New Jersey Regulatory Update

30 Jul New Jersey Regulatory Update

Posted at 07:07h in Compliance Alerts by

New Jersey Rules

 

Our May 13, 2009 Memorandum discussed New Jersey Assembly 3816, which enacted the New Jersey Residential Mortgage Lending Act (“RMLA”) to comply with the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the “S.A.F.E. Act”).  The New Jersey Department of Banking and Insurance (the “Department”) recently amended its mortgage lending rules under the RMLA, effective July 31, 2010.  If you have any questions concerning this Memorandum, please contact Laura LaRaia.

 

Definitions

 

The term “lender” has replaced the term “banker” in the rules.

 

The following definitions have been deleted: consumer lender, consumer loan, consumer loan business, mortgage banker, mortgage broker, mortgage loan, and mortgage solicitor.

 

“Business licensee” means a corporation, association, joint venture, partnership, limited liability company, limited liability partnership, sole proprietorship, or any other legal entity, however organized, permitted under the laws of New Jersey, that is licensed as a residential mortgage lender or residential mortgage broker, or that should be so licensed.

 

“Clerical or support duties” includes:

  • The receipt, collection, distribution, and analysis of information common for the processing or underwriting of a residential mortgage loan; or
  • Communicating with a borrower to obtain the information necessary for the processing or underwriting of a residential mortgage loan, to the extent that the communication does not include offering or negotiating loan rates or terms, or counseling borrowers about loan rates or terms.

 

“Clerical or support duties” do not include making representations to the public, through advertising or other means of communicating or providing information, such as through the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, indicating that a person can or will perform any of the activities of a licensee under the RMLA or of a person exempt from licensure.

 

“Federal banking agencies” means the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the National Credit Union Administration, or the Federal Deposit Insurance Corporation, or any of their successor agencies.

 

“First mortgage loan” means a residential mortgage loan secured in whole or in part by any interest in residential real estate, which is not subject to any prior or superior mortgage lien.

 

“Immediate family member” means a spouse, domestic partner, partner in a civil union, parent, stepparent, grandparent, sibling, stepsibling, child, stepchild, and grandchild, as related by blood or by law.

 

“Individual” means a natural person.

 

“Individual licensee” means a natural person licensed as a qualified individual licensee for a residential mortgage lender or residential mortgage broker, correspondent mortgage lender, or a mortgage loan originator.

 

“Lender” means a residential mortgage lender.

 

“License or licensing period” means the one-year calendar period beginning January 1, 2011and each succeeding calendar year (previously the two-year period beginning on July 1 of each odd numbered year and ending on June 30 of the next odd numbered year).

 

“Licensee” means a legal entity or natural person licensed under the RMLA.

 

“Loan processor” or “loan underwriter” means an individual who performs clerical or support duties as an employee, at the direction of and subject to the supervision and instruction of a licensee under the RMLA or a person exempt from licensure.

 

“Mortgage loan originator” means any individual, not exempt from licensure, and licensed pursuant to the RMLA, and any individual who should be licensed who, for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly takes a residential mortgage loan application, or offers or negotiates terms of a residential mortgage loan.

 

“Mortgage loan originator” does not mean an individual:

  • Who is a qualified licensee for a residential mortgage lender or residential mortgage broker;
  • Engaged solely as a loan processor or underwriter, unless an independent contractor; or
  • Engaged solely in extensions of credit relating to timeshare plans.

 

“Nationwide Mortgage Licensing System and Registry” or “NMLSR” means a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the licensing and registration of residential mortgage brokers, residential mortgage lenders, and mortgage loan originators.

 

“Nontraditional mortgage product” means any mortgage product other than a 30-year fixed rate residential mortgage loan.

 

“Originate” means to offer or commit to make a residential mortgage loan, or to close a residential mortgage loan in the name of the licensee.

 

“Qualified individual licensee” means an individual licensed as a residential mortgage lender or residential mortgage broker, who is required to be licensed as a condition for a person to be issued or to hold a license as a business licensee, whereby the individual:

  • Meets, at a minimum, the licensing criteria applicable to a mortgage loan originator; and
  • Is an officer, director, partner, owner, or principal of the business licensee.

