N.J. Admin. Code § 3:15-1.2

Current through Register Vol. 56, No. 8, April 15, 2024

Section 3:15-1.2 - Definitions

The following words and terms, when used in this chapter, shall have the following meaning unless the context clearly indicates otherwise.

"Accrual basis of accounting" means the accounting method by which expenses are recorded when incurred, whether paid or unpaid, and income is recorded when earned, whether received or not received.

"Act" means the "New Jersey Residential Mortgage Lenders Act," 17:11C-51 et seq.

"Advertisement" means any announcement, statement, assertion, or representation that is placed before the public in a newspaper, magazine, or other publication or in the form of a notice, circular, pamphlet, letter or poster or over any radio or television station, by means of the internet or by other electronic means of distributing information, or in any other way.

"Alternate name" means an alternate name of a licensed person other than an individual registered pursuant to 14A:2-2.1(2) or 42:2B-4b.

"Application" means the document or documents or information, including the payment of any fees, that a particular lender or broker requires a borrower to submit for the purpose of having the lender or broker begin to process the mortgage loan document or documents to determine whether to grant or deny a loan.

"Application fee" shall have the meaning of that term in 3:1-16.2.

"Appraisal fee" shall have the meaning of that term in N.J.A.C. 3:1-16.2.

"Borrower" means any person applying for a loan from a lender licensed under the Act, whether or not the loan is granted, and any person who has actually obtained such a loan.

"Branch office" means any location where, in the regular course of business, applications for mortgage loans are distributed to or received from consumers, loan records are maintained, underwriting decisions are made, commitments or lock-in agreements are issued, or any fees or charges relating to the loan are received from consumers.

1. A home or place of business of a consumer shall not be considered a branch office.

2. A location shall not be considered a branch office merely because any or all of the following activities are conducted at the location:

i. Consumers receive information concerning available loan products from a computer terminal;

ii. Consumers are prequalified for a loan, so long as no additional fee is charged for this service; and

iii. Advertising materials are distributed to consumers so long as the materials do not in any way resemble an application for a loan.

3. A branch office of a licensee under the Act does not also constitute a branch office of another licensee merely because the first licensee distributes or receives applications of that other licensee at the branch office.

4. A licensed real estate office of a person licensed as a real estate broker or salesman pursuant to 45:15-1 et seq., does not constitute a branch office of a business licensee merely because the real estate broker or salesman distributes or receives an application of the business licensee at that office, or because a business licensee or a mortgage loan originator of that licensee who does not hold himself out to the public as performing mortgage lending or mortgage brokering there, and does not maintain an office or desk there, meets prospective borrowers at the office of the real estate broker as a convenience to the borrower and distributes or receives applications or fees there.

"Business licensee" means a corporation, association, joint venture, partnership, limited liability company, limited liability partnership, sole proprietorship, or any other legal entity, however organized, permitted under the laws of this State, that is licensed as a residential mortgage lender or residential mortgage broker, or that should be so licensed.

"Clerical or support duties" means and includes: the receipt, collection, distribution, and analysis of information common for the processing or underwriting of a residential mortgage loan; or communicating with a borrower to obtain the information necessary for the processing or underwriting of a residential mortgage loan, to the extent that the communication does not include offering or negotiating loan rates or terms, or counseling borrowers about loan rates or terms. The term "clerical or support duties" does not include making representations to the public, through advertising or other means of communicating or providing information, such as through the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, indicating that a person can or will perform any of the activities of a licensee under the Act or of a person exempt from licensure pursuant to the Act or rules.

"Closed-end loan" with respect to a secondary mortgage loan means a mortgage loan pursuant to which the business licensee advances a specified amount of money and the borrower agrees to repay the principal and interest in substantially equal installments over a stated period of time, except that: the amount of the final installment payment may be substantially greater than the previous installments if the term of the loan is at least 36 months, or under 36 months if the remaining term of the first mortgage loan is under 36 months; or the amount of the installment payments may vary as a result of the change in the interest rate as permitted by the Act.

