes a loan to the debtor, and who, at the authorization of the debtor, acts as an adjuster of the debtor's debts in the disbursement of the proceeds of the loan, without compensation for the services rendered in adjusting those debts ; or (f) a municipality or third party who obtains and acts upon a municipal lien in accordance with the procedures of the “tax sale law,” R.S.54:5-1 et seq .

     (3) Subject to paragraph (2) of this subsection c., a distressed property purchaser as defined in subsection g. of this section and a foreclosure consultant as defined in subsection i. of this section shall be deemed to be a debt adjuster.

     d.    "Debtor" means an individual or two or more individuals who are jointly and severally, or jointly or severally indebted.

     e.     “Debtor-owner” means a debtor who is the owner of record of title to a distressed property.

     f.     “Distressed property” means residential real property consisting of from one to six dwelling units, at least one of which is occupied by a debtor-owner as a primary residence, and which is the subject of a foreclosure or tax sale proceeding, or which is at risk of loss due to nonpayment of taxes or whose debtor-owner is more than 90 days delinquent on any loan that is secured by the property.

     g.     "Distressed property purchaser" means a person who acquires an interest in fee or a beneficial interest through a trust document in a distressed property while allowing the debtor-owner to possess, occupy, or retain a leasehold interest or any present or future interest in fee in the property, or a person who participates in a joint venture or joint enterprise involving a distressed property conveyance. A distressed property purchaser does not mean a federally insured financial institution or a person who acquires distressed property through a deed in lieu of foreclosure or a person acting in participation with any person who acquires distressed property through a deed in lieu of foreclosure, provided that person does not promise to convey an interest in fee back to the debtor-owner or does not give the debtor-owner an option to purchase the property at a later date.  A distressed property purchaser also does not mean a spouse, child, parent, or sibling of the debtor-owner.

     h.     "Distressed property conveyance" means a transaction in which: a debtor-owner transfers an interest in fee, or a beneficial interest created through a trust document, in a distressed property; the acquirer of the property allows the debtor-owner to occupy the property; and the acquirer of the property or a person acting in participation with the acquirer of the property conveys or promises to convey an interest in fee back to the debtor-owner or gives the debtor-owner an option to purchase the property at a later date.

     i.      (1) "Foreclosure consultant" means any debt adjuster who, directly or indirectly, makes any solicitation, representation, or offer to perform, or who performs, any debt adjustment or credit counseling that the debt adjuster represents will in any manner do any of the following in relation to the debtor-owner’s distressed property:

     (a)   prevent or postpone the foreclosure sale or the loss of the property due to nonpayment of taxes;

     (b)   obtain any forbearance from any beneficiary or mortgagee or relief with respect to a tax sale of the property;

     (c)   assist the debtor-owner in exercising any right of reinstatement or right of redemption;

     (d)   obtain any extension of the period within which the debtor-owner may reinstate the debtor-owner's rights with respect to the property;

     (e)   obtain any waiver of an acceleration clause contained in any promissory note, contract, or mortgage evidencing or securing a debt in relation to the property;

     (f)    assist the debtor-owner in obtaining a loan or advance of funds to pay off the promissory note, contract, or mortgage evidencing or securing a debt in relation to the property; or

     (g)   avoid or ameliorate the impairment of the debtor-owner's credit resulting from default on the promissory note, contract, or mortgage, or the conduct of a foreclosure sale or tax sale or offer to repair the debtor-owner’s credit.

     (2)   The following persons shall not be deemed foreclosure consultants:

     (a)   a person or the person's authorized agent acting under the express authority or written approval of the United States Department of Housing and Urban Development;

     (b)   a person who holds or is owed an obligation secured by a lien on any distressed property in situations in which the person performs services in connection with the obligation or lien, provided the obligation or lien did not arise as the result of, or as part of, a proposed distressed property conveyance;  and

     (c)   a mortgagee approved by the United States Department of Housing and Urban Development and any subsidiary, affiliate, agent or employee of the mortgagee, and any financial institution, subsidiary, or affiliate, and any mortgage banker or mortgage broker licensed pursuant to the “New Jersey Licensed Lenders Act,” P.L.1996, c.157 (C.17:11C-1 et seq.), while engaged in the business of the mortgagee.