 

“Registered mortgage loan originator” means any individual:

  • Who meets the definition of mortgage loan originator and is an employee of:
    • A depository institution;
    • A subsidiary that is owned and controlled by a depository institution and regulated by a federal banking agency; or
    • An institution regulated by the Farm Credit Administration; and
  • Is registered with, and maintains a unique identifier through, the NMLSR.

 

“Residential mortgage broker” or “mortgage broker” or “broker” means any person, not exempt from licensure, and licensed pursuant to the RMLA, who for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly takes a residential mortgage loan application for others, or negotiates, places or sells for others, or offers to take an application for, negotiate, place or sell, residential mortgage loans in the primary market for others.  A residential mortgage broker also includes an individual who is a qualified individual licensee for a residential mortgage broker.

 

“Residential mortgage lender” or “mortgage lender” means any person, not exempt from licensure, and licensed pursuant to the RMLA, and any person who should be licensed, who for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly takes a residential mortgage loan application, or offers, negotiates, originates, or acquires residential mortgage loans in the primary market.  A residential mortgage lender also includes:

  • With respect to a business licensee, a correspondent mortgage lender, unless the provisions of the Act clearly indicate otherwise; and
  • With respect to an individual licensee, an individual who is a qualified individual licensee for a residential mortgage lender.

 

“Residential mortgage loan” means any loan that is primarily for personal, family, or household purposes that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate where a dwelling is constructed or intended to be constructed.

 

“Residential real estate” means any real property located in New Jersey, upon which is constructed or intended to be constructed a dwelling.

 

“Unique identifier” means a number or other identifier assigned by the NMLSR.

 

Office Requirement

 

A licensee must maintain a principal office (previously place of business in New Jersey).  The maintenance of a principal office at which there will be no direct contact with New Jerseyconsumers will not relieve the licensee of the obligation to maintain the confidentiality of any financial information in accordance with all applicable federal and state laws and rules.  A principal office where the licensee has direct contact with New Jersey consumers regarding residential mortgage loan origination or brokering must be in a suitable location as determined by the Commissioner of Banking and Insurance (the “Commissioner”).

 

In addition to the prior factors, in considering whether a location is suitable in New Jersey, the Commissioner will consider whether the location will have a space that may only be utilized for the purposes of the licensee’s business and by the licensee and its employees, structured in such a way as to ensure the maintenance of a consumer’s right to privacy with respect to conversations and documents involving personal and financial information.

 

The Commissioner will consider the following factors in determining whether an out-of-state location at which there is direct contact with New Jersey consumers is suitable:

  • The location must ensure that the maintenance of a consumer’s right to privacy with respect to conversations and documents involving personal and financial information; and
  • The location of the out-of-state office must comply with all applicable federal, state, and local laws in the state where the office is located.

 

Applicants for a business license must certify, on a form as prescribed by the Commissioner, that the location of their principal office is in compliance with the above requirements.

 

Each licensee that maintains more than one licensed office must identify one licensed office as its principal office.  The designation of the principal office must be made as part of the application for licensure (previously filed with the Commissioner).  Notice of a change in the location of the business licensee’s principal office must be entered into the NMLSR within 10 days of the effective date of the change.  After the processing of the change has been completed, the Commissioner will issue a new license.

 

Display and Availability of License

 

Each business licensee must post its license conspicuously at its principal office location.  Each business licensee must make the licenses of its qualified individual licensee(s) and mortgage loan originators available for inspection at the licensed office from which they operate.  Each branch office license must be displayed at the branch office designated thereon.

 

Authority of the Commissioner to Oversee Implementation of the RMLA

 

The Commissioner will coordinate the processing of an applicant through the NMLSR with the state licensing of the applicant on any matters deemed necessary for participation in the NMLSR, including, but not limited to, electronic filings, information sharing, and other activities that facilitate the operation of the NMLSR.

 

The Commissioner may investigate or examine any mortgage lender, mortgage broker, mortgage loan originator, qualified individual licensee, or other person as necessary to determine the eligibility for licensure and compliance with the RMLA and orders, rules, and regulations issued thereunder and take such action as the Commissioner deems appropriate based upon the results of any such investigation or examination consistent with the provisions of the RMLA and the rules.  The Commissioner may require a mortgage lender, mortgage broker, mortgage loan originator, qualified individual licensee, or other person as necessary to make or compile reports or prepare other information as directed by the Commissioner for the purposes of implementing the RMLA.

