Bill Text: NJ A5168 | 2018-2019 | Regular Session | Introduced
Bill Title: Regulates certain servicing activities provided by mortgage servicing organizations for residential mortgage loans.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2019-03-11 - Introduced, Referred to Assembly Financial Institutions and Insurance Committee [A5168 Detail]
Download: New_Jersey-2018-A5168-Introduced.html
Sponsored by:
Assemblyman P. CHRISTOPHER TULLY
District 38 (Bergen and Passaic)
Assemblywoman LISA SWAIN
District 38 (Bergen and Passaic)
SYNOPSIS
Regulates certain servicing activities provided by mortgage servicing organizations for residential mortgage loans.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning mortgage servicers and supplementing Title 17 of the New Jersey Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. The Legislature finds and declares:
a. Mortgage servicing organizations provide important services to New Jersey's residential property mortgagors by crediting mortgage payments, crediting escrow account payments, managing escrow accounts, providing escrow statements, providing payoff statements, forwarding discharges of mortgages, canceling mortgage guaranty insurance, and responding to consumer complaints in accordance with applicable State and federal law.
b. However, when these important services are not correctly performed, New Jersey residents may be subject to substantial financial risks and great inconvenience.
c. While recognizing the risk to consumers, the Legislature is also sensitive to the benefits of preserving the open marketability of servicing rights to New Jersey mortgages, and the potential to adversely impact marketability if it imposes burdensome regulation on servicing organizations.
d. Therefore, the Legislature, through this act, seeks to balance the protections of regulatory oversight to mortgagors, to assure their mortgages are serviced in a proper and timely manner, with the preservation of the marketability of servicing rights to New Jersey residential mortgages.
2. As used in this act:
"Business day" means any day on which the office of a servicing organization is open to the public to provide mortgage servicing activities.
"Commissioner" means the Commissioner of Banking and Insurance.
"Department" means the Department of Banking and Insurance.
"Mortgage escrow account" or "escrow account" means an account which is part of a mortgage loan agreement, whether incorporated into the agreement or as part of a separately executed document, whereby: the mortgagor is obligated to make periodic payment to the mortgagee or his agent for taxes, insurance premiums, or other charges with respect to the real property which secures the mortgage loan; and the mortgagee or his agent is obligated to make payments for taxes, insurance premiums or other charges with respect to the real property which secures the mortgage loan.
"Mortgage loan" means a loan made to a natural person or persons to whom credit is offered or extended primarily for personal, family or household purposes which is secured by a mortgage constituting a lien upon real property located in this State on which there is erected or to be erected a structure containing, one, two, three, four, five or six dwelling units, a portion of which structure may be used for nonresidential purposes, in the making of which the mortgagee relies primarily upon the value of the mortgaged property.
"Mortgage loan agreement" means all documents related to a mortgage loan that obligate the mortgagor to repay the mortgage loan or that support the mortgage obligation, including, but not limited to, the mortgage note, mortgage instrument, mortgage escrow account, deed, and any riders and addenda to these documents.
"Mortgagee" means the holder of a mortgage loan.
"Mortgagor" includes any person liable for the payment of a mortgage loan, and the owner of real property which secures the payment of a mortgage loan.
"Servicing" means performing, or possessing the authority to perform, any of the following activities for a fee in connection with a mortgage loan agreement: crediting mortgage payments, crediting escrow account payments, managing escrow accounts, providing escrow statements, providing payoff statements, forwarding discharges of mortgages, canceling mortgage guaranty insurance, and responding to consumer complaints in accordance with applicable law.
"Servicing organization" means a mortgagee or an agent of the mortgagee, pursuant to a written agreement between the agent and the mortgagee, which is responsible for servicing one or more mortgage loans.
