Magazine article Mortgage Banking

As New Jersey Goes

Magazine article Mortgage Banking

As New Jersey Goes

Article excerpt

Critical states often set the pattern for the rest of the nation when it comes to drafting legislation or regulations that move into new territory. New Jersey has proven such a state in helping to fashion the crazy quilt of state laws and regulations now governing mortgage lending.

Looking back over the past year in New Jersey from a legislative and regulatory perspective, it is easy to see why New Jersey is a state that is often a bellwether for the rest of the country. Having had licensing for mortgage bankers and mortgage brokers since 1981, the New Jersey Department of Banking (DOB) has promulgated regulations covering a broad range of subjects and, by now, has had the opportunity to evaluate the industry's performance under these regulations. Based upon this experience, the DOB has modified many of its regulations recently, with some proposals still pending at this time.

Legislatively, New Jersey has often been ahead of its sister states on matters dealing with mortgage lending. This past year was no exception. The following summary of legislation is a good example of this.

Legislation on net worth and licensing requirements (still pending)

Assembly Bill 1676 is a recently introduced proposal that would deprive the Commissioner of Banking of the power to establish net worth requirements for mortgage bankers, where such licensed entities have demonstrated the ability to fund loans based upon warehouse lines of credit, table-funding agreements or other relevant means. This proposal is designed to eliminate the net worth requirements already established via regulation by the Department of Banking and would prevent the commissioner from promulgating such regulations in the future.

The proposal would also require the licensing of mortgage solicitors for the first time in New Jersey. In order to qualify for a mortgage solicitor's license, the individual would have to intern for a period of three to six months, engage in a course of study and pass an examination.

The legislation would also impose, for the first time, apprenticeship and educational requirements for mortgage brokers and bankers. A mortgage broker, under the proposal, would have to serve a two-year apprenticeship as a mortgage solicitor, complete a thirty-hour course of study and pass an examination (the exam is currently required for mortgage bankers and brokers). A mortgage banker, in addition to passing an exam, must have served a five-year apprenticeship with at least two years as a mortgage solicitor and three as a mortgage broker and complete a fifty-hour course of study.

This proposal would have a far-reaching impact upon the licensing and regulation of mortgage bankers, brokers and solicitors and is one that the Mortgage Bankers Association of New Jersey is following very closely.

Legislation on foreclosures (still pending)

The Fair Foreclosure Act, Assembly Bill 1217 (A1217), had its inception in a concept developed by the Public Advocate. The Department of the Public Advocate is in the executive brance of state government and has the authority to represent the public interest in matters such as the proposed legislation. Despite the Public Advocate's effort to pass its own Fair Foreclosure Act, a bill which was premised, in part, upon Pennsylvania law, it did not succeed. The Public Advocate called for more time to be given to borrowers during the foreclosure process, to allow them the opportunity to ride out a bad economy until they could afford to make their mortgage payments again.

The Public Advocate's proposal resulted in Assemblywoman Charlotte Vandervalk's (R) introduction of her own version of this legislation--A1217. As vice chair of the Financial Institutions Committee, Assemblywoman Vandervalk worked from the Public Advocate's legislative concept without incorporating all of the provisions of that bill that were sought by the Public Advocate. For example, the Public Advocate would have included a required forbearance procedure, under which every lender would have had to make forbearance available to all delinquent borrowers based upon specific written criteria. …

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