The New Jersey Department of Banking and Insurance, Division of Banking, has established a new model application disclosure. The disclosure, required pursuant to N.J.A.C. 3:1-16.3, is now consistent with the federal disclosure requirements in TRID and the disclosures contained in the Loan Estimate and the Closing Disclosure. The Department has posted the disclosure on its web site at http://www.state.nj.us/dobi/division_banking ocf/NJ_Application_Disclosure_Form_20170927.pdf.
The Department has advised that, beginning on January 1, 2018, the “NJ Application Disclosure Form” must be used, preferably in a two-sided single sheet format, and that a copy of the completed form must be provided to the applicant(s) and maintained in the loan file. However, we recommend that the form be utilized as soon as practicable.
By opinion dated January 13, 2015, the United States Supreme Court held in Jesinoski v. Countrywide Home Loans, Inc. 2015 U.S. Lexis 607 (2015), that a borrower wanting to exercise a right of rescission on a loan under the Truth In Lending Act’s (“TILA’s”) extended right of rescission is not required to bring a court action to do so. Instead, the borrower is only required to submit a rescission notice to the lender within three years after consummation. TILA gives certain borrowers, mostly on refinance transactions, a right to rescind their mortgage loans. Although that right typically lasts only for three days from the time the loan is made, 15 U.S.C. § 1635(a), the right to rescind can extend to three years if the lender, for example, does not make certain disclosures or makes them improperly. The borrowers in this case mailed a notice of rescission to the lender three years after the loan was made and Countrywide Home Loans responded by denying that borrowers had a right to rescind. A year after the rescission notice was filed and four years after the loan was made, the borrowers filed a law suit seeking the rescission. Rescission allows for a refund of all fees chargeable by the creditor, including interest charged during the term of the loan.
The Court’s opinion resolved a split among the Circuit Courts circuit over whether borrowers exercising their right to rescind during the extended rescission period must file a lawsuit or whether they can rescind by merely sending a notice of rescission to the lender. Justice Scalia, speaking for the Court in the unanimous decision, stated as follows:
Section 1635(a) explains in unequivocal terms how the right to rescind is to be exercised: It provides that a borrower “shall have the right to rescind . . . by notifying the creditor, in accordance with regulations of the Board, of his intention to do so” (emphasis added). The language leaves no doubt that rescission is effected when the borrower notifies the creditor of his intention to rescind. It follows that, so long as the borrower notifies within three years after the transaction is consummated, his rescission is timely. The statute does not also require him to sue within three years.
Based on this opinion, a lender receiving a rescission notice during the extended rescission period may need to file suit against the borrower to determine the status of the loan. If a loan is properly rescinded, the lender must return all fees, including interest, and the borrower must return the principal amount of the loan.
On April 13, 2015, The Multi-State Mortgage Committee (“MMC”) of the Conference of State Bank Supervisors (“CSBS”) entered into a settlement with New Day Financial, LLC for violating the testing and education requirements of the SAFE Act. Pursuant to the Order, New Day was penalized $5,160,000 ($5.16 million), which is to be divided equally among the 43 participating state regulators. The Order was based on the following practices:
-Employees of New Day violated the NMLS Rules of Conduct for Test Takers by having employees take information from the testing program and storing that information so as to teach other employees what was on the test.
– Members of the New Day compliance staff took continuing education course and quiz requirements for at least 20 other employees.
– Robert Posner, the Chief Executive Officer, and Paul Alger, the Chief Operating Officer of New Day acknowledged that continuing education requirements were taken for them at least 18 times. Mr. Alger claimed that he was unaware of his requirements and only became aware of this activity after the initial complaint was disclosed to New Day. However, the Maryland Investigation uncovered evidence demonstrating that Mr. Alger did indeed have direct knowledge of and condoned these practices while they were occurring.
As part of the settlement, Mr. Alger is removed from his role as COO, but is permitted to maintain his ownership interest in New Day and may remain employed with New Day, but not as an NMLS “control person.” In addition, New Day must hire an independent auditor to evaluate New Day’s policies and procedures and review New Day’s training and education program to determine if additional remedial action is required.
This Order is a strong message that state regulators take SAFE Act requirements seriously. Licensed Companies and Loan Originators that continue practices such as this do so at substantial risk.
The Department of Housing and Urban Development (“HUD’) has reduced THE FHA annual premiums for new borrowers, effective January 26, 2015. Borrowers with case numbers assigned on and after that date will be eligible for the reduced annual mortgage insurance premiums. HUD has projected that the action will save more than two million FHA homeowners an average of $900 annually and spur 250,000 new homebuyers to purchase their first home over the next three years. The change was made possible by the fact that the FHA’s Mutual Mortgage Insurance Fund (MMIF) has improved.
For loans in the pipeline, FHA has indicated that it will permit lenders to cancel existing case numbers and assign new numbers so that borrowers who have yet to close on their loans may take advantage of the premium reduction. The change does not impact loans that have closed. However, it is expected that the reduced premiums will spur refinance action among existing borrowers.
The reduction impacts the rate for all Title II forward mortgages with terms greater than 15 years, except single family forward streamline refinance transactions that are refinancing existing FHA loans that were endorsed on or before May 31, 2009. The rates, as set forth in Mortgagee Letter 2015-01, reduce the MIP by .50%. For example for a loan of less than $625,000 and a loan to value of less than 95%, the MIP was reduced from 1.3% to .80%.