SENATE, No. 1391

 

STATE OF NEW JERSEY

 

INTRODUCED JUNE 27, 1996

 

 

By Senator INVERSO

 

 

An Act concerning secondary mortgage lenders and amending P.L.1970, c.205.

 

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

 

    1. Section 13 of P.L.1970, c.205 (C.17:11A-46) is amended to read as follows:

    13. A secondary mortgage loan licensee shall not:

    a. Transact any business subject to the provisions of this act under any other name or at any other location except that designated in his license. For the purpose of this section, the transaction of business includes, but is not limited to, the signing of any instrument, document or any other form by the borrower, except that a borrower's application for a secondary mortgage loan need not be signed in the office of the licensee and that a secondary mortgage loan need not be closed at the office of a licensee provided that it is closed in New Jersey at the office of an attorney admitted to practice in this State. A licensee who changes his name or place of business shall immediately notify the commissioner who shall issue a certificate to the licensee, which shall specify the licensee's new name or address.

    b. Photocopy or otherwise reproduce his license.

    c. Request that a borrower incorporate in connection with a secondary mortgage loan or aid or abet such a scheme.

    d. Make a secondary mortgage loan which has been referred by a retail seller, who, in connection with such referral, has required the borrower to purchase personal property or services or has indicated that such purchase is necessary as a condition precedent for such loan.     e. Charge an application fee in excess of $300 or collect an application fee, if charged, prior to the time a secondary mortgage loan is closed or make any other charge or accept an advance deposit prior to the time a secondary mortgage loan is closed ; provided however, that if an application fee is charged and collected with respect to an open-end secondary mortgage loan, no annual fee shall be charged pursuant to subsection m. of this section with respect to that loan.

    f. Require or accept from a borrower any collateral or security for a secondary mortgage loan other than a mortgage, indenture or any other similar instrument or document which creates a lien upon any real property or an interest in real property including, but not limited to, shares of stock in a cooperative corporation.

    g. Contract for, charge, receive or collect directly or indirectly, any of the following in connection with a secondary mortgage loan: a broker's or finder's fee; commission; expense; fine; penalty; premium, or any other thing of value other than the charges authorized by this act; except the expenses incurred on actual sale of the real property in foreclosure proceedings or upon the entry of judgment, which are otherwise authorized by law; provided, however, that:

    (1) a licensee may require a borrower to pay a reasonable legal fee at the time of the execution of the secondary mortgage loan, provided any such legal fee shall represent a charge actually incurred in connection with said secondary mortgage loan and shall not be paid to a person except an attorney authorized to practice law in this State; provided, further, that such legal fee shall be evidenced by a statement from such attorney issued to the licensee; and

    (2) a licensee may charge and receive no more than three discount points computed as a percentage of the amount of the loan and may add such discount points to the principal balance of the loan which discount points shall be fully earned when the loan is made and shall be included in the finance charge and disclosed to the borrower as required under the truth in lending provisions of the Consumer Credit Protection Act, 15 U.S.C.§1601 et seq. The annual percentage rate charged to the borrower, including the discount points, if any, disclosed under this paragraph (2), shall be subject to N.J.S.2C:21-19. As used in this paragraph (2), "discount point" means one per cent of the amount of credit to be extended to the borrower.

    h. Assign, sell or transfer a secondary mortgage loan to a person other than a banking institution as defined in section 1 of P.L.1948, c.67 (C.17:9A-1), association, as defined in section 5 of P.L.1963, c.144 (C.17:12B-5), or another secondary mortgage loan licensee, the Federal National Mortgage Association created pursuant to section 302 of the [National Housing Act ,] "National Housing Act," 48 Stat. [1246] 1254 (12 U.S.C.§1717), the Federal Home Loan Mortgage Corporation created pursuant to section 303 of the "Federal Home Loan Mortgage Corporation Act," Pub.L. 91-351 (12 U.S.C.§1452), or other persons or entities as from time to time approved by the commissioner to facilitate and assure the steady flow of secondary mortgage funds into the State. Notwithstanding any other provisions of this act, such persons or entities need not be licensed under the act to purchase or accept such an assignment or transfer of a secondary mortgage loan.

    i. Solicit secondary mortgage loan business through any other person by paying, directly or indirectly, for such business referred to the licensee by any such person, except that a licensee may solicit secondary mortgage loan business on behalf of another licensee or lender expressly authorized to make secondary mortgage loans in this State if (1) such solicitation results in no additional cost or expense to the borrower; and (2) the application and all advertising in connection therewith clearly disclose the identity of the person or entity which will be making the loan. If those conditions are met, a licensee may collect a fee or a commission from the lender as consideration for the solicitation.

    j. (Deleted by amendment, P.L.1993, c.260).

    k. Advertise, cause to be advertised or otherwise solicit whether orally, in writing, by telecast, by broadcast or in any other manner:

    (1) That he is licensed by, or that his business is under the supervision of, the State of New Jersey or the Department of Banking, except that a licensee may advertise that he is "licensed pursuant to the 'Secondary Mortgage Loan Act'"; provided, however, that for the purpose of raising capital, no such advertisement shall be permitted if it is to be used in connection with a public solicitation for such funds.             (2) Any name, address or telephone number other than the licensee's own name, address and telephone number in this State, except as permitted in paragraph (3) of this subsection.

    (3) The word "bank" or any term inferring that the licensee is or is associated with a bank provided, however, that nothing in this paragraph shall be deemed to prohibit a licensee which is owned by or affiliated with a banking institution, as defined pursuant to section 1 of P.L.1948, c.67 (C.17:9A-1), or a holding company which owns or controls a banking institution from using the name of the banking institution or the holding company in its advertising.

    (4) The amount of the interest to be charged, unless such charge is also expressed as an annual percentage rate.

    (5) Any statement or representation which is false, misleading or deceptive and, provided further, a written or other visual advertisement shall include the licensee's name, address and telephone number in this State and the phrase "Secondary Mortgage Loans" in 10-point bold type or larger.

    (6) Any statement or representation that the licensee will provide "immediate approval" of a loan application or "immediate closing" of a loan or will afford unqualified access to credit.

    l. Make or offer to make any secondary mortgage loan which would not be a prudent loan.

    m. Charge an annual fee on an open-end secondary mortgage loan in excess of 1 per cent of the line of credit or $50, whichever is less, provided however, that:

    (1) no annual fee shall be charged or collected prior to the closing of an open-end secondary mortgage loan, but an initial annual fee may be collected at the time an open-end secondary mortgage loan is closed; and

    (2) if an annual fee is charged on an open-end secondary mortgage loan, it shall be in lieu of, and not in addition to, the application fee which is permitted to be collected at the time of closing pursuant to subsection e. of this section.

    n. Fail to make the disclosures required pursuant to the federal "Truth in Lending Act," 15 U.S.C.§1601 et seq. and the regulations implementing that act, 12 C.F.R.§226 et seq. 

(cf: P.L.1993, c.260, s.10)

 

    2. This act shall take effect immediately.

 

 

STATEMENT

 

    This bill would permit licensed secondary mortgage lenders to charge an application fee not in excess of $300, which may be collected at the time a secondary mortgage loan is closed. In addition, with respect to open-end secondary mortgage loans, a secondary mortgage lender is permitted to charge either an application fee or an annual fee. The annual fee cannot exceed the lesser of $50 or one percent of the line of credit. Under the bill, an initial annual fee may be collected at the time an open-end secondary mortgage loan is closed.

 

 

                             

 

Provides certain fees for secondary mortgage loans under certain circumstances.