(TRENTON) – Legislation Assembly Democrats Gary S. Schaer, John J. Burzichelli, Bonnie Watson Coleman and Wayne P. DeAngelo sponsored to protect New Jersey homeowners from foreclosure rescue scams by unscrupulous lenders received final legislative approval on Wednesday.
“Faced with the prospect of becoming homeless, many New Jersey homeowners 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 was approved 78-0 by the Assembly in October. An amended version was approved 39-0 by the Senate and 77-0 by the Assembly on Wednesday. It now goes to the governor.
The measure (A-359) requires 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.
“These are desperate people looking for legitimate help to keep a roof over their heads,” said Burzichelli (D-Gloucester/Cumberland/Salem). “That we have to consider legislation to make sure they are not taken in by individuals looking to profit on the suffering of others is sickening.”
The sponsors said the measure stemmed 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.
“A person’s home is the single biggest purchase they will make and the single biggest investment they have,” said Watson Coleman (D-Mercer). “These scam artists know that and are intent on dangling false hope to homeowners teetering on the brink of financial collapse while taking them for literally everything they’re worth.”
“We want to make it perfectly clear that we are as serious about punishing these scam artists as we are about keeping distressed homeowners in their homes,” said DeAngelo (D-Mercer/Middlesex). “The last thing we need are individuals working to turn the American dream of homeownership into a nightmare.”
The bill requires 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.
I situations in which there is a distressed property conditional conveyance, whereby an owner transfers the distressed property to a distressed property purchaser, occupies the property, and retains an option to purchase the property back from the purchaser, or a distressed property conveyance, whereby an owner simply transfers the distressed property to a distressed property purchaser, the bill provides certain contract rights to owners, including requirements that:
· The contract be in writing and include certain notices and disclosures in 14-point boldface type; and
· The owner has a right to cancel the contract during certain periods.
As to distressed property conditional conveyances, the bill places certain obligations on distressed property purchasers, including requirements to:
· Verify that the owner has a reasonable ability to pay for a subsequent conveyance of title back to the owner;
· Ensure that the owner is paid at least 82 percent of the property’s fair market value in consideration for the owner’s conveyance of title, or transfer of a beneficial interest through a trust, to the distressed property purchaser; and
· Provide to the owner, prior to a distressed property conditional conveyance, a disclosure statement that includes all costs the owner will incur in connection with the conveyance and any option for the owner to purchase the property back from the purchaser.
For a violation of the bill’s provisions, the bill provides for a civil penalty of not more than $10,000 for the first offense, and not more than $20,000 for the second and each subsequent offense.