46:10B-63 Prohibited actions of distressed property purchaser.

11. a. A distressed property purchaser, in the course of a distressed property conditional conveyance, shall not:

(1) enter into, or attempt to enter into, a distressed property conditional conveyance unless the distressed property purchaser verifies and can demonstrate that the owner has a reasonable ability to pay for the subsequent conveyance of a fee interest back to the owner under the terms of any option to purchase and a reasonable ability to make monthly or any other required payments due prior to the subsequent conveyance;

(2) fail to make a payment to the owner at the time the title to the distressed property is conveyed from the owner to the distressed property purchaser, or, if the distressed property purchaser acquires a beneficial interest through a trust, at the time of the creation of the trust, so that the owner has received consideration in an amount of at least 82% of the property's fair market value, or, in the alternative, fail to make a payment to the owner, in situations in which the owner is unable to purchase the distressed property from the distressed property owner at the time of the expiration of the owner's option to purchase, so that the owner has received consideration in an amount of at least 82% of the property's fair market value;

(3) enter into an option to purchase or lease as part of a distressed property conditional conveyance containing terms that are unfair or commercially unreasonable, or engage in any other unfair conduct;

(4) represent, directly or indirectly, that the distressed property purchaser is acting as an advisor or a consultant, or in any other manner represent that the distressed property purchaser is acting on behalf of the homeowner;

(5) misrepresent the distressed property purchaser's status as to licensure or certification;

(6) do any of the following until after the time during which the owner may cancel the transaction:

(a) accept from the owner an execution of a deed or any other instrument of conveyance of any interest in the distressed property;

(b) induce the owner to execute a deed or any other instrument of conveyance of any interest in the distressed property; or

(c) record with the county recorder of deeds any document signed by the owner, including but not limited to a deed or any other instrument of conveyance;

(7) fail to convey title to the distressed property to the owner under an option to purchase provided for in the distressed property conveyance contract, in situations in which the terms of the conveyance contract have been fulfilled;

(8) enter into a distressed property conditional conveyance if any party to the transaction is represented by way of a power of attorney;

(9) fail to extinguish all liens encumbering the distressed property, immediately following the conveyance of the distressed property, or fail to assume all liability with respect to the lien in foreclosure and prior liens that will not be extinguished by the foreclosure, which assumption shall be accomplished without violations of the terms and conditions of the lien being assumed;

(10) cause the property to be conveyed or encumbered without the knowledge or permission of the owner, or in any way frustrate the ability of the owner to complete the conveyance back to the owner;

(11) fail to have all documents executed as part of a distressed property conditional conveyance also signed by a notary public licensed in the State who is unrelated in any way to the distressed property purchaser or any participant in the distressed property conveyance;

(12) fail to complete a distressed property conditional conveyance in the office of a title insurance producer licensed pursuant to the "New Jersey Insurance Producer Licensing Act of 2001," P.L.2001, c.210 (C.17:22A-26 et seq.), or in the office of an attorney licensed to practice law in this State;

(13) fail to provide to the owner, prior to the time of completion of a distressed property conditional conveyance, a disclosure statement in a form to be designed and prescribed by regulation by the Commissioner of Banking and Insurance, which statement shall require disclosure to the owner of all costs that the owner will incur in connection with the conveyance and any option for the owner to purchase the property, including a schedule of monthly and annual payments, closing costs, and any additional costs and fees related to the conveyance;

(14) claim, demand, charge, collect, or receive any fee, interest, or any other compensation for any reason from an owner, for services or as consideration for offering or providing any option to purchase to the owner or for otherwise participating in the conveyance transaction, in excess of 3.5% of the purchase price;

(15) in situations in which the distressed property conditional conveyance involves a transfer of an interest in fee from an owner to a distressed property purchaser, fail to record the deed to the purchaser in the county clerk's office in which the property is located, or fail to include a statement on the recorded deed that the deed was obtained through a transaction governed by the "Foreclosure Rescue Fraud Prevention Act";

(16) fail to notify in writing all existing mortgage lien holders of the distressed property purchaser's intent to accept conveyance of an interest in the property from the owner;

(17) fail to fully comply with all terms and conditions contained in the mortgage lien documents, including but not limited to due-on-sale provisions;

