BANKING
DEPARTMENT OF BANKING AND INSURANCE
DIVISION OF BANKING

Licensed Lenders: Mortgage Bankers; Correspondent Mortgage Bankers; Mortgage Brokers; Secondary Lenders; Consumer Lenders and Sales Finance Companies

Proposed Readoption with Amendments: N.J.A.C. 3:15
Proposed Recodification with Amendments: N.J.A.C. 3:15-2.2 as 2.4 and 2.4 as 2.3

Authorized By: Holly C. Bakke, Commissioner, Department of Banking and Insurance
Authority: N.J.S.A. 17:1-8.1 and 15e and 17:11C-1 et seq.

Calendar Reference: See Summary below for explanation of exception to calendar requirement.

Proposal Number: PRN 2002-180

Submit comments by July 19, 2002 to:
Karen Garfing, Assistant Commissioner
Regulatory Affairs
New Jersey Department of Banking and Insurance
P.O. Box 325
Trenton, NJ 08625-0325
Fax: (609) 292-0896
E-mail: Legsregs@dobi.state.nj.us

The agency proposal follows:

Summary

The Department of Banking and Insurance ("Department") proposes to readopt N.J.A.C. 3:15, which was scheduled to expire on April 21, 2002. In accordance with N.J.S.A. 52:14B-5.1c, the submission of this notice of proposal to the Office of Administrative Law extended that expiration date 180 days to October 18, 2002. The chapter provides for the licensing and regulation of the business of mortgage bankers, correspondent mortgage bankers, secondary mortgage lenders, consumer lenders and sales finance companies. Some of the areas covered by the chapter are licensing requirements, bonding requirements, tangible net wroth required of licensees, and books and records required to be kept by licensees.

Subchapter 1 sets forth general provisions. This includes the purpose and scope of the chapter, definitions and requirements as to offices and display of licensees. The Department proposes to add several new definitions regarding the names under which licensees may operate and to add new sections at N.J.A.C. 3:15-1.4, 1.5 and 1.6 regarding license names and approval by the Commissioner of said names. These amendments and new rules are proposed to ensure that names that cause confusion will not be used and to make sure that licensees do not use more than three alternate or trade names under most circumstances. The Department believes these proposed amendments and new rules will help prevent confusion among consumers as to who they are dealing with and will assist the Department to maintain accurate and current records of alternate names or trade names used by a licensee.

The definition of consumer loan and consumer loan business is proposed to be amended to take into account the recent change in N.J.S.A. 17:11C-1 et seq. as a result of the enactment of P.L. 2001 c. 294. The statute now defines consumer loans as those loans of $50,000 or less made by a consumer lender. Before the change in the statute, a consumer loan was one of $15,000 or less.

A definition of "biennial period" is proposed to be added to make it clear when licenses need to be renewed.

A definition of "substantial stockholder" is proposed to be added to clarify a term used in the proposed change in control section at N.J.A.C. 3:15-2.14.

The Department also proposes an amendment to N.J.A.C. 3:15-1.3 setting forth standards to be used for the approval of an office location. Some licensees operate out of their residences. The proposed amendment would make it clear that the business area of the premises would have to be separate from the residential area and accessible to consumers through a separate entrance.

Subchapter 2 governs licensing. The Department proposes to amend this subchapter to clarify that a legal entity that is licensed as a licensed lender also needs a licensed individual in a management capacity. The Department also proposes to amend this subchapter to provide that an application for licensing is not complete unless it is in fully proper form and includes the necessary fees. The Department also proposes to amend the subchapter so that the certified consent certificates done for investigation purposes will be routed to the New Jersey State Police as is done in current practice, rather than the Division of Criminal Justice.

The Department also proposes to amend the subchapter to require that a licensee provide, as part of the application, its true name, and trade or alternate names to be used, and to also require that those trade or alternate names conform to the new sections regarding approval of names proposed in N.J.A.C 3:15-1.4, 1.5 and 1.6. The Department also proposes to amend this subchapter to change the references from the Secretary of State to the Department of Treasury, Division of Revenue, in conjunction with the filed Certificates of Incorporation and alternate names, to reflect the change in the state agency responsible for filing the documents. The proposed amendment also requires that a copy of any trade or alternate name registrations or Certificate of Formation for a Limited Liability Company be provided as part of a license application. In addition, it requires that a copy of the deed, lease or rental agreement for the principal place of business of a licensed entity be provided. That same document will also be required for licensing of branch offices.

Further, the Department proposes to amend this subchapter to clarify what constitutes an acceptable branch office. The proposed amendment to this section will make it clear that a branch office shall not be, nor operate as, a separate business entity but be part of the licensee. Further, the Department proposes to amend this subchapter at N.J.A.C. 3:15-2.12 to spell out the responsibilities of the individual licensee upon whom a licensed lender entity license is based.

Subchapter 2 is also proposed to be amended to eliminate a one-time administrative fee. The fee was imposed in 1997 when the Licensed Lenders Act (the "Act") was signed into law, and the four separate laws that previously governed mortgage bankers, mortgage brokers, secondary mortgage lenders, consumer lenders and sales finance companies were repealed. The elimination of those separate licenses under the separate statutes resulted in the Department issuing new licenses under the Act and the imposition of a one time fee for the conversion. Since all licenses have now been converted since 1997, the need for the one-time administrative fee has ceased to exist and is therefore proposed to be eliminated.

The Department also proposes extensive changes in N.J.A.C. 3:15-2.6 regarding late renewals of licenses by: (1) providing in subsection (c) that if a renewal is submitted later than 90 days following the expiration of the license, it shall no longer be considered a renewal, rather that the entire application process would have to be started again (2) in subsection (a), moving from 30 days to 45 days the timeframe for which a license may be renewed without requiring it to be reinstated, but increasing the penalty for such a late renewal from $50.00 to $500.00, (3) in subsection (b), adding a provision that a renewal submitted later than 45 but no more than 90 days following expiration shall require reinstatement and payment of a $700.00 reinstatement fee and (4) clarifying in subsection (f) what is considered the date of submission of the renewal.

The Department also proposes major amendments to N.J.A.C. 3:15-2.7 regarding inactive license status. These amendments include reducing in subsection (b) from five biennial renewal periods to three biennial renewal periods the length of time for which an individual may keep a license without requiring a retesting; providing a process for reactivation of such an inactive license; imposing in subsection (c) a $200.00 reactivation fee; and permitting a person holding a sole proprietor license with authority as a mortgage banker, correspondence mortgage broker or secondary lender to place the individual right to licensure in inactive status as set forth by the requirement in subsection (a).

Also proposed is an amendment to N.J.A.C. 3:15-2.8, governing conversion of licenses, which is when a mortgage broker is converting to a mortgage banker or a correspondent mortgage banker is converting to a mortgage banker. The applicant for conversion, in addition to submitting its original license, the licenses of all branch offices, and the licenses of all individuals, will now be required to submit the certificates of all its registered mortgage solicitors, a conversion fee of $300.00 (increased from $200.00), plus a fee of $50.00 (increased from $25.00) for each branch license, $50.00 (increased from $25.00) for each licensed individual, and a new $10.00 fee for each registered mortgage solicitor. Conversions from a mortgage banker or a correspondent mortgage banker to a mortgage broker or from a mortgage broker to a mortgage banker or correspondent mortgage banker will now also require certificates of all registered mortgage solicitors and the fees as outlined above.

An amendment to N.J.A.C. 3:15-2.9, regarding examination for licensure, is proposed to provide that the examination may be prepared either by the Department or by an entity designated by the Department. An additional amendment is proposed to make it clear that an entity applying for a license must also have an affiliated licensed individual.