 

Licensing

 

The following applies to mortgage lender and mortgage broker business licensees and to persons engaged in activity for which licensure is required:

  • A business entity must not act as a mortgage lender or mortgage broker without first obtaining a license;
  • A mortgage lender may act as a broker if proper disclosure is made; and
  • A person must not be licensed as a mortgage lender or mortgage broker unless one officer, director, partner, owner, or principal is a qualified individual licensee of that same type.

 

A qualified individual licensee licensed as a mortgage lender or mortgage broker may act as a mortgage loan originator without obtaining a separate license.  A mortgage loan originator must be employed as an originator by only one business licensee at a time and will be subject to direct supervision and control by that business licensee.

 

A loan processor or individual who is an independent contractor must not act as a processor or underwriter unless licensed as a mortgage loan originator.

 

The following are exempt from the licensure requirements under the RMLA:

  • Depository institutions, except for subsidiaries and service corporations of depository institutions;
  • A registered mortgage loan originator that is registered under the S.A.F.E. Act;
  • A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney’s representation of the client, unless the attorney is compensated by a residential mortgage lender, residential mortgage broker, or mortgage loan originator;
  • A person licensed as a real estate broker or salesperson and not engaged in the business of a residential mortgage lender or residential mortgage broker.  Any person holding a license under the Act as a residential mortgage lender or broker is exempt from the licensing and other requirements for real estate brokers or salespersons in the performance of those functions authorized by the Act;
  • Any employer, other than a residential mortgage lender, who provides residential mortgage loans to his or her employees as a benefit of employment, which are at an interest rate that is not in excess of the usury rate in existence at the time the loan is made, as established by New Jersey law, and on which the borrower has not agreed to pay, directly or indirectly, any charge, cost, expense, or any fee, other than interest;
  • The state of New Jersey or a municipality, or any agency or instrumentality thereof, which finances affordable housing; and
  • Any individual who offers or negotiates terms of a residential mortgage loan:
    • With or on behalf of an immediate family member; or
    • Secured by a dwelling that served as the individual’s residence.

 

Application for a Business License

 

A person applying for a business license pursuant to the RMLA must submit the following:

  • A completed application as prescribed by the Commissioner or the NMLSR, which must include:
    • The true name of the applicant and no more than 3 trade names or alternate names;
    • The location of the principal office;
    • Information regarding partners, members and managers of a limited liability company, corporate officers, directors, and stockholders owning 10% or more of the shares of a corporation as required by the NMLSR and the RMLA;
    • The name and address of the applicant’s registered agent in New Jersey;
    • Information regarding incorporation, registration, and authorization to do business in New Jersey; and
    • The applicant’s federal Tax Identification Number or Social Security Number, as applicable;
  • Completion of criminal history record background check for all owners, principals, officers, directors, partners, members and managers of a limited liability company, shareholders owning 10% or more of the applicant and qualified individual licensees, which must include:
    • An FBI criminal history record background check through the NMLSR; and
    • A New Jersey Division of State Police criminal history record background check;
  • The identification of at least one officer, director, partner, member, owner, or principal to be a qualified individual licensee and who must apply through the NMLSR for a qualified individual license of the same type as sought by the business entity;
  • All applications for a mortgage lender or mortgage broker license must include submission to the Department of Banking and Insurance (the “Department”) of an original executed bond, on bond forms issued by the Department, from a surety company authorized to business in New Jersey;
  • All applications for a corporate, partnership, limited liability company, or sole proprietorship license as a mortgage lender or mortgage broker must include an unqualified audited financial statement prepared by a certified public accountant or a public accountant, in good standing, demonstrating proof of tangible net worth;
  • An application for a corporate license by a corporation organized under the laws of New Jersey must be accompanied by a copy of the applicant’s Certificate of Incorporation as filed with the New Jersey Department of Treasury, Division of Revenue. A foreign corporation must 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 New Jerseyapproved by the New Jersey 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 must be provided;
  • An application for a sole proprietorship or partnership license where a trade name is to be used must 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 Department of Treasury, Division of Revenue.  An application for a limited liability company license must 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 must 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 must be provided;
  • The non-refundable application fee; and
  • The certification showing that the principal office meets the requirements of the rules.

