4 HOUR NJ SAFE PE - NEW JERSEY STATE LAW. Course Approval: 1698 Course Material Date: 12/31/2015 Course Approval Date: 11/1/2015

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1 4 HOUR NJ SAFE PE - NEW JERSEY STATE LAW Course Approval: 1698 Course Material Date: 12/31/2015 Course Approval Date: 11/1/2015

2 2 Rules of Conduct Click Notes to see text of document.

3 New Jersey State Law I. N E W J E R S E Y D E PA R T M E N T O F B A N K I N G A N D I N S U R A N C E I I. S TAT E L AW A N D R E G U L AT I O N D E F I N I T I O N S I I I. N E W J E R S E Y R E S I D E N T I A L M O R T G A G E L E N D I N G A C T A N D R E G U L AT I O N S I V. C O M P L I A N C E V. D I S C I P L I N A RY A C T I O N V I. T I T L E 4 6 H O M E O W N E R S H I P S E C U R I T Y A C T O F ( A N T I - P R E D AT O RY L E N D I N G L AW ) 3

4 Course Overview 4 Copyright Mortgage Education.com All Rights Reserved

5 5 Education Our Education Format and Purpose Organized in Relevant and Intuitive Order Slide Presentation: Summary of Textbook and includes correlated text in the notes section Textbook: Detailed and includes footnotes to original documents Activities: Made to reinforce information Course Overview Copyright Mortgage Education.com All Rights Reserved

6 6 Laws and Regulations Course Overview New Jersey Laws and Regulations Laws and Statutes included in New Jersey Statutes Annotated (NJSA) Footnote example: NJSA 17:11c-51 refers to Title 17, Chapter 11c, Section 51 of the NJSA obase=statutes.nfo&softpage=toc_frame_pg42 Rules and Regulations included in New Jersey Administrative Code (NJAC) Footnote example: NJAC 3: 2-1 refers to Title 3, Chapter 2, Subchapter 1 of the New Jersey Administrative Code (NJAC) Copyright Mortgage Education.com All Rights Reserved

7 7 Laws and Regulations New Jersey Residential Mortgage Lending Act (RMLA) Protect consumers seeking mortgage loans Ensure the industry operates without unfair, deceptive, and fraudulent practices Satisfy SAFE Act requirements Course Overview Increase Commissioner s powers of oversight Source: NJSA 17:11C-52 Copyright Mortgage Education.com All Rights Reserved

8 8 Laws and Regulations New Jersey Home Ownership Security Act Of 2002 (HOSA) Prevent abusive terms in loans secured by a consumer's home Course Overview Source: NJSA 46:10B-23(c) Copyright Mortgage Education.com All Rights Reserved

9 9 Laws and Regulations Reference List New Jersey Residential Mortgage Lending Act NJSA Title 17:11C-51 to 11C-89 n&hitsperheading=on&infobase=statutes.nfo&record={5a9c}&softpage=doc_frame_pg42 New Jersey Home Ownership Security Act Of 2002 NJSA Title 46: 10b-23 to 10b-35 n&hitsperheading=on&infobase=statutes.nfo&record={13ed5}&softpage=doc_frame_pg42 Course Overview New Jersey Administrative Code References Title 3 ( ) Chapter 1, Subchapter 16.1 and Subchapter 7 Chapter 2, Subchapter 1; Chapter 15, Subchapter 1; Chapter 30, Subchapter 1. Source: There is no direct link to each code section, but this link will take you to the table of contents Copyright Mortgage Education.com All Rights Reserved

10 I. New Jersey Department of Banking and Insurance 10 A. R E G U L AT O RY A U T H O R I T Y B. D E PA R T M E N T / A G E N C Y S T R U C T U R E C. R E S P O N S I B I L I T I E S A N D L I M I TAT I O N S Copyright Mortgage Education.com All Rights Reserved

11 11 I. New Jersey Department of Banking and Insurance A. Regulatory Authority Department of Banking Responsibilities: Supervises State-Chartered Banks & Credit Unions Conducts On-site Examinations Monitors Net worth & Surety Bond Requirements Issues Enforcement Actions Issues Licenses to Mortgage Originators, Lenders, Brokers, Correspondents Division of Banking

12 12 I. New Jersey Department of Banking and Insurance A. Regulatory Authority Office of Consumer Finance Regulates 16 types of financial service businesses Investigates complaints Conducts on-site examinations Monitors net worth and surety bonding requirements Initiates enforcement actions as required Supervises state-chartered credit unions Office of Depositories Processes and reviews applications by depository institutions for: New charters, branches, relocations Plans of acquisition, mergers, bulk sales, stock conversions & auxiliary offices Conducts examinations of statechartered commercial banks, savings banks and savings and loan institutions Initiates enforcement actions as required Copyright Mortgage Education.com. All Rights Reserved

13 13 I. New Jersey Department of Banking and Insurance DOBI consists of two units Office of Consumer Finance Supervision Bureau Examinations & Surveillance Consumer Services Bureau Enforcement Bureau B. Department/ Agency Structure Office of Depositories Legislative & Regulatory Affairs Banking Online Licensing Services

14 14 I. New Jersey Department of Banking and Insurance C. Responsibilities & Limitations Enforces statutes and regulations that protect NJ consumers in financial transactions DOBI oversees compliance & issues enforcement actions for violations Investigates & examines books, records, accounts Issues administrative penalties / fines Issues temporary suspension or full suspension of licenses (cease & desist orders) Bars violators from mortgage originations Processes and reviews applications by depository institutions for new charters, branches, auxiliary offices, relocations, acquisitions, mergers, bulk sales and stock conversion

15 II. State Law and Regulation Definitions A. N J A C ( 3 : ) M O R T G A G E L O A N S, F E E S, O B L I G AT I O N S B. T I T L E 4 6 R E A L P R O P E R T Y L AW C. N E W J E R S E Y R E S I D E N T I A L M O R T G A G E L E N D I N G A C T A N D R E G U L AT I O N S D. O T H E R S TAT E L AW S A N D R E G U L AT I O N D E F I N I T I O N S 15