An amendment to N.J.A.C. 3:15-2.12 is proposed to provide that the individual representing a licensed entity shall be responsible for supervising the activities of that licensee. The proposed amendment requires that a supervisory individual makes sure the business is being properly conducted, that communication from the Department are promptly responded to, that reports to the Department are made in a timely fashion and that license renewals and changes in the license, such as control address, are submitted to the Department.

An amendment to N.J.A.C. 3:15-2.13, regarding registration of mortgage solicitors, is proposed to require that the completed application form include, in addition to basic information already requested, general authority for the Commissioner to request any additional information that the Commissioner determines is appropriate. It would also clarify the policy of the Department that only one affiliation is permitted at a time. The proposed amendment to subsection also increases the fee for a duplicate mortgage solicitor registration form from $10.00 to $15.00 and increases the biennial fee for each mortgage solicitor's registration from $50.00 to $100.00. The increases are necessary to cover administrative costs of administering these licenses, including upgrades to computer technology in licensing and additional screening of applicants. The fees have not been increased since implementation of mortgage solicitor registration in 1983.

The Department also proposes to amend subchapter 2 to provide, at N.J.A.C. 3:15-2.1(d), that time spent by a real estate broker, real estate salesperson or a salaried employee of a real estate broker for mortgage-related services may be reimbursed by a mortgage lender if fully itemized. The Department also proposes new rule at N.J.A.C. 3:15-2.14 governing change of control of a licensed entity; at N.J.A.C. 3:15-2.15 governing discontinuation of licensed activity; and N.J.A.C. 3:15-2.16 governing notification to the Department of events affecting a licensee.

Subchapter 3 specifies bonding requirements for licensees. Increases doubling the amount of the initial surety bond have been proposed, along with a requirement for annual increases in the bond based on the volume of closed loans for mortgage and mortgage bankers and secondary lenders and based on the number of applications taken by mortgage brokers. The bond amount increases are necessary to protect consumers, and comport with the Department’s experience in this regard. Bond amounts have not been increased since July of 1997. A minor _______ in the form of address for bond claims forwarded to the Department has also been proposed.

Subchapter 4 sets forth license fees. The current N.J.A.C. 3:15-4.2, providing for a one-time administrative fee, which was detailed above in the discussion of subchapter 2, has been repealed. The increases in the biennial license fees in N.J.A.C. 3:15-4.3 represent an increase of $100.00 per year, per authority. This covers increased costs to the Department for staff, office operations, and overhead. These fees were last increased in July of 1997. Further, at the request of licensees, substantial information is available on the Department website. The proposed increased fees will help defer the cost of site maintenance and updating. The Department's website address is www.njdobi.org.

Subchapter 5 governs tangible net worth, net worth, liquid assets and solvency. A provision in N.J.A.C. 3:15-5.3, adopted in 1997 in connection with the elimination of the four separate laws and the transition to the Act, is proposed to be deleted. The Department proposes an amendment to N.J.A.C. 3:15-5.4(a) to require that the licensee who fails to maintain the tangible worth, net worth or liquid assets required shall comply with a capital plan within a time frame set by the Department to get back to the proper levels required. Additional changes to this section to improve the sentence structure are also proposed.

Subchapter 6 governs books and records, examinations and annual reports.

Subchapter 7 regulates insurance issues.

Subchapter 8 governs advertising.

Subchapter 9 governs permissible fees to be charged by mortgage bankers, correspondent mortgage bankers and mortgage brokers. N.JA.C. 3:15-9.1(a) is proposed to be deleted, as the subsection is duplicative of what is contained in the balance of the subchapter. In addition, N.J.A.C. 3:15-9.2(b), which prohibits secondary lenders from collecting interest before it is earned, is proposed to be deleted. The Department has determined that the Act does not prohibit this practice as to secondary lenders.

Subchapter 10 sets forth characteristics of loans. N.J.A.C. 3:15-10.3(d) is proposed to be amended. This section deals with consumer loans, and the recent statutory change from $15,000 to $50,000 as the consumer loan definitional maximum is reflected here. In addition, a new N.J.A.C. 3:15-10.4 is proposed, governing characteristics of first mortgage loans. It provides that the only collateral that a first mortgage lender may take is a first mortgage lien on the real estate that is subject to the loan.

Subchapter 11 governs other permissible lines of business for consumer lenders. The Department proposes a new section at N.J.A.C. 3:15-11.3 to make it clear that the Commissioner may, after opportunity to be heard, suspend or revoke a licensee's approval to engage in outside businesses if the licensee has violated a condition of the prior approval, or has demonstrated unworthiness for such approval.

Subchapter 12 sets forth the rules regarding imposition of administrative penalties.

The Department also is proposing amendments to make certain grammatical and spelling changes as a matter of form to update the rules to add terms connected with limited liability company entities and to update references in the rules to the current New Jersey Administrative Code.

The Department has reviewed the remaining rules and has determined that they are necessary, reasonable and proper for the purpose for which they were originally promulgated.

This rule proposal provides for a comment period of 60 days, and, therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, is not subject to the provisions of N.JA.C. 1:30-3.1 and 3.2 governing rulemaking calendars.

Social Impact

The rules proposed for readoption with amendments apply to all licensed lenders. This includes mortgage bankers, correspondent mortgage bankers, mortgage brokers, secondary lenders, consumer lenders and sales finance companies. The rules proposed for readoption with amendments will continue to implement the licensing requirements and the policy of the Department regarding these types of lenders. Moreover, the rules proposed for readoption with amendments will continue to enable the Department to carry out its mission of requiring licensed lenders to engage in their business in a manner that protects consumers. Therefore, the rules proposed for readoption with amendments will continue to have a beneficial social impact on consumers, licensed lenders and the general public.

Economic Impact

The rules proposed for readoption with amendments will affect mortgage bankers, correspondent mortgage bankers, mortgage brokers, secondary lenders, consumer lenders and sales finance companies. Persons or entities engaging in these businesses will be required to pay the fees, file reports, maintain records and meet any net worth or bonding requirements, as set forth in these rules.

Licensed lenders will incur costs to comply with the rules proposed for readoption with amendments. Some licensed lenders may choose to use the services of outside professionals, such as accountants and attorneys, for assistance with compliance. The costs for this will vary based on the professional chosen and the amount of work requested.

The fees charged are intended to reflect the costs of regulation. The license fees are substantially less than permitted by statute. The proposed increases are reasonable and an anticipated cost of doing business. The proposed fee increases for filing late license renewals, reactivation fees for inactive licenses, reinstatement fees, license conversions and duplicate mortgage solicitor registration certificates reflect increased costs to the Department for the special handling of these materials. The increased bonding requirements may result in an increased bond cost; however the increases are not anticipated to be burdensome. Further, the benefit to consumers of increased bond amounts upon which to draw in the event of improper charges by a licensee outweighs the added expense.

Federal Standards Statement

The rules proposed for readoption with amendments do not contain any standards or requirements that exceed the standards or requirements imposed by Federal law. The rules proposed for readoption with amendments continue to apply certain Federal standards to New Jersey licensed lenders. The Federal standards involved are: The Real Estate Settlement and Procedures Act, 12 U.S.C. § 2607, and the Depository Institutions Deregulation and Monetary Control Act of 1980, P.L. 96-221.

Jobs Impact

The Department does not anticipate that any jobs will be generated or lost as a result of the rules proposed for readoption with amendments. Licensed lenders will use existing staff or retain outside professionals for continued compliance with existing rules. The amendments will not require additional staff.

The Department invites commenters to submit any data or studies concerning jobs impact of the proposed readoption with amendments together with written comments on other aspects of this proposal.

Agriculture Industry Impact

The Department does not expect any agriculture industry impact from the rules proposed for readoption with amendments.

