SENATE, No. 2988

STATE OF NEW JERSEY

213th LEGISLATURE

 

INTRODUCED NOVEMBER 23, 2009

 


 

Sponsored by:

Senator  SHIRLEY K. TURNER

District 15 (Mercer)

 

 

 

 

SYNOPSIS

     The “Foreclosure Rescue Fraud Prevention Act."

 

CURRENT VERSION OF TEXT

     As introduced.

  


An Act concerning certain mortgage foreclosure consultant practices and supplementing Title 46 of the Revised Statutes.

 

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

 

     1.    This act shall be known and may be cited as the "Foreclosure Rescue Fraud Prevention Act."

 

     2.    As used in this act:

     “Business day” means any day other than a Saturday, Sunday, or a federal holiday.

     "Distressed property" means residential real property consisting of from one to six dwelling units, at least one of which is occupied by the 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 owner is more than 90 days delinquent on any loan that is secured by the property.

     "Distressed property purchaser" means a person who acquires an interest in a distressed property through a distressed property conditional conveyance or a distressed property conveyance, or a person who participates in a joint venture or joint enterprise involving a distressed property conditional conveyance or a distressed property conveyance. The term "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 owner or does not give the owner an option to purchase the property at a later date.

     "Distressed property conditional conveyance" means a transaction in which an owner transfers an interest in fee, or a beneficial interest created through a trust document, in the distressed property; the acquirer of the property allows the 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 owner or gives the owner an option to purchase the property at a later date.

     “Distressed property conveyance” means a transaction in which an owner transfers an interest in fee in a distressed property.

     "Distressed property service" means, without limitation, any of the following:

     (1)   debt, budget, or financial counseling of any type;

     (2)   receiving money for the purpose of distributing it to creditors in payment or partial payment of any obligation secured by a mortgage or other lien on a distressed property;

     (3)   contacting creditors on behalf of an owner;

     (4)   arranging or attempting to arrange for an extension of the period within which the owner may cure the owner's default and reinstate a debt obligation;

     (5)   arranging or attempting to arrange for a delay or postponement of the time of sale of the distressed property;

     (6)   advising with respect to the filing of any document or assisting in any manner in the preparation of any document for filing with any court; or

     (7)   giving advice, explanation, or instruction to an owner that in any manner relates to the cure of a default or forfeiture or to the postponement or avoidance of a sale of the distressed property.

     "Foreclosure consultant": (1) means any person, located out-of-State or within the State, who, directly or indirectly, for compensation from an owner, makes any solicitation, representation, or offer to perform, or who performs, any distressed property service that the person represents will in any manner do any of the following in relation to the 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 owner in exercising any right of reinstatement or right of redemption;

     (d)   obtain any extension of the period within which the owner may reinstate the 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 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 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 owner’s credit.

     (2)   shall not include any of the following:

     (a)   a housing counseling agency contracted by the United States Department of Housing and Urban Development to provide counseling;

     (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 conditional conveyance or a distressed property conveyance;

     (c)   a person licensed to practice law in this State while acting under the authority of that license;

     (d)   a nonprofit, charitable entity qualified pursuant to section 501(c)(3) of the Internal Revenue Code of 1986 (26 U.S.C. s.501(c)(3)), which is licensed pursuant to P.L.1979, c.16 (C.17:16G-1 et seq.), and which offers counseling or advice to an owner of a distressed property, provided the entity does not contract for services with for-profit lenders or distressed property purchasers or any person who structures or plans a distressed property conveyance;

     (e)   a municipality which has a tax lien on distressed property;

     (f)    an assignee or a purchaser of a municipal tax lien from a tax sale; or

     (g)   a sponsor which is certified by the Commissioner of Community Affairs to participate in the “New Jersey Housing Assistance and Recovery Program” established pursuant to sections 8 through 14 of P.L.2008, c.127 (C.55:14K-88 et seq.).

