STATE OF NEW JERSEY

							               SENATE, No. 1554

STATE OF NEW JERSEY
            208th LEGISLATURE
                 INTRODUCED DECEMBER 17, 1998



Sponsored by:
Senator ROBERT W. SINGER
District 30 (Burlington, Monmouth and Ocean)




SYNOPSIS
  "New Jersey Fair Mortgage Lending Practices Act."

CURRENT VERSION OF TEXT
  As introduced.
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 1   A N ACT concerning certain mortgage lending practices and
 2      supplementing Title 17 of the Revised Statutes.
 3
 4      BE IT ENACTED by the Senate and General Assembly of the State
 5   of New Jersey:
 6
 7      1. This act shall be known and may be cited as the "New Jersey
 8   Fair Mortgage Lending Practices Act."
 9
10       2. The Legislature finds and declares:
11       a. A consumer who seeks mortgage financing to purchase a home
12   in New Jersey should be provided with the opportunity to shop for a
13   mortgage loan which the consumer considers the most appropriate and
14   which is available at the lowest possible cost;
15       b. Although a consumer now receives various disclosures required
16   by both federal and State law concerning mortgage loan products, the
17   purpose of these disclosures is defeated if a consumer cannot use them
18   to shop in the marketplace between competing lenders for loan
19   products best suited to the consumer's needs;
20       c. Entities known as "affiliated business arrangements" or
21   "controlled business arrangements," in which there is a common
22   ownership of a realty office and an originator of mortgage loans,
23   through a single owner or a joint venture, are used by the owners to
24   refer a consumer from their real estate brokers and real estate broker-
25   salespersons to their commonly owned mortgage lender;
26       d. Most of the time a consumer will use the mortgage lender to
27   which the consumer is referred by the real estate broker or real estate
28   broker-salesperson;
29       e. In an attempt to insure that a consumer will use the mortgage
30   lender to which the consumer has been referred by the real estate
31   broker or real estate broker-salesperson, these affiliated real estate
32   offices have engaged in a practice known as "lender lock-out": they
33   refuse to allow representatives of unaffiliated mortgage lenders to
34   enter their real estate offices to meet with real estate brokers, real
35   estate broker-salespersons or a consumer regarding the mortgage loan
36   products the unaffiliated mortgage lenders offer, while at the same
37   time, representatives of an affiliated mortgage lender are provided
38   access to the real estate office building and in some cases a
39   representative of an affiliated mortgage lender even has a desk,
40   telephone and fax machine in the office or even a separate room in the
41   real estate office building;
42       f. Through threatened retaliation or other pressures, these affiliated
43   businesses attempt to induce real estate brokers and real estate broker-
44   salespersons to refer all or most of the consumers seeking financing to
45   purchase a home in New Jersey to their affiliated mortgage lender;
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 1      g. These practices undermine the competitive marketplace and its
 2   ability to provide the best available mortgage products to a consumer.
 3
 4      3. As used in this act:
 5      "Commissioner" means the Commissioner of Banking and
 6   Insurance.
 7      "Commission" means the New Jersey Real Estate Commission.
 8      "Lender lock-out" means the refusal by a real estate broker or real
 9   estate broker-salesperson to allow representatives of unaffiliated
10   mortgage lenders to enter their real estate offices to meet with real
11   estate brokers, broker-salespersons, salespersons or a consumer
12   regarding the mortgage loan products offered by an unaffiliated
13   mortgage lender, while at the same time providing access for
14   representatives of an affiliated mortgage lender to brokers, broker-
15   salespersons, salespersons or consumers in the real estate offices.
16      "Mortgage banker" and "mortgage broker" have the meaning given
17   those terms pursuant to the "New Jersey Licensed Lenders Act,"
18   P.L.1996, c.157 (C.17:11C-1 et seq.).
19      "Real estate broker" and "real estate broker-salesperson" and "real
20   estate salesperson" have the meaning given those terms pursuant to
21   R.S.45:15-3.
22      "Reasonable access" means allowing a representative of an
23   unaffiliated lender to enter a realty office to meet with real estate
24   brokers, real estate broker-salespersons, real estate salespersons or a
25   consumer for the purpose of providing verbal and written information
26   about the unaffiliated lender's mortgage loan products. The delivery
27   of rate sheets or other written material to real estate offices or directly
28   to real estate brokers, broker-salespersons or salespersons on behalf
29   of unaffiliated mortgage lenders, shall not be considered "reasonable
30   access."
31
32      4. A mortgage banker or mortgage broker, and a real estate broker
33   or real estate broker-salesperson, are "affiliated" for the purposes of
34   this act if:
35      a. A real estate broker or real estate broker-salesperson, or an
36   officer, director, spouse, parent or child of the real estate broker or
37   real estate broker-salesperson, is an officer, director or employee of
38   the mortgage banker or mortgage broker or works as a solicitor for
39   the mortgage banker or mortgage broker;
40      b. A mortgage banker or mortgage broker, or an officer, director,
41   spouse, parent or child of the mortgage banker or mortgage broker, is