Regulatory Flexibility Analysis

The Regulatory Flexibility Act, N.J.S.A. 52:14B-1 et seq., defines a "small business" as any business resident in this State that employs fewer than 100 employees, is independently owned and operated and is not dominant in its field. Many of the licensees affected by the rules proposed for readoption with amendments are small businesses.

The rules proposed for readoption with amendments will continue to impose recordkeeping, reporting and other compliance requirements on these entities, as discussed in the Summary above. Costs are discussed in the Economic Impact above. Some licensed lenders may choose to use the services of outside professionals, such as accountants and attorneys , for assistance with compliance. The costs for this will vary based on the professional chosen and the amount of work requested.

The rules proposed for readoption with amendments will continue to require mortgage bankers, correspondent mortgage bankers, mortgage brokers, secondary lenders, consumer lenders and sales finance companies to operate in a manner that is responsible to the industry, their customers and the general public. Moreover, the Department does not believe that these requirements are unduly burdensome. They are consistent with prudent regulatory practices. The purpose of these requirements does not vary based upon business size. Accordingly, no differentiation based on business size is provided.

 

Smart Growth Impact

The rules proposed for readoption with amendments will have no impact on the achievement of smart growth and implementation of the State Development and Redevelopment Plan.

Full text of the rules proposed for readoption may be found in the New Jersey Administrative Code at N.J.A.C. 3:15.

Full text of the proposed amendments follows (additions indicated in boldface thus; deletions indicated in brackets [thus]):

SUBCHAPTER 1. GENERAL PROVISIONS

3:15-1.1 Purpose and scope

(a) This chapter implements the New Jersey Licensed Lenders Act, N.J.S.A. 17:11C-1 et seq.[, which combines under one licensing authority activities that previously required separate licenses.]

(b) This chapter shall apply to all [licenses issued or renewed under the Act with an effective date of July 1, 1997 or later] licensed lenders with mortgage banker, correspondent mortgage banker, mortgage broker, secondary lender, consumer lender and/or sales finance company authority or authorities and registered mortgage solicitors and those whose activities require they be licensed or registered.

3:15-1.2 Definitions

The following words and terms, when used in this chapter, shall have the following meaning unless the context clearly indicates otherwise.

. . .

"Alternate name" means an alternate name registered pursuant to N.J.S.A. 14A:2-2.1(2) or 42:2B-4b.

. . .

"Biennial period" means the two-year period beginning on July 1 of an odd-numbered year.

. . .

"Branch office" means any location where, in the regular course of business, applications for first mortgage loans, second mortgage loans, consumer loans or sales finance contracts are distributed to or received from consumers, loan records are maintained, underwriting decisions are made, commitments or lock-in agreements are issued, or any fees or charges relating to the loan are received from consumers.

1. (No change.)

2. A location shall not be considered a branch office merely because any or all of the following activities are conducted at the location:

i. Consumers receive information concerning available loan products [form] from a computer terminal;

ii. - iii. (No change.)

3. - 5. (No change.)

. . .

"Commitment" means a signed statement issued by a lender in [that] which the lender [premises] promises to make a loan of specified terms to a specified borrower, and which is based on a satisfactory underwriting analysis of the appraisal, if an appraisal is required in connection with the loan, and satisfactory underwriting analysis of the credit report, if a credit report is required in connection with the loan, except that any document indicating approval of a loan application that is contingent on the approval of a party to whom the lender seeks to sell the loan shall not be deemed a commitment.

. . .

"Consumer loan" means a loan of $[15,000] 50,000 or less made by a consumer lender pursuant to the terms of the Act, and not a first mortgage loan or a secondary mortgage loan.

"Consumer loan business" means the business of making loans of money, credit, goods or things in action in the amount of value of $[15,000] 50,000 or less and charging, contracting for, or receiving a greater rate of interest, discount or consideration therefore than the lender would be permitted by law to charge if he or she were not a licensee hereunder, except as authorized by the Act and without first obtaining a license from the Commissioner. Any person directly or indirectly engaging in the business of soliciting or taking applications for such loans of $[15,000] 50,000 or less, or in the business or negotiating or arranging or aiding the borrower or lender in procuring or making such loans of $[15,000] 50,000 or less, or in the business of buying, discounting or indorsing notes, or of furnishing, or procuring guarantee or security for compensation in amounts of $[15,000] 50,000 or less, shall be deemed to be engaging in the consumer loan business.

. . .

"Direct contact" means in-person contact, and contact by means of a telephone, computer terminal, internet or other electronic means during which contact, in the regular course of business, applications for first mortgage loans, second mortgage loans, consumer loans or sales finance contracts are distributed to or received from consumers, underwriting decisions are made, commitments or lock-in agreements are issued, or any fees or charges relating to the loan are authorized.

. . .

"License name" means any name listed on the license issued by the Department including the true name and any alternate or trade names.

. . .

"Secondary mortgage loan business" means advertising, causing to be advertised, soliciting, negotiating, offering to negotiate, offering to make or making a secondary mortgage loan in this State, whether directly or by any person acting for his or her benefit[, or becoming the subsequent holder of a promissory note or mortgage, indenture or any other similar instrument or document received in connection with a secondary mortgage loan].

. . .

"Substantial stockholder" means a person or entity owning 10 percent or more of the stock of a licensee.

. . .

"Trade name" means an assumed name filed pursuant to N.J.S.A. 56:1-2.

"True name" means the legal name of the licensed entity and shall not include any alternate or trade name.

. . .

3:15-1.3 Office requirement

(a) A licensee, except a licensee engaging solely in the sales finance company business, shall maintain a place of business in this State. A licensee shall maintain a place of business in a suitable location as determined by the Commissioner. The Commissioner shall consider the following factors in determining whether a location is suitable:

    1. The location shall conform to all local ordinances and zoning requirements;
    2. The location shall be reasonably accessible to the public;
    3. Any signage proposed for the location shall clearly identify the licensee;

4. The location shall be reasonably free of noise and other distractions so as to permit customers to give appropriate consideration to the loan transaction; and

5. A residence shall not be considered a suitable location unless the applicant submits acceptable proof that the office would be separate from the residential area and conveniently accessible to all consumers through a separate business entrance. Acceptable proof shall include, at a minimum, a floor plan and related photographs depicting the necessary criteria set forth in (a)1 through 4 above.

(b) A licensee may maintain more than one place of business and shall secure a license for each such branch office as required by N.J.A.C. 3:15-[2.4] 2.3.

(c) Each licensee that maintains more than one licensed office shall designate one licensed office as the principal office. The designation of the principal office shall be filed with the Commissioner. Any change in the designation shall be filed within 10 days of the effective date of the change. [The] If the filing is complete, the Commissioner shall issue a new license reflecting the new designation.

(d) – (e) (No change.)

3:15-1.4 License name

(a) A licensee may use alternate or trade names, and may change such name or names, in connection with business under the Act, following approval by the Commissioner and subject to the provisions of N.J.A.C. 3:15-1.5, and 1.6 and N.J.S.A. 17:11C-22(a).

(b) The true name and all alternate or trade names shall appear on the license issued by the Department.

(c) A licensee may use its true name, any or all of its alternate or trade names, or any combination of them, in its advertising.

(d) In closing documents, a licensee shall use its true name plus the alternate or trade name that it used in its contacts with the consumer involved in the transaction.