     “Owner” means an owner of record of title to a distressed property.

     “Residual income” means an owner’s net income available to meet living expenses after the payment of all ordinary and necessary debt, including payments under an option to purchase back the owner’s property transferred in a distressed property conditional conveyance.

 

     3.    A foreclosure consultant shall not conduct any business in this State until the foreclosure consultant:

     a.     obtains a bond from a surety company authorized to do business in the State in a form and an amount to be prescribed by the Director of the Division of Consumer Affairs by regulation; and

     b.    files the bond with the director and obtains written approval of the bond from the director.

     For the purposes of complying with the requirements of this section, “foreclosure consultant” shall not include:

     (1)   a bank, savings bank, savings and loan association, credit union, or other federally insured financial institution, or insurance company organized, chartered, licensed, or holding a certificate of authority to do business under the laws of this State or any other state or under the laws of the United States;

     (2)   a person licensed pursuant to the “New Jersey Licensed Lenders Act,” P.L.1996, c.157 (C.17:11C-1 et seq.), while acting under the authority of that license; or

     (3)   a person licensed as a real estate broker, broker-salesperson, or salesperson pursuant to R.S.45:15-1 et seq., while acting under the authority of that license.

 

     4.    a.  A foreclosure consultant contract shall be written in plain language and shall fully disclose the exact nature of the foreclosure consultant's services and the total amount and terms of compensation.

     b.    The following notice, printed in at least 14-point boldface type, if the contract is printed, or in capital letters, if the contract is typed, and completed with the name of the foreclosure consultant, shall be printed immediately above the statement required by subsection c. of this section:

 

"NOTICE REQUIRED BY NEW JERSEY LAW

.........................................(Name) or anyone working for him or her CANNOT:

     (1)   Take any money from you or ask you for money until .........................................(Name) has completely finished doing everything he or she said would be done; or 

     (2)   Ask you to sign or have you sign any lien, mortgage, or deed unless all provisions of the “Foreclosure Rescue Fraud Prevention Act,” P.L.      , c      (C.      ) (pending before the Legislature as this bill), and any other applicable federal and State laws have been complied with.

     (3)   Guarantee that they will be able to refinance a loan on your home or arrange for you to keep your home.”

     c.     A foreclosure consultant contract shall be written in the same language as principally used by the foreclosure consultant to describe the consultant’s services or to negotiate the contract, shall be dated and signed by the owner, and shall contain in immediate proximity to the space reserved for the owner's signature a conspicuous statement in 14-point boldface type, if the contract is printed, or in capital letters, if the contract is typed, as follows:

     "You, the owner, may cancel this transaction at any time until after the foreclosure consultant has fully performed every service the foreclosure consultant contracted to perform or represented would be performed. See the attached notice of cancellation form for an explanation of this right."

     d.    A foreclosure consultant contract shall contain on the first page, in a type size no smaller than that generally used in the body of the document, each of the following:

     (1)   the name and address of the foreclosure consultant to which the notice of cancellation is to be mailed; and

     (2)   the date the owner signed the contract.

     e.     A foreclosure consultant contract shall be accompanied by a completed form, captioned "NOTICE OF CANCELLATION" which shall be attached to the contract and easily detachable, and shall contain, in at least 14-point boldface type, if the contract is printed, or in capital letters, if the contract is typed, the following statement written in the same language as used in the contract:

"NOTICE OF CANCELLATION

........................................

(Enter date of transaction)

     You may cancel this transaction, without any penalty or obligation, at any time until after the foreclosure consultant has fully performed every service the foreclosure consultant contracted to perform or represented would be performed.

     To cancel this transaction, mail or deliver a signed and dated copy of this cancellation notice, or any other written notice to: 

......................................(Name of foreclosure consultant) at ......................................(Address of foreclosure consultant's place of business)

     I hereby cancel this transaction on .....................................(Date) .........................................................................(Owner's signature).”

     f.     The foreclosure consultant shall provide the owner with a copy of a foreclosure consultant contract and the attached notice of cancellation in duplicate immediately upon execution of the contract.

     g.     The foreclosure consultant shall record the contract with the county clerk in the county in which the distressed property is located, within 10 business days of its execution.

