[Ord. 6 S+FE, 9-4-2002 § 2]
The following terms have the following meanings:
Shall mean any person that controls, is controlled by, or
is under common control with another person, including any successors
in interest.
Shall mean the annual percentage rate for a home loan calculated
according to the provisions of the Truth in Lending Act, as amended
by the Home Ownership and Equity Protection Act of 1994 (15 U.S.C.
§ 1601 et seq.), and its implementing regulations as such
statute or regulations may be amended from time to time.
Shall mean discount points knowingly paid by the borrower,
funded through any source which in fact results in a bona fide reduction
of the interest rate or time-price differential applicable to the
loan, provided that the amount of the interest rate reduction purchased
by the discount points is reasonably consistent with established industry
norms and practices for secondary mortgage market transactions. For
purposes of this section, it shall be presumed that a point is a bona
fide loan discount point if it reduces the interest rate by a minimum
of 35 basis points or 3/8 of a point provided all other terms of the
loan shall remain the same.
Shall mean the City of Newark or other office, position,
administration, department, division, bureau, board or commission,
or a corporation, institution or agency of City government, the expenses
of which are paid in whole or in part from the Director of Finance.
Shall mean a bank, savings and loan association, thrift,
credit union, mortgage banker, mortgage broker, trust company, savings
bank, securities broker, municipal securities broker, securities dealer,
municipal securities dealer, securities underwriter, municipal securities
underwriter, investment trust, bank holding company, finance company,
financial services holding company or home repair contractor.
Shall mean a home loan secured by a first lien on residential
real property, a condominium unit or cooperative share.
Shall mean a home loan that meets either of the following
thresholds:
The total points and fees on the loan exceed 5% of the total
loan amount if the total loan amount is $20,000 or more; or 6% of
the total loan amount if the total loan amount is $20,000 or more
and the loan is a purchase money loan guaranteed by the Federal Housing
Administration or the Veterans Administration; or the lesser of 6%
of the total loan or $800, if the total loan amount is less than $20,000;
provided that the following discount points shall be excluded from
the calculation of the total points and fees payable by the borrower.
Up to and including two bona fide loan discount points payable
by the borrower in connection with the loan transaction, but only
if the interest rate from which the loan's interest rate will be discounted
does not exceed by more than one percentage point the required net
yield for a ninety day standard mandatory delivery commitment for
a reasonably comparable loan from either the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation, whichever
is greater; or
Up to and including two bona fide loan discount points payable
by the borrower in connection with the loan transaction, but only
if the interest rate from which the loan's interest rate will be discounted
does not exceed by more than one percentage point the required net
yield for a ninety day standard mandatory delivery commitment for
a reasonably comparable loan from either the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation, whichever
is greater; or
For a first lien home mortgage loan, the annual percentage rate
of the home loan at consummation of the transaction exceeds five percentage
points over the yield on U.S. treasury securities, having comparable
periods of maturity on the fifteenth day of the month immediately
preceding the month in which the application for the extension of
credit is received by the lender; or for a subordinate mortgage lien,
the annual percentage rate of the home loan at consummation of the
transaction equals or exceeds 7% points over the yield on U.S. treasury
securities having comparable periods of maturity on the fifteenth
day of the month immediately preceding the month in which the application
for the extension of credit is received by the lender and for purposes
of paragraph d of the definition of predatory loan, the date of application
for the home loan is received.
For purposes of this definition:
If the terms of the home loan provide for an initial or introductory
period during which the annual percentage rate is lower than that
which will apply after the end of such initial or introductory period,
the annual percentage rate to be considered is the rate which applies
after the initial or introductory period.
If the terms of the home loan provide for an annual percentage
rate that varies in accordance with an index plus a margin, the annual
percentage rate to be considered is the rate that is in effect on
the date the loan is extended or on the date the loan application
is made for purposes of the definition of predatory loan as herein
defined.