"Commissioner" means the Commissioner of the Department of Banking and Insurance.

"Commitment" means a signed statement issued by a lender in which the lender promises to make a loan of specified terms to a specified borrower, and which is based on a satisfactory underwriting analysis of the appraisal, if an appraisal is required in connection with the loan, and satisfactory underwriting analysis of the credit report, if a credit report is required in connection with the loan, except that any document indicating approval of a loan application that is contingent on the approval of a party to whom the lender seeks to sell the loan shall not be deemed a commitment.

"Commitment fee" shall have the meaning of that term in N.J.A.C. 3:1-16.2.

"Controlling interest" means ownership, control or interest of 25 percent or more of the licensee or applicant.

"Correspondent mortgage lender" means a residential mortgage lender who:

1. In the regular course of business, does not hold mortgage loans in its portfolio, or service mortgage loans, for more than 90 days; and

2. Has shown to the Department's satisfaction an ability to fund mortgage loans through warehouse agreements, table funding agreements or otherwise.

"Credit report fee" shall have the meaning of that term in N.J.A.C. 3:1-16.2.

"Department" means the Department of Banking and Insurance.

"Depository institution" means a "depository institution" as defined in section 3 of the "Federal Deposit Insurance Act," 12 U.S.C. § 1813, and also means any credit union.

"Direct contact" means in-person contact, and contact by means of a telephone, computer terminal, Internet or other electronic means during which contact, in the regular course of business, applications for first mortgage loans or second mortgage loans are distributed to or received from consumers, underwriting decisions are made, commitments or lock-in agreements are issued, or any fees or charges relating to the loan are authorized.

"Discount point" shall have the meaning of that term in N.J.A.C. 3:1-16.2.

"Federal banking agency" means the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the National Credit Union Administration, or the Federal Deposit Insurance Corporation, or any of their successor agencies.

"First mortgage loan" means a residential mortgage loan secured in whole or in part by any interest in residential real estate which is not subject to any prior or superior mortgage lien.

"Immediate family member" means a spouse, domestic partner as defined in 26:8A-3, partner in a civil union couple as defined in 37:1-29, parent, stepparent, grandparent, sibling, stepsibling, child, stepchild, and grandchild, as related by blood or by law.

"Individual" means a natural person.

"Individual licensee" means a natural person licensed as a qualified individual licensee for a residential mortgage lender or residential mortgage broker, correspondent mortgage lender or a mortgage loan originator.

"Insolvent" means having negative tangible net worth, or being unable to pay debts when due.

"Lender" means a residential mortgage lender.

"License name" means any name listed on the license issued by the Department including the true name and any alternate or trade names.

"License or licensing period" means the one-year calendar period beginning January 1, 2011 and each succeeding calendar year.

"Licensee" means a legal entity or individual who is licensed under the Act.

"Loan processor" or "loan underwriter" means an individual who performs clerical or support duties as an employee, at the direction of and subject to the supervision and instruction of a licensee under the Act or a person exempt from licensure.

"Lock-in agreement" means an agreement between the lender and the borrower whereby the lender guarantees until a specified date the availability of a specified rate of interest or time price differential or specified formula by which the rate of interest or time price differential will be determined and/or specific number discount points, provided the loan is approved and closed by the specified date. If a specified date is not determinable, the lender may fulfill the requirement of this provision by setting forth with specificity the method by which the duration of the lock-in period will be determined. The term "lock-in agreement" does not include an agreement to fix the rate executed three or fewer calendar days before closing where appropriate disclosures have been made under the provisions of this chapter and N.J.A.C. 3:1-16.2.

"Lock-in fee" shall have the meaning of that term in N.J.A.C. 3:1-16.2.