16 16 II. State Law & Regulation Definitions Before accepting any fee, Lenders/Brokers make written disclosure to borrower providing: Description and amount of fee Whether fees are refundable Terms & conditions for the refund Loan Estimate meets all requirements of disclosure if: Delivered or mailed to applicant within 3 business days of application receipt A realistic estimate of calendar days required to issue a commitment A. NJAC 3: Mortgage Loan Fees & Obligations Provide the name or title of person to whom borrower may address questions or concerns For correspondent mortgage lenders, a statement that the licensee is a correspondent mortgage lender and does not hold or service mortgage loans for more than 90 days in regular course of business Source: NJAC: 3: (a)(1-6) Application Process

17 17 II. State Law & Regulation Definitions Disclosures shall be: Acknowledged in writing by borrower Maintained by the lender/broker Copy of acknowledgment given to borrower Lender obligated to process applications submitted and grant or deny Provide borrower with a Loan Estimate within three business days of application date A. NJAC 3: Mortgage Loan Fees & Obligations Borrowers may withdraw applications without penalty any time prior to acceptance of a commitment Source: NJAC: 3: (b-e) Application Process

18 18 II. State Law & Regulation Definitions Brokers may only charge application fee and discount points on its own behalf Brokers disclose: Special Rule for Brokers Amount of broker s application fee Circumstances in which fee is refundable Amount of discount points payable for broker services Detailed listing of services provided by broker and statement that all fees paid to broker are refundable if broker doesn t perform services indicated A. NJAC 3: Mortgage Loan Fees & Obligations Whether broker places loans exclusively with any three or fewer lenders and lender name Brokers may not execute lock-in agreements, issue commitments, or guarantee acceptance into loan programs Brokers may not accept a lender s lock-in agreement or lock-in fees unless agreement contains all disclosures required by NJAC 3:1-16.4(a) Required broker disclosures should be acknowledged by borrower in writing and maintained by the broker and a copy of the acknowledgement will be given to borrower Source: NJAC: 3: Special Rule for Brokers

19 DOBI Allowed Mortgage Fees Application Fee Credit Report Fee Appraisal Fee Commitment Fee Lock-In Fee Warehouse Fee Third Party Fees Overnight delivery, messenger, fax, & other special delivery fees Flood Certification Fees Pest Inspection Fee Outside Counsel Fees Certified Check Fees Credit Report & Appraisal Update Fees One-Time Mortgage Insurance Premiums Survey Fees Recording Fees Title and Title Search Fees Taxes Tax Service Fees Radon Test Fees Discount Points Cancellation Fees capped at $25.00 Final Inspection Fees NJAC 33:1-16.2(a)(1-9) Fees 19

20 Fees Not Allowed by DOBI Doc Prep Fees Underwriting Fees Lender Review Fees Funding Fees Processing Fees File Update Fees Copying Fees Miscellaneous Fees A. NJAC 3:1-16.2(a)(7)(xv), 3:1-16.2(b) 20

21 21 II. State Law & Regulation Definitions B. Title 46 Real Property Law Examples of abusive lending practices: Loss of borrower equity in homes due to: Lenders making loans that are equity based instead of income-based Financing of points and fees provides immediate income to abusive lenders and eats up borrower equity Abusive lenders benefit even if borrower can t afford the payment and is forced to refinance Source: N.J.S.A. 46:10B-23(2)(a-c) Findings, Declarations Relative to Abusive Lending Practices

22 22 II. State Law & Regulation Definitions B. Title 46 Real Property Law Pursuant to the Home Ownership Security Act a home loan is An extension of credit, primarily for personal or household purposes, secured by a mortgage on real estate in NJ on which there is located or to be located a dwelling which will be occupied by the borrower as the borrower s principal dwelling or A security interest in a manufactured home which is or will be occupied by the borrower as the borrower s principal dwelling. Source: N.J.S.A. 46:10B-24(3)(4) Definitions relative to abusive lending practices

23 23 II. State Law & Regulation Definitions The New Jersey Residential Mortgage Lending Act concerns certain licensed mortgage and consumer lending practices, supervision and enforcement. Signed into Law May 4, 2009 C. NJ Residential Mortgage Lending ACT Source: N.J.S.A. 17:11C-54(c) Governor, Jon S. Corzine

24 24 II. State Law & Regulation Definitions Application Regulation Definitions The document(s) or information, including the payment or any fees, that a lender or broker requires a borrower to submit for the purpose of having the lender to determine whether to grant or deny a mortgage loan. (Source: NJAC 3: Definitions) Borrower s Agent A person or entity hired, contracted or requested by the borrower to supply information or documentation to the lender (Source: NJAC 3: Definitions) D. Other State Laws & Regulation Definitions Business Licensee A corporation, association, joint venture, partnership, limited liability company, limited liability partnership, sole proprietorship, licensed as a residential mortgage lender or residential mortgage broker, or that should be so licensed. (Source: N.J.S.A. 17:11C-53(3) Definitions)

25 25 II. State Law & Regulation Definitions Closed-end Loan Regulation Definitions A secondary mortgage loan pursuant to which the business 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, (Source: N.J.S.A. 17:11C-53) D. Other State Laws & Regulation Definitions Commitment Current Market Yield A signed statement issued by a lender in which the lender promises to make a loan of specified terms to a specified borrower (Source: NJAC 3: Definitions) The yield being sought by that purchaser for that loan. (Source: NJAC 3: Definitions)

