Measure Passed Legislature Unanimously 48 Days Ago; Governor’s Own Department of Banking and Insurance Fully Supported Legislation
In light of Monday’s Superior Court ruling that will allow many of the state’s biggest mortgage lenders to continue with foreclosure proceedings, Assemblyman Gary S. Schaer (D-Passaic) on Wednesday urged Governor Christie to sign a measure he has sponsored to protect beleaguered homeowners from predatory foreclosure consultants.
Among other licensing requirements, the bill stipulates that homeowners must receive at least 82 percent of fair market value, a necessary protection as some property owners have received pennies on the dollar for their distressed property, if anything at all. Similar legislation was signed into law in Minnesota and Illinois by Republican and Democratic governors, respectively. The Republican Attorney General of Texas also strongly supports similar legislation that includes the 82 percent provision.
The generally accepted percentage banks try to recoup in a short-sale is 82 percent. Assemblyman Schaer continues to believe that vulnerable homeowners should receive the same remuneration as the big banks.
“We need to do everything in our power to ensure that families who can afford to stay in their homes are given a fighting chance, absent any questionable or predatory practices. It is in everyone’s best interest for the Governor to sign this measure into law as quickly as possible,” said Schaer.
“New Jersey continues to be the ‘Wild West’ of foreclosure consulting. Hair stylists are required to undergo more government scrutiny than foreclosure consultants,” Schaer continued.
The measure (A-359), known as the “Foreclosure Rescue Fraud Prevention Act” is designed to protect New Jersey homeowners from foreclosure rescue scams. The bill, which received final legislative approval on June 29, passed both houses unanimously and has since been awaiting action by the Governor.
Support for the legislation came from many industry groups including:
– The New Jersey Bankers Association
– The New Jersey Realtors Association; and
– The New Jersey Land Title Association.
In addition, the consumer watchdog groups New Jersey Citizen Action and New Jersey Legal Services also supported the bill.
Assemblyman Schaer also received support on the bill from the NJ Department of Banking and Insurance, which had urged members of the legislature to vote for it.
First introduced in 2007 and twice receiving unanimous support in the Assembly, the bill would require foreclosure consultants and distressed property purchasers, who contract with owners of residential properties in financial distress, to adhere to certain practices in providing foreclosure prevention services to owners.
In December, NJ Supreme Court Chief Justice Stuart Rabner ruled that six of the state’s biggest lenders had to demonstrate that they were treating homeowners fairly during foreclosure proceedings. The order slowed filings in the first half of this year to a near halt in comparison to 2010. Schaer noted that with Monday’s court ruling allowing Bank of America, Citibank, JPMorgan Chase and Wells Fargo to once again proceed with filings, thousands of New Jersey homeowners may be at risk once again.
Schaer also pointed out that the measure stems from 2008 legal action initiated by the state Office of the Attorney General against numerous foreclosure rescue companies, mortgage loan providers, industry employees and lawyers for violating the state’s Consumer Fraud and RICO acts.
“Faced with the prospect of becoming homeless, many New Jersey families are turning to foreclosure consultants and foreclosure rescue firms in a last-ditch effort to stay in their homes,” said Schaer (D-Passaic/Bergen/Essex). “Unfortunately, some of the firms are nothing more than fronts for elaborate schemes to rob troubled homeowners of their hard-bought equity.”
The bill would require a foreclosure consultant to post a bond with the Department of Banking and Insurance before conducting any business in the state. In addition, the bill provides contract rights for owners of a financially distressed residential property who contract with foreclosure consultants, including requirements that:
– The contract for foreclosure consulting services must be in writing and must contain certain disclosures and notice requirements in 14-point boldface type; and
– The owner has a right to cancel the foreclosure consulting contract at any time until after the foreclosure consultant has fully performed every service and secured the relief the consultant contracted to perform.
The bill also prohibits foreclosure consultants from collecting any fee prior to the completion of all agreed upon services and until the distressed property relief is secured; and collecting fees in excess of certain limits as prescribed in the bill.
The bill also provides certain contract rights to owners and places a number of obligations on distressed property purchasers.
Anyone found in violation of the bill’s provisions would be subject to a civil penalty of up to $10,000 for the first offense, and up to $20,000 for the second and each subsequent offense.
Assemblyman Schaer, an investment consultant with more than two decades of experience, is Chairman of the Assembly Financial Institutions and Insurance Committee.