 

The applicant will bear all costs, including those associated with the completion of the criminal history record background checks through the New Jersey Division of State Police and the FBI, the securing of a credit report, and all fees and charges imposed by the NMLSR and the Department, including non-refundable application fees and costs.

 

Application for Licensure as a Qualified Individual Licensee or Mortgage Loan Originator

 

An individual applying for a qualified individual license pursuant to the RMLA must comply with the following conditions and provide the following submissions, as applicable:

  • A criminal history record background check in connection with an application, based upon information provided to and received from the Division of State Police, and provided to and received from or through the NMLSR, which does not contain any disqualifying information.  The background check will include a State criminal history record background check based upon an exchange of fingerprint data with the State Bureau of Identification in the Division of State Police, for which the Division will promptly notify the Commissioner if the subject of the original criminal history record background is arrested for a crime or offense in New Jersey after the date the original criminal history record background check was performed, and a check of both criminal and non-criminal information as requested from and distributed to the FBI and any other governmental agency through the NMLSR as follows:
    • Fingerprints, for submission to the FBI and any other governmental agency authorized to receive this information for a state, federal, and international criminal history record background check, to determine whether the individual has been convicted of, or pled guilty or no contest to, a felony in a domestic court, including any crime in New Jersey of the fourth degree or higher punishable by a term of imprisonment of more than one year, or in a foreign or military court:
      • During the 7-year period preceding the filing of the application, except that a conviction that is pardoned is not considered disqualifying information; or
      • At any time preceding the filing of the application, if the felony involved an act of fraud, dishonesty, a breach of trust, or money laundering, except that a conviction that is pardoned is not considered disqualifying information; and
    • Personal history and experience, collected in a form prescribed by the NMLSR, and with the applicant’s permission, in order for the NMLSR and the Commissioner to obtain:
      • An independent credit report; and
      • Information related to any administrative, civil, or criminal findings by any governmental jurisdiction, to determine whether the individual had a mortgage loan originator license revoked in any governmental jurisdiction, except that a formal revocation that was vacated is not disqualifying information;
  • Evidence of good character and fitness, whereby the applicant has demonstrated financial responsibility, character, and general fitness as to command the confidence of the community that the applicant will operate honestly, fairly, and efficiently.  An applicant is not financially responsible if he or she has shown a disregard in the management of the applicant’s own financial condition, including, but not limited to:
    • Current outstanding judgments, except judgments solely as a result of medical expenses;
    • Current outstanding tax liens or other government liens and filings;
    • Foreclosures during the 3-year period preceding the filing of the application; or
    • A pattern of seriously delinquent accounts during the 3-year period preceding the filing of the application;
  • Evidence of completion of pre-licensing education, passing of the written federal and state law tests, and continuing education requirements, as applicable; and
  • Payment of required fees to the Commissioner and/or NMLSR, as set forth in the rules or by the NMLSR, including nonrefundable application fees.

 

Branch Offices

 

Applicants for branch office licenses must certify on a form prescribed by the Commissioner that the location of the branch office is in compliance with the branch office requirements.  A branch office location at which activity as a mortgage lender or broker is conducted but at which there is no direct contact with New Jersey consumers must be licensed and must comply with the requirements regarding the maintenance of the confidentiality of financial information, with the exception of the standards regarding the suitability of office locations at which a licensee has direct contact with New Jersey consumers.

 

Application for Renewal of a Business License

 

The Commissioner or the NMLSR may prescribe the form of a renewal application.

 

Late Renewal of Business and/or Branch Licenses

 

A person who submits a renewal application for a business license after the expiration of the license, but no later than the last day of February immediately thereafter (previously 45 calendar days after such expiration) may renew by paying a penalty for late filing of $600 per license (previously $500).  A person who submits a renewal application for a branch license after the expiration of the branch license but no later than the last day of February immediately thereafter (previously later than 45 but no more than 90 calendar days following the expiration of the license) may renew by paying a penalty for late filing of $500 per branch license (previously $700).  A person who submits a renewal application after the last day of February immediately (previously no later than 90 days) following the expiration of the license will be treated as a new licensee and will be required to submit an application fee.