26 26 II. State Law & Regulation Definitions D. Other State Laws & Regulation Definitions Lock-in Agreement Mortgage Loan Regulation Definitions An agreement between the lender and the borrower whereby the lender guarantees until a specified date the availability of a specified rate of interest or specified formula by which the rate of interest will be determined and/or specific number of discount points, provided the loan is approved and closed by the specified date. (Source: NJAC 3: Definitions) Any closed-end loan to a borrower secured by a first mortgage on real property located in New Jersey on a one to four family dwelling units, a portion of which may be used for nonresidential purposes. (Source: NJAC 3: Definitions

27 27 II. State Law & Regulation Definitions D. Other State Laws & Regulation Definitions Residential Mortgage Broker Regulation Definitions Any person who for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly takes a residential mortgage loan application for others, or negotiates, places or sells for others, or offers to take an application for, negotiate, place or sell, residential mortgage loans in the primary market for others. (Source: NJAC 3: Definitions) Copyright Mortgage Education.com All Rights Reserved

28 28 II. State Law & Regulation Definitions D. Other State Laws & Regulation Definitions Correspondent Mortgage Lender Mortgage Loan Originator NMLSR Regulation Definitions Originates & closes in own name using funds provided by wholesale table-funder or warehouse agreements. (Source: N.J.S.A. 17:11C-53) Person who for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly takes a residential mortgage loan application, or offers or negotiates terms of a residential mortgage loan. (Source: N.J.S.A. 17:11C-53) Nationwide Mortgage Licensing System and Registry (Source: N.J.S.A. 17: 11C-53) Copyright Mortgage Education.com All Rights Reserved

29 29 II. State Law & Regulation Definitions D. Other State Laws & Regulation Definitions Tangible Net Worth Registered Mortgage Loan Originator Regulation Definitions Assets less liabilities (Source: NJAC 3: Definitions) Any individual who is a mortgage loan originator and an employee of a depository institution; a subsidiary that is owned and controlled by a depository institution and regulated by a federal banking agency; or an institution regulated by the Farm Credit Administration; and is registered with, and maintains a unique identifier through the Nationwide Mortgage Licensing System and Registry (Source: NJAC 17:11C-53) Copyright Mortgage Education.com All Rights Reserved

30 30 II. State Law & Regulation Definitions D. Other State Laws & Regulation Definitions Unique Identifier Qualified Individual Licensee Regulation Definitions A number or other identifier assigned by NMLSR (Source: N.J.S.A. 17:11C-53) An individual licensed as a residential mortgage lender or residential mortgage broker, who is required to be licensed under this act as a condition for a person to be issued or hold a license as a business licensee, whereby the individual: (1) meets, at a minimum, the licensing criteria applicable to a mortgage loan originator; and (2) is an officer, director, partner, owner, or principal of the business licensees (Source: N.J.S.A. 17:11C-53) Copyright Mortgage Education.com All Rights Reserved

31 31 II. State Law & Regulation Definitions Warehouse Agreement Regulation Definitions Is an agreement to provide credit to a licensee to enable the licensee to have funds to close mortgage loans and hold those mortgage loans pending sale to permanent investors (Source: 3: Definitions) D. Other State Laws & Regulation Definitions

32 III. New Jersey Residential Mortgage Lending Act & Regulations A. P E R S O N S R E Q U I R E D T O B E L I C E N S E D B. L I C E N S E E Q U A L I F I C AT I O N S & A P P L I C AT I O N P R O C E S S C. G R O U N D S F O R D E N Y I N G L I C E N S E 32 D. L I C E N S E M A I N T E N A N C E

33 33 III. New Jersey Residential Mortgage Lending Act & Regulations A.1 Persons Required to be Licensed Residential Mortgage Lenders Correspondent Mortgage Lenders Residential Mortgage Broker Mortgage Loan Originator Qualified Individual Licensees Secondary Mortgage Lenders Source: N.J.S.A.17:11C-54 Licensing Requirements

34 34 III. NJ Residential Mortgage Lending Act & Regulations A.2 Exemptions Depository Institutions Subsidiaries & service corps are not exempt A NMLSR registered mortgage originator A licensed residential real estate attorney Person licensed as a real estate broker or salesperson Employers providing mortgage loans as employee benefit Source: N.J.S.A. 17:11C-55(5)(a-e) Inapplicability of Act

35 35 III. NJ Residential Mortgage Lending Act & Regulations The State of New Jersey, municipality Any person who offers or negotiates terms of a residential mortgage loan: With or on behalf of immediate family member or Secured by a dwelling that served as individual s residence A.2 Exemptions Source: N.J.S.A. 17:11C-55(5)(f-g) Inapplicability of Act

36 36 III. NJ Residential Mortgage Lending Act & Regulations New Licenses for Residential Mortgage Lenders & Residential Mortgage Brokers 1. Completed electronic application through NMLSR with Unique Identifier assigned & supporting documentation 2. Name, address, fingerprints & written consent for criminal background checks for all officers, directors, partners, & owners of controlling interest B. Licensee Qualifications & Application Process 4. Demonstration of character & fitness 5. Demonstration of Affiliated Qualified Individual licensees Source: N.J.S.A. 17:11C-56

37 37 III. NJ Residential Mortgage Lending Act & Regulations New Licenses for Residential Mortgage Lenders & Residential Mortgage Brokers 5. Provide Surety Bond meeting state requirements 6. Meet tangible net worth requirements 7. Payment of investigative & license fees 8. Complete pre-licensing education requirements B. Licensee Qualifications & Application Process 9. Pass NMLSR and State written exams with a 75% or above score 10. Completion of any requirements as requested by Commissioner Source: N.J.S.A. 17:11C-56, N.J.S.A. 17:11C-59(a.), N.J.S.A. 17:11C-60(10)

38 38 III. NJ Residential Mortgage Lending Act & Regulations B. Licensee Qualifications & Application Process Additional Application requirements for Residential Mortgage Lenders & Brokers: Licensing application required for each office originating mortgages with NJ consumers: Located in NJ & outside NJ if interacting with NJ consumers License one principal office and branch offices where mortgage origination occurs Office address (Office must meet suitable location requirement) Source: N.J.S.A. 17:11C-65 Maintenance of Branch Offices by Business Licensee

