The New Jersey Department of Banking and Insurance (the “Department”) recently issued a Bulletin to notify all entities and individuals involved in residential mortgage lending activity regulated under the New Jersey Licensed Lenders Act (“LLA”) and the New Jersey Residential Mortgage Lending Act (“RMLA”), of how they may comply with New Jersey’s disclosure requirements without altering the HUD forms that have been revised to conform to the new Real Estate Settlement Procedures Act (“RESPA”) regulations. The Department intends to propose amendments to conform its rules to the revised RESPA regulations. Until the Department adopts the amendments, the following guidance is provided regarding how to comply with the disclosure requirements imposed by New Jersey’s law and regulations. If you have any questions concerning this Memorandum, please contact Laura LaRaia.
New Jersey Bulletin 2010-17 (dated August 2, 2010)
New Jersey regulations establish certain mortgage transaction disclosure requirements that are distinct from those required under the RESPA regulations. HUD has made it clear that state disclosure requirements are not preempted by the new RESPA regulations. States must provide a separate mechanism other than the new HUD forms in order for licensees to comply with a state’s distinct disclosure requirements.
The New Jersey Administrative Code provides that not later than 3 business days after the lender receives the borrower’s application, or before closing of the loan, whichever is earlier, the lender must provide the borrower with a good faith estimate as a dollar amount or range of each fee for a settlement service, which the borrower is likely to incur. The Administrative Code also provides that with respect to settlement service fees imposed on a borrower by the lender (and not by third parties), the lender must indicate which, if any, of the fees are refundable in whole or in part and the terms and conditions for the refund.
The amended RESPA regulations are not consistent with the New Jersey rules. Under the revised RESPA regulations, the individual mortgage broker and banker fees that are required to be disclosed to the borrower under New Jersey regulations are no longer separately disclosed on the Good Faith Estimate (“GFE”) form, but are aggregated on Blocks 1 through 11 of the GFE. Therefore, the information that is permitted to be entered on the GFE by the amended RESPA regulations will no longer satisfy New Jersey’s disclosure requirements. Additionally, the inclusion of fees for settlement services on the GFE may no longer be relied on to comply with New Jersey’s disclosure requirements.
In order to satisfy New Jersey’s fee disclosure requirements without affecting the scope of required RESPA disclosures, the borrower should be presented with a New Jersey disclosure form (“form”) that is completely separate and apart from the HUD forms. The form must include all of the applicable origination and settlement fees that are provided in the New Jersey regulations. The individual fees must be totaled by category, with the total amounts equal to the amounts shown on the various Blocks and Lines on the GFE. The form should also identify which, if any, fees are refundable in whole or in part and the terms and conditions for the refund.
The form should be provided to the borrower and specify the date of the presentation. The Department recommends that the borrower should sign and date the form as evidence of compliance. A copy of the form should be maintained with the disclosure documentation in the licensee’s mortgage files and would be subject to inspection and examination by the Department. The form should not be attached or referred to in any manner as an addendum or supplement to the GFE or HUD-1/HUD-1A forms. Until new rules or amendments are adopted to comply with the New Jersey rules, licensees should create and use their own disclosure forms consistent with the above-provided requirements.
MRG provides the above-required information, including the itemization of fees and the terms and conditions for the refund of fees, in MRG’s New Jersey Application Disclosure form.
The Department does not believe that the amended RESPA regulations affect the validity of the requirements established in the New Jersey Home Ownership Security Act, including the notice requirements.
Business entities and individual licensees under the LLA and conditionally approved business entities and qualified individual licensees under the RMLA must provide copies of the Bulletin to the mortgage solicitors or licensed loan originators employed by their firms. The Bulletin may be found on the Department’s website at http://www.state.nj.us/dobi/bulletins/blt10_17.pdf.