 

     5.    a.  In addition to any other legal right to rescind a foreclosure consultant contract, an owner has the right to cancel a foreclosure consultant contract at any time until after the foreclosure consultant has fully performed every service the foreclosure consultant contracted to perform or represented would be performed.

     b.    Cancellation occurs when the owner delivers by any means, written notice of cancellation to the foreclosure consultant at the address specified in the foreclosure consultant contract. A notice of cancellation, if given by mail, is effective when deposited in the mail properly addressed with postage prepaid. A notice of cancellation sent by certified mail, return receipt requested, to the address specified in the foreclosure consultant contract, shall be conclusive proof of notice of cancellation.

     c.     A notice of cancellation given by the owner need not take the particular form as provided with the foreclosure consultant contract and, however expressed, is effective if it indicates the intention of the owner not to be bound by the contract.

 

     6.    It is a violation of this act for a foreclosure consultant to:

     a.     claim, demand, charge, collect, or receive any compensation until after the foreclosure consultant has fully performed every distressed property service the foreclosure consultant contracted to perform or represented would be performed, unless compensation for partial performance is expressly agreed to by both parties in the foreclosure contract;

     b.    claim, demand, charge, collect, or receive any fee, interest, or any other compensation for any reason, in excess of two monthly mortgage payments of principal and interest, or the most recent quarterly property tax installment on the distressed property, whichever is less;

     c.     take a wage assignment, a lien of any type on real or personal property, or other security to secure the payment of compensation. Any agreement to take such security is void and unenforceable;

     d.    receive any consideration from any third party in connection with distressed property services rendered to an owner;

     e.     acquire any interest, directly or indirectly, or by means of a subsidiary or affiliate in a distressed property from an owner with whom the foreclosure consultant has contracted;

     f.     accept any power of attorney from an owner for any purpose, except to inspect documents as provided by law; or 

     g.     induce or attempt to induce an owner to enter a contract that does not comply in all respects with sections 4 and 5 of this act.

 

     7.    a.  Any waiver by an owner of the provisions of section 4, 5, or 6 of this act is void and unenforceable as contrary to public policy.

     b.    Any attempt by a foreclosure consultant to induce an owner to waive the owner's rights is a violation of this act.

 

     8.    a.  A distressed property purchaser who enters into a distressed property conditional conveyance or a distressed property conveyance shall do so in the form of a written contract. A distressed property conditional conveyance contract and a distressed property conveyance contract shall be written in at least 14-point boldface type, in the same language principally used by the owner to negotiate the sale of the distressed property, shall be fully completed, signed, and dated by the owner and the distressed property purchaser, and shall be witnessed and acknowledged by a notary public, before the owner executes a deed or any other instrument of conveyance of the distressed property.

     b.    A distressed property conditional conveyance contract and a distressed property conveyance contract shall contain the entire agreement of the parties, be fully assignable, and survive delivery of any deed or any other instrument of conveyance of the distressed property.

     c.     A distressed property conditional conveyance contract and a distressed property conveyance contract shall include the following terms, except that a distressed property conveyance contract shall not be required to contain the terms set forth in paragraph (5):

     (1)   the name, business address, and telephone number of the distressed property purchaser;

     (2)   the address of the distressed property;

     (3)   the total consideration to be given by the distressed property purchaser in connection with or incident to the transaction;

     (4)   a complete description of the terms of payment or other consideration including, but not limited to, any distressed property services of any nature that the distressed property purchaser represents will be performed for the owner before or after the transaction;

     (5)   a complete description of the terms of any related agreement designed to allow the owner to remain in the dwelling including, but not limited to, a lease agreement, repurchase agreement, contract for deed, or a lease agreement with an option to purchase;