In the case of a home loan with a regular interest rate that
varies in accordance with an index plus a margin, but with an initial
or introductory annual percentage rate established in some other manner
that would be lower than the fully-indexed rate, the annual percentage
rate to be considered is the fully-indexed rate on the date the loan
is extended or on the date the loan application is made for purposes
of the definition of predatory loan as herein defined.
Shall mean a loan secured by residential real property for
not more than four families or a residential condominium or cooperative
unit (or shares issued in respect thereof) located in the City of
Newark, which is for the principal residence of one or more of the
borrowers.
Shall mean a home loan secured by a lien on residential real
property, condominium unit or cooperative share which is junior in
priority to a first lien home loan with respect to such property.
Shall mean any person that extends, purchases or invests,
directly or indirectly including through collective investment or
securitization entities, in one or more home loans or arranges, directly
or indirectly including through collective investment or securitization
entities, for the extension, purchase of or investment in one or more
home loans and any mortgage broker in respect of home loans. Furthermore,
a person shall not be considered a lender by investing (and not acting
as an arranger for the extension, purchase or securitization of home
loans) in a collective investment or securitization entity which acquires
or otherwise invests, directly or indirectly, in home loans if such
collective investment or securitization entity is not an affiliate
of such person.
Shall mean any person who functions as an intermediary for
a fee between the borrower and the lender in the making of a home
loan.
Shall mean any individual, domestic corporation, foreign
corporation, association, syndicate, joint stock company, partnership,
joint venture or unincorporated association engaged in a business
or commercial enterprise.
Shall mean:
All items listed in U.S.C. sections 1605 (a)(1) through (4)
except interest or the time-piece differential;
All charges for items listed under section 226.4(c)(7) of Title
12 of the code of Federal regulations, as amended from time to time,
but only if the lender receives direct or indirect compensation in
connection with the charge or the charge is paid to an affiliate of
the lender;
All compensation not otherwise specified in this definition
paid directly or indirectly to a mortgage broker, including a broker
that originates a home loan in its own name through an advance of
funds and subsequently assigns the home loan to the person advancing
the funds;
The premium of any single premium credit life, credit disability,
credit unemployment or other life or health insurance;
The maximum prepayment penalty that could be payable under the
terms of the relevant home loan.
Shall mean a person that was, or is the affiliate of a person
that was:
A lender within the last 12 months in respect of, as determined
in the aggregate for such lender and its affiliates, and is at least
the lesser of:
Charged any fees or other charges to modify, renew, extend or
amend or to defer any payment due in respect of at least five high
cost home loans, except for customary fees charged in connection with
the extension of a high cost home loan after giving effect to which
and the other terms of the extended loan, the borrower receives a
reasonable and tangible net benefit from such extension; or
Engaged in fraudulent or deceptive marketing or sales efforts
in respect of high-cost home loans in the City of Newark provided
that any person shall not be a predatory lender if it:
Submits to the Director of Finance a plan to discontinue the
practice of making of, purchasing or otherwise investing in predatory
loans by the person and its affiliates, and the complete cessation
of the making of, purchasing or otherwise investing predatory loans
by the person and its affiliates within 90 days after the plan is
submitted; and
Is in compliance with such plan, provided that no more than
one plan may be submitted on behalf of any person, except a subsequent
plan may be submitted by a person solely in connection with the acquisition
of a predatory lender after the date of a prior plan, if such plan
will discontinue the practice of marking of, purchasing or otherwise
investing in predatory loans by the acquired predatory lender within
60 days of such acquisition;
By virtue of, directly or indirectly, purchasing or investing
in predatory loans, or arranging for the purchase or investment in
predatory loans by a collective investment or securitization entity,
if such person reasonably believes, after reasonable investigation
based upon reasonable procedures implemented by or on behalf of such
person, that all of the home loans purchased or invested in do not
constitute predatory loans.
As documented by both the United States Department of Housing
and Urban Development and Treasury Task Force Report and other commentators
include among other things: repeated refinancing of a loan without
any tangible benefit to the borrower; charging excessive prepayment
penalties; financing single premium credit insurance; encouraging
a borrower to default on his or her other debts; failing to comply
with Federal requirements with respect to the disclosure of loan terms
and loan settlements; making a loan for more than the borrower can
repay; financing excessive points and fees; requiring advance payments;
charging fees to modify a loan or defer payments; permitting acceleration
of a loan at lenders discretion; and increasing the interest rate
upon default.
