New Jersey-2010-S841-Introduced

An Act concerning certain mortgage foreclosure practices, and amending and supplementing P.L.1979, c.16 (C.17:16G-1 et seq.).

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

1. (New section) This act, amending P.L.1979, c.16 (C.17:16G-1 et seq.), shall be known and may be cited as the "Foreclosure Consulting and Anti-Fraud Act."

2. Section 1 of P.L.1979, c. 16 (C.17:16G-1) is amended to read as follows:

1. As used in this act,

a. "Nonprofit social service agency" or "nonprofit consumer credit counseling agency" means any corporation duly organized under Title 15 of the Revised Statutes or Title 15A of the New Jersey Statutes, no part of the assets, income or profit of which is distributable to, or enures to the benefit of its members, directors or officers, except to the extent permitted under this act, and which is engaged in debt adjustment.

b. "Credit counseling" means any guidance or educational program or advice offered by a nonprofit social service agency or nonprofit consumer credit counseling agency for the purpose of fostering the responsible use of credit and debt management.

c. (1) "Debt adjuster" means a person who either (a) acts or offers to act for a consideration as an intermediary between a debtor and his creditors for the purpose of paying off, settling, compounding, or [otherwise] altering the terms of payment of any debts of the debtor, or (b) who, to that end, receives money or other property from the debtor, or on behalf of the debtor, for payment to, or distribution among, the creditors of the debtor.

(2) The following persons shall not be deemed debt adjusters: (a) an attorney-at-law of this State who is not principally engaged as a debt adjuster; (b) a person who is a regular, full-time employee of a debtor, and who acts as an adjuster of his employer's debts; (c) a person acting pursuant to any order or judgment of court, or pursuant to authority conferred by any law of this State or the United States; (d) a person who is a creditor of the debtor, or an agent of one or more creditors of the debtor, and whose services in adjusting the debtor's debts are rendered without cost to the debtor; (e) a person who, at the request of a debtor, arranges for or makes a loan to the debtor, and who, at the authorization of the debtor, acts as an adjuster of the debtor's debts in the disbursement of the proceeds of the loan, without compensation for the services rendered in adjusting those debts; [or] (f) a person who is: (i) certified by the United States Secretary of Housing and Urban Development as a housing counseling organization or agency pursuant to section 106 of Pub.L.90-448 (12 U.S.C. s.1701x); (ii) participating in a counseling program approved by the New Jersey Housing and Mortgage Finance Agency; and (iii) not holding or disbursing the debtor's funds ; or (g) a municipality or third party who obtains and acts upon a municipal lien in accordance with the procedures of the "tax sale law," R.S.54:5-1 et seq.

(3) Subject to paragraph (2) of this subsection c., a distressed property purchaser as defined in subsection g. of this section and a foreclosure consultant as defined in subsection i. of this section shall be deemed to be a debt adjuster.

d. "Debtor" means an individual or two or more individuals who are jointly and severally, or jointly or severally indebted.

e. "Debtor-owner" means a debtor who is the owner of record of title to a distressed property.

f. "Distressed property" means residential real property consisting of from one to six dwelling units, at least one of which is occupied by a debtor-owner as a primary residence, and which is the subject of a foreclosure or tax sale proceeding, or which is at risk of loss due to nonpayment of taxes or whose debtor-owner is more than 90 days delinquent on any loan that is secured by the property.

g. "Distressed property purchaser" means a person who acquires an interest in fee or a beneficial interest through a trust document in a distressed property while allowing the debtor-owner to possess, occupy, or retain a leasehold interest or any present or future interest in fee in the property, or a person who participates in a joint venture or joint enterprise involving a distressed property conveyance. A distressed property purchaser does not mean a federally insured financial institution or a person who acquires distressed property through a deed in lieu of foreclosure or a person acting in participation with any person who acquires distressed property through a deed in lieu of foreclosure, provided that person does not promise to convey an interest in fee back to the debtor-owner or does not give the debtor-owner an option to purchase the property at a later date. A distressed property purchaser also does not mean a spouse, child, parent, or sibling of the debtor-owner.

