New Jersey passed a law designed to prevent foreclosure consultants from taking advantage of distressed homeowners. Foreclosure rescue scammers often take title to victims' homes in a sale/leaseback arrangement or convince homeowners to give up ownership of their homes with an option to repurchase at a later date.
Read on to learn more about New Jersey’s Foreclosure Rescue Fraud Prevention Act and how it can help prevent foreclosure rescue scammers from preying on you if you are facing foreclosure.
(To learn more about the common ways fraudulent foreclosure consultants prey upon homeowners in foreclosure, see our Foreclosure Rescue Scams topic area.)
On December 20, 2011, New Jersey Governor Chris Christie signed into law the Foreclosure Rescue Fraud Prevention Act (the Act) (N.J. Stat. Ann. § 46:10B-53 et seq.) The new law took effect on June 18, 2012, and protects homeowners with residential properties in foreclosure from rescue scams. The Act:
The definition of a foreclosure consultant, which includes in- and out-of-state parties, includes anyone who offers to perform, or who performs, any distressed property service that will:
Under the Act, foreclosure consultants must acquire an official license from the New Jersey Department of Banking and Insurance (DOBI). To obtain a license, foreclosure consultants must:
Additionally, foreclosure consultants, including on any officer, director, partner, or owner of a controlling interest, or any employee of the foreclosure consultant, must consent to be fingerprinted and undergo a criminal history check. Licenses are valid for only two years.
Contracts for foreclosure consulting must be in writing and include certain non-waivable disclosures, including, for example:
The property owner may cancel the contract at any time before the foreclosure consultant has fully performed every service and obtained the relief set forth in the contract. (This means the homeowner can cancel the contract if the consultant’s efforts are unsuccessful.) Foreclosure consultants may not request or receive a fee prior to the completion of all services.
The foreclosure consultant’s fee may not exceed two monthly mortgage payments (principal and interest only) or the most recent quarterly property tax installment on the distressed property, whichever is less. Foreclosure consultants may not take a wage assignment, a lien of any type on real or personal property, or other security to secure payment. Perhaps more importantly, the foreclosure consultant is not allowed to acquire any interest in the distressed property from an owner with whom the foreclosure consultant has contracted.
When there is a distressed property conditional conveyance (where an owner transfers the distressed property to a purchaser, but the owner occupies the property and retains an option to purchase the property back from the purchaser) or a distressed property conveyance (where the owner transfers the distressed property to a purchaser), the Act provides certain rights for owners. The contract must:
Also, a distressed property purchaser must pay the owner at least 82% of fair market value for distressed property conveyances and distressed property conditional conveyances.
Regarding distressed property conditional conveyances, the Act requires the purchaser to:
There are civil and criminal sanctions for violations of the Act.
Criminal liability. Violators are subject to a $10,000 fine for the first offense and $20,000 for the second and each subsequent offense. A person who violates any provision of the Act is guilty of a crime of the third degree. Any violation in connection with a pattern of foreclosure rescue fraud or conspiracy to engage in a pattern of foreclosure rescue fraud is a second-degree crime.
Civil actions. Under the Act, property owners can sue a foreclosure consultant or a distressed property purchaser in Superior Court for any violation of the Act for treble damages, attorney’s fees, costs of suit, and appropriate equitable relief.
(Learn more about the foreclosure process in New Jersey.)