Shall mean any high cost home loan with one or more of the
following characteristics:
Proceeds of the high cost home loan are used to payoff all or
part of an existing home loan or other debt of the borrower(s), and
the borrower(s) does (do) not receive a reasonable and tangible net
benefit from the new home loan considering all the circumstances,
including the terms of both the new home loan and the refinanced debt,
the cost of the new home loan, and the borrower's circumstances.
The lender does not reasonably believe, based upon a consideration
of the borrower(s) current and expected income, current obligations,
employment status, and other financial resources (other than equity
in the home being financed), at the time it makes the high cost home
loan that one or more of the borrowers will be able to make the scheduled
payments. There shall be a presumption that the borrower(s) is (are)
able to make the scheduled payments if, at the time the loan is made:
The scheduled monthly payments (after giving effect to any index
adjustments in respect of the loan) on the loan (including principal,
interest, taxes, insurance, assessments, condominium fees, cooperative
maintenance expenses) combined with the scheduled payments for all
other debt, do not exceed 50% of the borrower(s) documented and verified
monthly gross income; and
That the borrower(s) has (have) sufficient residual income as
defined in the guidelines established in Title 38 code of Federal
regulations section 36.4337(e) and United States Department of Veteran
Administration form 26-6393 to pay essential monthly expenses after
paying the scheduled monthly payments and any additional debt; and
If paragraphs 1 or 2 do not apply, predatory lender as defined
in paragraph b shall apply unless the lender determines and documents
prior to the closing of the loan that the making of the loan is justified
based upon specific compensating factors, such as the excellent long-term
credit history of the borrower(s), a demonstrated ability in the past
by the borrower(s) to make payments under comparable or greater debt
obligations to income ratios, conservative use of credit standards,
significant liquid assets of the borrower(s) or other reasonable factors.
The total points and fees exceed 5% of the total loan amount
if the total loan amount is $20,000 or more, or 6% of the total loan
amount if the total loan amount is $20,000 or more and the loan is
a purchase money loan guaranteed by the Federal Housing Administration
or Veterans Administration; or the lesser of 6% of the total loan
amount or $800, if the total loan amount is less than $20,000; provided,
that the following discount points shall be excluded from the calculation
of the total points and fees payable by the borrower:
Up to and including two bona fide discount points payable by
the borrower in connection with the loan transaction, but only if
the interest rate from which the loan's interest rate will be discounted
does not exceed by more than 1% point the required net yield for a
ninety day standard mandatory delivery commitment for a reasonably
comparable loan from either the Federal National Home Loan Mortgage
Association or the Federal Home Loan Mortgage Corporation, whichever
is greater; or
Up to and including one bona fide loan discount point payable
by the borrower in connection with the loan transaction, but only
if the interest rate from which the loan's interest rate will be discounted
does not exceed by more than two percentage points the required net
yield for a ninety day standard mandatory delivery commitment for
a reasonably comparable loan from either the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation, whichever
is greater.
The lender does not receive prior to making the high cost home
loan a written certification from an independent housing or credit
counselor approved by the United States Department of Housing and
Urban Development, the State of New Jersey or the City of Newark that
the borrower has received counseling on the advisability of the loan
transaction and the appropriateness of the loan for the borrower,
or has waived the counseling option; provided that a borrower may
waive the counseling option only by contacting such an independent
housing or credit counselor by personal meeting or live telephone
conversation at least three days prior to the closing of the home
loan and certifying in writing to the counselor that he or she has
elected to waive the counseling option and no such waiver shall be
valid if the lender or a mortgage broker or any of their affiliates
has recommended or advised the borrower to make such waiver.
More than two periodic payments (or portions thereof) required
under the high cost home loan are consolidated and paid in advance
from the loan proceeds provided to the borrower other than a loan
issued by or guaranteed by an instrumentality of the United States
or of any State or any City agency, such as loan products offered
by the United States Department of Veterans Administration, Fair Housing
Administration or State of New Jersey Mortgage Agency.