42   an officer, director or employee of the real estate broker or real estate
43   broker-salesperson;
44      c. The real estate broker or real estate broker-salesperson, either
45   alone or with spouse, parent or parents, or child or children, owns
46   more than one percent of the mortgage banker or mortgage broker;
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 1      d. The mortgage banker or mortgage broker, either alone or with
 2   spouse, parent or parents, or child or children, owns more than one
 3   percent of the real estate broker or real estate broker-salesperson;
 4      e. The real estate broker or real estate broker-salesperson owns
 5   more than one percent or is more than one percent owned by a
 6   corporate parent, holding company or other business entity which is
 7   a majority shareholder in the mortgage banker or mortgage broker, or
 8   the mortgage banker or mortgage broker owns more than one percent
 9   or is more than one percent owned by a corporate parent, holding
10   company or other business entity which is a majority shareholder in the
11   real estate broker or real estate broker-salesperson;
12      f. The real estate broker is a franchise of a franchisor which owns
13   more than one percent of the mortgage banker or mortgage broker or
14   the licensee itself is the franchisor or franchisee of a mortgage lending
15   franchise; or
16      g. The real estate broker or real estate broker-salesperson shares
17   office space or other facilities, or staff, with the mortgage banker or
18   mortgage broker.
19
20      5. No affiliated mortgage banker or mortgage broker, and no
21   affiliated real estate broker or real estate broker-salesperson shall
22   participate, directly or indirectly, in any lender lockout.
23
24      6. An affiliated real estate broker or real estate broker-salesperson
25   who is assisting with mortgage financing, whether directly or
26   indirectly, shall have a duty to a consumer to provide the consumer
27   with alternative sources of mortgage loans so that the consumer can
28   compare different mortgage products and their costs.
29
30      7. No affiliated real estate broker or real estate broker-salesperson
31   shall preclude or prevent representatives of unaffiliated mortgage
32   lenders from entering a realty office to meet with consumers, real
33   estate brokers, real estate broker-salespersons or real estate
34   salespersons unless that entry would cause disruption or overcrowding
35   in the office, in which case the representative shall be offered an
36   opportunity to enter the office on the following day.
37
38      8. No affiliated real estate broker or real estate broker-salesperson
39   shall retaliate against or threaten, directly or indirectly, any real estate
40   broker, real estate broker-salesperson or real estate salesperson who
41   refers a consumer to an unaffiliated mortgage banker or mortgage
42   broker.
43
44      9. The commissioner may refuse to issue and may revoke, suspend
45   or refuse to renew a license, or impose a penalty pursuant to section
46   11 of this act, if the commissioner finds, after notice and an
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 1   opportunity for a hearing in accordance with the "Administrative
 2   Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) and any rules
 3   adopted thereunder, that any person, applicant for or holder of a
 4   license under the "New Jersey Licensed Lenders Act," P.L.1996, c.157
 5   (C.17:11C-1 et seq.), has violated any provision of this act or any
 6   order, rule or regulation made or issued pursuant to this act.
 7
 8      10. The commission, after notice and an opportunity for a hearing
 9   in accordance with the "Administrative Procedure Act," P.L.1968,
10   c.410 (C.52:14B-1 et seq.) and any rules adopted thereunder, may
11   place on probation, suspend or revoke any license of a real estate
12   broker or real estate broker-salesperson, or impose a penalty pursuant
13   to section 11 of P.L.        , c.     (C.        )(pending before the
14   Legislature as this bill), if the commission finds that a real estate
15   broker or real estate broker-salesperson has violated any provision of
16   P.L. , c.      (C.      )(pending before the Legislature as this bill) or
17   any order, rule or regulation made or issued pursuant to P.L. , c.
18   (C.    )(pending before the Legislature as this bill).
19
20      11. Any person who engages in any conduct or practice prohibited
21   by this act may be liable for a penalty not exceeding $5,000 to be
22   recovered in a summary proceeding under the "penalty enforcement
23   law," N.J.S.2A:58-1 et seq. Each violation shall constitute a separate
24   offense, and the penalty under this subsection shall be in addition to
25   any suspension or revocation of a license.
26
27      12. The commissioner and real estate commission may promulgate
28   rules and regulations, in accordance with the "Administrative
29   Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) necessary to
30   effectuate the provisions of this act.
31
32      13. This act shall take effect on the 90th day after enactment.
33
34
35                               STATEMENT
36
37      This bill establishes the "New Jersey Fair Mortgage Lending
38   Practices Act." The bill prohibits affiliated real estate brokers and
39   mortgage lenders from engaging in the practice of denying unaffiliated
40   mortgage lenders access to a real estate salesperson or to a consumer
41   who has used the services of the real estate broker and is now
42   interested in obtaining a mortgage loan, a practice known as "lender
43   lock-out."