"Mortgage loan originator" or "originator" means any individual not exempt under section 5 of the Act and licensed pursuant to the provisions of the Act, and any individual who should be licensed pursuant to the provisions of the Act and this chapter who, for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly takes a residential mortgage loan application, or offers or negotiates terms of a residential mortgage loan. The term "mortgage loan originator" does not mean an individual:

1. Who is a qualified individual licensee for a residential mortgage lender or residential mortgage broker;

2. Engaged solely as a loan processor or underwriter, except as provided in section 4 of the Act; or

3. Engaged solely in extensions of credit relating to timeshare plans, as defined in section 101 (53D) of Title 11, United States Code ( 11 U.S.C. § 101(53D) ).

"Nationwide Mortgage Licensing System and Registry" (NMLSR) or "nationwide system and registry" means the mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, or their successors, and utilized for licensing and registering residential mortgage lenders and residential mortgage brokers as business licensees in accordance with the Act, and residential mortgage lenders and brokers as qualified individual licensees and mortgage loan originators as required pursuant to the Federal "Secure and Fair Enforcement for Mortgage Licensing Act of 2008," Title V of Pub. L. 110-289 ( 12 U.S.C. §§ 5101 et seq.)

"Nontraditional mortgage product" means any mortgage product other than a 30-year fixed rate residential mortgage loan.

"Open-end loan" means a secondary mortgage loan made by a residential mortgage lender pursuant to a written agreement with the borrower whereby:

1. The lender may permit the borrower to obtain advances of money from the lender from time to time or the lender may advance money on behalf of the borrower from time to time as directed by the borrower;

2. The amount of each advance and permitted interest and charges are debited to the borrower's account and payments and other credits are credited to the same account;

3. Interest is computed on the unpaid principal balance or balances of the account from time to time; and

4. The borrower has the privilege of paying the account in full at any time or, if the account is not in default, in monthly installments of fixed or determinable amounts as provided in the agreement.

"Originate" means to offer or commit to make a residential mortgage loan, or to close a residential mortgage loan in the name of the licensee.

"Person" means an individual, sole proprietorship, association, joint venture, partnership, limited partnership association, limited liability company, corporation, trust, or any other group of individuals however organized.

"Prequalification" means the process whereby a licensee prior to application advises a person whether or not he or she qualifies for a loan product, subject to satisfactory appraisal and other contingencies.

"Primary market" means the market wherein residential mortgage loans are originated between a lender and a borrower, whether or not through a mortgage broker or other conduit, and shall not include the sale or acquisition of a residential mortgage loan after the loan is closed.

"Qualified individual licensee" means an individual licensed as a residential mortgage lender or residential mortgage broker, who is required to be so licensed pursuant to the Act as a condition for a person to be issued or to hold a license as a business licensee, and who:

1. Meets, at a minimum, the licensing criteria applicable to a mortgage loan originator; and

2. Is an officer, director, partner, owner, or principal of the business licensee.

"Registered mortgage loan originator" means any individual who:

1. Is a mortgage loan originator and an employee of:

i. A depository institution;

ii. A subsidiary that is:

(1) Owned and controlled by a depository institution; and

(2) Regulated by a Federal banking agency; or

iii. An institution regulated by the Farm Credit Administration established by section 5.7 of the "Farm Credit Act of 1971," Pub. L. 92-181 ( 12 U.S.C. § 2241 ), or its successor; and

2. Is registered with, and maintains a unique identifier through the NMLSR.

"Residential mortgage broker" or "mortgage broker" or "broker" means any person, not exempt under section 5 of the Act and licensed pursuant to the provisions of the Act, and any person who should be licensed pursuant to the provisions of the Act, who for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly takes a residential mortgage loan application for others, or negotiates, places or sells for others, or offers to take an application for, negotiate, place or sell residential mortgage loans in the primary market for others. The term "residential mortgage broker" also means an individual who is a qualified individual licensee for a residential mortgage broker.