3:15-1.5 License names permitted

(a) The number of alternate or trade names that may be used by a licensee in this State shall not exceed three, unless

1. The licensee is exercising four authorities under the Licensed Lenders Act and applies for a fourth alternate or trade name so that it may use one for each of the authorities;

2. The licensee provides evidence to the Commissioner that prohibiting it from using a fourth or subsequent alternate or trade name would produce a substantial and unreasonable hardship on the licensee beyond the mere ability to market under the new name, and the licensee can satisfy the Department that procedures have been established to assure that consumers will not be misled about the true identity of the licensee. The Commissioner shall not grant an exception to the limitation of three alternate or trade names under this paragraph except in extraordinary circumstances; or

3. The licensee has, prior to the effective date of this rule, been approved to use four or more alternate or trade names, in which case, the licensee may continue to use those names, but shall not be approved to use an additional alternate or trade name until the total number of alternate or trade names being used by that licensee is two or fewer, unless a larger number is permitted pursuant to (a) 1 or 2 above.

3:15-1.6 Grounds for denying use of alternate or trade names

(a) The Commissioner may deny an application to use an alternate or trade name if:

1. The name is lewd, offensive or otherwise inappropriate for the conduct of the licensed activity; or

2. The name would create a substantial risk of misleading or confusing consumers.

3:15-[1.4] 1.7 ( No change in text.)

SUBCHAPTER 2. LICENSING

3:15-2.1 Requirement to be licensed

(a) [After June 30, 1997, no] No person shall act as a mortgage banker, correspondent mortgage banker, mortgage broker, secondary lender, consumer lender, or sales finance company without holding, in good standing, a license under the Act, unless that person is exempt from licensure pursuant to N.J.S.A. 17:11C-4, 5 or 6. No corporation, partnership, limited liability company, association or any other entity shall be issued or hold a license as a mortgage banker, correspondent mortgage banker, mortgage broker or secondary lender unless one officer, partner, member or principal has an individual license of that same type sought or held.

(b) - (c) (No change.)

(d) For purposes of (b) above, the time spent by a real estate broker, real estate salesperson or a salaried employee of a real estate broker providing specific mortgage-related services is reimbursable provided that:

1. The reimbursement shall be paid by the mortgage lender directly to the real estate broker;

2. The reimbursement shall be in the amount itemized in the statement of reimbursable expenses submitted to the mortgage lender prior to closing;

3. The rate used to determine the amount of the reimbursement for mortgage-related services personally provided by the real estate broker, or provided by a non-salaried salesperson employed or retained by the real estate broker, shall not substantially exceed the average rate of regular (non-overtime) compensation of the real estate broker’s support staff;

4. The rate used to determine the reimbursement for mortgage-related services provided by a salaried employee of the real estate broker shall not exceed that employee’s regular (non-overtime) rate of compensation;

5. Any reimbursement paid to the real estate broker for mortgage-related services provided by a non-salaried real estate salesperson shall be passed through in the full amount itemized on the statement of reimbursable expenses submitted to the mortgage lender prior to closing; and

6. Any reimbursement passed through by the real estate broker to a non-salaried salesperson shall be in addition to any real estate commission generated by the sales transaction to which the specific mortgage services related and was paid to the salesperson.

[(d)] (e) (No change in text.)

[(e)] (f) If a licensee files [an] a complete application for renewal of his or her license on or before [June 30, 1997, or on or before] the expiration date of any [subsequent] biennial licensing period[.] , the [applicant or] licensee may continue to transact business without interruption until such time as he or she is notified that his or her application for renewal has been denied or that his or her license has been suspended or revoked. An application is complete if it is in proper form and includes the necessary fees.

3:15-2.2 Application for an initial license

(a) A person applying for an initial license pursuant to the Act shall submit the following:

1. A completed application form as prescribed by the Commissioner which shall include the following:

i. The true name of the applicant [, including any] conforming to N.J.S.A. 17:11C-22(a) and no more than three trade names or ["doing business as" name] alternate names conforming to N.J.A.C. 3:15-1.4 and 1.5 to be utilized;

ii. - vi. (No. change.)

2. Certified consent certificates permitting the Department to make inquiries to the [Department of Law and Public Safety, Division of Criminal Justice] New Jersey State Police as to any information it may have on file with respect to the applicant, that is, the person, sole proprietor, partners, members and managers of a limited liability company, corporate officers, directors and shareholders owning 10 percent or more of the shares of the corporation. The Department may make such inquiries on the basis of answers to questions in the application or on the basis of any other information which the Department receives that would make such an inquiry relevant to the decision on the application;

3. - 4. (No change.)

5. An application for a corporate license by a corporation organized under the laws of this State shall be accompanied by a copy of the applicant's Certificate of Incorporation as filed with the New Jersey [Secretary of State's Office] Department of Treasury, Division of Revenue. A foreign corporation shall submit a copy of its Certificate of Incorporation from the state where it is incorporated, and a copy of its Certificate of Authority to do business in this State approved by the New Jersey [Secretary of State] Department of Treasury, Division of Revenue. If an alternate name is to be utilized, a copy of the registration of that name with the New Jersey Department of Treasury, Division of Revenue shall be provided;

6. An application for a sole proprietorship or partnership license where a trade name is to be used shall be accompanied by a trade name certificate filed with the County Clerk's office in the county in which the licensee is to be located, and any filing made with the New Jersey [Secretary of State] Department of Treasury, Division of Revenue. An application for a limited liability company license shall be accompanied by a copy of the applicant’s Certificate of Formation as filed with the New Jersey Department of Treasury, Division of Revenue. A foreign limited liability company shall submit a copy of its formation document from the state where it was established. If an alternate name is to be utilized, a copy of the registration of that name with the New Jersey Department of Treasury, Division of Revenue shall be provided;

7. (No change.)

8. A copy of the deed, lease or rental agreement for the principal place of business, or a letter of intent for such a document. If a letter of intent is submitted, an executed copy of the document shall be provided within 60 days of approval of the application;

[8.] 9. The biennial license fee as specified in N.J.A.C. 3:15-[4.4] 4.3;

[9.] 10. The application fee as specified in N.J.A.C. 3:15-[4.3] 4.2; and

[10.] 11. A completed branch office application as specified in N.J.A.C. 3:15-[2.4] 2.3, if applicable.

(b) – (c) (No change.)

(Agency Note: N.J.A.C. 3:15-2.3 is proposed for recodification with amendment as N.J.A.C. 3:15-2.4)

3:15-[2.4] 2.3 Branch offices; branch licensing requirement; initial branch licensing application

(a) (No change.)

(b) The application for a branch office license shall include the following:

    1. The true name of the licensed entity[, including any] and no more than three trade names or ["doing business as" name to be utilized] alternate names conforming to N.J.A.C. 3:15-1.4 and 1.5;
    2. (No change.)
    3. The addresses of all branches to be licensed and a copy of the deed, lease or rental agreement for each, or a letter of intent for such a document. If a letter of intent is submitted, an executed copy of the document shall be provided within 60 days of approval of the application;

4. A branch application fee as required by N.J.A.C. 3:15-[4.3] 4.2; and

5. The branch license fee as specified in N.J.A.C. 3:15- [4.4] 4.3.

(c) - (e) (No change.)

(f) Branch office arrangements shall be restricted as follows:

1. A branch office shall not be a separate business entity. If an office of another entity is purchased by or merged into a licensed lender, the licensed lender shall file for a branch office license. The filing shall include documentation evidencing the acquisition and/or merger of that entity into the surviving licensed entity;

2. A branch office shall not pay its own operating expenses. Operating expenses shall include, but are not limited to, compensation of branch office employees, and payments for equipment, furniture, office rent, and other similar expenses incurred in operating a mortgage lending business;

3. A branch office shall not maintain a banking account or accounts for the payment of expenses of that branch that is separate from the account or accounts of the licensee;

4. A branch office shall not maintain contractual relationships with vendors for items such as leases, telephones, utilities, and advertising in the name of the branch office;

5. A branch office shall not maintain lines of credit, warehouse agreements, or other investor agreements that are separate from those of the licensee; and

6. A branch office shall not indemnify the licensed lender against damages incurred from any apparent, express, or implied agency representation by or through the branch office's actions.

