New Jersey Re-adopts and Amends Predatory Lending Regulation
by: Margaret Wright
The Predatory Lending regulations implemented under New Jersey Home Ownership Security Act (“the Act”) have been re-adopted and certain definitions have been technically amended to be consistent with new January 2014 federal Home Ownership and Equity Protection Act (“HOEPA”) amendments. The Effective Re-adoption Date is February 12, 2014 and the Effective Amendment Date is March 17, 2014.
Amended Definitions
The amended definitions include updated CFR citation revisions to the definitions of “Conventional mortgage rate”, “Escrow charge”, and “Points and fees”.
In addition to updated CFR citation revisions, the definitions for “Rate” and “Rate threshold” have also been amended to reflect consistency with the HOEPA counterpart definitions. These revisions include removal of the phrase “at closing” when referring to determination of the annual percentage rate under the “Rate” definition and revision of the phrase “definition of “points and fees”” to “description of “points and fees”” under the “Rate threshold” definition.
Re-adopted Consumer Protections
Although amended for HOEPA consistency, the Act as re-adopted continues to afford a higher level of protection to consumers. Covered high cost loans under the Act continue to include a wider range of loans than would fall under the HOEPA high cost loan coverage.
A key difference between HOEPA and the Act is the lower high cost home loan “points and fees threshold” under the Act:
- Under the Act points and fees may not exceed four and one half percent of the total loan amount if the total loan amount is $ 40,000 or more; or the lesser of six percent of the total loan amount or $ 1,000, if the total loan amount is less than $ 20,000, and six percent if the total loan amount is $ 20,000 or more but less than $ 40,000.
- Under HOEPA points and fees may not exceed 5 percent of the total loan amount for a transaction with a loan amount of $20,000 or more; or the lesser of 8 percent of the total loan amount or $1,000 for a transaction with a loan amount of less than $20,000; the $1,000 and $20,000 figures shall be adjusted annually.
Additionally, New Jersey Home Ownership Security Act covered high cost loans may include transactions which finance the initial construction of a dwelling which are excluded under HOEPA.
The New Jersey Home Ownership Security Act also includes additional prohibitions against creditors from structuring a loan in a way that purposefully circumvents the high cost loan requirements, and the Act also allows consumers to make affirmative claims and defenses against a creditor where the home loan was made or referred by a person selling a manufactured home or home improvements.
About the Author
Margaret Wright, J.D., is Manager of Regulatory Compliance at Bankers Advisory, Inc. She is a graduate of Stonehill College and earned her Juris Doctor at Suffolk University Law School. She serves on the Compliance Committee of the Massachusetts Mortgage Bankers Association and is admitted to the Massachusetts Bar. She can be reached at Margaret@bankersadvisory.com
Margaret Wright, JD, is regulatory compliance director with CLA. She is a graduate of Stonehill College and earned her juris doctor at Suffolk University Law School. She is admitted to the Massachusetts Bar.
Very interesting post.
New Jersey home loans