h. "Distressed property conveyance" means a transaction in which: a debtor-owner transfers an interest in fee, or a beneficial interest created through a trust document, in a distressed property; the acquirer of the property allows the debtor-owner to occupy the property; and the acquirer of the property or a person acting in participation with the acquirer of the property conveys or promises to convey an interest in fee back to the debtor-owner or gives the debtor-owner an option to purchase the property at a later date.

i. (1) "Foreclosure consultant" means any debt adjuster who, directly or indirectly, makes any solicitation, representation, or offer to perform, or who performs, any debt adjustment or credit counseling that the debt adjuster represents will in any manner do any of the following in relation to the debtor-owner's distressed property:

(a) prevent or postpone the foreclosure sale or the loss of the property due to nonpayment of taxes;

(b) obtain any forbearance from any beneficiary or mortgagee or relief with respect to a tax sale of the property;

(d) obtain any extension of the period within which the debtor-owner may reinstate the debtor-owner's rights with respect to the property;

(e) obtain any waiver of an acceleration clause contained in any promissory note, contract, or mortgage evidencing or securing a debt in relation to the property;

(f) assist the debtor-owner in obtaining a loan or advance of funds to pay off the promissory note, contract, or mortgage evidencing or securing a debt in relation to the property; or

(g) avoid or ameliorate the impairment of the debtor-owner's credit resulting from default on the promissory note, contract, or mortgage, or the conduct of a foreclosure sale or tax sale or offer to repair the debtor-owner's credit.

(2) The following persons shall not be deemed foreclosure consultants:

(a) a person or the person's authorized agent acting under the express authority or written approval of the United States Department of Housing and Urban Development;

(b) a person who holds or is owed an obligation secured by a lien on any distressed property in situations in which the person performs services in connection with the obligation or lien, provided the obligation or lien did not arise as the result of, or as part of, a proposed distressed property conveyance; and

(c) a mortgagee approved by the United States Department of Housing and Urban Development and any subsidiary, affiliate, agent or employee of the mortgagee, and any financial institution, subsidiary, or affiliate, and any residential mortgage lender or mortgage broker licensed pursuant to the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 through C.17:11C-89),while engaged in the business of the mortgagee.

(cf: P.L.2009, c.173, s.1)

3. Section 2 of P.L.1979, c.16 (C.17:16G-2) is amended to read as follows:

2. a. No person other than a nonprofit social service agency or a nonprofit consumer credit counseling agency shall act as a debt adjuster.

b. It shall be unlawful for any nonprofit social service agency or nonprofit consumer credit counseling agency to act as a debt adjuster without first obtaining a license from the Commissioner of the Department of Banking and Insurance pursuant to this act. The commissioner may also require any agent, officer, or employee of a nonprofit social service agency or a nonprofit consumer credit counseling agency providing debt adjustment or credit counseling, or category of agent, officer, or employee, to be licensed pursuant to regulations promulgated by the commissioner.

c. A licensee is authorized to offer debt adjustment and credit counseling as provided by the provisions of P.L.1979, c.16 (C.17:16G-1 et seq.).

(cf: P.L.1986, c.184, s.2)

4. Section 3 of P.L.1979, c.16 (C.17:16G-3) is amended to read as follows:

3. a. Application for [said] a debt adjuster license shall be made on forms prescribed by the commissioner, who shall be empowered to require information deemed necessary to demonstrate that the applicant is qualified to be licensed and possesses the necessary financial resources to sustain its operation.

b. As part of the application process, the commissioner may, as established by regulation, require any applicant or category of applicants to consent to a criminal history record background check. The commissioner is authorized to exchange fingerprint data with, and receive criminal history information from, the Federal Bureau of Investigation, Identification Division, and the State Bureau of Identification in the Division of State Police in performing background checks. The commissioner is authorized to conduct additional background checks the commissioner deems appropriate.