(cf: P.L.1986, c.184, s.1)

 

     15.  Section 2 of P.L.1979, c.16 (C.17:16G-2) is amended to read as follows:

     2.    a.  No person other than a nonprofit social service agency or a nonprofit consumer credit counseling agency shall act as a debt adjuster.

     b.    It shall be unlawful for any nonprofit social service agency or nonprofit consumer credit counseling agency to act as a debt adjuster without first obtaining a license from the Commissioner of the Department of Banking and Insurance pursuant to this act.  The commissioner may also require any agent, officer, or employee of a nonprofit social service agency or a nonprofit consumer credit counseling agency providing debt adjustment or credit counseling, or category of agent, officer, or employee, to be licensed pursuant to regulations promulgated by the commissioner.

     c.     A licensee is authorized to offer debt adjustment and credit counseling as provided by the provisions of P.L.1979, c.16 (C.17:16G-1 et seq.).

(cf: 1986, c.184, s.2)

 

     16.  Section 3 of P.L.1979, c.16 (C.17:16G-3) is amended to read as follows:

     3.    a.  Application for [said] a debt adjuster license shall be made on forms prescribed by the commissioner, who shall be empowered to require information deemed necessary to demonstrate that the applicant is qualified to be licensed and possesses the necessary financial resources to sustain its operation.

     b.    As part of the application process, the commissioner may, as established by regulation, require any applicant or category of applicants to consent to a criminal history record background check. The commissioner is authorized to exchange fingerprint data with, and receive criminal history information from, the Federal Bureau of Investigation, Identification Division, and the State Bureau of Identification in the Division of State Police in performing background checks.  The commissioner is authorized to conduct additional background checks the commissioner deems appropriate.

(cf: P.L.1986, c. 184, s.3)

 

     17.  Section 4 of P.L.1979, c.16 (C.17:16G-4) is amended to read as follows:

     4.    The commissioner: shall promulgate procedures and standards for the issuance or denial of licenses, which may include disqualifications based upon standards of good moral character, or disqualifications based upon a criminal history record background check performed pursuant to section 3 of P.L.1979, c.16 (C.17:16G-3), including, but not limited to, conviction of any crime involving fraud or dishonesty; shall promulgate grounds for and procedures under which licenses may be revoked, suspended, or reinstated [,] ; and shall establish fees necessary to meet administrative costs under this act.

(cf: P.L.1979, c.16, s.4)

 

     18.  Section 5 of P.L.1979, c.16 (C.17:16G-5) is amended to read as follows:

     5.    a. Any nonprofit social service agency or nonprofit consumer credit counseling agency licensed under this act shall be bonded to the satisfaction of the commissioner for each location pursuant to regulation.  In setting the bonding requirements for each location, the commissioner shall consider the number of debtors provided credit counseling and debt adjustment services at that location, and the balance of funds in the trust account required to be maintained by the licensee pursuant to section 3 of P.L.2005, c.287 (C.17:16G-9).

     b.    The commissioner may require a licensee to file an annual report containing that information required by the commissioner by regulation concerning activities conducted as a licensee in the preceding calendar year.  The report may encompass all debt adjustment or credit counseling activities of a licensee in the preceding calendar year, or may encompass one or more particular activities, including, but not limited to, distressed property conveyances, as specified by the commissioner.  The report shall be submitted under oath and in the form and within the time specified by the commissioner by regulation.

     c.     The commissioner may require a high cost home loan counselor to file an annual report containing that information required by the commissioner by regulation concerning activities conducted pursuant to subsection g. of section 5 of P.L.2003, c.64 (C.46:10B-26) as a registrant in the preceding calendar year.  The report shall be submitted under oath and in the form specified by the commissioner by regulation.

     d.    Each licensee shall file with the commissioner on or before April 1 of each year a copy of its annual report, containing the information required by the commissioner by regulation pursuant to P.L.1979, c.16 (C.17:16G-1 et seq.) and section 3 of P.L.2005, c.287 (C.17:16G-9).  A licensee or high cost home loan counselor that fails to make and file its annual report in the form and within the time provided in this section shall be subject to a penalty of not more than $100 for each day’s failure, and the commissioner may revoke or suspend its authority to do business in this State.  The penalty may be collected in a summary proceeding pursuant to the “Penalty Enforcement Law of 1999,” P.L.1999, c.274 (C.2A:58-10 et seq.).  A warrant may issue in lieu of a summons.

     e.     Each licensee shall have its financial records relating to debt adjustment audited annually by a certified public accountant or a public accountant, which audit shall be filed with the commissioner. Such an audit shall certify that the salaries and expenses paid by the licensee are reasonable compared to those incurred by comparable organizations providing similar services.

     f.     After reviewing the annual report and audit, the Commissioner of Banking and Insurance may cause an examination of the licensee to be made, the actual expenses of such an examination shall be paid by the licensee, and the commissioner may maintain any action against any licensee to recover the fees and expenses herein provided for.

     g.     The licensee shall make a copy of the annual report and audit available for public inspection at each of the licensee's locations.