     (6)   a notice of cancellation as provided in this section;

     (7)   the following notice in at least 14-point boldface type, if the contract is printed, or in capital letters, if the contract is typed, and completed with the name of the distressed property purchaser immediately above the statement required by this section:

"NOTICE REQUIRED BY NEW JERSEY LAW

     Until your right to cancel this contract has ended, .........................(Name) or anyone working for  .........................(Name) CANNOT ask you to sign or have you sign any deed or any other document. You are urged to have this contract reviewed by an attorney of your choice within five business days of signing it."; and

     (8)   if title to the distressed property will be transferred in the transaction, the following notice in at least 14-point boldface type, if the contract is printed, or in capital letters, if the contract is typed, and completed with the name of the distressed property purchaser immediately above the statement required by this section:

"NOTICE REQUIRED BY NEW JERSEY LAW

     As part of this transaction, you are giving up title to your home."

 

     9.    a.  In addition to any other right of rescission provided by applicable State or federal laws, the owner has the right to cancel a distressed property conditional conveyance contract or a distressed property conveyance contract with a distressed property purchaser until midnight of the 10th business day following the day on which the owner signs the contract, or until the conclusion of a sheriff’s sale pursuant to the provisions of the “Fair Foreclosure Act,” P.L.1995, c.244 (C.2A:50-53 et seq.) or the conclusion of a municipal tax sale foreclosure pursuant to the provisions of the “tax sale law,” chapter 5 of Title 54 of the Revised Statutes, whichever occurs first.

     b.    Cancellation of the contract occurs when the owner delivers, by any means, written notice of cancellation to the address specified in the contract. Notice of cancellation, if given by mail, is effective when deposited in the mail properly addressed with postage prepaid. Notice by certified mail, return receipt requested, to the address specified in the contract, shall be conclusive proof of notice of cancellation.

     c.     A notice of cancellation given by the owner need not take the particular form as provided with the contract, and however expressed, is effective if it indicates the intention of the owner not to be bound by the contract.

     d.    Within 10 business days following receipt of a notice of cancellation delivered in accordance with this section, the distressed property purchaser shall return to the owner, without condition, any original contract and any other documents signed by the owner.

 

     10.  a.  A distressed property conditional conveyance contract and a distressed property conveyance contract with a distressed property purchaser shall contain in immediate proximity to the space reserved for the owner’s signature a conspicuous statement in a size equal to at least 14-point boldface type, if the contract is printed, or in capital letters, if the contract is typed, as follows:

     "You may cancel this contract for the conveyance of your  house, without any penalty or obligation, at any time before ...........................................(Date and time of day).  See the attached notice of cancellation form for an explanation of this right."

     The distressed property purchaser shall accurately enter the date and time of day on which the cancellation right ends.

     b.    A contract with a distressed property purchaser shall be accompanied by a completed form in duplicate, captioned "NOTICE OF CANCELLATION" in a size equal to a 14-point boldface type, if the contract is printed, or in capital letters, if the contract is typed, followed by a space in which the distressed property purchaser shall enter the date on which the owner executes any contract. This form shall be attached to the contract, shall be easily detachable, and shall contain in at least 14-point type, if the contract is printed, or in capital letters, if the contract is typed, the following statement written in the same language as used in the contract: 

"NOTICE OF CANCELLATION

...........................................

(Enter date contract signed)

     You may cancel this contract for the conveyance of your home, without any penalty or obligation, at any time before ............................ (enter date and time of day). To cancel this transaction, mail or deliver a signed and dated copy of this cancellation notice to ................................. (Name of purchaser) at ................................... (Street address of purchaser's place of business) NOT LATER THAN ................................................. (Enter date and time of day).