3. a. A servicing organization shall be subject to department regulation for the limited purposes set forth in this act.
b. Except as provided in subsection c. of this section, a servicing organization shall:
(1) if it becomes a servicing organization of a mortgage loan on or after the effective date of this act, within 30 days of becoming the servicing organization, file a registration with the department, which includes: the organization's name; principal business address; name and address of an appropriate contact person; and name and address of the organization's agent for service of process in this State, which may be the commissioner, if the servicing organization is not in this State;
(2) if it is already a servicing organization of a mortgage loan before the effective date of this act, and continues to be a servicing organization for a mortgage loan on and after the effective date, file the registration as set forth in paragraph (1) of this subsection within 30 days of the effective date of this act, or within a longer period of days as specified by the commissioner by regulation.
c. (1) Except as provided in paragraph (2) of this subsection, any person or entity that is subject to registration and regulation by the department pursuant to any other State law, and is also a servicing organization, shall not be required to additionally register as a servicing organization pursuant to subsection b. of this section, but shall be subject to all other provisions of this act.
(2) The provisions of this act shall not apply to any federally insured bank or out-of-State bank, any wholly-owned subsidiary of a federally insured bank, or any operating subsidiary where each owner of the operating subsidiary is wholly owned by the same bank. A bank shall comply with all applicable federal laws and regulations relating to mortgage loan servicing, including, but not limited to, the "Real Estate Settlement Procedures Act of 1974", Pub.L.93-533 (12 U.S.C. s.2601 et seq.), and the "Truth in Lending Act", Pub.L.90-321 (15 U.S.C. s.1601 et seq.), and the regulations promulgated thereunder. In addition to any other remedies provided by law, a violation of any federal law or regulation shall be deemed a violation of this act and a basis upon which the commissioner may take enforcement action pursuant to this act.
4. a. A servicing organization shall maintain a written schedule of fees that it charges mortgagors. The schedule shall identify each fee, provide a plain explanation of the fee, and state how the fee is calculated or determined. A servicing organization shall make its schedule available to the mortgagor or the mortgagor's authorized representative at the time that the servicing of the mortgage loan is transferred to the servicing organization and at any time upon request of the mortgagor or the mortgagor's authorized representative.
b. A servicing organization shall not impose any late fee, convenience fee, delinquency fee, or any other fee that is imposed as a penalty for a late payment, in situations in which the mortgagor's payment is otherwise a full payment for the applicable period and is paid on, or prior to, its due date or within any applicable grace period provided under the terms of the mortgage loan agreement, using any manner of payment method or service that the servicing organization uses to obtain payment from a mortgagor.
c. A servicing organization shall not:
(1) employ any scheme, device, or artifice to defraud or mislead a mortgagor or any other person; or
(2) engage in any unfair or deceptive practice toward any person or misrepresent or omit any material information in connection with the servicing of the residential mortgage loan, including, but not limited to, misrepresenting:
(a) the amount, nature, or terms of any late fee, convenience fee, delinquency fee, any other fee that is imposed as a penalty for a late payment, or any payment due or claimed to be due on a mortgage loan;
(b) the terms and conditions of the agreement for servicing; or
(c) the mortgagor's obligations under the mortgage loan.
5. In addition to the provisions of this act, a servicing organization shall comply with any other State and federal law concerning the servicing of mortgage loan agreements, including, but not limited to:
a. N.J.S.46:26A-1 et seq., regarding the recording of instruments affecting a mortgage loan, and the satisfaction and discharge of that loan;
b. P.L.1990, c.69 (C.17:16F-15 et seq.) and the federal "Real Estate Settlement Procedures Act of 1974," Pub.L.93-533 (12 U.S.C. s.2601 et seq.), regarding the assumption of responsibility for one or more mortgage escrow accounts;
c. the "New Jersey Home Ownership Security Act of 2002," P.L.2003, c.64 (C.46:10B-22 et seq.), regarding the servicing of certain high-cost home loans as defined by that act;
d. the "Fair Foreclosure Act," P.L.1995, c.244 (C.2A:50-53 et seq.), regarding foreclosure procedures; and
e. the Mortgage Guaranty Insurance Act, P.L.1968, c.248 (C.17:46A-1 et seq.), and the federal "Homeowners Protection Act of 1998," Pub.L.105-216 (12 U.S.C. s.4901 et seq.), regarding the application and cancellation of mortgage guaranty insurance.