(cf: P.L.1986, c. 184, s.3)

5. Section 4 of P.L.1979, c.16 (C.17:16G-4) is amended to read as follows:

4. The commissioner: shall promulgate procedures and standards for the issuance or denial of licenses, which may include disqualifications based upon standards of good moral character, or disqualifications based upon a criminal history record background check performed pursuant to section 3 of P.L.1979, c.16 (C.17:16G-3), including, but not limited to, conviction of any crime involving fraud or dishonesty; shall promulgate grounds for and procedures under which licenses may be revoked, suspended, or reinstated [,] ; and shall establish fees necessary to meet administrative costs under this act.

(cf: P.L.1979, c.16, s.4)

6. Section 5 of P.L.1979, c.16 (C.17:16G-5) is amended to read as follows:

5. a. Any nonprofit social service agency or nonprofit consumer credit counseling agency licensed under this act shall be bonded to the satisfaction of the commissioner for each location pursuant to regulation. In setting the bonding requirements for each location, the commissioner shall consider the number of debtors provided credit counseling and debt adjustment services at that location, and the balance of funds in the trust account required to be maintained by the licensee pursuant to section 3 of P.L.2005, c.287 (C.17:16G-9).

b. The commissioner may require a licensee to file an annual report containing that information required by the commissioner by regulation concerning activities conducted as a licensee in the preceding calendar year. The report may encompass all debt adjustment or credit counseling activities of a licensee in the preceding calendar year, or may encompass one or more particular activities, including, but not limited to, distressed property conveyances, as specified by the commissioner. The report shall be submitted under oath and in the form and within the time specified by the commissioner by regulation.

c. The commissioner may require a high cost home loan counselor to file an annual report containing that information required by the commissioner by regulation concerning activities conducted pursuant to subsection g. of section 5 of P.L.2003, c.64 (C.46:10B-26) as a registrant in the preceding calendar year. The report shall be submitted under oath and in the form specified by the commissioner by regulation.

d. Each licensee shall file with the commissioner on or before April 1 of each year a copy of its annual report, containing the information required by the commissioner by regulation pursuant to P.L.1979, c.16 (C.17:16G-1 et seq.) and section 3 of P.L.2005, c.287 (C.17:16G-9). A licensee or high cost home loan counselor that fails to make and file its annual report in the form and within the time provided in this section shall be subject to a penalty of not more than $100 for each day's failure, and the commissioner may revoke or suspend its authority to do business in this State. The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.

e. Each licensee shall have its financial records relating to debt adjustment audited annually by a certified public accountant or a public accountant, which audit shall be filed with the commissioner. Such an audit shall certify that the salaries and expenses paid by the licensee are reasonable compared to those incurred by comparable organizations providing similar services.

f. After reviewing the annual report and audit, the Commissioner of Banking and Insurance may cause an examination of the licensee to be made, the actual expenses of such an examination shall be paid by the licensee, and the commissioner may maintain any action against any licensee to recover the fees and expenses herein provided for.

g. The licensee shall make a copy of the annual report and audit available for public inspection at each of the licensee's locations.

(cf: P.L.2007, c.81, s.25)

7. Section 8 of P.L.1979, c.16 (C.17:16G-8) is amended to read as follows:

8. Any person who violates any provisions of this act shall be subject to a penalty of $1,000 for the first offense and not more than $5,000 for the second and each subsequent offense to be collected [by and] in the name of the commissioner in a summary proceeding under the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).

If the commissioner has reason to believe that any person or licensee has engaged in or is engaging in any practice or transaction prohibited by P.L.1979, c.16 (C.17:16G-1 et seq.), the commissioner may, in addition to any remedies available, bring a summary action in the name of and on behalf of the State against the person or licensee and any other person concerned or in any way participating in or about to participate in those practices or transactions, including, with respect to distressed property conveyances, any residential mortgage lender, residential mortgage broker, or other licensee pursuant to the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 through C.17:11C-89), any real estate broker or other licensee pursuant to R.S.45:15-1 et seq., or any real estate appraiser licensed or certified pursuant to the "Real Estate Appraisers Act," P.L.1991, c.68 (C.45:14F-1 et seq.), to enjoin the person or licensee from continuing those practices or engaging in or doing any act in furtherance of those practices or in violation of that act. In addition to any other remedies or penalties available for a violation of P.L.1979, c.16 (C.17:16G-1 et seq.), any debtor injured by a violation of P.L.1979, c.16 (C.17:16G-1 et seq.) may bring a civil action for recovery of damages, which shall include punitive damages, attorney's fees, and costs of suit.