3:15-[2.3] 2.4 Application for renewal of a license

(a) A person who holds in good standing a license as a licensed lender with authority to act as a mortgage banker, correspondent mortgage banker [or], mortgage broker, secondary mortgage lender, consumer lender or sales finance company [that has an expiration date of June 30, 1997 and who wishes to continue to act in that line of business after June 30, 1997, shall renew that license pursuant to this subchapter by July 1, 1997. Such renewal license shall be issued for the biennial period July 1, 1997 through June 30, 1999 and shall be renewable for subsequent biennial licensing periods. A person renewing] who seeks to renew a license pursuant to this section shall submit the following in connection with the renewal application:

1. A completed renewal application form as prescribed by the Commissioner which shall include the following:

i.-ii (No change.)

[iii. In the case of the renewal for the period July 1, 1997 through June 30, 1999, the original executed bond or original rider to the original executed bond meeting the requirements of N.J.A.C. 3:15-3.1 and 3.2;]

[iv. In the case of renewals for July 1, 1999 and after a] iii A certification that the applicant has bond coverage as specified in N.J.A.C. 3:15-3.1, and net worth as specified by N.J.S.A. 17:11C-14 of the Act, in the case of a mortgage banker, correspondent mortgage banker, mortgage broker; or a certification that the applicant has bond coverage as specified in N.J.A.C. 3:15-3.1, and net worth and liquid assets as specified in N.J.S.A. 17:11C-15, in the case of a secondary mortgage lender; or a certification that the applicant has net worth and liquid assets as specified in N.J.S.A. 17:11C-16, in the case of a consumer lender; and

[v.] iv. The biennial license fee as specified in N.J.A.C. 3:15-[4.4;] 4.3. [and

vi. The one-time administrative fee as required by N.J.A.C. 3:15-4.2.

(b) A person who holds in good standing a license to engage in the secondary mortgage loan business, engage in the consumer loan business, or engage in the sales finance company business that has an expiration date of December 31, 1997 and who wishes to remain in business after June 30, 1997, shall by July 1, 1997 renew that license or licenses pursuant to this subchapter. Such renewal licenses shall be for the biennial period July 1, 1997 through June 30, 1999 and shall be renewable for biennial periods subsequent to June 30, 1999. A licensee renewing a license pursuant to this section shall submit the following in connection with the renewal application.

1. A completed renewal application form as prescribed by the Commissioner which shall include the following:

    1. The name of the applicant; and
    2. The location of the principal place of business of the applicant;

2. In the case of a person renewing a secondary lender license, a certification that the applicant has bond coverage as specified in N.J.A.C. 3:15-3.1, and has net worth and liquid assets as specified in N.J.S.A. 17:11C-15;

3. In the case of a consumer lender, a certification that the applicant has net worth and liquid assets as specified in N.J.S.A. 17:11C-16;

4. In the case of the renewal by a secondary lender for the period July 1, 1997 through June 30, 1999, the original executed bond or original rider to the original executed bond meeting the requirements of N.J.A.C. 3:15-3.1;

5. A biennial license fee in the amount set forth in N.J.A.C. 3:15-4.4; and

    1. The one-time administrative fee as required by N.J.A.C. 3:15-4.2

(c) A secondary lender, consumer lender or sales finance company who renews pursuant to (b) above for the period July 1, 1997 through June 30, 1999 shall receive a credit of $250.00 toward the biennial license fee for that renewal for each of those lines of business for which the secondary lender, consumer lender or sales finance company was licensed on June 30, 1997.]

3:15-2.5 Branch offices; renewal of branch licenses

    1. A licensee in good standing who holds a license for a branch or branches with authority for the conduct of the business of a mortgage banker, correspondent mortgage banker, [or]mortgage broker, secondary mortgage lender, consumer lender or sales finance company [that has an expiration date of June 30, 1997 and who wishes to continue to conduct mortgage banking, correspondent mortgage banking or mortgage brokering business at such branch or branches after June 30, 1997, shall renew that license pursuant to this subchapter by July 1, 1997. Such renewal license shall be issued for the biennial period July 1, 1997 through June 30, 1999 and shall be renewable for subsequent biennial periods. A person renewing] who wishes to renew a branch license pursuant to this section shall submit the following in connection with the renewal application:

1. A completed renewal application form as prescribed by the Commissioner which shall include the following for each branch to be renewed:

i. The true name of the [license] licensed entity [, including any] and all trade names or ["doing business as" name] alternate names conforming to N.J.A.C. 3:15-1.4 or 1.5 to be utilized;

ii. (No change.)

iii. The [addresses] address of [all branches] each branch whose [licenses are] license is being renewed; and

2. The branch licensing fee as specified in N.J.A.C. 3:15-[4.4] 4.3. [; and

3. The one-time administrative fee as required by N.J.A.C. 3:15-4.2.

(b) A licensee in good standing who holds a license for a branch or branches for the conduct of the business of a secondary lender, consumer lender or sales finance company that has an expiration date of December 31, 1997 and who wishes to continue to conduct secondary lending business or consumer loan business at that branch or branches after June 30, 1997 shall, by July 1, 1997, renew that branch license or licenses pursuant to this subchapter. Such renewal licenses shall be for the biennial period July 1, 1997 through June 30, 1999 and shall be renewable for subsequent biennial periods. A licensee renewing a branch license pursuant to this section shall submit the following in connection with the renewal application:

1. A completed application form as prescribed by the Commissioner that shall include the following:

i. The name of the licensed entity, including any trade name or "doing business as" name;

    1. The address of the principal New Jersey place of business; and
    2. The addresses of all branches whose licenses are being renewed; and

2. The branch licensing fee as specified in N.JA.C. 3:15-4.4.

(c) A secondary lender, consumer lender or sales finance company who renews a branch license pursuant to (b) above for the period July 1, 1997 through June 30, 1999 shall receive a credit of $250.00 toward the biennial license fee for that renewal for each of those lines of business for which the secondary lender, consumer lender or sales finance company was licensed on June 30, 1997.]

3:15-2.6 Late renewal of licenses;[refiling] late filing fees; reinstatement fees

(a) A person who submits a renewal application after the expiration of the license, but no later than [30] 45 calendar days after such expiration, may renew by paying the license fee as specified in N.J.A.C. 3:15-4.3 and paying a penalty for late filing of $500.00. [a refiling fee of $50.00. A person who submits a renewal application between 31 calendar days after the expiration of the license but no later than 60 calendar days after such expiration, may renew by paying a refiling fee of $150.00. A person who submits a renewal application between 61 calendar days after the expiration of the license but no later than 90 calendar days after such expiration, may renew by paying a refiling fee of $300.00.]

(b) A person who submits a renewal application later than 45 but no more than 90 calendar days following the expiration of the license shall be required to submit an application [as if the person were applying for an initial license] for reinstatement of the license. Such application for reinstatement shall be on a form as prescribed by the Commissioner and shall be accompanied by the license fee as specified in N.J.A.C. 3:15-4.3 and a $700.00 reinstatement fee per license.

(c) A person who submits a renewal application later than 90 days following the expiration of the license shall be treated as a new licensee and be required to submit an application with application and license fees as specified in N.J.A.C. 3:15-4.

[(b)] (d) The [refiling] fees set forth in this section shall be as specified in (a), (b) and (c) above regardless of the number of authorities of the licensee.

[(c)] (e) Payment of the [refiling] fees under (a), (b) and (c) above shall be submitted in the form of a check made payable to "Treasurer - State of New Jersey."