(18) fail to satisfy all qualification requirements for assuming the repayment of mortgage; and

(19) enter into an option to purchase or lease as part of a distressed property conditional conveyance in which the agreement fails to provide for a length of time of at least three years within which the owner may exercise his right to purchase back the property.

b. For purposes of paragraph (1) of subsection a. of this section, an evaluation of "reasonable ability to pay" shall include the owner's debt to income ratio, the owner's residual income, the fair market value of the distressed property, and the owner's credit history. There shall be a rebuttable presumption that the distressed property purchaser has not verified reasonable payment ability if the distressed property purchaser has not obtained documents of assets, liabilities, and income, other than a statement by the owner.

c. For purposes of paragraph (2) of subsection a. of this section: (1) an appraisal at the time that the distressed property is conveyed by a person licensed or certified by an agency of this State or the federal government shall create a rebuttable presumption that the appraisal is an accurate determination of the fair market value of the property; and (2) "consideration" means any payment or thing of value provided to the owner, including reasonable costs paid to independent third parties necessary to complete the distressed property conveyance or payment of money to satisfy a debt or legal obligation of the owner. "Consideration" shall not include amounts imputed as a down payment or fee to the distressed property purchaser, or a person acting in participation with the distressed property purchaser.

d. If an owner fails to make a required payment or otherwise defaults under a distressed property conditional conveyance contract which contains an owner's option to purchase or a promise to convey an interest in fee back to the owner, the distressed property purchaser shall only enforce the forfeiture of the owner's interest under the contract as follows:

(1) for purposes of the "Fair Foreclosure Act," P.L.1995, c.244 (C.2A:50-53 et seq.), the distressed property conditional conveyance contract shall be deemed to be a residential mortgage, the distressed property purchaser shall be deemed to be a lender, and the owner shall be deemed to be a debtor; and

(2) the distressed property purchaser may bring an action to enforce the forfeiture of the owner's interest in the property and for recovery of possession of the property by use of the procedures for foreclosure and judicial sale of residential real property available to lenders pursuant to the provisions of the "Fair Foreclosure Act."

e. With respect to the amount of any fee or other consideration provided by an owner to a distressed property purchaser at the time of the execution of an option to purchase, as part of any distressed property conditional conveyance, and as consideration for that agreement:

(1) the entire fee or other consideration shall be provided by the owner at the time of the execution of the option to purchase or lease agreement;

(2) the distressed property purchaser may declare some or all of the fee or other consideration to be non-refundable, regardless of whether the owner exercises his right to purchase back the property from the distressed property purchaser pursuant to the option to purchase or lease agreement, or declare that some or all of the fee or other consideration shall be applied as credit toward the purchase of the property, if the owner does exercise his right to purchase back the property, so long as this declaration is agreed to by the owner and expressly stated in the agreement; and

(3) the fee or other consideration provided to the distressed property purchaser shall not constitute an equitable ownership interest in the property.

f. With respect to any money provided by the owner to the distressed property purchaser pursuant to any distressed property conditional conveyance, remitted as a monthly credit towards the purchase of the property in excess of any monthly rental obligation established pursuant to any agreement designed to allow the owner to remain in the property, including, but not limited to, a lease agreement between the parties:

(1) the distressed property purchaser may declare some or all of the money to be non-refundable, if the owner does not exercise his right to purchase back the property from the distressed property purchaser pursuant to the option to purchase or lease agreement, so long as this declaration is agreed to by the owner and expressly stated in the agreement;

(2) the money provided to the distressed property purchaser shall not constitute an equitable ownership interest in the property; and

(3) the money shall continue to be the property of the owner and shall be held in trust by the distressed property purchaser for use as a credit towards the purchase of the property, subject to any agreement pursuant to paragraph (1) of this subsection.

g. If the owner exercises his right to purchase back the property from the distressed property purchaser pursuant to the option to purchase agreement: (1) any amount still owed toward the purchase price or other consideration on the property, as set forth in the agreement, following the application of any fee, money, or other consideration agreed to be applied towards the purchase by the distressed property purchaser as credit towards the purchase, shall be the sole responsibility of the owner; and (2) a new deed for the property shall be executed by the distressed property purchaser and filed with the office of the county clerk in the county in which the property resides.

L.2011, c.146, s.11.