A New Jersey homeowner in default contacts a company that offers to pay off her mortgage and allow her to remain in the home as a renter, with an option to repurchase the property within two years. The company charges a large upfront fee for this service. Under New Jersey law, which statement best describes this arrangement?
Correct Answer
B) This arrangement may constitute foreclosure rescue fraud under NJ law, and charging upfront fees for such services is prohibited
This arrangement describes a classic foreclosure rescue scheme. New Jersey enacted the Foreclosure Rescue Fraud Prevention Act (N.J.S.A. 2C:21-24.2) specifically to address predatory practices targeting distressed homeowners. Under this law, charging advance or upfront fees for foreclosure rescue services — including sale-leaseback arrangements marketed as a way to save a homeowner from foreclosure — is prohibited. Such arrangements are heavily scrutinized because they often result in the homeowner losing both their home and their money. Real estate licensees who participate in or facilitate such schemes face criminal liability and license revocation.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Predatory lending refers to unfair, deceptive, or abusive lending practices that impose unjustified terms on borrowers, often targeting vulnerable populations. It includes practices like excessive fees, inflated appraisals, and unnecessary refinancing.
RESPA is a federal law that requires lenders to provide borrowers with information about settlement costs, prohibits kickbacks and referral fees, and limits escrow account deposits. It applies to federally related mortgage loans.
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
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