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September 06, 2019

License Required for Nonbank Servicers in New Jersey

New Jersey recently joined a handful of states seeking to increase regulation and oversight of nonbank mortgage servicers. The Mortgage Servicers Licensing Act went into effect just over a month ago and created new requirements for nonbank servicers doing business in the state.

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New Legislation

The legislation, which was signed into law by New Jersey Governor Phil Murphy on April 29, 2019, requires all nonbank servicers to obtain a license from the state’s Commissioner of Banking and Insurance. Servicers affiliated with federally-insured banks and credit unions are exempt from the licensing requirements.  There is an exemption for nonbank servicers licensed under New Jersey’s Residential Mortgage Lending Act (RMLA), and continue to meet additional requirements.  However, any nonbank servicers that are new entrants to the New Jersey market, or are not currently holding a license, will need to meet all applicable requirements under the new act.

Why the Change?

New Jersey has struggled with a high volume of foreclosures and convened a special committee last year to address some of the issues contributing to the state’s foreclosure rate – the highest in the country.  “A major part of the foreclosure crisis has been mortgages that were serviced by individuals who were not properly trained and in many cases, simply operated using unethical practices,” said legislation co-sponsor and New Jersey Assemblyman Vincent Mazzeo. “This bill creates a checks and balances of sorts.”

Licensing Requirements

The legislation outlines a number of specific licensing requirements.  Several of the stipulations are tied to experience and financial responsibility.  Individuals that hold key management roles at branch or main office locations must have three current years of experience in mortgage servicing, pass background checks illustrating a clear record for the past seven years, and meet character fitness guidelines.  Licensure is also contingent on meeting annual reporting, recordkeeping, servicing transfer disclosure, fees, surety bond, and fidelity bond requirements. There is a $100,000 surety bond requirement.  The license fee is $1,000 initially and $3,000 for license renewals.

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Noncompliance Impact

Nonadherence to this new legislation has consequences.  Nonbank servicers are subject to having their licenses suspended or revoked by the New Jersey Commissioner of Banking and Insurance in instances of misconduct. Certain violations of the act may result in civil penalties up to $25,000.

As nonbank servicers assume a larger share of the mortgage servicing market, more states are looking at similar ways to enhance oversight. In the past year, Ohio, Oregon, and Pennsylvania have all added nonbank servicer licensing requirements, demonstrating that this legislative trend is likely to continue at the state level.

We’re Here to Help

Maintaining compliance with regulations at the federal and state level, as well as meeting agency guidelines, continues to intensify, especially for nonbank servicers.  Juggling complex workflow rules that often overlap and/or conflict is no simple task.  Nonbank servicers have a real opportunity to leverage innovative technology to stay ahead of this matrix of rule-making with the CLARIFIRE® workflow application.  CLARIFIRE is designed to assist servicers of all kinds, in overcoming exactly this type of operational challenge.  With extensive experience in secure workflow automation, encompassing powerful business rules, CLARIFIRE® offers the capability to easily change controls and provides operational visibility and governance.  Gain both certainty and flexibility with an experienced industry partner like Clarifire.  Contact us today at 866.222.3370 or visit eclarifire.com to start preparing for the next iteration of regulation.

Let us show you how to future-proof your organization with CLARIFIRE®.

 

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Jane Mason

Jane Mason | @janemasonceo

Jane has applied her vast experience (over 25 years) operating process-driven businesses to successfully redefine client-focused service. Jane has worked with expert programmers to apply cutting-edge web-based technology to automate complex processes in industries such as Financial Services, Healthcare and enterprise workflow. Her vision confirms Clarifire's trajectory as a successful, scaling, Software-as-a-Service (SaaS) provider. A University of South Florida graduate, Jane has received many awards related to her entrepreneurial skills.
 
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