6. A servicing organization shall respond to a mortgagor whose mortgage loan agreement is serviced by the servicing organization regarding any complaint or inquiry presented to it by the mortgagor, and shall initiate any appropriate responsive action, within 10 business days of receipt of the complaint or inquiry.
7. A servicing organization shall, upon request, make available to the commissioner for inspection any accounts, books, and records concerning the servicing activities subject to regulation by this act which are necessary to enable the commissioner to reasonably determine the servicing organization's compliance with this act.
8. A servicing organization that violates any provision of this act shall be liable to a civil penalty of not more than $500 for each offense. Each violation of this act shall constitute a separate offense. If the violation is of a continuing nature, each day during which it continues shall constitute an additional, separate, and distinct offense. The penalties provided by this section shall be collected in a civil action by a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).
9. The commissioner shall adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations necessary to effectuate the purposes of this act.
10. This act shall take effect on the first day of the fourth month next following enactment, but the commissioner may take any anticipatory administrative action in advance thereof as shall be necessary for the implementation of this act.
STATEMENT
This bill provides the Department of Banking and Insurance with authority to regulate certain servicing activities provided by mortgage servicing organizations for mortgage loans on residential real property located in New Jersey.
The underlying intent of the bill is to balance the protections provided by regulatory oversight to mortgagors, to assure their mortgages are serviced in a proper and timely manner, without imposing burdensome regulation on servicing organizations and the
marketability of selling, assigning, or transferring servicing rights to New Jersey residential mortgages. To this end, the bill requires a servicing organization to register with the Department of Banking Insurance and to be subject to regulation by the department for the limited purposes of this bill.
The bill exempts from its provisions: any federally insured bank or out-of-State bank; any wholly-owned subsidiary of a federally insured bank; or any operating subsidiary where each owner of the operating subsidiary is wholly owned by the same bank. The bill requires a servicing organization to maintain a written schedule of fees that it charges mortgagors. The schedule shall identify each fee, provide a plain explanation of the fee, and state how the fee is calculated or determined. A servicing organization shall make its schedule available to the mortgagor or the mortgagor's authorized representative at the time that the servicing of the mortgage loan is transferred to the servicing organization and at any time upon request of the mortgagor or the mortgagor's authorized representative.
The bill prohibits a servicing organization from imposing any late fee, convenience fee, delinquency fee, or any other fee that is imposed as a penalty for a late payment, in situations in which the mortgagor's payment is otherwise a full payment for the applicable period and is paid on, or prior to, its due date or within any applicable grace period provided under the terms of the mortgage loan agreement, using any manner of payment method or service that the servicing organization uses to obtain payment from a mortgagor.
The bill also prohibits servicing organizations from engaging in certain unfair or deceptive practices, including those relating to misrepresentation of late fees and mortgage payments.
Servicing organizations shall also comply with any other State and federal law concerning the servicing of mortgage loans or any related obligation, including certain State and federal laws specified in the bill. A violation of any federal law or regulation shall be a violation of the bill and a basis upon which the Commissioner of Banking and Insurance may take enforcement action pursuant to the bill.
The bill also requires servicing organizations to respond to a mortgagor whose mortgage loan agreement is serviced by a servicing organization regarding any complaint or inquiry presented to it by the mortgagor, and shall initiate any appropriate responsive action, within 10 business days of receipt of the complaint or inquiry. Servicing organizations shall, upon request, make any accounts, books, and records concerning servicing activities available to the commissioner.
If a servicing organization violates any provision of the bill, it shall be liable to a civil penalty of not more than $500 for each offense. Each violation shall constitute a separate offense, and if the violation is of a continuing nature, each day during which it continues shall constitute an additional, separate, and distinct offense. The penalties provided under the bill shall be collected pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10).
Finally the bill requires the commissioner to adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations necessary to effectuate the purposes of this act.