 

Payment of the penalties for late renewal application filing will be collected on behalf of the Commissioner through the NMLSR.  The date of submission for renewal application will be the date on which the electronically submitted complete renewal application was accepted for processing by the NMLSR (previously stamped received by the Department).

 

Inactive License Status

 

A formerly licensed individual whose New Jersey license is not under suspension or revoked and who has not had a mortgage loan originator license or a qualified individual licensee license or its equivalent revoked in any other governmental jurisdiction may, for up to 5 years from the date on which the license was placed in inactive status, apply to reactivate the individual license pursuant to the rules and in accordance with the format and standards of the NMLSR.  The inactive individual licensee must complete the continuing education requirements in effect for the last calendar year in which the individual was licensed as a requirement for reactivation.

 

Conversion of Mortgage Lender and Mortgage Broker Licenses

 

In addition to the prior requirements, for a conversion from a correspondent mortgage lender to a mortgage lender or from a mortgage broker to a mortgage lender or to a correspondent lender, a person must submit an audited financial statement demonstrating the required tangible net worth.

 

Pre-Licensing Education Requirements for Mortgage Loan Originators and Qualified Individual Licensees

 

An applicant for a new license as a mortgage loan originator or a qualified individual licensee must complete, as a pre-licensing requirement, at least 20 hours of education from a provider approved by the NMLSR.  The approved education courses must include at a minimum, but not be limited to:

  • 3 hours of instruction on federal statutes and regulations;
  • 3 hours of instruction on ethics, including instruction on fraud, consumer protection, and fair lending issues;
  • 2 hours of instruction on lending standards for the nontraditional mortgage product marketplace; and
  • 4 hours of instruction on New Jersey-specific statutes and rules.

 

Pre-licensing education requirements of another state that were approved by the NMLSR and completed by an applicant for licensure as a New Jersey qualified individual licensee or mortgage loan originator will be accepted as credit towards completion of the pre-licensing education requirements.

 

 

 

Licensing Examination Requirements for Mortgage Loan Originators and Qualified Individual Licensees

 

An applicant for a new license as a mortgage loan originator or qualified individual licensee must pass, as a pre-licensing requirement a national written test developed by the NMLSR and administered by a test provider approved by the NMLSR and a New Jersey-specific written test, developed by the NMLSR in consultation with New Jersey, and administered by a test provider approved by the NMLSR.  The national written test and the New Jersey-specific test will examine, at a minimum, the applicant’s knowledge of:

  • Federal and New Jersey statutes and regulations pertaining to mortgage loan origination;
  • Other federal and New Jersey statutes and rules, including those pertaining to fraud, consumer protection, fair lending issues, and the non-traditional marketplace; and
  • Ethics.

 

The test for licensure as a qualified individual will also include questions relating to employee supervision, office management, licensing, and regulatory compliance issues.

 

An applicant must receive a test score on each test of at least 75% to obtain a passing score. An applicant who fails to pass the written test must not take a subsequent, consecutive test until at least 30 calendar days after the applicant’s preceding test date.  An applicant may take the written test up to 3 consecutive times.  An applicant who fails to pass the written test after 3 consecutive attempts will not be permitted to retake the test for a period of at least 6 months from his or her last preceding test date.  A mortgage loan originator or a qualified individual licensee who fails to maintain a valid license for a period of 5 years or longer will be required to pass again a written national and state law test as precondition to license reinstatement.

 

Continuing Education Requirements for Renewal as a Mortgage Loan Originator or Qualified Individual Licensee

 

An applicant for renewal as a mortgage loan originator or qualified individual licensee must, during the license term preceding renewal, complete at least 12 hours of continuing education from a provider approved by the NMLSR.  The approved continuing education course(s) must include at minimum, but not be limited to:

  • 3 hours of instruction on federal statutes and regulations;
  • 2 hours of instruction on ethics, including instruction on fraud, consumer protection, and fair lending issues;
  • 2 hours of training related to lending standards for the non-traditional mortgage product marketplace; and
  • 2 hours of instruction on New Jersey-specific statutes and rules.