"Residential mortgage lender" or "mortgage lender" means any person, not exempt under this chapter and licensed pursuant to the Act and the provisions of this chapter, and any person who should be so licensed who, for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly takes a residential mortgage loan application or offers, negotiates, originates, or acquires residential mortgage loans in the primary market. The term "residential mortgage lender" also means:

1. With respect to a business licensee, a correspondent mortgage lender, unless the provisions of this chapter clearly indicate otherwise; and

2. With respect to an individual licensee, an individual who is a qualified individual licensee for a residential mortgage lender.

"Residential mortgage loan" or "mortgage loan" means any loan primarily for personal, family, or household purposes that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a one- to four-family dwelling, as defined in section 103(v) of the Truth in Lending Act, Pub. L. 90-321 ( 15 U.S.C. § 1602(v) ), or residential real estate upon which is constructed or intended to be constructed a dwelling.

"Residential real estate" means any real property located in this State, upon which is constructed or intended to be constructed a one to four family dwelling as defined in section 103(v) of the Truth in Lending Act ( 15 U.S.C. § 1602(v) ).

"RESPA" means the Federal Real Estate Settlement Procedures Act, 12 U.S.C. § 2607, regulations implementing RESPA, and any opinion regarding RESPA issued by the Department of Housing and Urban Development.

"Secondary mortgage loan" means a residential mortgage loan secured in whole or in part by a lien upon any interest in residential real estate, which is subject to one or more prior mortgage liens except that the following loans shall not be subject to the provisions of this chapter:

1. A loan that is to be repaid in 90 days or less;

2. A loan that is taken as security for a home repair contract executed in accordance with the provisions of the Home Repair Financing Act, 17:16C-62 et seq.; or

3. A loan that is the result of the private sale of a dwelling, if title to the dwelling is in the name of the seller and the seller has resided in the dwelling for at least one year, if the buyer is purchasing that dwelling for his or her own residence and, if the buyer, as a part of the purchase price, executes a secondary mortgage in favor of the seller.

"Settlement service" means any service provided in connection with a real estate settlement including, but not limited to, the following: title searches, title examinations, the provision of title certificates, title insurance, services rendered by an attorney, the preparation of documents, property surveys, the rendering of credit reports or appraisals, pest and fungus inspections, services rendered by a real estate agent or broker, and the handling of the processing, and closing or settlement.

"Substantial stockholder" means a person or entity owning 10 percent or more of the stock of a licensee.

"Table funding agreement" means an agreement between an investor and a licensee whereby the investor agrees to purchase specified mortgage loans from a licensee immediately after the closing of the mortgage loans, and which permits the licensee to close with funds of the investor.

"Tangible net worth" means net worth less the following assets:

1. That portion of any assets pledged to secure obligations of any person or entity other than that of the applicant;

2. Any asset (except construction loan receivables secured by first mortgages from related companies) due from officers or stockholders of the applicant or related companies in which the applicant's officers and/or stockholders have an interest;

3. That portion of the value of any marketable security (listed or unlisted) not shown at lower of cost or market, except for any shares of FNMA stock required to be held under a servicing agreement, which should be carried at cost;

4. Any amount in excess of the lower of the cost or market value of mortgages in foreclosures, construction loans, or foreclosed property acquired by the applicant through foreclosure;

5. Any investment shown on the balance sheet in the applicant's joint ventures, subsidiaries, affiliates and/or related companies that is greater than the value of said assets at equity;

6. Goodwill;

7. The value placed on insurance renewals or property management contract renewals or other similar intangibles of the applicant;

8. Organization costs of the applicant;

9. The value of any servicing contracts held by the applicant not determined in accordance with FASB Statement No. 65, "Accounting for Certain Mortgage Banking Activities," dated September 1982, as amended by FASB No. 122, "Accounting for Mortgage Servicing Rights," dated May 1995, or subsequent revisions thereto;

10. Any real estate held for investment where development will not start within two years from the date of its initial acquisition;

11. Any leasehold improvements not being amortized over the lesser of the expected life of the asset or the remaining term of the lease; and

12. Any commitment fees paid/collected that are not recoverable through the closing or selling of loans.

"Third party fees" shall have the meaning of that term in N.J.A.C. 3:1-16.2.