39 39 III. NJ Residential Mortgage Lending Act & Regulations B. Licensee Qualifications & Application Process Residential Mortgage Lender or Residential Mortgage Broker Application Requirements: Blanket Surety Bond from company approved to issue in NJ - $25,000 minimum Bond to cover all individual licensees employed by business Include certification that all mortgage offices are covered by Surety Bond Non-refundable application fee as determined by DOBI Source: N.J.S.A. 17:11C-63 Business Licensee Required to Obtain Blanket Bond N.J.S.A. 17:11C-57(7)(b.)(3)

40 40 III. NJ Residential Mortgage Lending Act & Regulations Closed Loan Volume Surety Bond Coverage Initial $150,000 $0 to $50,000,000 $150,000 $50,000,001 to $75,000,000 $200,000 $75,000,001 to $100,000,000 $250,000 $100,000,001 and over $300,000 B. Licensee Qualifications & Application Process Source: N.J.A.C. 3: Bond Requirements

41 41 III. NJ Residential Mortgage Lending Act & Regulations B. Licensee Qualifications & Application Process Minimum net worth required for applicant for business license: Residential Mortgage Lender - $250,000 Correspondent Mortgage Lender - $150,000 Residential Mortgage Broker - $50,000 Commissioner may by regulation require business licensees to demonstrate that it has adequate means to fund loans through lines or credit, or otherwise Source: N.J.S.A. 17:11C-64(14) Minimum Net Worth Required for Applicant for Business License

42 42 III. NJ Residential Mortgage Lending Act & Regulations B. Licensee Qualifications & Application Process Residential Mortgage Lenders and Brokers applying as Qualified Individual Licensees need: 1. Completed application 2. Determination with respect to stricter or additional requirements 3. Payment of any required fees 4. Completion of 20-hrs pre-licensing education 5. Passage of qualified written exam Source: Public Law 2009, Chapter 53

43 43 III. NJ Residential Mortgage Lending Act & Regulations New Licenses for Residential Mortgage Loan Originators & Qualified Individual Licensees 1. Completed electronic application through NMLSR with unique identifier assigned 2. Criminal history background, credit report, & check of governmental information relative to administrative, civil or criminal findings 3. Demonstration of personal history, experience, & employment by licensed mortgage lender or broker 4. Demonstration of character and fitness. B. Licensee Qualifications & Application Process 5. Document coverage under employer s security bond 6. Completion of Pre-licensing and/or Continuing Education requirements. 7. Passage of qualified written exam with 75% or more score 8. Payment of investigative & license fees 9. Completion of any other requirements as set by Commissioner N.J.S.A. 17:11C-57(7)(a.)

44 44 III. NJ Residential Mortgage Lending Act & Regulations B. Licensee Qualifications & Application Process Source: Public Law 2009, Chapter 53, s. 12

45 45 III. NJ Residential Mortgage Lending Act & Regulations B.1 Financial Responsibility License applicants are not considered financially responsible when credit includes: Current outstanding judgments Outstanding tax or govt. liens Foreclosures during 3-yr period prior to application A pattern of seriously delinquent accounts during 3-yr period prior to application Source N.J.S.A. 17:11C-57(a.)(3)(a-d)

46 46 III. NJ Residential Mortgage Lending Act & Regulations B.2 Background Checks & Fingerprinting Background checks include: State criminal history record based on fingerprint data with State Bureau Includes criminal & non-criminal information FBI background check through NMLSR Fingerprints run through FBI database Source: N.J.S.A. 17:11C-57(7)(a.)(2)

47 47 III. NJ Residential Mortgage Lending Act & Regulations Pre-Licensing Education for Mortgage Loan Originators & Qualified Individual Licensees B.3 Pre- Licensing Education & Experience N.J.A.C. 3: (b)

48 48 III. NJ Residential Mortgage Lending Act & Regulations B.3 Pre- Licensing Education & Experience Mortgage Loan Originators must: Be registered with the Nationwide Mortgage Licensing System and Registry and Have a unique identifier issued by NMLSR Be employed by licensed residential mortgage lenders or brokers and provide documentation of employment Document evidence of coverage under employer s Security Bond Source: N.J.S.A. 17:11C-63(13)

49 49 III. NJ Residential Mortgage Lending Act & Regulations B.4 Testing & Re-Testing Qualified Individual Licensees and Mortgage Loan Originator applicants and one partner with 10% or more ownership must sit for and pass a qualified written test approved by NMLSR and/or DOBI with a score of 75% or higher. Test may be administered at any location including applicant s employer Test must cover Ethics, Federal and NJ state law & regulation pertaining to mortgage origination, fraud, consumer protection, non-traditional mortgages, and fair lending Source: Public Law 2009, Chapter 53, N.J.S.A. 17:11C-60(10)(a.)(1)

50 50 III. NJ Residential Mortgage Lending Act & Regulations Source: Public Law 2009, Chapter 53 and Federal Clarification HUD 24 CFR Parts 30 and 3400 Re-testing: May re-test 2 times with at least 30 days between tests After failing 3rd test, must wait 6 months before re-testing. This test would begin a new test cycle. Below example assumes Initial exam of 1/15 of previous year. Each yellow highlighted square represents when a test what was taken. B.4 Testing & Re-Testing

51 51 III. NJ Residential Mortgage Lending Act & Regulations If applicants have been convicted of or pled guilty or nolo contendere to a felony in a domestic court, which in NJ includes any crime of the fourth degree or higher punishable by a term of imprisonment of more than one year If Applicants have had a previous licensed issued by NJ or another state licensing agency revoked C. 1-4 Grounds for Denying a License Applicant hasn t demonstrated financial responsibility indicating inability to conduct business in a honest and ethical manner When applicants are subjects of a DOBI order N.J.S.A. 17:11C-57