     I hereby cancel this transaction on ................................... (Date) ......................................................................... (Owner's signature)."

     c.     The distressed property purchaser shall provide the owner with a copy of the contract and the attached notice of cancellation in duplicate at the time the contract is executed by all parties.

     d.    The distressed property purchaser shall record the contract and the attached notice of cancellation with the county clerk in the county in which the distressed property is located within 10 business days of the signing of the contract by both parties.

     e.     The 10 business days during which the owner may cancel the contract shall not begin to run until all parties to the contract have executed the contract and the distressed property purchaser has complied with all the requirements of this section.

 

     11.  a.  A distressed property purchaser, in the course of a distressed property conditional conveyance, shall not:

     (1)   enter into, or attempt to enter into, a distressed property conditional conveyance unless the distressed property purchaser verifies and can demonstrate that the owner has a reasonable ability to pay for the subsequent conveyance of a fee interest back to the owner under the terms of any option to purchase and a reasonable ability to make monthly or any other required payments due prior to the subsequent conveyance;

     (2)   fail to make a payment to the owner at the time the title to the distressed property is conveyed from the owner to the distressed property purchaser, or, if the distressed property purchaser acquires a beneficial interest through a trust, at the time of the creation of the trust, so that the owner has received consideration in an amount of at least 82% of the property's fair market value, or, in the alternative, fail to make a payment to the owner, in situations in which the owner is unable to purchase the distressed property from the distressed property owner at the time of the expiration of the owner’s option to purchase, so that the owner has received consideration in an amount of at least 82% of the property’s fair market value;

     (3)   enter into an option to purchase or lease as part of a distressed property conditional conveyance containing terms that are unfair or commercially unreasonable, or engage in any other unfair conduct;

     (4)   represent, directly or indirectly, that the distressed property purchaser is acting as an advisor or a consultant, or in any other manner represent that the distressed property purchaser is acting on behalf of the homeowner;

     (5)   misrepresent the distressed property purchaser's status as to licensure or certification;

     (6)   do any of the following until after the time during which the owner may cancel the  transaction:

     (a)   accept from the owner an execution of a deed or any other instrument of conveyance of any interest in the distressed property;

     (b)   induce the owner to execute a deed or any other instrument of conveyance of any interest in the distressed property; or 

     (c)   record with the county recorder of deeds any document signed by the owner, including but not limited to a deed or any other instrument of conveyance; 

     (7)   fail to convey title to the distressed property to the owner under an option to purchase provided for in the distressed property conveyance contract, in situations in which the terms of the conveyance contract have been fulfilled;

     (8)   enter into a distressed property conditional conveyance if any party to the transaction is represented by way of a power of attorney;

     (9)   fail to extinguish all liens encumbering the distressed property, immediately following the conveyance of the distressed property, or fail to assume all liability with respect to the lien in foreclosure and prior liens that will not be extinguished by the foreclosure, which assumption shall be accomplished without violations of the terms and conditions of the lien being assumed;

     (10) cause the property to be conveyed or encumbered without the knowledge or permission of the owner, or in any way frustrate the ability of the owner to complete the conveyance back to the owner;

     (11) fail to have all documents executed as part of a distressed property conditional conveyance also signed by a notary public licensed in the State who is unrelated in any way to the distressed property purchaser or any participant in the distressed property conveyance; 

     (12) fail to complete a distressed property conditional conveyance in the office of a title insurance producer licensed pursuant to the “New Jersey Insurance Producer Licensing Act of 2001,” P.L.2001, c.210 (C.17:22A-26 et seq.), or in the office of an attorney licensed to practice law in this State;

     (13) fail to provide to the owner, prior to the time of completion of a distressed property conditional conveyance, a disclosure statement in a form to be designed and prescribed by regulation by the Director of the Division of Consumer Affairs, within the Department of Law and Public Safety, in consultation with the Commissioner of Banking and Insurance, which statement shall  require disclosure to the owner of all costs that the owner will incur in connection with the conveyance and any option for the owner to purchase the property, including a schedule of monthly and annual payments, closing costs, and any additional costs and fees related to the conveyance; 