"Trade name" means an assumed name filed pursuant to 56:1-2.

"True name" means the legal name of the licensed entity and shall not include any alternate or trade name.

"Unique identifier" means a number or other identifier assigned by the NMLSR.

"Warehouse agreement" means an agreement to provide credit to a licensee to enable the licensee to have funds to close mortgage loans and hold those mortgage loans pending sale to permanent investors.

"Warehouse fee" shall have the meaning of that term in 3:1-16.2.

N.J. Admin. Code § 3:15-1.2

Amended by R.1997 d.257, effective 6/16/1997.
See: 29 N.J.R. 1489(a), 29 N.J.R. 2641(a).
Added "Accrual basis of accounting", "Advertisement", "Application fee", "Appraisal fee", "Billing cycle", "Closed-end loan", "Commitment fee", "Controlling interest", "Credit report fee", "Depository institution", "Discount point", "Insolvent", "Lender", "Lock-in fee", "Mortgage loan", "Mortgage solicitor", "Open-end loan", "RESPA", "Settlement service", "Table funding agreement", "Tangible net worth", "Third party charges", "Time price differential", "Warehouse agreement", and "Warehouse fee".
Amended by R.1999 d.191, effective 6/21/1999 (operative July 21, 1999).
See: 30 N.J.R. 1658(a), 31 N.J.R. 1609(a).
In "Act", changed New Jersey Licensed Lenders Act reference; and in "Secondary mortgage loan", changed Home Repair Financing Act reference in 2.
Amended by R.2002 d.353, effective 11/4/2002.
See: 34 N.J.R. 1775(a), 34 N.J.R. 3795(a).
Added "Alternate name", "Biennial period", "License name", "Substantial stockholder", "Trade name", and "True name"; amended "Branch office", "Commitment", "Consumer loan", "Consumer loan business", "Direct contact", and "Secondary mortgage loan business".
Amended by R.2008 d.70, effective 4/7/2008.
See: 39 N.J.R. 4361(a), 40 N.J.R. 1826(b).
Deleted definition "Biennial period"; and added definitions "License or licensing period" and "Registration period".
Amended by R.2010 d.129, effective 6/21/2010 (operative July 31, 2010).
See: 41 N.J.R. 2829(a), 42 N.J.R. 1139(b).
Rewrote definitions "Act", "Alternate name", "Application", "Branch office", "Closed-end loan", "Depository institution", "Direct contact", "First mortgage loan", "Lender", "License or licensing period", "Lock-in agreement", "Open-end loan", "Originate", "Person", "Primary market" and "Secondary mortgage loan"; deleted definitions "Authority", "Billing cycle", "Consumer lender", "Consumer loan", "Consumer loan business", "Licensed lender", "Liquid assets", "Mortgage banker", "Mortgage broker", "Mortgage loan", "Mortgage solicitor", "Registration period", "Sales finance company", "Secondary lender", "Secondary mortgage loan business" and "Time price differential"; added definitions "Business licensee", "Clerical or support duties", "Federal banking agency", "Immediate family member", "Individual", "Individual licensee", "Licensee", "Loan processor", "Mortgage loan originator", "Nationwide Mortgage Licensing System and Registry (NMLS&R)", "Nontraditional mortgage product", "Qualified individual licensee", "Registered mortgage loan originator", "Residential mortgage broker", "Residential mortgage lender", "Residential mortgage loan", "Residential real estate" and "Unique identifier"; substituted definition "Correspondent mortgage lender" for definition "Correspondent mortgage banker"; rewrote definition "Correspondent mortgage lender"; and substituted definition "Third party fees" for definition "Third party charges".