46:10A-6. Borrower to choose own attorney; fees; disclosure; definitions

1. a. No banking institution, other financial institution or other lender, which is licensed or authorized under the laws of this State or of the United States to engage in the business of making loans secured by mortgage, or which has an office in this State for that purpose, which institution or other lender is hereinafter referred to as a "lender," shall require a borrower to employ the services of the lender's counsel or an attorney specified by the lender with respect to such a loan secured by real property from the lender to the borrower if some or all of the collateral is located in this State.

b. If a lender makes a written offer to a borrower to make a loan secured by real property located in this State, the lender shall disclose, in writing, prominently and in bold type, to the borrower before the acceptance of the offer by the borrower, that the interests of the borrower and lender are or may be different and may conflict, and that the lender's attorney represents only the lender and not the borrower and the borrower is, therefore, advised to employ an attorney of the borrower's choice licensed to practice law in this State to represent the interests of the borrower.

c. If a lender makes a written offer to a borrower to make a loan secured by real property located in this State, the lender shall disclose in writing as part of the loan commitment, or within 10 days after the issuance of the commitment, to the borrower and before the acceptance of the commitment by the borrower:

(1) the basis for the determination of any charge which the borrower will be required to pay the lender's attorney for services provided to the lender in connection with that loan; and

(2) a good faith estimate of any charge which the borrower will be expected to pay to the lender's attorney for the services specified in paragraph (1) of this subsection c.

If the good faith estimate supplied to the borrower by the lender pursuant to paragraph (2) of this subsection c. will be materially exceeded, the lender shall notify the borrower of the increase at the time the lender becomes aware of the change and, to the extent feasible, at least prior to closing of the loan. The failure of the lender to advise the borrower of an increase in the estimate shall preclude the lender from seeking payment of the excess from the borrower. The failure to give a good faith estimate or to advise the borrower of additional charges shall not affect the validity or enforceability of the loan commitment, the loan, or the security for the loan.

d. If a loan is made to a person or persons primarily for personal, family or household purposes and is secured by real property located in this State: (1) on which the principal structure is a one-to-four family residence; or (2) on which a one-to-four family residence is to be the principal structure to be constructed with the use of the loan proceeds, the lender shall not require the borrower to reimburse the lender for, or to pay all or any portion of, any fee or expense charged by the lender's attorney except to the extent of a fee for the review of the loan documents prepared or submitted by or at the direction of the borrower's attorney or such other work or services as requested by the borrower or the borrower's attorney. Any other legal fee or expense of the lender's attorney shall be the sole responsibility of the lender.

For the purposes of this subsection, "loan document" means a promissory note, loan agreement, mortgage, affidavit of title, power of attorney, survey and survey affidavit, title documents and searches and commitments for title insurance and modification of any promissory note, mortgage or loan agreement.

e. If a loan is secured by real property and is not subject to subsection d. of this section, the lender and borrower may agree that the borrower shall reimburse the lender or pay directly for all or any part of the fees and expenses incurred with respect to the loan transaction, including, but not limited to, the fees and expenses of the lender's attorney.

f. If, pursuant to the provisions of this section, a borrower is required to reimburse for or pay the fees and expenses of the lender's attorney for services performed in connection with a loan secured by real property, all such fees and expenses shall be reasonable as defined by the Rules of Professional Conduct adopted by the Supreme Court of New Jersey.

g. (1) The provisions of this section shall not apply to secondary mortgage loans secured by real property which are made pursuant to P.L.1970, c.205 (C.17:11A-34 et seq.), section 24 of P.L.1948, c.67 (C.17:9A-24) or section 155 of P.L.1963, c.144 (C.17:12B-155) or which are similar secondary mortgage loans made by lenders pursuant to other authority.

(2) The provisions of this section shall not be deemed to permit any attorney's fee or charge or other charge or permit any action otherwise prohibited or limited by any other applicable law or regulation, including, but not limited to, the "Consumer Loan Act," R.S.17:10-1 et seq., the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.), the "pawnbroking law," R.S.45:22-1 et seq., Article 12 of "The Banking Act of 1948," P.L.1948, c.67 (C.17:9A-53 et seq.) and P.L.1959, c.91 (C.17:9A-59.1 et seq.).

(3) For purposes of this section, "written offer" includes a written commitment to make a loan.

L.1975,c.145,s.1; amended 1978,c.65,s.2; 1993,c.33,s.1.