United States: New Jersey Giveth And Taketh Away: Recent Steps to Reduce And To Increase Regulatory Burden On Home Mortgage Lenders

Last Updated: June 19 2017
Article by Robert M. Jaworski

Most Read Contributor in United States, May 2017

Recently, the State of New Jersey has taken a small step in the direction of less regulation over home mortgage lenders and, virtually at the same time, a potentially more significant step in the opposite direction. Details are set forth below.

NJDOBI Proposes to Eliminate a Regulation

Yes, you read that right! On June 5, 2017, the New Jersey Department of Banking and Insurance ("Department") published a proposal to repeal a regulation first adopted in 2002 and readopted every 5 years thereafter. See 49 N.J. Reg. 1273-1274. That regulation, N.J.A.C. 3:1-16.2(a)3, required the Department to conduct and publish in the New Jersey Register an annual survey of third party appraisal fees (the "Annual Survey"). The purpose of the Annual Survey was to enable the Department to determine the current "usual, customary and reasonable" fee ("Customary Fee") that lenders would be permitted to charge their borrowers for the cost of an appraisal, whether "performed and delivered in-house" or obtained from an appraisal management company ("AMC"). The regulation states that for in-house appraisals, "the fee shall approximate the [Customary Fee] for comparable appraisals by third-party appraisers based on the [Annual Survey]"; and for appraisals obtained from AMCs, "the fee shall not exceed the amount charged by the [AMC] and shall approximate the [Customary Fee] for comparable appraisals by third party appraisers based on the [Annual Survey]."

The part of the regulation that addressed appraisals obtained from AMC was prompted by the Department's desire to protect consumers from lenders who try to pass along inappropriate costs in appraisal fees. The "inappropriate costs" of concern to the Department were what it perceived to be extra fees that AMCs (which were often owned by lenders) would charge lenders over and above the fees the AMCs paid to the independent third party appraisers they hired to perform the appraisals and prepare the appraisal reports. (AMCs generally manage the appraisal process for lenders. They select and hire appraisers, negotiate their fees, review the reports they prepare and submit those reports to the lenders in the form the lender requires.)

The Department has now changed its mind. It explains, in the Summary section of the proposal, that its prior concerns about AMCs "have subsided" and that the Annual Survey "could effectively represent an unwarranted restraint on a free market for appraisal charges, ... have a negative impact on the business community, and ... constitute an unneeded and burdensome regulatory requirement imposed upon lenders."

However, despite that the Department's concerns about AMCs have apparently subsided, its proposal appears to adversely impact AMCs and lenders that choose to use them. The proposal states that lenders may only recover from the borrower "the direct cost of the fee charged by a duly credentialed real estate appraiser for an appraisal in connection with a mortgage loan application." Whether or not so intended, this provision can be read to limit the amount of an AMC's fee that a lender may pass through to the borrower to the amount the AMC actually pays to the third-party appraiser it hires to perform the appraisal. We would be pleased to submit comments on the proposed regulation on behalf of industry participants.

One welcome addition in the proposal is its recognition that lenders may occasionally have "good cause" to require a second appraisal and that they should be able to recoup the cost of such a second appraisal from the borrower. Nevertheless, the proposal's "good cause" requirement leaves lenders at risk of an after-the-fact determination by the Department that no "good cause" existed. The Department attempts to provide guidance by setting forth the factors that it would consider in making such a determination – changed circumstances shown to materially affect value, staleness (not the result of material delay on the part of the lender), the need to comply with Federal regulations, and "such other factors as may reasonably be deemed material to the specific determination." These guidelines may not be viewed by lenders as particularly helpful, particularly in light of the Department's authority to order wholesale refunds.

New Jersey Assembly Passes Bill to Amend Fair Foreclosure Act

On June 8, 2017, the New Jersey Assembly, by a vote of 76 to 0, passed a bill (A-4369) which, if enacted into law, would: (1) require persons who make or hold residential mortgages or their assignees ("Lenders") to send a follow-up Notice of Intent to Foreclose ("NOI") to the debtor not later than 30 days before filing of a foreclosure action in any situation where more than 90 days has gone by since they sent a prior NOI to the debtor; and (2) give debtors a private right of action for damages against their Lender if the Lender violates any provision of the Fair Foreclosure Act, N.J.S.A. 2A:50-53 et seq.(the "FFA"). Currently, a lender's failure to comply with the provisions of the FFA may only be used by homeowners as a procedural defense to foreclosure.

The FFA currently requires Lenders to send debtors an NOI at least 30 days before accelerating the debt or filing a foreclosure action. The NOI must disclose 11 specific items of information, including how to cure the default, possible sources of financial assistance, and that the debtor has a right to his/her own attorney. And it must do so in a "clear and conspicuous" manner that is "calculated to make the debtor aware of the situation."

The bill now goes to the New Jersey Senate for consideration. If the bill is enacted into law in its current form, the additional notice requirement will cause further delays in the filing of some foreclosure actions. Moreover, and more importantly, the inclusion in the bill of a private right of action for damages will provide foreclosure defense counsel with yet another tool with which to fight Lenders' efforts to foreclose. For example, under the proposed legislation, if a Lender mistakenly files its foreclosure action or accelerates the debt sooner than 30 days or later than 90 days after sending the NOI, does not include in it each of the required items of information, or sets forth the required information in a manner that a court concludes is not "clear and conspicuous" or "calculated to make the debtor aware of the situation," the debtor could bring an action in Superior Court against the Lender and, if successful, recover "actual damage or $1,000, whichever is greater, attorney's fees, costs of suit and appropriate equitable relief."

*****

In sum, there does not appear to be anything in the Department's proposed regulation that is likely to be received by home mortgage lenders with enthusiasm, and much in the bill to amend the FFA that they will likely view with concern.

This article is presented for informational purposes only and is not intended to constitute legal advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.