 

Credit for an approved continuing education course will be applied only in the calendar year in which the course is taken and provided that it is not the same approved course already taken in that calendar year or the immediately preceding calendar year.  A licensee who is an approved instructor of an approved continuing education course may receive credit towards the individual’s own continuing education requirements for the content of the course taught at the rate of 2 hours of credit for every 1 hour of an approved continuing education course taught.  Any continuing education requirements of another state reviewed and approved by the NMLSR and completed in another state by the applicant for renewal will be accepted as credit towards completion of the continuing education requirements in New Jersey.

 

Responsibilities and Replacement of a Business Licensee’s Qualified Individual Licensee

 

If a qualified individual licensee upon whom a corporation, partnership, association, limited liability company, or other entity relies for its license has his or her qualified individual license revoked or suspended by any state, or allows the license to lapse, or for some other reason is no longer affiliated with the business licensee, the business licensee must notify the Commissioner within 10 days of the event.  In addition, the business licensee must appoint another qualified individual licensee within 90 days of the effective date of the termination of the former qualified individual licensee’s affiliation with the business licensee for any reason. The Department may extend the 90-day period for good cause upon written request of the business licensee.

 

A qualified individual licensee must ensure that all employees operating as mortgage loan originators are duly licensed and that copies of the licenses issued for all mortgage loan originators are available for inspection at the licensed office from which the mortgage loan originator operates.

 

Requirements Regarding Licenses and Renewal of the Licenses of Mortgage Loan Originators and Qualified Individual Licensees

 

When applying to renew a license, a qualified individual licensee or mortgage loan originator in good standing must submit a completed renewal application as may be required by the Commissioner or the NMLSR and which must include at a minimum:

  • Payment of any required fees to the NMLSR; and
  • Evidence of completion of continuing education requirements.

 

The license must contain the name of the mortgage loan originator, the name of the employing licensee, and the address of the office location of the employing licensee from which the mortgage loan originator operates.  The employing licensee must make available for inspection licenses at the licensed office from which the mortgage loan originator operates.

 

Within 5 calendar days (previously 30) after a mortgage loan originator ceases his or her affiliation with a business licensee, the employing licensee must return the license (previously registration certificate) to the Department.  An employing licensee need not return the license of a mortgage loan originator who changes from one branch location of the employing licensee to another branch of that licensee.  Within 10 calendar days after a qualified individual licensee ceases to be affiliated with a business licensee in that capacity, the qualified individual licensee must return the license to the Department.

 

The requirements for the registration of a mortgage solicitor have been deleted.

 

Late Renewal of an Individual License; Late Filing Fees

 

An individual who submits a renewal application after the expiration of the license, but no later than the last day of February immediately thereafter, may renew by paying a penalty for late filing as follows:

  • Qualified individual license: $250; and
  • Mortgage loan originator: $75.

 

An individual who submits a renewal application after the last day of February following the expiration of the license will be treated as a new licensee and be required to submit an application with a fee.  Payment of penalties for late renewal filing will be collected on behalf of the Commissioner through the NMLSR.  The date of submission will be the date on which the electronically submitted complete renewal application was accepted by the NMLSR.

 

Sale or Transfer or Change of Control of Business Licensee

 

A business licensee must file a completed application for approval whenever a change of ownership of 25% or more of the licensee is planned.  The change of control request must be submitted at least 90 days (previously 60 days) prior to the sale date.  Each new officer, partner, member or manager of an LLC, director, and any other individual who, as a result of the sale, transfer, or change of control owns at least 10% of the business must satisfy the requirements for obtaining a business license.

 

The Commissioner will approve the sale or transfer or change of control unless, after an opportunity for a hearing, it is determined that there are sufficient grounds to deny the application.  Unless the Commissioner issues a preliminary denial of the application and affords the applicant an opportunity for a hearing within 90 days of the Commissioner’s receipt of the completed application, the application will be deemed approved.

 

Licensee Notification Requirements

 

In addition to the prior requirements, a licensee must notify the Department in writing within 15 days of the occurrence of any of the following:

  • The entry of any final judgment in a civil or administrative action against the licensee upon the grounds of fraud, misrepresentation, or deceit; and
  • Failure to demonstrate financial responsibility through disregard in the management of the licensee’s own financial condition.  Occurrences which indicate a disregard in the management of a licensee’s financial condition will include, but not be limited to:
    • The entry of any civil judgment against the licensee, which is not appealed and remains unsatisfied except judgments solely as a result of medical expenses;
    • The issuance to the licensee of a tax lien or other government lien;
    • The entry against the licensee of a judgment of foreclosure; or
    • The receipt of notifications within a 6-month period that 2 or more of the licensee’s accounts with creditors are 90 days or more in arrears.