(f) The date of submission for this subsection shall be the date the application is stamped received by the Department. If the licensee has proof of mailing issued by the post office or a pick-up receipt from a delivery service, that date shall be considered the date of submission.

(d)] (g) (No change in text.)

3:15-2.7 Inactive license status; fee

(a) A person holding an individual license with authority as a mortgage banker or correspondent mortgage banker or mortgage broker and/or as a secondary lender in good standing [to engage in the mortgage banking business, correspondent mortgage banking business mortgage brokering business or secondary lending business] may apply to the Department, either at the time of license renewal or at any time during a biennial period during which the individual license is active, to place that license in inactive status by paying the appropriate fee and by completing an inactive license status request form as prescribed by the Commissioner.

(b) A person holding a sole proprietorship license with authority as a mortgage banker or correspondent mortgage banker or mortgage broker and/or secondary lender in good standing may apply to the Department, either at the time of license renewal or at any time during a biennial period during which the sole proprietorship license is active, to place his individual right to licensure, but not the right of the sole proprietorship entity, in inactive status by paying the appropriate fee and by completing an inactive status request form as prescribed by the Commissioner.

[(b)] (c) A person may keep his or her individual license and a person licensed as a sole proprietorship may keep his or her personal right to licensure but not the sole proprietorship licensure [or] in inactive status for a period not to exceed [five renewal] three biennial license periods without becoming subject to re-examination, provided that:

1.-2. (No change.)

[(c)] (c) A person who holds an inactive individual license may reactivate the individual license by submitting [a]an individual license [renewal application] reactivation form as prescribed by the Commissioner to the Department [as set forth in N.J.A.C. 3:15-2.3], including the payment of the appropriate license fee as set forth in N.J.A.C. 3:15-[4.4] 4.3, a $200.00 reactivation fee and proof of continuous employment as defined in (b) above [to the Department as part of the application to reactivate the license].

3:15-2.8 Conversion of mortgage banking, correspondent mortgage banking, and mortgage brokering licenses

    1. A person licensed, in good standing, as a mortgage banker shall submit the following to convert from a mortgage banker to a correspondent mortgage banker, and a person licensed, in good standing, as a correspondent mortgage banker shall submit the following to convert from a correspondent mortgage banker to a mortgage banker:

1. The original license, [and] the licenses of all branch offices, [and] the licenses of all licensed individuals and the certificates of all registered mortgage solicitors;

2. A completed conversion form, which shall include the name and address of the licensee, the requested date of conversion and a copy of the licensee’s most recent annual report of tangible net worth filed pursuant to N.J.A.C. 3:15-[6.15] 6.16;

3. For a conversion to a correspondent mortgage banker, a signed affidavit from the president or other principal who owns, controls or votes 25 percent or more of the stock of the licensee, a general partner, a managing member or the sole proprietor stating that the licensee will not hold or service mortgage loans for more than 90 days in the regular course of business; and

4. A conversion fee of $[200.00] 300.00 plus $[25.00] 50.00 for each branch license [and $25.00] , $50.00 for each licensed individual and $10.00 for each registered mortgage solicitor.

(b) A licensee shall submit the following to convert from a mortgage banker or a correspondent mortgage banker to a mortgage broker, or from a mortgage broker to a mortgage banker or a correspondent mortgage banker:

1. The original license, [and] the licenses of all branch offices, [and] the licenses of all licensed individuals and the certificates of all registered mortgage solicitors.

2. A completed conversion form, which shall include the name and address of the licensee, the requested date of conversion and a copy of the licensee’s most recent annual report of tangible net worth filed pursuant to N.J.A.C. 3:15-[6.15] 6.16;

3. For a conversion to a mortgage broker, a signed affidavit from the president or other principal who owns, controls or votes 25 percent or more of the stock of the licensee, a general partner, a managing member or the sole proprietor stating that the licensee will not issue commitments or lock-ins in its name, will not close mortgage loans in its name, and will only charge borrowers application fees and discount points; and

4. A conversion fee of $[200.00] 300.00 plus $[25.00] 50.00 for each additional branch office and $[25.00] 50.00 for each licensed individual and $10.00 for each registered mortgage solicitor.

(c) (No change.)

3:15-2.9 Examination for licensure as a mortgage banker, correspondent mortgage

banker, mortgage broker or secondary lender

(a) [Upon receipt of an application] An applicant for an individual license with authority as a mortgage banker, correspondent mortgage banker, mortgage broker or secondary lender in affiliation with an entity similarly licensed or applying for such licensure and an applicant for a sole proprietorship license with any of these authorities must take and pass a written [the Department shall notify the applicant of the date of the next scheduled] examination [, application] as a condition for licensure.

(b) The examination shall be prepared by the Department and/or an entity designated by the Department and shall cover the following topics:

1. - 4. (No change.)

3:15-2.12 [Replacement] Responsiblities and replacement of the entity’s licensed natural person

(a) If a natural person upon whom a corporation, partnership, association, limited liability company or other entity relies for its license pursuant to N.J.S.A. 17:11C-3 discontinues his or her affiliation or employment with such entity for any reason whatsoever, the entity may continue to operate under its license for a period of 90 calendar days or for such other extended period as the Commissioner determines necessary for the entity to replace that natural person with another licensed natural person provided that the entity notifies the Department within 10 days following the date that the natural person discontinues his or her affiliation or employment with the entity.

(b) The individual licensee upon whom a licensed lender entity license is dependent shall be fully qualified by passing the written examination required by N.J.A.C. 3:15-2.9 and shall be responsible to perform the following:

    1. Supervise the operations of the licensed office(s) to ensure that the business is being conducted in compliance with all applicable State and Federal laws and regulations;
    2.  

    3. Supervise the prompt review and response to Department communications relating to consumer complaints and inquiries regarding the licensee’s licensed activities;
    4.  

    5. Supervise the prompt review and response to Department communications relating to on-site examinations, including but not limited to, requests for scheduling, responses to examination findings and responses to directives arising from examinations;
    6.  

    7. Ensure the proper completion and timely submission of the required licensee annual report filing as well as any other special reports or surveys that may, from time to time, be requested by the Department;
    8.  

    9. Ensure that license renewals and other licensing matters such as new branch office applications, changes of address, changes of name, change of control, change of business style, and requests for additional license authorities are submitted to the Department on the appropriate forms and accompanied by the required documentation and fees;
    10.  

    11. Have and maintain sufficient knowledge of all applicable Federal and State statutes and rules; and
    12.  

7. Ensure that all employees required to be registered as mortgage solicitors are properly registered with the Department and that copies of the certificates issued for each solicitor are maintained at the licensed office(s).

3:15-2.13 Registration of mortgage solicitors

(a) Before an individual may act as a mortgage solicitor for a person licensed as a mortgage banker, correspondent mortgage banker or mortgage broker, that individual shall be registered with the Department [for] in affiliation with that licensee. A mortgage solicitor shall not be registered in affiliation with more than one licensee at the same time.

(b) To register a mortgage solicitor, the prospective employing mortgage banker, correspondent mortgage banker or mortgage broker shall submit the following to the Department:

1. A completed registration form, which shall include the mortgage solicitor’s name, birth date, social security number, residence address [and], the name of the employing licensee, and

2. A $[50.00] 100.00 registration fee [that is payable every two years upon renewal]. A mortgage solicitor who changes employing mortgage broker, correspondent mortgage banker or mortgage broker within the two-year registration period shall be re-registered by the new employing licensee by filing a new registration form with the $[50.00] 100.00 fee. The employing licensee may obtain a duplicate certificate for $[10.00] 15.00 in the event the original certificate is lost or destroyed.