     (14) claim, demand, charge, collect, or receive any fee, interest, or any other compensation for any reason from an owner, for services or as consideration for participating in the conveyance transaction, in excess of two monthly mortgage payments of principal and interest, or the most recent quarterly property tax installment on the distressed property, whichever is less;

     (15) in situations in which the distressed property conditional conveyance involves a transfer of an interest in fee from an owner to a distressed property purchaser, fail to record the deed to the purchaser in the county clerk’s office in which the property is located, or fail to include a statement on the recorded deed that the deed was obtained through a transaction governed by the “Foreclosure Rescue Fraud Prevention Act”;

     (16) fail to notify in writing all existing mortgage lien holders of the distressed property purchaser’s intent to accept conveyance of an interest in the property from the owner;

     (17) fail to fully comply with all terms and conditions contained in the mortgage lien documents, including but not limited to due-on-sale provisions; and

     (18) fail to satisfy all qualification requirements for assuming the repayment of mortgage.

     b.    For purposes of paragraph (1) of subsection a. of this section, an evaluation of "reasonable ability to pay" shall include the owner’s debt to income ratio, the owner’s residual income, the fair market value of the distressed property, and the owner's credit history. There shall be a rebuttable presumption that the distressed property purchaser has not verified reasonable payment ability if the distressed property purchaser has not obtained documents of assets, liabilities, and income, other than a statement by the owner.

     c.     For purposes of paragraph (2) of subsection a. of this section: (1) an appraisal at the time that the distressed property is conveyed by a person licensed or certified by an agency of this State or the federal government shall create a rebuttable presumption that the appraisal is an accurate determination of the fair market value of the property; and (2) "consideration" means any payment or thing of value provided to the owner, including reasonable costs paid to independent third parties necessary to complete the distressed  property conveyance or payment of money to satisfy a debt or  legal obligation of the owner. "Consideration" shall not include amounts imputed as a down payment or fee to the distressed property purchaser, or a person acting in participation with the distressed property purchaser.

     d.    If an owner fails to make a required payment or otherwise defaults under a distressed property conditional conveyance contract which contains an owner’s option to purchase or a promise to convey an interest in fee back to the owner, the distressed property purchaser shall only enforce the forfeiture of the owner’s interest under the contract as follows:

     (1)   for purposes of the “Fair Foreclosure Act,” P.L.1995, c.244 (C.2A:50-53 et seq.), the distressed property conditional conveyance contract shall be deemed to be a residential mortgage, the distressed property purchaser shall be deemed to be a lender, and the owner shall be deemed to be a debtor; and

     (2)   the distressed property purchaser may bring an action to enforce the forfeiture of the owner’s interest in the property and for recovery of possession of the property by use of the procedures for foreclosure and judicial sale of residential real property available to lenders pursuant to the provisions of the “Fair Foreclosure Act.”

     12.  A distressed property purchaser, in the course of a distressed property conveyance, shall not fail to:

     a.     make a payment to the owner at the time the title to the distressed property is conveyed from the owner to the distressed property purchaser, so that the owner has received consideration, as defined by paragraph (2) of subsection c. of section 11 of this act, in an amount of at least 82% of the property’s fair market value;

     b.    have all documents executed as part of a distressed property conveyance also signed by a notary public licensed in the State who is unrelated in any way to the distressed property purchaser or any participant in the distressed property conveyance;

     c.     complete a distressed property conveyance in the office of a title insurance producer licensed pursuant to the “New Jersey Insurance Producer Licensing Act of 2001,” P.L.2001, c.210 (C.17:22A-26 et seq.), or in the office of an attorney licensed to practice law in the State;

     d.    provide to the owner, prior to the time of completion of a distressed property conveyance, a disclosure statement in a form to be designed and prescribed by regulation by the Director of the Division of Consumer Affairs, within the Department of Law and Public Safety, in consultation with the Commissioner of Banking and Insurance, which statement shall require disclosure to the owner of all costs and fees that the owner will incur in connection with the conveyance;

     e.     notify in writing all existing mortgage lien holders of the distressed property purchaser’s intent to accept conveyance of an interest in the property from the owner;

     f.     fully comply with all terms and conditions contained in the mortgage lien documents, including but not limited to due-on-sale provisions; and

     g.     satisfy all qualification requirements for assuming the repayment of the mortgage.