52 52 III. NJ Residential Mortgage Lending Act & Regulations NJ DOBI Bulletin 09-31; Subject Criminal Convictions Prohibited from Licensing when applicant has: 1. Any federal crime exceeding 1- year imprisonment 2. Any 1 st, 2 nd, 3 rd, 4 th degree crime with punishment exceeding 1-yr imprisonment 3. Any Title 2A misdemeanor with punishment exceeding 1-yr imprisonment C. 1 Criminal Conviction 4. Any crime in another state whether or not a felony with punishment exceeding 1-yr imprisonment

53 53 III. NJ Residential Mortgage Lending Act & Regulations Annually, Residential Mortgage Lenders, Brokers, and Correspondent Mortgage Lenders: Must complete 12-hrs continuing education Must be registered with NMLSR Maintain Security Bond coverage Maintain tangible net worth requirements set by state of NJ Continue to comply with all licensing requirements as determined by Commissioner D. License Maintenance Payment of all required fees to DOBI & NMLSR Comply to all NJ Statutes & Federal Laws Source: N.J.S.A. 17:11C-57

54 54 III. NJ Residential Mortgage Lending Act & Regulations Annually, Mortgage Loan Originators and Qualified Individual Licensees must: Complete 12-hrs continuing education Be registered with NMLSR Document Security Bond coverage with employer Continue to comply with all licensing requirements as determined by Commissioner Payment of all required fees to DOBI & NMLSR D. License Maintenance Comply to all NJ Statutes & Federal Laws Source: N.J.A.C. 3:

55 55 III. NJ Residential Mortgage Lending Act & Regulations D. License Maintenance Must complete 12-hrs continuing education provided by NMLSR approved training company Topics included: 3-hrs on federal statutes & regulations 2-hrs of instruction on ethics, including fraud, consumer protection, & fair lending issues 2-hrs on lending standards for nontraditional mortgage products 2-hrs on state-specific statutes and rules 3-hrs of undefined instruction Source: N.J.A.C. 3: (a-b), N.J.A.C. 3: (c)

56 56 III. NJ Residential Mortgage Lending Act & Regulations Continue to meet minimum standards for license issuance Standards for Mortgage Lenders, Brokers, Originators license renewal: Satisfy the continuing education requirements D. License Maintenance Pay all required fees for the renewal of the license Failure to comply results in license expiration. Source: Public Law 2009, Chapter 53

57 57 III. NJ Residential Mortgage Lending Act & Regulations Licensee Personal Updates Every residential mortgage lender and broker shall submit: Annual mortgage call reports to the Commissioner of DOBI and NMLSR providing updated information regarding: Location of records Details of origination conducted during reporting period Licensees personal information D. License Maintenance NOTE: Change in location of records are to be reported in writing to the Commissioner within 5 business days of change N.J.S.A. 17:11C-85(35)(a.)(1-2), N.J.S.A. 17:11C-19(19)(b)

58 58 III. NJ Residential Mortgage Lending Act & Regulations D. License Maintenance Record Keeping and Reporting All licensees shall: Identify place of business where mortgage origination records are maintained Notify Commissioner in writing of records change of location within five (5) business days of change Maintain & make available for examination by Commissioner for at least three (3) yrs from origination or longer as required by regulation Source: N.J.S.A. 17:11C-71(21)

59 59 III. NJ Residential Mortgage Lending Act & Regulations D.5 Suspension & Reinstatement Licensure may be revoked, suspended or renewal refused if: Any officer, director, partner, or member/owner commits any act with cause for suspension or revocation If license issued to partnership, association, or corporation, license may be suspended until relationship with individual is severed Offending individual (officer or director) required to fully divest themselves of all stock, bonds, or corp. holdings. Source: N.J.S.A. 17:11C-70(20)

60 60 III. NJ Residential Mortgage Lending Act & Regulations D.5 Suspension & Reinstatement License Reinstatement requires: Applicants failing to maintain a valid license for 5-years must pass a qualified written test with a 75% or higher passing score Complete continuing education requirements for last calendar year license was valid Meet reinstatement standards established by NMLSR Source: N.J.S.A. 17:11C-68(18)(b)(1)

61 IV. Compliance A. P R O H I B I T E D C O N D U C T A N D P R A C T I C E S T I T L E 3 1 B. R E Q U I R E D C O N D U C T C. F E E S A N D C H A R G E S D. D I S C L O S U R E S A N D A G R E E M E N T S 61 E. A D V E R T I S I N G N. J. A. C. 3 :

62 62 IV. Compliance A. Prohibited Conduct & Practices Title 31 New Jersey Statute Title 31 (State Usury) establishes: The maximum lawful interest rate (ceiling rate) that may be charged in the State. NOTE: For Secondary market residential mortgages not purchased w/n 395 days from note date, the maximum rate of interest may not exceed the State defined Usury Rate. For the purpose of calculating interest: A Day is deemed 1/360 of a year & A Month is deemed 1/12 of a year regardless of actual number of days Source: N.J.A.C. 3:1-1.1(c)(2-3)

63 63 IV. Compliance A. Prohibited Conduct & Practices NO Residential Mortgage Broker, Lender, or MLO Licensee shall: Advertise, print the word mortgage or negotiate mortgage loans unless licensed to act as a mortgage lender/broker, or mortgage loan originator Attempt to obtain licensing by fraud Assist, aide, or abet a licensee with respect to licensed activities unless properly licensed under NJ Residential Mortgage Lending Act Source: N.J.S.A. 17:11C-75(25)

64 64 IV. Compliance A. Prohibited Conduct & Practices NO Residential Mortgage Broker, Lender, or MLO Licensee shall: In any manner make any statement which is false, misleading or deceptive Engage in any unfair or deceptive practices toward any person with intent to defraud or mislead borrowers Advertise, solicit, or make or broker a mortgage for a specific interest rate & points unless those terms are actually available Source: N.J.S.A. 17:11C-75(25)