(cf: P.L.2007, c.81, s.25)

 

     19.  Section 8 of P.L.1979, c.16 (C.17:16G-8) is amended to read as follows:

     8.    Any person who violates any provisions of this act shall be subject to a penalty of $1,000 for the first offense and not more than $5,000 for the second and each subsequent offense to be collected [by and] in the name of the commissioner in a summary proceeding under the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).

     If the commissioner has reason to believe that any person or licensee has engaged in or is engaging in any practice or transaction prohibited by P.L.1979, c.16 (C.17:16G-1 et seq.), the commissioner may, in addition to any remedies available, bring a summary action in the name of and on behalf of the State against the person or licensee and any other person concerned or in any way participating in or about to participate in those practices or transactions, including, with respect to distressed property conveyances, any mortgage banker, mortgage broker, or other licensee licensed pursuant to the “New Jersey Licensed Lenders Act,” P.L.1996, c.157 (C.17:11C-1 et seq.), any real estate broker, broker-salesperson, or salesperson licensed pursuant to R.S.45:15-1 et seq., or any real estate appraiser licensed or certified pursuant to the "Real Estate Appraisers Act," P.L.1991, c.68 (C.45:14F-1 et seq.), to enjoin the person or licensee from continuing those practices or engaging in or doing any act in furtherance of those practices or in violation of that act.  In addition to any other remedies or penalties available for a violation of P.L.1979, c.16 (C.17:16G-1 et seq.), any debtor injured by a violation of P.L.1979, c.16 (C.17:16G-1 et seq.) may bring a civil action for recovery of damages, which shall include punitive damages, attorney’s fees, and costs of suit.

(cf: P.L.2005, c.287, s.2)

 

     20.  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.     No creditor shall make a home loan to a borrower without verifying and documenting the borrower’s reasonable ability to pay the scheduled loan payments, which shall include a reasonable inquiry concerning the borrower’s current and expected income, financial obligations, and employment. For loans in which the interest rate may vary, the reasonable ability to pay shall be determined based on a fully indexed rate and a repayment schedule that achieves full amortization over the life of the loan. 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.

     h.  (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; and

     (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 “fully indexed rate” as defined in subsection g. of this section.

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

 

     21.  Section 5 of P.L.2003, c.64 (C.46:10B-26) is amended to read as follows:

     5.    A high-cost home loan shall be subject to the following additional limitations and prohibited practices:

     a.     No high-cost home loan shall contain a scheduled payment that is more than twice as large as the average of earlier scheduled payments.  This provision shall not apply when the payment schedule is adjusted to the seasonal or irregular income of the borrower.

     b.    No high-cost home loan shall include payment terms under which the outstanding principal balance will increase at any time over the course of the loan because the regular periodic payments do not cover the full amount of interest due.

     c.     No high-cost home loan shall contain a provision that increases the interest rate after default.  This provision shall not apply to interest rate changes in a variable rate loan otherwise consistent with the provisions of the loan documents, provided the change in the interest rate is not triggered by the event of default or the acceleration of the indebtedness.

     d.    No high-cost home loan shall include terms under which more than two periodic payments required under the loan are consolidated and paid in advance from the loan proceeds provided to the borrower.

     e.     Without regard to whether a borrower is acting individually or on behalf of others similarly situated, any provision of a high-cost home loan agreement that allows a party to require a borrower to assert any claim or defense in a forum that is less convenient, more costly, or more dilatory for the resolution of a dispute than a judicial forum established in this State if the borrower may otherwise properly bring a claim or defense or limits in any way any claim or defense the borrower may have is unconscionable and void.

     f.     A creditor shall not make a high-cost home loan unless the creditor has given the following notice, or substantially similar notice, in writing, to the borrower, acknowledged in writing and signed by the borrower not later than the time the notice is required under the notice provision contained in 12 C.F.R. s.226.31(c).

     NOTICE TO BORROWER

     YOU SHOULD BE AWARE THAT YOU MIGHT BE ABLE TO OBTAIN A LOAN AT A LOWER COST.  YOU SHOULD SHOP AROUND AND COMPARE LOAN RATES AND FEES.  MORTGAGE LOAN RATES AND CLOSING COSTS AND FEES VARY BASED ON MANY FACTORS, INCLUDING YOUR PARTICULAR CREDIT AND FINANCIAL CIRCUMSTANCES, YOUR EMPLOYMENT HISTORY, THE LOAN-TO-VALUE REQUESTED AND THE TYPE OF PROPERTY THAT WILL SECURE YOUR LOAN. THE LOAN RATE AND FEES COULD ALSO VARY BASED ON WHICH CREDITOR OR BROKER YOU SELECT.