3. Any additional information requested of a specific applicant by the Department.

(c) The Department shall provide all employing licensees with a mortgage solicitor registration certificate for each solicitor that shall be renewable every two years. The registration shall run from July 1, 1997 to June 30, 1999 and for two-year intervals thereafter. For renewal, the licensee shall pay the $100.00 fee for each mortgage solicitor and submit such forms as requested by the Commissioner.

(d) - (f) (No change.)

3:15-2.14 Change of control

(a) Licensee shall file a request for approval whenever a change of control of direct ownership of 25 percent or more of the licensee is planned. The change of control request shall be submitted at least 60 days prior to the anticipated sale date and shall include:

    1. A fully executed change of control form as prescribed by the Commissioner;
    2. A copy of the executed stock purchase agreement or other agreement evidencing the proposed sale;
    3. A fee in the amount of $100.00;
    4. A copy of the corporate resolution providing that existing officers and/or directors cease to hold positions and that new officers or directors are appointed, if applicable; and
    5. Certified consent certificates as set forth in N.J.A.C. 3:15-2.2(a)2 for each new officer, director, partner, member or stockholder resulting from the change of control.

3:15-2.15 Discontinuation of licensed lender business activity

(a) When a licensed lender with authority to act as a mortgage banker, correspondent mortgage banker, mortgage broker or secondary mortgage lender discontinues its licensed business operations in New Jersey, licensed lender shall:

1. Surrender the entity’s current principal office license as well as the license of each affiliated supervisory individual, branch office, and the certificates of all registered mortgage solicitors; if any;

2. Identify, in writing, if there are any New Jersey residential mortgage loans being processed and provide the total number of any such loans together with the consumer’s names and addresses and the property address for each loan;

3. Identify, in writing, the number of New Jersey residential mortgage loans being processed that have scheduled closing dates and such dates and provide the consumers' names and addresses and the property address for each loan;

4. Identify, in writing, the location of the loan files of pending New Jersey residential loan applications;

5. Identify, in writing, the location of other loan files required to be maintained under New Jersey law and regulations;

6. Identify, in writing, any arrangements that have been made to have other entities take over loan files together with complete information on the name, address, telephone number, and contact person of entities involved in such arrangements;

7. Identify, in writing, the name and telephone number of person(s) within the licensee's operation designated to handle consumer problems that may arise;

8. Satisfy all outstanding obligations owed to the Department; and

9. Satisfy all filing requirements including the final annual report which report shall be for the year in which the licensed lender discontinues its licensed business operations in New Jersey.

(b) When a licensed lender with authority to act as a consumer lender or sales finance company discontinues its licensed business operations in New Jersey, the licensed lllender shall:

1. Surrender the entity's current principal office license as well as the license of each branch office;

2. Identify, in writing, if there are any New Jersey consumer loan installment sales contracts or charge account agreements being processed and provide the total number of any such transaction together with the consumers' names and addresses for each transaction;

3. Identify, in writing, the location of loan or agreement files required to be maintained under New Jersey law and regulations;

4. Identify, in writing, any arrangements that have been made to have other entities take over loan or agreement files together with complete information on the name, address, telephone number, and contact person of entities involved in such arrangements;

5. Identify, in writing, the name and telephone number of person(s) within the licensee's operation designated to handle any consumer problems that may arise;

6. Satisfy all outstanding obligations owed to the Department; and

7. Satisfy all filing requirements including the final annual report which report shall be for the year in which the licensed lender discontinues its licensed business operations in New Jersey.

3:15-2.16 Licensee notification requirements

    1. A licensee shall notify the Department in writing within 15 days of the occurrence of any of the following:
    2.  

    1. Upon each arrest, indictment or conviction of the licensee, or of any officer, director, partner, member, owner or substantial stockholder of the licensee in this State, in another state, or in any Federal jurisdiction for any offense, crime or misdemeanor, except for a motor vehicle violation;
    2.  

    3. Upon each revocation, denial, suspension or restraint of a business or professional license, registration, certificate or other right to engage in business issued to the licensee, or to any officer, director, partner, member, owner or substantial stockholder of the licensee, or to any affiliate thereof, by this State, by another state, by the Federal government, or by any agency or instrumentality thereof;
    4.  

    5. Upon filing a petition of bankruptcy or reorganization by the licensee, or by any officer, director, partner, member, owner or substantial stockholder of the licensee, or by any affiliate thereof;
    6.  

    7. Upon the fining, penalizing or disciplining of the licensee, or any affiliates, by this State, by another state, by the federal government, or by any agency or instrumentality thereof; and
    8.  

    9. Upon the involvement of the licensee, or any officer, director, partner, member, owner or substantial stockholder of the licensee, or any affiliate thereof, may have a substantial impact on the ability of a licensee to engage in the licensed activity in a prudent or worthy manner.
    10.  

 

SUBCHAPTER 3. BONDING

3:15-3.1 Bond requirements

    1. A person who seeks an initial licensed lender license [to engage in the mortgage banking, correspondent mortgage banking business, mortgage brokering business or secondary mortgage loan business] with authority as a mortgage banker, correspondent mortgage banker, mortgage broker or secondary lender shall obtain a surety bond in the following initial amount [for the initial licensing period prior to submitting the first annual report as follows]:
    1. One authority - $[50,000] 100,000;
    2. Two authorities - $[75,000] 150,000.

[(b) All persons renewing a license for the biennial period beginning July 1, 1997 through June 30, 1999 to engage in the mortgage banking, correspondent mortgage banking business, mortgage brokering business or secondary mortgage loan business shall obtain a bond as follows:

    1. One authority - $50,000;
    2. Two authorities - $75,000.]

[(c)] (b) [Upon] Following the submission of [an] each annual report, [licensees] licensed lenders with authority as a mortgage banker, correspondent mortgage banker or secondary lender shall increase the amount of the surety bond based on the following closed loan volumes and provide proof thereof to the Department within [60] 30 days of the submission of the report.

    1. One authority:
    2. i. Closed loan volume: $0 to $50,000,000 $[50,000] 100,000;

      ii. Closed loan volume: $50,000,001

      to $75,000,000 $[75,000] 150,000;

      iii. Closed loan volume: $75,000,001

      to $100,000,000 $[100,000] 200,000;

      iv. Closed loan volume: $100,000,001

      and over $[125,000] 250,000.

    3. Two authorities:

i. Closed loan volume: $0 to $50,000,000 $[75,000] 150,000;

ii. Closed loan volume: $50,000,001

to $75,000,000 $[100,000] 200,000;

iii. Closed loan volume: $75,000,001

to $100,000,000 $[125,000] 250,000;

iv. Closed loan volume: $100,000,001

and over $[150,000] 300,000.

(c) Following the submission of each annual report, licensed lenders with authority only as a mortgage broker shall be required to increase the amount of the surety bond based on the following schedule relating to the number of mortgage loan applications taken and provide proof thereof to the Department within 30 days of the submission of the report.