 

     13.  Any waiver of the provisions of sections 8, 9, 10, 11, or 12 of this act is void and unenforceable as contrary to public policy.

 

     14.  a.  Any person who violates any provision of this act shall, in addition to any other penalty provided by law, be liable to a penalty of not more than $10,000 for the first offense,  and not more than $20,000 for the second and each subsequent offense, which 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.).

     b.    A person who violates any provision of this act is guilty of a crime of the third degree.  A person who violates any provision of this act in connection with a pattern of foreclosure rescue fraud or a conspiracy or endeavor to engage in a pattern of foreclosure rescue fraud is guilty of a crime of the second degree.

     c.     (1) Except as provided in paragraph (2) of this subsection, any distressed property conditional conveyance involving the transfer of an interest in fee or a beneficial interest created through a trust document, in a distressed property, and involving the acquirer of the property allowing the owner to occupy the property, which is made in violation of any provision of this act, is voidable and the transfer may be rescinded by the owner within two years of the date of the transfer.

     (2)   A violation of paragraph (2) of subsection a. of section 11 of this act or of subsection a. of subsection 12 of this act, shall not be a violation of this act that may cause a transfer described in paragraph (1) of this subsection to be voidable or subject to rescission.

     d.    (1) Except as provided in paragraph (2) of this subsection, an owner or a municipal lien tax holder of interest in a distressed property on behalf of an owner may bring an action in Superior Court against a foreclosure consultant or a distressed property purchaser for any violation of this act, for treble damages, attorney’s fees, costs of suit and appropriate equitable relief. In an action under this paragraph, the owner or municipal lien tax holder may:

     (a)   cause a notice of lis pendens to be filed in the office of the county clerk in the county in which the property is located, pursuant to N.J.S.2A:15-6 et seq.; and

     (b)   introduce or provide as evidence in the action, any contemporaneous oral agreements or representations made to the owner by any party to a foreclosure consultant contract, distressed property conditional conveyance contract, or distressed property conveyance contract signed by the owner.

     (2)   For a violation of paragraph (2) of subsection a. of section 11 of this act or of subsection a. of subsection 12 of this act, an owner may bring an action in Superior Court against a distressed property purchaser for actual damages.  In an action under this paragraph, the court may award attorney’s fees and costs of suit to the prevailing party.

     e.     The remedies and rights provided for in this act are not exclusive, but cumulative, and all other remedies or rights provided by State or federal law, including, but not limited to, those brought under the doctrine of equitable mortgage, are specifically preserved.

 

     15.  The Director of the Division of Consumer Affairs, within the Department of Law and Public Safety, in consultation with the Commissioner of Banking and Insurance, shall enforce the provisions of this act, and may promulgate regulations pursuant to the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.) necessary to effectuate the purposes of the act.

 

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

STATEMENT

 

     This bill, the "Foreclosure Rescue Fraud Prevention Act," requires foreclosure consultants and distressed property purchasers, who contract with owners of residential properties in financial distress, to adhere to certain practices in providing foreclosure prevention services to owners.

     The bill requires a foreclosure consultant to post a bond with the Division of Consumer Affairs prior to conducting any business in the State. In addition, the bill provides certain contract rights for owners of a financially distressed residential property, as defined in the bill, who contract with foreclosure consultants, including requirements that:

     (1)   the contract for foreclosure consulting services must be in writing and must contain certain disclosures and notice requirements in 14-point boldface type; and

     (2)   the owner has a right to cancel the foreclosure consulting contract at any time until after the foreclosure consultant has fully performed every service the consultant contracted to perform.