Any of the proceeds of the high cost home loan are paid to either
a home improvement contractor that is an affiliate of the lender or
any home improvement contract other than:
Proceeds of the high cost home loan are used to pay for any
credit life, credit disability, credit property, credit unemployment,
health or life insurance.
The high cost home loan violates any applicable provision of
the Federal Truth in Lending Act, as amended by the Home Ownership
and Equity Protection Act of 1994 (15 U.S.C. § 1601, et
seq.), the Federal Real Estate Settlement Procedures Act of 1974 (12
U.S.C. § 2601, et seq.) or any regulations implementing
these statues, or the restrictions and limitations on high cost home
loans in the general regulations of the New Jersey State Department
of Banking and Finance, as these statutes and regulations may be amended
from time to time.
[Ord. 6 S+FE, 9-4-2002 § 3]
The City and each City agency shall not provide to a predatory
lender or an affiliate of a predatory lender any grants, loans or
tax incentives specifically granted to such person. No person shall
promote, utilize, package or in any other way market any predatory
loans in combination with any such grants, loans or tax incentives.
If the City or a City agency determines that any grants, loans or
tax incentives have been given in violation of this section, it shall
rescind them and promptly require return of any funds advanced and
require payment of any taxes or interest abated or deferred.
[Ord. 6 S+FE, 9-4-2002 § 4]
a.
No City agency shall procure goods or services from, or enter into
any contract with any financial institution that:
b.
No City agency shall enter into any contract with any financial institution
unless such contract contains as a material binding provision thereof
a covenant of continued compliance by the financial institution and
its affiliates with the certification described herein, the breach
of which shall excuse the City agency from further performance of
its obligations under the contract without payment of damages to the
contracting party. This subdivision shall not affect the validity
of any contract evidencing or establishing the terms of any debt obligations
issued by or on behalf of the City or any City agency, but shall apply
to contracts with respect to agency, underwriting and other services
provided in connection with any issuance thereof.
c.
Whenever the contracting City agency has reason to believe that a
financial institution or its affiliates may be in violation of any
contractual covenant given pursuant to this section, such City agency
shall investigate, or have another appropriate City agency investigate,
compliance with such certification. If the City agency determines,
after such investigation and an opportunity for the person to respond,
that the financial institution or one of its affiliates is in violation
of its certification, the relevant City agency shall arrange for the
alternate procurement of the goods or services to which such contract
relates in such manner as to prevent any loss to the City that otherwise
might result from the immediate cessation of the contract.
Upon securing the alternate procurement of the relevant goods
or services, the City agency shall notify the financial institution
of its determination not to perform any further obligations under
the contract because of the breach and may charge such financial institution
the difference in price resulting from such alternate procurement
and an administrative charge established by such agency in connection
with such alternative procurement. This paragraph shall not apply
to any contract evidencing or establishing the terms of any debt obligations
issued by or on behalf of the City or any City agency, but shall apply
to contracts with respect to agency, underwriting and other services
provided in connection with any issuance thereof.
d.
A City agency may, in its discretion, issue a certificate permitting
noncompliance with this section with respect to any contract it proposes
to enter into if in the written judgment of such City agency specifying
with the relevant facts that:
1.
The contract is necessary in order to respond to an emergency which
endangers the public health, welfare or safety and no person that
is capable of responding to this emergency and complying with this
section is available; or
2.
The application of this section will violate or be inconsistent with
the terms and conditions of a grant, subvention or contract of the
United States government.
All waivers shall become part of the contract file of the relevant
City agency. Notwithstanding any waiver, the relevant City agency
shall take every reasonable measure to contract with a person who
best satisfies the requirements of this section.
e.
Nothing in this chapter shall operate to impair any contract in effect
on the date this local law takes effect, except that renewal, amendment
or modification of such contract occurring on or after the enactment
of this section shall be subject to the conditions specified in this
section.
f.