1. Applications taken: 0 to 100 $100,000;

2. Applications taken: 101 to 300 $150,000;

3. Applications taken: 301 to 500 $200,000;

4. Applications taken: 501 and over $250,000.

3:15-3.7 Publication of notices of bond claims by the Department

When the Department receives notice from a surety company of a claim against a mortgage banker, correspondent mortgage banker, mortgage broker or secondary lender that appears valid, a consumer is unable to obtain payment of a court judgement that was obtained against the mortgage banker, correspondent mortgage banker, mortgage broker or secondary lender for activities undertaken as a licensee, or the Department in its sole discretion otherwise determines it is necessary and proper to do so, the Department shall cause a notice to be published once a week for three successive weeks in a newspaper having general circulation in the area where the mortgage banker, correspondent mortgage banker, mortgage broker or secondary lender conducts or conducted business advising consumers of their right to file claims against the bond. The Department is not required to publish notice when it has a claim against the bond for an examination charge or any other fee, charge or penalty if there are no consumer claims or complaints that appear valid and that may require payment from the bond. If the Department determines a notice is necessary, the notice shall be in the following form:

NOTICE TO CONSUMERS

TO ANY CONSUMER HAVING CLAIMS AGAINST

(Name of Licensee), (Type of licensed activity, i.e., mortgage banker,

correspondent mortgage banker, mortgage broker, or secondary lender)

TAKE NOTICE that in order to provide a procedure for the orderly

resolution of claims against the bond obtained by (Name of Licensee)

for the benefit of any consumer injured by the wrongful act, default,

fraud or misrepresentation of (Name of Licensee), you are hereby

required to present your claims against (Name of Licensee) at the following address:

N.J. Department of Banking and Insurance

Division of Banking

Office of Consumer Finance

20 West State Street, [CN] P.O. Box 040

Trenton, NJ 08625-0040

[Attn: Office of Consumer Finance]

Each claim shall be presented in writing, specifying the amount claimed

and the particulars of the claim, and shall be duly verified under oath or affirmation.

TAKE FURTHER NOTICE that each person having claims against

(Name of Licensee) should file a claim no later than (one month after

last notice) or risk losing the opportunity to file a claim.

 

_________________________________

Commissioner of Banking and Insurance

SUBCHAPTER 4. FEES

[3:15-4.2 One-time administrative fee

(a) A person who holds a license in good standing to engage in the mortgage banking business, correspondent mortgage banking business, mortgage brokering business, secondary mortgage loan business, consumer loan business, or sales finance company business and who seeks to continue in activities regulated by the Act shall be subject to a one-time, non-refundable, administrative fee set forth below for each license authority renewed.

1. One authority – No fee;

2. Two authorities - $100.00;

3. Three authorities - $300.00;

4. Four authorities - $400.00]

3:15-[4.3] 4.2 (No change in text.)

3:15-[4.4] 4.3 License fees

(a) The license fees for licensed lenders are as follows:

1. One authority for an individual, company and/or branch: biennial fee- $[1,200] 1,400; annual fee $[600.00] 700.00;

2. Two authorities for an individual, company and/or branch: biennial fee - $[2,400] 2,800; annual fee $[1,200] 1,400;

3. Three authorities for a company and/or branch: biennial fee - $[3,600] 4,200; annual fee $[1,800] 2,100;

4. Four authorities for a company and/or branch: biennial fee - $[4,800] 5,600; annual fee $[2,400] 2,800.

(b) (No change.)

SUBCHAPTER 5. TANGIBLE NET WORTH NET WORTH, LIQUID ASSETS, INSOLVENCY

3:15-5.3 Requirement to achieve and maintain tangible net worth, net worth and liquid assets

Each applicant for a license with authority as a mortgage banker, correspondent mortgage banker, mortgage broker, secondary lender or consumer lender shall achieve and maintain the tangible net worth, net worth, and liquid assets as required by N.J.S.A 17:11C-14, 15 and 16[, except that a correspondent mortgage banker who is licensed as a mortgage banker non-servicing on June 30, 1997 shall have and maintain a tangible net worth equal to or greater than $125,00 until December 31, 1997 when the correspondent mortgage banker shall have and maintain a net worth of $150,000].

3:15-5.4 Failure to maintain tangible net worth, net worth or liquid assets; action by the Department

(a) If the tangible net worth of a mortgage banker, correspondent mortgage banker, or mortgage broker, or if the net worth or liquid assets of a secondary lender or consumer lender falls below the amounts required by N.J.S.A. 17:11C-14, 15 and 16, or if the mortgage banker, correspondent mortgage banker, mortgage broker, secondary lender or consumer lender is insolvent, the Department may take such action as it deems appropriate and necessary to protect the public. [including, but not limited to,] The action may include requiring the mortgage banker, correspondent mortgage banker, mortgage broker, secondary lender or consumer lender to operate pursuant to a Memorandum of Understanding, or directing the mortgage banker, correspondent mortgage banker, mortgage broker, secondary lender or consumer lender to submit and comply with a capital plan [until] within a time frame established by the Department to attain the tangible net worth, net worth or liquid assets required by the Act [are attained].

(b) (No change.)

SUBCHAPTER 9. PERMISSIBLE FEES

3:15-9.1 Fees permitted to be charged by mortgage bankers, correspondent mortgage bankers, and mortgage brokers

[(a) Fees permitted to be charged by mortgage bankers, correspondent mortgage bankers, and mortgage brokers are set forth in N.J.S.A. 17:11C-23 and in N.J.A.C. 3:1-16.2 and 3:1-16.10, as applicable. Correspondent mortgage bankers may charge any fee that may be charged by mortgage bankers.]

[(b)] (a) Mortgage bankers, correspondent mortgage bankers and mortgage brokers may charge the following fees:

1. (No change.)

2. Pursuant to N.J.S.A. 17:11C-30 and 46:18-11.2, the fee charged by the county recording officer to cancel the mortgage, plus an additional service fee not to exceed $25.00, providing that the borrower has received prior notice of the fees required by the mortgage banker or correspondent mortgage banker, and providing further that if the mortgage banker or correspondent mortgage banker[/] collects the service fee at the time of the mortgage transaction and transfers the servicing rights prior to cancellation, the mortgage banker shall refund the service fee to the borrower.

[(c)] (b) (No change in text.)

3:15-9.2 Fees permitted to be charged by secondary lenders

(a) (No change.)

[(b) A secondary lender shall not charge interest in advance of it being earned, other than as discount points.]

[(c)] (b) (No change in text.)

[(d)] (c) The following provisions shall govern the charging of attorney fees by secondary lenders:

1. - 2. (No change.)

3. No person listed in [(d)2](c)2 above shall receive compensation for the preparation of documents or for any other services performed for or on behalf of an attorney who is providing legal service in accordance with N.J.S.A. 17:11C-28.

4. - 5. (No change.)

6. A secondary lender shall provide the following to the borrower at or before closing:

i. A copy of the itemized listing of attorney fees prepared by the attorney pursuant to [(d)5] (c)5 above;

ii. (No change.)

7. (No change.)

 

SUBCHAPTER 10. CHARACTERISTICS OF LOANS

3:15-10.3 Consumer loans

(a) - (c) (No change.)

(d) When a consumer lender knows or has reason to know that the proceeds of loan of [$15,000] $50,000 or less are to be delivered by the borrower to an individual already indebted to such consumer lender on a loan of [$15,000] $50,000 or less, then such loans shall be construed as a single loan to such individual for the purpose of interest computations. If the aggregate of such loans ever exceeds [$15,000] $50,000 or less interest on such accounts earned from the date such excess occurred shall be restricted to the rate on unpaid balances authorized by the Interest and Usury Law, N.J.S.A. 31:1-1 et seq. and its implementing rule set forth at N.J.A.C. 3:1-1.1.

(e) - (g) (No change.)

3:15-10.4 First mortgage loans

A first mortgage lender shall not require or accept from a borrower any collateral or security for a first mortgage loan other than a mortgage, indenture or any other similar instrument or document that creates a first lien upon any real property or an interest in real property including, but not limited to, shares of stock in a cooperative corporation.

SUBCHAPTER 11. OTHER PERMISSIBLE LINES OF BUSINESS FOR CONSUMER LENDERS

 

3:15-11.3 Suspensions or revocations of approved business activities

The Commissioner may, by written directive and after the licensee has had an opportunity to be heard, suspend or revoke a licensee’s approval to engage in any of the business activities specified in N.J.A.C. 3:15-11.2 if it is determined that the licensee has violated the Act or these regulations.

 

 

LLag/INOREGS