(cf: P.L.2005, c.287, s.2)

8. This act shall take effect immediately.

STATEMENT

This bill, referred to as the "Foreclosure Consulting and Anti-Fraud Act," expands and clarifies the existing scope and provisions of P.L.1979, c.16 (C.17:16G-1 et seq.), concerning debt adjustment and credit counseling activities, and expressly incorporates certain foreclosure consulting practices therein.

Under the bill, the definition of "debt adjuster" is altered, to clarify that debt adjusters are not limited to only payment-altering activities, but may act or offer to act for the purpose of "paying off" the terms of any debt. The definition of "debt adjuster" is further altered to incorporate a new exception to this definition, applicable to a municipality or third party who obtains and acts upon a municipal lien in accordance with the procedures of the "tax sale law," R.S.54:5-1 et seq. This exception is intended to insure that the bill does not inadvertently interfere in the regular tax sales conducted by such parties based upon municipal liens on properties.

The bill clarifies that under existing law, foreclosure consultants who, directly or indirectly, solicit, offer to perform, or perform debt adjustment or credit counseling activities for property owners facing foreclosure with respect to such owners' ability to retain ownership or possession of their property, are required to be licensed in this State as debt adjusters. The bill contains several exceptions from this licensing requirement, including U.S. Housing and Urban Development (HUD) Certified Housing Counseling Agencies (along with other authorized agents of HUD), and mortgagees approved by HUD, plus any financial institutions, subsidiaries, or affiliates, and any residential mortgage lenders or brokers licensed pursuant to the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 through C.17:11C-89), while engaged in the business of such approved mortgagees.

The bill also includes "distressed property purchasers" as among those who must be licensed as debt adjusters under the law. A distressed property purchaser is anyone who acquires an interest in fee or a beneficial interest through a trust document in a distressed property, while allowing the debtor-owner to possess, occupy, or retain a leasehold interest or any present or future interest in fee in the property, or anyone involved in a joint venture or enterprise involving a distressed property conveyance.

The bill provides the Commissioner of Banking and Insurance with additional regulatory authority to oversee foreclosure consulting activities as well as other debt adjustment and credit counseling activities in this State. Such regulatory authority includes:

-permitting the commissioner to establish licensing requirements for any agent, officer, or employee of a debt adjuster, or any category of agent, officer, or employee, which may include disqualifications based upon standards of good moral character; and

-permitting the commissioner, as part of any licensing application, to require the applicant, or any category of applicants, to consent to a criminal history record background check, and any additional background check as deemed appropriate.

While the commissioner is already authorized to request an annual report from any debt adjuster concerning that adjuster's activities conducted in the preceding calendar year, the bill emphasizes that the commissioner may also collect information from a debt adjuster encompassing only one or more particular activities, such as those activities primarily performed with respect to foreclosure consulting.

The bill, concerning penalties for violations of the applicable debt adjustment and credit counseling law, would permit any person to bring an action for punitive damages, as well as receive attorney's fees and costs of suit. Additionally, the bill clarifies the law's penalty provisions by emphasizing that the commissioner's existing authority to enjoin any licensed debt adjuster and "any other person concerned or in any way participating in" a violation, includes, with respect to foreclosure consulting activities, any residential mortgage lender, residential mortgage broker, or other licensee pursuant to the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 through C.17:11C-89), any real estate broker or other licensee pursuant to R.S.45:15-1 et seq., or any real estate appraiser licensed or certified pursuant to the "Real Estate Appraisers Act," P.L.1991, c.68 (C.45:14F-1 et seq.).