     IF YOU ACCEPT THE TERMS OF THIS LOAN, THE CREDITOR WILL HAVE A MORTGAGE LIEN ON YOUR HOME.  YOU COULD LOSE YOUR HOME AND ANY MONEY YOU PUT INTO IT IF YOU DO NOT MEET YOUR PAYMENT OBLIGATIONS UNDER THE LOAN.

     YOU SHOULD CONSULT AN ATTORNEY-AT-LAW AND A QUALIFIED INDEPENDENT CREDIT COUNSELOR OR OTHER EXPERIENCED FINANCIAL ADVISOR REGARDING THE RATE, FEES AND PROVISIONS OF THIS MORTGAGE LOAN BEFORE YOU PROCEED.  A LIST OF QUALIFIED COUNSELORS IS AVAILABLE BY CONTACTING THE NEW JERSEY DEPARTMENT OF BANKING AND INSURANCE.

     YOU ARE NOT REQUIRED TO COMPLETE THIS LOAN AGREEMENT MERELY BECAUSE YOU HAVE RECEIVED THIS DISCLOSURE OR HAVE SIGNED A LOAN APPLICATION.

     REMEMBER, PROPERTY TAXES AND HOMEOWNER'S INSURANCE ARE YOUR RESPONSIBILITY.  [NOT ALL CREDITORS] HOWEVER, THE CREDITOR WILL PROVIDE ESCROW SERVICES FOR THESE PAYMENTS.  YOU SHOULD ASK YOUR CREDITOR ABOUT THESE SERVICES.

     ALSO, YOUR PAYMENTS ON EXISTING DEBTS CONTRIBUTE TO YOUR CREDIT RATINGS.  YOU SHOULD NOT ACCEPT ANY ADVICE TO IGNORE YOUR REGULAR PAYMENTS TO YOUR EXISTING CREDITORS.

     g.     A creditor shall not make a high-cost home loan to a borrower who finances points and fees in connection with [a] the high-cost home loan [without first receiving certification from a third-party nonprofit credit counselor, approved by the United States Department of Housing and Urban Development and the Department of Banking and Insurance, that the borrower has received counseling on the advisability of the loan transaction or completing another substantial requirement developed by the department].

     h.     A creditor shall not pay a contractor under a home-improvement contract from the proceeds of a high-cost home loan, unless the instrument is payable to the borrower or jointly to the borrower and the contractor, or, at the election of the borrower, through a third-party escrow agent in accordance with terms established in a written agreement signed by the borrower, the creditor, and the contractor prior to the disbursement.

     i.      A creditor shall not charge a borrower any fees or other charges to modify, renew, extend, or amend a high-cost home loan or to defer any payment due under the terms of a high- cost home loan.

     j.     A creditor shall not charge a borrower points and fees in connection with a high- cost home loan if the proceeds of the high-cost home loan are used to refinance an existing high- cost home loan held by the same creditor as note holder.

     k.    Notwithstanding any other law to the contrary, a creditor making a high-cost home loan that has the legal right to foreclose shall use the judicial foreclosure procedures of this State so long as the property securing the loan is located in this State. 

     l.      [No creditor making a high-cost home loan shall directly or indirectly finance points and fees in excess of 2% of the total loan amount.] (Deleted by amendment, P.L.    , c.   ) (pending before the Legislature as this bill)

     m.    A creditor shall not make a high-cost home loan to a borrower unless the terms of the loan require an escrow account to be established whereby the borrower is obligated to make periodic payments into the account for taxes, insurance premiums, or other charges with respect to the real property which secures repayment of the loan, and the mortgagee is obligated to use the account to make payments for the taxes, insurance premiums, or other charges on behalf of the borrower.

(cf: P.L.2003, c.64, s.5)

     22. This act shall take effect on the first day of the seventh month next following enactment, except that the Commissioner of Banking and Insurance may take such anticipatory administrative action in advance as shall be necessary for the implementation of the act.

 

 

STATEMENT

 

     This bill provides greater regulatory oversight and consumer protections concerning certain mortgage products, mortgage lending, and mortgage foreclosure practices.

