SENATE NO 2412 STATE OF NEW JERSEY 212TH LEGISLATURE

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S2412

SENATE, No. 2412

STATE OF NEW JERSEY

212th LEGISLATURE

INTRODUCED DECEMBER 14, 2006

Sponsored by:

Senator ELLEN KARCHER

District 12 (Mercer and Monmouth)

SYNOPSIS

Regulates certain servicing activities provided by mortgage servicing organizations for residential mortgage loans and obligations related to such loans.

CURRENT VERSION OF TEXT

As introduced.

SENATE NO 2412 STATE OF NEW JERSEY 212TH LEGISLATURE

An Act concerning mortgage servicing organizations and supplementing P.L.1977, c.1 (C.17:16F-1 et seq.).

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. The Legislature hereby 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 guarantee 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 such marketability if it imposes burdensome regulation on servicing organizations.

d. Therefore, the Legislature, through this act, seeks to balance the protections of legislative and 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 purchasing servicing organization is open to the public to provide mortgage services.

“Business hours” means that part of a day in which a depository institution is normally open to the public for carrying on substantially all of its financial services.

“Commissioner” means the Commissioner of Banking and Insurance.

“Department” means the Department of Banking and Insurance.

“Depository institution” means “depository institution” as defined in section 2 of P.L.1977, c.1 (C.17:16F-2).

“Mortgage escrow account” means “mortgage escrow account” as defined in section 1 of P.L.1990, c.69 (C.17:16F-15).

“Mortgage loan” means “mortgage loan” as defined in section 1 of P.L.1990, c.69 (C.17:16F-15).

“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.

“Mortgagor” means “mortgagor” as defined in section 1 of P.L.1990, c.69 (C.17:16F-15).

“Purchasing servicing organization” or “servicing organization” means “purchasing servicing organization” as defined in section 1 of P.L.1990, c.69 (C.17:16F-15). “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 guarantee insurance, and responding to consumer complaints in accordance with applicable law.

3. a. Each mortgage loan made on or after the effective date of this act shall provide that any servicing organization which may purchase or otherwise accept by assignment or transfer the authority to service the mortgage loan agreement is subject to department regulation for the limited purposes set forth in this act.

b. (1) Except as provided in paragraph (2) of this subsection, a servicing organization shall, within 30 days of becoming the servicing organization of a mortgage loan agreement, file a registration with the department, which includes: the organization’s name; principal business address; name and address of an appropriate contract 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) Any person or entity, including a State-chartered bank, savings bank, savings and loan association, credit union, and person or entity licensed by the Division of Banking, the Division of Insurance, or the Division of the New Jersey Real Estate Commission in the department, 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 this subsection, but shall be subject to all other provisions of this act.

4. With respect to any payment on a mortgage loan agreement, a servicing organization shall:

a. if accepting a payment on behalf of a depository institution, post any payment received on the same business day of its receipt; or

b. if accepting a payment on behalf of a creditor that is not a depository institution:

(1) post any payment received before or during business hours on the same business day of its receipt; or

(2) post any payment received after business hours on the business day next following the business day of its receipt.

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. R.S.46:18-1 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 “Fair Foreclosure Act,” P.L.1995, c.244 (C.2A:50-53 et seq.), regarding foreclosure procedures; and

d. 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 guarantee 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. Upon request by the commissioner, a servicing organization shall make any accounts, books, and records concerning the servicing activities subject to regulation by this act available to the commissioner for inspection which are necessary to enable the commissioner to reasonably determine 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. This act shall take effect on the first day of the fourth month next following enactment, and shall apply to any mortgage loan made on or after the effective date.

STATEMENT

This bill regulates certain servicing activities provided by mortgage servicing organizations for residential mortgage loans and other obligations, such as escrow account activities, which relate to the mortgage loan. The underlying intent of the bill is to balance the protections provided by legislative and regulatory oversight to mortgagors, to assure their mortgages are serviced in a proper and timely manner, without imposing burdensome regulation over servicing organizations and the marketability of selling, assigning, or transferring servicing rights to New Jersey residential mortgages.

To this end, with respect to each mortgage loan made on or after the bill’s effective date, the bill requires servicing organizations to register with the Department of Banking and Insurance, within 30 days of becoming the servicing organization of a mortgage loan, and include an agent for service of process in this State. If a servicing organization is not located in this State, it may name the Commissioner of Banking and Insurance as its agent. However, if a servicing organization is otherwise registered and already subject to regulation by the department pursuant to any other State law, it is not required to additionally register as a servicing organization, but is subject to all other provisions of the bill.

With respect to any payment on a mortgage loan or related obligation, servicing organizations shall post any payment received on the same business day of its receipt or, if accepting payment on behalf of a creditor that is not a depository institution, post the payment either the same business day, or the business day next following its receipt when received after business hours.

Additionally, servicing organizations shall comply with any other State and federal law concerning the servicing of mortgage loans or any related obligation, including, but not limited to: R.S.46:18-1 et seq. (recording of instruments affecting the mortgage); 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.) (assumption of responsibility for an escrow account); the “Fair Foreclosure Act,” P.L.1995, c.244 (C.2A:50-53 et seq.) (foreclosure procedures); and 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.) (guarantee insurance).

In order to better assure compliance with the bill’s provisions, servicing organizations shall be required 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. Also, servicing organizations shall make any accounts, books, and records concerning its servicing activities available to the Commissioner of Banking and Insurance, upon the request of the commissioner.

If any 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).

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