65 65 IV. Compliance A. Prohibited Conduct & Practices NO Residential Mortgage Broker, Lender, or MLO Licensee shall: Advertise immediate approval or closing of any mortgage Fail to make any disclosures required by Federal and State law Make any payment, threat, or promise to influence independent judgment of persons connected with mortgage transactions (i.e. Appraisers) Source: N.J.S.A. 17:11C-75(25)

66 66 IV. Compliance A. Prohibited Conduct & Practices NO Residential Mortgage Broker, Lender, or MLO Licensee shall: Allow an applicant to sign a loan agreement, promissory note, or other mortgage instrument containing blank spaces Receive or pay any commission, bonus, or fees to/from any person not licensed by Residential Mortgage Lending Act (RMLA) Charge borrowers any fees not authorized by RMLA Source: N.J.S.A. 17:11C-75(25)

67 67 IV. Compliance A. Prohibited Conduct & Practices NO Residential Mortgage Broker, Lender, or MLO Licensee shall: Fail to disburse funds on closed loans Fail to place funds in a trust/escrow account where funds are kept until disbursement is authorized Fail to present certified, cashier s, teller s or bank check for mtg. proceeds; or electronic funds, or cash to the closing agent Fail to truthfully account or deliver to any person personal property, funds, mortgage docs, etc. which licensee is not entitled to retain Source: N.J.S.A. 17:11C-75(25)

68 68 IV. Compliance B. Required Conduct Individuals currently licensed or registered under the NJ Lenders Licensing Act (LLA) seeking licensure under Residential Mortgage Lending Act (RMLA) as either a qualified individual licensee or a mortgage loan originator will be subject to requirements: Pre-licensure education, Testing, Continuing education, Criminal history record background checks that include fingerprinting, and credit-related background checks Source: N.J.S.A. 17:11C-54 Licensing Requirements

69 69 IV. Compliance Mortgage Licensees shall: Renew license annually Meet and maintain original license requirements File an annual Mortgage Call Report with DOBI & NMLSR on prescribed forms describing mortgage origination for reporting period and B. Required Conduct Pay renewal fees Source: N.J.S.A. 17:11C-85(35)

70 70 IV. Compliance B. Required Conduct NOTE: Failure to file the Annual Report to DOBI & NMLSR results in: Penalty of $100 per day for each day after reporting date cut-off payable to Commissioner plus Any monetary fees required by NMLSR for late reporting also payable to Commissioner Any fraudulent information or omission deemed as violation of act Source: N.J.S.A. 17:11C-85(35)

71 71 IV. Compliance Mortgage Loan Originators and Qualified Individual Licensees are required to: Complete 12-hours of Continuing Education as follows: 3-hrs Federal Statutes & Regulations 2-hrs Ethics, Fraud, Consumer Protection & Fair Licensing issues 2-hrs lending standards for non-traditional mortgage products 3-hrs of undefined instruction B. Required Conduct Training completed in calendar year reported and may not be the same approved course taken in preceding year Source: N.J.S.A. 17:11C-61(11) Educational Requirements for License Renewal

72 72 IV. Compliance B. Required Conduct Every mortgage licensee, registered mortgage loan originator, and qualified individual shall: Display license with unique identifier assigned by NMLSR in a conspicuous place & include unique identifier in all mortgage loan documents, advertisements & any document (form) required by regulation Transact business with exact name as issued on the license only Source: Public Law 2009, Chapter 53, Section 22, N.J.S.A. 17:11C-67(17)(a.)(2)

73 73 IV. Compliance B. Required Conduct Every residential mortgage lender, broker, and MLO shall: Maintain books, accounts, records and documents which the DOB is to have full access to when conducting examinations. Be subject to examination at the discretion of the Department of Banking & Insurance Refund fees paid by borrower above the exact charge (i.e. credit report, appraisal, inspection) Ensure that all lock-in agreements are in writing. Source: N.J.S.A. 17:11C-71 Identification of Place of Business

74 74 IV. Compliance Borrowers shall not be required to purchase credit life & health insurance or credit involuntary unemployment insurance in connection with mortgage loans. If borrower consents in writing, licensees may obtain or provide insurance B. Required Conduct

75 75 IV. Compliance Licensees may require evidence that property is insured against damage or loss due to fire & other perils for: Term not extending term of loan & Policy amount not to exceed loan amount needed to satisfy all outstanding liens on property B. Required Conduct Source: N.J.S.A. 17:11C-73(d.)

76 76 IV. Compliance B. Required Conduct Provide an Insurance 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 CHOOSING. N.J.S.A. 17:11C-73(d.)

77 77 IV. Compliance B. Required Conduct Mortgage Lenders must cancel or discharge mortgage within 30 days of payment. If mortgagee or assign fails to comply: Borrower may serve mortgagee with a notice of non-compliance Mortgagee or assigns must cancel or discharge within 15 business days after receipt of notice or be subject to $50.00 per day fine (Up to $1,000 maximum) plus damages if borrower brings suit Source: N.J.S.A. 46: , N.J.S.A. 46: (2)(a.)(1)

78 78 IV. Compliance Mortgage Application Process Pre-fee Disclosures B. Required Conduct 1. A description & amount of each fee plus 2. Whether all or part of such fees are refundable 3. The terms and conditions of the refund Source: N.J.A.C. 3:

79 79 IV. Compliance B. Required Conduct Mortgage Application Process Pre-fee Disclosures (continued) 4. Realistic estimate of calendar days required to issue commitment following receipt of fees 5. Name of lender contact to whom written questions, comments, or complaints are sent 6. Correspondent mortgage bankers provide a statement indicating they are a correspondent banker who doesn t hold or service mortgage loans for more than 90 days Source: N.J.A.C. 3:

80 80 IV. Compliance B. Required Conduct Mortgage Application Process Pre-fee Disclosures (continued) 7. Required application disclosures must be signed by borrower & maintained by licensees with copy provided to borrower 8. Lenders are obligated to process applications & to grant or deny the application within time estimate disclosed 9. Licensees to provide the borrower a Loan Estimate within three business days of application receipt Source: N.J.A.C. 3:1-16.3

81 81 Compliance Mortgage Application Process New Jersey Disclosures Form Must also provide an NJ Disclosures Form Includes all NJ noted fees totaled by category Notes which fees are refundable Signed, dated and kept available B. Required Conduct Source: N.J.A.C. 3:1-16 and State of NJ Bulletin 10-17

82 82 IV. Compliance B. Required Conduct Mortgage Application Process Loan Estimates conforming to TRID requirements meet the disclosure requirement of the NJ Administrative Act Borrowers may withdraw an application w/o penalty or responsibility for additional fees anytime before acceptance of a commitment Upon withdrawal, licensees shall refund fees to which borrower may be entitled as set forth in written application disclosure Source: N.J.A.C. 3:1-16.3(e)

83 83 IV. Compliance B. Required Conduct Mortgage Application Process Licensees refund all borrower paid fees when: When licensee fails to provide written disclosure When licensee fails to issue a commitment or justifiable credit denial, & estimate of time to process When application denied or counteroffered with terms unacceptable to borrower for which the licensee knew or should have known at application the loan didn t meet loan parameters. Source: N.J.A.C. 3:1-16.3(e)(2-3)

84 84 IV. Compliance B. Required Conduct Lock-in Agreements All lock-in agreements shall contain provisions: 1. Expiration date of lock (if any) 2. Interest Rate locked (if any) 3. Discount Points locked (if any) 4. Commitment fee locked in (if any) 5. Lock-in Fee (if any) Source: N.J.A.C. 3:1-16.4

85 85 IV. Compliance B. Required Conduct Lock-in Agreements All lock-in agreements shall contain provisions: 6. Statement advising of following provisions: Lender will make a good faith effort to process the application and/or fill terms of commitment before expiration date of lock-in If lock-in agreement is executed & loan is denied, licensee to promptly refund lock-in fee (if any) Any lock-in agreement received by lender by mail or through a broker must be signed by lender before it becomes effective Source: N.J.A.C. 3:1-16.4

86 86 IV. Compliance B. Required Conduct Lock-in Agreements Lock-in Rescission Borrower may rescind lock-in agreement until receipt of a lender signed agreement by providing written notification of rescission Mailed notification of rescission is effective upon mailing If borrower elects to rescind, lender shall promptly refund any lock-in fee paid. Source: N.J.A.C. 3:1-16.4(d)

87 87 IV. Compliance B. Required Conduct Commitment Process At or before issuance of a commitment, lender shall disclose in writing: Expiration date of commitment Amount financed (as defined in REG-Z) In the event interest rate isn t subject to increase before expiration of commitment Finance Charge (Dollar amount credit will cost) APR (Cost of yearly rate) Payment schedule Source: N.J.A.C. 3:1-16.5

88 88 IV. Compliance Commitment Process When interest rates are subject to increase before commitment expiration include the following: Basis, index or method to determine rate at closing must be stated Include statement "The interest rate will be a rate established by the lender in its discretion stated in at least 10-point bold type B. Required Conduct Along with Finance charge, APR, payment schedule include "These figures are for illustrative purposes only. They reflect the rate now in effect, NOT necessarily the rate you will pay at closing, which will be established as indicated in this commitment." Source: N.J.A.C. 3:

89 89 IV. Compliance B. Required Conduct Commitment Process Amount of commitment fee (if any) & under what circumstances it s refundable If interest rate, APR, or term may vary after closing: Identification and specification of the terms that are variable Circumstances under which terms may change Limitation on a change Effect of a change Example of payment terms resulting from an increase Source: N.J.A.C. 3:

90 90 IV. Compliance B. Required Conduct Commitment Process Time within which the commitment must be accepted by the borrower & If lender charged fees or discount points are subject to change before closing & the circumstances permitting change (if any) Commitment Provisions may be stated in a RESPA or TILA disclosure as a supplement Provision of commitment can t be changed prior to expiration Variable rate provision must be fixed no later than midnight of 3 rd business day before the loan closes Source: N.J.A.C. 3:

91 91 IV. Compliance B. Required Conduct Commitment Process Assignments: Lenders may assign commitments to another lender licensed to make loans in NJ Lender committed to make the loan must maintain a copy of the mortgage note & closing statement Lender committed to make the loan remains responsible to ensure Lender closes loan with terms of signed commitment & applicable to New Jersey and Federal laws and regulations Source: N.J.A.C. 3:1-16.5(e)

92 92 IV. Compliance B. Required Conduct Commitment Process Commitment Expiration (not borrowers fault): Borrower may withdraw the application or terminate commitment with lender refunding lock-in agreement and commitment fee paid by borrower Have lock-in agreement extended for no more than 14 calendar days following expiration of commitment If lock-in agreement not executed & commitment was issued & not closed: Borrower may terminate, lender to refund commitment fee or Have commitment extended not exceed 14 calendar days to permit closing Source: N.J.A.C. 3:1-16

93 93 IV. Compliance B. Required Conduct Special Rules for Mortgage Brokers No broker shall charge or collect on its own behalf any fees other than an application fee & discount points Before accepting an application, broker makes written disclosure in a separate service agreement: Amount of broker s application fee If broker s application fee is refundable Amount of discount points (if any) List of broker services provided & statement that broker fees will be refunded if services not provided Source: N.J.A.C. 3: (a-e)