     The bill prohibits certain lending practices with respect to “home loans” and “high-cost 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.), which prohibits certain abusive lending practices commonly known as predatory lending.  The bill prohibits a creditor from making a home loan to a borrower without verifying and documenting the borrower’s reasonable ability to repay the loan, throughout its entirety, which shall include a reasonable inquiry into the borrower’s current and expected income, financial obligations, and employment.  By requiring lenders to verify and document a borrower’s ability to make all scheduled payments throughout the term of the loan, the bill protects many borrowers from agreeing to mortgage payments that are beyond their means to pay.

     The bill additionally 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, and the amount expressed as a percentage of the borrower’s annual gross income; and (6) total points to be paid.  This written notice reinforces the creditor’s responsibility to verify the borrower’s reasonable ability to pay the loan.

     The bill prohibits a creditor from making a high-cost home loan to a borrower unless the creditor establishes an escrow account to ensure that payments for taxes, insurance premiums, and other charges related to the property are collected and paid by the lender.   In addition, the bill prohibits the financing of points and fees in connection with a high-cost home loan.  By requiring an escrow account and prohibiting the financing of points and fees, the bill protects many subprime borrowers from agreeing to mortgage terms without fully realizing all the costs involved in repaying the high-cost home loan.

     The bill also revises the “New Jersey Licensed Lenders Act,” P.L.1996, c.157 (C.17:11C-1 et seq.), to mandate the licensing of mortgage solicitors.  An applicant for a mortgage solicitor license shall qualify by an examination approved by the Commissioner of Banking and Insurance.  The commissioner may establish additional licensing requirements, which include pre-education and other experience benchmarks.  These pre-education requirements shall include a program of study concerning: State and federal mortgage lending laws; the New Jersey consumer fraud act, P.L.1960, c.39 (C.56:8-1 et seq.); the processes for mortgage underwriting and loan closing; and the ethical responsibilities of a mortgage solicitor, including, but not limited to consumer confidentiality and counseling.  Mortgage solicitors shall also be subject to criminal history record background checks.

     Finally, for current and future borrowers facing mortgage foreclosures, the bill provides additional consumer protections by expanding and clarifying the scope and provisions of P.L.1979, c.16 (C.17:16G-1 et seq.), concerning debt adjustment and credit counseling activities, to expressly incorporate certain “foreclosure consulting practices.”

     The bill clarifies that under existing law, foreclosure consultants who, directly or indirectly, solicit, offer to perform, or perform debt adjustment or credit counseling activities for property owners facing foreclosure with respect to such owners’ ability to retain ownership or possession of their property, are required to be licensed in this State as debt adjusters.  The bill also includes “distressed property purchasers” as among those who must be licensed as debt adjusters under the law.  A distressed property purchaser is anyone who acquires an interest in fee or a beneficial interest through a trust document in a distressed property, while allowing the debtor-owner to possess, occupy, or retain a leasehold interest or any present or future interest in fee in the property, or anyone involved in a joint venture or enterprise involving a distressed property conveyance.

     The bill provides the Commissioner of Banking and Insurance with additional regulatory authority to oversee foreclosure consulting activities as well as other debt adjustment and credit counseling activities in this State.  Such regulatory authority includes:

     -permitting the commissioner to establish licensing requirements for any agent, officer, or employee of a debt adjuster, or any category of agent, officer, or employee, which may include disqualifications based upon standards of good moral character; and

     -permitting the commissioner, as part of any licensing application, to require the applicant, or any category of applicants, to consent to a criminal history record background check, and any additional background check as deemed appropriate.

     While the commissioner is already authorized to request an annual report from any debt adjuster concerning that adjuster’s activities conducted in the preceding calendar year, the bill emphasizes that the commissioner may also collect information from a debt adjuster encompassing only one or more particular activities, such as those activities primarily performed with respect to foreclosure consulting.

     The bill, concerning penalties for violations of the applicable debt adjustment and credit counseling law, would permit any person to bring an action for punitive damages, as well as receive attorney’s fees and costs of suit.  Additionally, the bill clarifies the law’s penalty provisions by emphasizing that the commissioner’s existing authority to enjoin any licensed debt adjuster and “any other person concerned or in any way participating in” a violation, includes, with respect to distressed property conveyances, any mortgage banker, mortgage broker, or other licensee licensed pursuant to the “New Jersey Licensed Lenders Act,” P.L.1996, c.157 (C.17:11C-1 et seq.), any real estate broker, broker-salesperson, or salesperson licensed pursuant to R.S.45:15-1 et seq., or any real estate appraiser licensed or certified pursuant to the "Real Estate Appraisers Act," P.L.1991, c.68 (C.45:14F-1 et seq.).