     The bill also prohibits certain practices by foreclosure consultants, including:

     (1)   collecting any fee prior to the completion of all agreed upon services, unless compensation for partial performance is expressly agreed upon in the contract; and

     (2)   collecting fees in excess of certain limits as described in the bill.

     In situations in which there is a distressed property conditional conveyance, whereby an owner transfers the distressed property to a distressed property purchaser, occupies the property, and retains an option to purchase the property back from the purchaser, or a distressed property conveyance, whereby an owner simply transfers the distressed property to a distressed property purchaser, the bill provides certain contract rights to owners, including requirements that:

     (1)   the contract be in writing and include certain notices and disclosures in 14-point boldface type; and

     (2)   the owner has a right to cancel the contract during certain periods as described in the bill.

     As to distressed property conditional conveyances, the bill places certain obligations on distressed property purchasers, including requirements to:

     (1)   verify that the owner has a reasonable ability to pay for a subsequent conveyance of title back to the owner;

     (2)   ensure that the owner is paid at least 82% of the property’s fair market value in consideration for the owner’s conveyance of title, or transfer of a beneficial interest through a trust, to the distressed property purchaser; and

     (3)   provide to the owner, prior to a distressed property conditional conveyance, a disclosure statement that includes all costs the owner will incur in connection with the conveyance and any option for the owner to purchase the property back from the purchaser.

     As to distressed property conveyances, the bill places certain obligations on distressed property purchasers, including a requirement that the owner is paid at least 82% of the property’s fair market value in consideration for the owner’s transfer of title to the distressed property purchaser.

     For a violation of the bill’s provisions, the bill provides for a civil penalty of not more than $10,000 for the first offense, and not more than $20,000 for the second and each subsequent offense, which 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.).

     The bill provides that any person who violates any provision of the bill is guilty of a crime of the third degree.  A person who violates any provision of the bill in connection with a pattern of foreclosure rescue fraud or a conspiracy or endeavor to engage in a pattern of foreclosure rescue fraud is guilty of a crime of the second degree.

     The bill also provides that any distressed property conditional conveyance involving the transfer of an interest in fee or a beneficial interest through a trust document and involving the acquirer of the property allowing the owner to occupy the property, which is made in violation of any provision of the bill, except a violation of the provision relating to payment of at least 82% of the property’s fair market value, is voidable and the transfer may be rescinded by the owner within two years of the date of the transfer.

     In addition, the bill provides that an owner or a municipal tax lien holder of interest in a distressed property on behalf of an owner, may bring an action in Superior Court against a foreclosure consultant or a distressed property purchaser for any violation of the bill’s provisions, for treble damages, attorney’s fees, costs of suit and appropriate equitable relief. If an owner or municipal tax lien holder commences such an action, the party may:

     (1)   cause a notice of lis pendens to be filed in the office of the county clerk in the county in which the property is located, pursuant to N.J.S.2A:15-6 et seq.; and

     (2)   introduce or provide as evidence in the action, any contemporaneous oral agreements or representations made to the owner by any party to a foreclosure consultant contract or distressed property conveyance contract signed by the owner.

     Further, for a violation of the bill’s provisions requiring payment of at least 82% of the property’s fair market value by a distressed property purchaser, in the course of a distressed property conditional conveyance or a distressed property conveyance, an owner may bring an action in Superior Court against a distressed property purchaser for actual damages, and a court may award attorney’s fees and costs of suit to the prevailing party in the action.

     Finally, the bill provides that the Director of the Division of Consumer Affairs, within the Department of Law and Public Safety, in consultation with the Commissioner of Banking and Insurance, shall enforce the provisions of the bill, and may promulgate regulations necessary to effectuate the purposes of the bill.