 

Bond Requirements

 

A person who seeks an initial license as a mortgage lender or mortgage broker must obtain a surety bond in the amount of $150,000, which will be applicable to the first $50,000,000 of closed loan volume.  Following the submission of each annual report, a mortgage lender or mortgage broker must, if necessary, increase the amount of the surety bond based on the following closed loan volumes and provide proof of the bond to the Department within 30 days of the submission of the report.

 

Closed Loan Volume Amount of Bond
Up to $50,000,000 $150,000
$50,000,001 to $75,000,000 $200,000
$75,000,001 to $100,000,000 $250,000
$100,000,001 and over $300,000

 

Fees

 

All fees associated with licensing must be paid electronically to the NMLSR (previously by check made payable to “Treasurer – State of New Jersey”) for administration of the NMLSR and collection of fees payable to the Department and the NMLSR according to the manner prescribed by the NMLSR.

 

A person who is applying for an initial individual or business license under the RMLA must pay a nonrefundable application fee as follows:

  • Business license: $1,200;
  • Each branch office: $1,000;
  • Qualified individual licensee: $500;
  • Mortgage loan originator: $150;
  • Change of affiliation by mortgage loan originator: $50; and
  • Change of affiliation by qualified individual licensee: $250.

 

Business licensees licensed under the Licensed Lenders Act who apply to transition by July 31, 2010 to business licensees under the RMLA must pay a fee of $600 plus $100 for each existing branch.

 

 

 

 

Tangible Net Worth

 

Each applicant for a business license must demonstrate tangible net worth of least the following amounts:

  • Residential mortgage lender: $250,000;
  • Correspondent mortgage lender: $150,000; and
  • Residential mortgage broker: $50,000.

 

As appropriate for the type of license they hold, business licensees must maintain tangible net worth of at least the amounts set forth above.  Applicants for business licenses and business licensees may be required by the Department to demonstrate adequate means to fund loans through lines of credit or otherwise.

 

Location of Books, Records, Accounts, and Other Documents Pertaining to a Business; Records Retention

 

Each business licensee must notify the Department of the place of business in which the books, records, accounts, and other business documents of its activity as a mortgage lender or mortgage broker are kept.  Business licensees must preserve all books, records, accounts, and documents related to the business for at least 3 years after making the final entry on any application or loan.  The denial or withdrawal of an application will constitute the final entry for an application, which is denied or withdrawn.  The assignment or sale of a loan will constitute the final entry for a loan, which is sold or assigned.  In the case of an open-end loan, the licensee must preserve the books, accounts, and records for at least 3 years after each entry.

 

All books, records, accounts, and documents may be stored electronically so long as the electronically stored information can be produced in electronic format upon request by the Department or reproduced on paper and delivered to the Department within 5 days of the business licensee’s receipt of a request from the Department to produce the records.  In the case of a business licensee that ceases to do business, the Commissioner may move and store abandoned books, accounts, and records in whatever form and make a claim against the bond for costs of moving and storage.

 

Advertising

 

All solicitations and advertisements by licensees, whether in print, broadcast, or electronically transmitted, must include, in a conspicuous manner, the unique identifier assigned to the licensee by the NMLSR.  Business cards will be considered advertisements.

 

Advertisements must not contain false, misleading, or deceptive claims or misrepresentations.  In all advertisements, which make express or implied claims that are likely to be misleading in the absence of certain qualifying information, such qualifying information must be disclosed in the advertisement in a clear and conspicuous manner.

 

Duly licensed mortgage lenders or correspondent mortgage lenders are not precluded from using the terms “mortgage banker” or “correspondent mortgage banker.”

 

A person who is not licensed under the RMLA or exempt under the RMLA  or the rules must not offer residential mortgage loans in New Jersey through direct or indirect solicitation or advertisement in print, electronic, or another medium.

 

Annual Reports

 

Mortgage lenders and mortgage brokers must file an annual report on or before May 1 on a form supplied by the Commissioner.