Glossary of Mortgage Terms > List of Approved Credit Counselors

• Application
  • Applies act to 1^st , 2^nd & subsequent mortgages secured by NJ Realty, or manufactured homes
    
    
• Threshold triggering the act
  • No rate or fees thresholds
    
    
• Prohibited practices
  • Financing certain credit insurance premiums or debt cancellation agreements
  • Recommending or encouraging default on an existing mortgage loan
  • Charging a late payment fee in excess of 5% of the amount of the payment due
  • Charging a late fee in excess of 5% of the past due payment
  • Accelerating indebtedness at the creditor's sole discretion
  • Charging a fee for borrower's payoff balance information

• Threshold Triggers
  • Points and fees (included and excluded points and fees specifically identified in bill minus 2 bona fide discounts points [also defined in the bill] or conventional prepayment penalty) exceeds EITHER:
    • 4.5% of total loan amount for loans over $40K; or
    • 6% for loans between $20K and $40K; or
    • the lesser of 6% or $1K for loans under $20K
  • OR the rate exceeds the HOEPA rate (current Treasury bill rate [apprx. 5%]) plus 8% = approximately 13 % or higher
    
    
• Prohibited Practices
  • Charging most balloon payments
  • Negative amortization (i.e., when the principal balance of the loan increases even though all payments are being made)
  • Increasing the interest rate after default
  • Requiring more than two periodic payments to be paid in advance from the loan proceeds
  • Allowing a creditor to require a borrower to assert any claim or defense in a forum that is less convenient, more costly or more dilatory for the resolution of a dispute than a NJ judicial forum
  • Lending without prior written notice, acknowledged in writing and signed by the borrower within three business days prior to loan closing, of buyer's rights and responsibilities
  • Lending to a borrower who finances points and fees, without first receiving certification from an HUD/DOBI approved third-party nonprofit credit counselor, that the borrower has received counseling on the loan transaction or completing another substantial requirement developed by the Department
  • Making direct payment to home improvement contractors out of the loan proceeds, instead of (1) to the borrower, (2) jointly to the borrower and contractor, or (3) to a third-party escrow selected by the borrower
  • Charging a fee for modification or deferral of the loan
  • Charging points and fees if the proceeds of a high-cost home loan are used to refinance an existing high-cost home loan held by the same creditor as note holder
  • Foreclosure by means other than the judicial foreclosure procedures of this State
  • Financing points and fees in excess of 2% of the total high-cost home loan amount
  • All prohibited practices listed above for all home loans
  • Prohibited flipping practice listed above for covered loans

• High-cost home loan assignees are subject to all the claims and defenses that could be brought that the borrower could assert against the original creditor or broker
• Assignee has presumed liability exemption when they can establish that it has:
  • a policy against buying high-cost home loans, and
  • exercises reasonable due diligence in purchasing such loans
• The liability exists:
  • for six years following the closing of the high-cost home loan; or
  • for the term of the loan in cases where foreclosure has been commenced, the debt has been accelerated, or the high-cost home loan is 60 days in default

• Only liable for actions in providing mortgage brokering services.

Bill provides DOBI with the following new powers:

• Impose a fine up to $10K per violation (vs. Licensed Lenders Act maximum fine of $5K per violation), with 40% of fine dedicated to non-profit groups for consumer finance education programs
• Bar a predatory lender from industries regulated by the Department
• Issue a cease and desist order
• Temporarily suspend a license on an emergent basis

Damages

• Statutory damages (all finance charges plus up to 10%)
• Punitive damages for malicious or reckless violations
• Attorneys fees recoverable
• Allows 45 days for creditor acting in good faith from time of closing, or 365 days after closing and prior to receiving notice from borrower of compliance failure, for lender to make restitution to the borrower

Other Remedy Rights

• Preserves borrowers other rights to damages under other NJ consumer protection laws
• Does not preclude Attorney General action under other statutes

Counseling And Awareness Program

• DOBI required to establish a counseling and awareness program in cooperation with the Divisions of Consumer Affairs and Civil Rights
• No creditor may make a high-cost home loan without first obtaining a certification that the borrower has received counseling from a HUD/DOBI approved, non-profit counselor
• The Department is to make its list of approved counselors available to the public

Pre-Emption

• Pre-empts any local government action to regulate or prohibit predatory lending

Application

• Laws of states where property located apply to loans covered by this law regardless of where loan originated
• Applies to home loans closed after effective date

• DOBI to promulgate in consultation and collaboration with the Director of the Division of Consumer Affairs rules to implement the bill's high-cost home loan disclosure, counseling and consumer education provisions
• Allows DOBI Commissioner to take immediate action to develop regulations as of enactment

Effective Date

• November 28, 2003; amendments, July 6, 2004
• DOBI rulemaking authority effective immediately upon enactment