Legislation sponsored by Assemblymen Troy Singleton and Joseph Lagana to protect homeowners from the rise in exorbitant and often hidden fees being charged by mortgage servicing organizations was approved by an Assembly panel on Thursday.
The sponsors noted that the bill was inspired, in part, by the rise in so-called “convenience fees” being charged by mortgage servicers for online payments, which eventually precipitated a rise in a host of other fees.
“Homeowners, particularly in this economy, are struggling as it is to make ends meet. The last thing they need is predatory or unscrupulous mortgage servicers compounding their financial situation with hidden or unexpected fees,” said Singleton (D-Burlington). “This bill balances much-needed protections for mortgage holders without imposing burdensome regulations on servicing organizations.”
The bill (A-3142) would give the Department of Banking and Insurance (DOBI) the authority to regulate certain activities provided by mortgage servicing organizations for mortgage loans on residential real property located in New Jersey. The bill would prohibit servicing organizations from engaging in certain unfair or deceptive practices, including those relating to misrepresentation of late fees and mortgage payments.
“You have homeowners, many of whom are still trying to get on stable footing after the housing crisis, who are now being hit with a range of hidden fees that can have a sizeable impact on their monthly mortgage payments,” said Lagana (D-Bergen/Passaic). “We need to find a fair way to protect homeowners without overburdening the industry with regulations. This bill achieves just that.”
Specifically, the bill would require a servicing organization to register with DOBI and to be subject to regulation by the department for the purposes of this bill.
Under the bill, servicing organizations would be required to maintain a written schedule of fees that it charges mortgagors. The schedule shall identify each fee, provide a plain explanation of the fee, and state how the fee is calculated or determined.
A servicing organization must also make its schedule of fees available to the mortgagor or the mortgagor’s authorized representative at the time that the servicing of the mortgage loan is transferred to the servicing organization and at any time upon request of the mortgagor or the mortgagor’s authorized representative.
Specifically, the bill prohibits a servicing organization from imposing any late fee, convenience fee, delinquency fee, or any other fee that is imposed as a penalty for a late payment, in situations in which the mortgagor’s payment is otherwise a full payment for the applicable period and is paid on, or prior to, its due date or within any applicable grace period provided under the terms of the mortgage loan agreement, using any manner of payment method or service that the servicing organization uses to obtain payment from a mortgagor.
Servicing organizations must also comply with any other state and federal laws concerning the servicing of mortgage loans or any related obligation, including certain state laws specified in the bill.
The bill also requires servicing organizations to respond to any complaint or inquiry by a mortgagor and initiate any appropriate responsive action within 10 business days of receipt of the complaint or inquiry. Servicing organizations shall, upon request, make any accounts, books, and records concerning servicing activities available to the commissioner of DOBI.
If a servicing organization violates any provision of the bill, it shall be liable for a civil penalty of not more than $500 for each offense. Each violation shall constitute a separate offense, and if the violation is of a continuing nature, each day during which it continues shall constitute an additional, separate, and distinct offense.
However, certain federally insured banks would be exempt from the provisions.
The bill was approved by the Assembly Financial Institutions and Insurance Committee.