Nothing in this chapter shall be construed to limit the authority
to cancel or terminate a contract, deny or withdraw approval to perform
a subcontract or provide supplies, issue a nonresponsibility finding,
issue a nonresponsiveness finding, deny a person or entity prequalification,
or otherwise deny a person or entity City business.
g.
Each year, beginning one year after the enactment of this chapter,
each City agency that has entered into contracts in the previous fiscal
year shall submit a report to the Mayor, the Director of Finance and
the City Council setting forth information concerning financial institutions
that have and have not agreed to such terms during the previous fiscal
year.
[Ord. 6 S+FE, 9-4-2002 § 5]
a.
No person shall be a depository for the funds of the City or any
City agency if it, or any of its affiliates, is a predatory lender.
Each depository of funds for the City or any City agency shall certify
to the City or such City agency that neither it nor any of its affiliates
is or will be a predatory lender.
b.
Whenever the City or City agency responsible for maintaining a deposit
of City funds has reason to believe that the relevant depository may
be in violation of the certification given pursuant to this section,
it shall investigate, or have another appropriate City agency investigate,
compliance with such certification. If it is determined, after such
investigation and an opportunity for the person to respond, that the
relevant depository is in violation of such certification, the funds
on deposit with such depository will be transferred promptly to another
depository, which is in compliance with paragraph a. No depository
may receive any fees or penalties in connection with the transfer
of funds in accordance with this section.
c.
Nothing in this chapter shall require a transfer of funds deposited
with a financial institution in connection with any debt obligation
issued by or on behalf of the City prior to the effective date of
this local law to the extent not permitted by the terms thereof.
[Ord. 6 S+FE, 9-4-2002 § 6]
a.
The City and each City agency shall not invest or permit to remain
invested any of its moneys or funds in any financial institution that
is a predatory lender or an affiliate of a predatory lender. Each
financial institution or affiliate of a financial institution in which
the City or any City agency makes any investment shall certify to
the City that neither it nor any of its affiliates is or will be a
predatory lender.
b.
Whenever the City or City agency responsible for maintaining an investment
has reason to believe that the person in which any investment is made
may be a predatory lender or an affiliate of a predatory lender, it
shall investigate, or request that another appropriate City agency
investigate. If it is determined, after such investigation and an
opportunity for the person to respond if appropriate given the nature
of the investment, that the person in which such investment is made
is a predatory lender or an affiliate of a predatory lender, the city
or such City agency shall use reasonable efforts to sell, liquidate
or otherwise terminate such investment in any manner designed to prevent
or minimize loss to the City or such City agency.
[Ord. 6 S+FE, 9-4-2002 § 7]
a.
Each City agency shall maintain the information that it must obtain
under this local law in the agency contract files and make it available
to the Director of Finance and for public inspection. The Director
of Finance shall have the power to investigate whether persons are
predatory lenders as described in this chapter and whether they have
made certifications in violation of this chapter, and shall offer
such persons an opportunity to respond. If the Director of Finance
finds that a violation has occurred, it shall provide evidence to
the contracting City agency or other relevant agency. It shall be
the duty of such agency to take such action as described in this local
law and as may otherwise be appropriate and provided for by law, rule
or contract, including but not limited to, imposing sanctions, seeking
compliance, recovering damages, declaring the relevant person in default
and/or seeking debarment or suspension of such person.
b.
One year after the enactment of this chapter, the Director of Finance shall publish and provide to the Mayor and the City Council, a quarterly list of persons found by him or her to be predatory lenders or affiliates, and shall provide any person designated on such list an opportunity to be heard. Prior to registering any contract with a person designated by the Director of Finance to be a predatory lender or an affiliate of a predatory lender, the Director of Finance shall notify the relevant City agency and give such City agency the opportunity to further investigate and determine whether its contracting party is in violation of the certification made by it pursuant to Section 10:29-3.
c.
Any person found to have made a false statement in a certification
required under this chapter shall be liable to the City for a civil
penalty of not less than $25,000 in addition to the other remedies
that the City or City agency may have under this chapter.