94 94 IV. Compliance B. Required Conduct Special Rules for Mortgage Brokers Broker written separate service agreement (continued): State lender placement policy with three or fewer lenders and the name of lenders Brokers cannot execute a lock-in agreement or commitment on its own behalf or behalf of any lender Can t guarantee acceptance or promise specific loan terms or conditions Can t accept lender s lock-in agreement or lock-in fee from borrower unless it contains all required disclosures in 3:1-16.4(a) Required disclosures must be signed by borrower & maintained by broker with copy to borrower Source: N.J.A.C. 3: (a-e)

95 95 IV. Compliance Licensees may charge only the following fees: Mortgage Lenders Mortgage Brokers Credit Report Fee Application Fee Appraisal Fee Application Fee Commitment Fee Warehouse Fee 3 rd Party Fee Reimbursement (for fees paid by Lender) XXX XXX XXX XXX XXX C. Fees and Charges Discount Points Discount Points NOTE: Points on Secondary Mortgage Loans are capped at three percent (3%) of loan principal

96 96 IV. Compliance C. Fees and Charges Borrowers may pay reasonable legal fees at settlement provided charge is incurred by the transaction Licensee may collect fees: Title Examination Abstract of Title Survey Title Insurance Recording Fees Source: N.J.S.A. 17:11C-80

97 97 IV. Compliance No residential mortgage licensee shall fail to make any disclosures concerning a mortgage loan as required by federal and State law, including any order, rule or regulation made or issued pursuant to that law & All disclosures must be complete no blank spaces before applicants sign. D. Disclosures & Agreements

98 98 IV. Compliance All advertisement of loan products shall comply with requirements of Truth-in-Lending Law and Regulation Z Truth in Advertising is an absolute Unique Identifier of mortgage licensee should be included in all advertisement (in all formats) E. Advertising NJAC 3:2-1-9 Source: N.J.S.A. 17:11C-72(22)

99 99 IV. Compliance E. Advertising NJAC 3:2-1-9 The following conduct is considered deceptive & a violation of the Act. Advertising immediate approval or immediate closing Advertising a no-point mortgage when points are charged or incorrect points are specified Advertising unqualified access to credit w/o indicating a higher interest rate or credit score is required Advertising a specific rate unless additional lender requirements are provided Source: N.J.A.C. 3:2-1.4(b)(1-4)

100 100 IV. Compliance E. Advertising NJAC 3:2-1-9 The following conduct is considered deceptive and a violation of the Act. Advertisement by mortgage brokers that doesn t specifically state that the advertising broker does not make or fund the loan Advertisement by mortgage licensees that doesn t include name, address, & Phone # of licensee and the words, Licensed by the N.J. Department of Banking and Insurance Source: N.J.A.C. 3:2-1.4(b)(5.-6.)

101 101 IV. Compliance The following conduct is considered deceptive and a violation of the Act. Advertising/printing the word mortgage in advertisements unless licensed to act as a mortgage lender/broker, or mortgage loan originator E. Advertising NJAC 3:2-1-9 Source: N.J.S.A. 17:11C-75(25)

102 V. Disciplinary Action A. N O T I F I C AT I O N S, H E A R I N G, A N D A P P E A L S B. S U S P E N S I O N, R E V O C AT I O N, A N D R E S C I S S I O N O F L I C E N S E S C. P E N A LT I E S / F I N E S 102 D. C I V I L A N D C R I M I N A L L I A B I L I T Y

103 103 V. Disciplinary Action A. Notifications, Hearing, and Appeals DOBI conducts examinations & investigations Issues subpoenas & orders to enforce provisions of the NJ state law Orders persons to cease & desist any violations of act & make restitution to borrowers Request orders from court requiring person to produce relevant information, books, accounts, records, etc. for examination Source: N.J.S.A. 17:11C-84 Investigation by Commissioner

104 104 V. Disciplinary Action A. Notifications, Hearing, and Appeals Before DOBI may impose an administrative penalty, the Department must: Send notice to alleged violator at last known address by personal delivery, or certified mail and regular mail providing the following: Statute, rule, or administrative order alleged violation Concise statement of facts the violation is based on Statement of the administrative penalty or other relief sought to be imposed and A statement advising the alleged violator of the right to a hearing and the procedure for requesting a hearing Notice may describe more than one alleged violation Source: N.J.A.C. 3: Initiation of Action

105 105 V. Disciplinary Action A. Notifications, Hearing, and Appeals Persons aggrieved by DOBI orders who have a direct interest in decision may appeal the decision of the department Appeal may be conducted according to provisions of the Administrative Procedure Act, P.L. 1968, c. 410 (C.52:14B-1 et seq.) Decisions of Commissioner are final orders of the DOBI & enforceable in a court of competent jurisdiction Source: N.J.S.A. 17:11C-70(20)(b) Authority of Commissioner

106 106 V. Disciplinary Action B. Suspension, Revocation, & Rescission of Licenses For Violations of Residential Mortgage Lending Act: DOBI may suspend, revoke, or refuse to renew any license issued by the department Prohibit or permanently remove individuals responsible for violation Order a person to cease and desist any violation of the act Make restitution for actual damages for borrowers Source: N.J.S.A. 17:11C 70(20)(a.)(1)-(2) Authority of Commissioner

107 107 V. Disciplinary Action C. Penalties / Fines Impose civil penalties up to $10,000 for each offense When determining penalty, DOBI asks the following questions: Was violation willful? Was violation part of a pattern or practice? The amount of the loan? The points and fees charges? The financial condition of the violator? Other relevant factors? N.J.S.A. 46:10B-28(7)(d)(1-2)

108 108 V. Disciplinary Action Surrendering a mortgage license does not relieve licensee from Civil or Criminal liability for acts committed prior to license surrender D. Civil and Criminal Liability N.J.S.A. 17:11C-11(2)

109 VI. Title 46 Home Ownership Security Act of 2002 (anti-predatory lending law) 109 A. T I T L E 4 6 D E F I N I T I O N S A N D P R O H I B I T I O N S B. R E Q U I R E M E N T S A N D L I A B I L I T Y C. H I G H - C O S T L O A N W O R K S H E E T