By Robert J. Tartaglia
Assemblyman Cohen Holds Hearing on Subprime Market Meltdown
Author’s Note: NJBankers expresses our best wishes to Gov. Jon Corzine for a speedy recovery, as he was critically injured in a recent car accident. By all accounts, he seems to be healing quite well and has resumed his duties from the governor’s mansion, Drumthwacket. Good luck and best wishes in your rehabilitation, governor!
Assemblyman Neil Cohen, chairman of the Assembly Financial Institutions and Insurance Committee, recently held a hearing on the mortgage foreclosure crisis facing many families in New Jersey and across the country. He had many industry executives testify on the issue and has asked Attorney General Stuart Rabner to call a 180-day moratorium on all mortgage foreclosures.
“The nation’s subprime mortgage loan market is experiencing a total and catastrophic meltdown,” said Cohen. “A moratorium is needed to provide breathing room so regulators, investigators and lawmakers can get a handle on what this meltdown means for New Jersey homeowners and what potential safeguards may be needed for consumers.”
Certain lending practices added to the foreclosure problem by prompting consumers to purchase products with undisclosed prepayment penalties, interest-only loans and other products that added to foreclosure filings. Analysts estimate that some 1.5 million homeowners across the nation will face foreclosure this year and that 2008 could be far worse.
NJBankers testified that the subprime loan market is relatively narrow, representing only one in 10 outstanding mortgages. It has largely been concentrated on loans made in late 2005 and 2006. Subprime lending has been encouraged by regulators and policy makers as a way to extend credit to those who might not have been creditworthy.
Additionally, New Jersey has already enacted one of the strongest predatory lending laws, which ultimately needed to be opened up for amendments due to the problems encountered by the ratings agencies in this market. It is wrong to link predatory lending with the subprime lending of creative loan products.
NJBankers hopes the Legislature treads lightly and does not rush to enact new onerous legislation, but rather allows regulators to do their jobs and enforce the laws that are already on the books. Over-reacting by proposing legislation or more regulation will cause these loans to dry up and cut off credit to people who need it and have been able to take advantage of these products.
Treasurer Bradley Abelow and Budget Analyst David Rosen testified that due to strong collections in May, the governor’s proposed $33 billion budget was in better shape, but warned public officials about potential impacts to it in 2008. In fact, Abelow projected a $2.5 billion budget deficit for the fiscal year that will start July 1, 2008. That could spell trouble for the governor’s ability to sustain the $2.3 billion property tax program, of which a big chunk was funded by this budget.
Because New Jersey’s economic climate is challenged, there will be ongoing difficulties for the administration to fund its budgets. That is why this governor is looking to monetize the toll roads of the state, another very risky tactic about which NJBankers has concerns. To put it bluntly, one of our members suggested that leasing or selling the toll roads to help balance budgets is analogous to selling your furniture to pay the mortgage. One thing is for sure, this budget will be a piece of cake compared to last year!
Regulations implementing the Identity Theft Protection Act were released from the Division of Consumer Affairs (DCA) and have created quite a controversy. As you may recall, NJBankers, along with other interested parties, worked very closely on the outcome of the Identity Theft Protection Act to create a model for the nation to follow. The current regulations have basically taken all of the amendments we had inserted into the legislation and recreated them through regulatory enforcement. NJBankers has asked to meet with DCA and is part of a very large coalition of special interests looking for relief.
Among other things, problems occur with computer systems requirements – applicable to all levels of government and the private sector. The statute does not authorize the adoption of mandates for computer security systems. It is impossible to establish meaningful standards to fit sole proprietorships up to international corporations, school boards to state agencies and authorities. Security standards are in a constant state of development and fluctuation. Failure to abide by even one standard results in severe penalties and potential private law suits under the Consumer Fraud Act. We have already communicated those concerns to Majority Leader Assemblywoman Bonnie Watson Coleman and will be meeting with others in the near future.
Paid Family Leave
Onerous legislation counterproductive to this administration’s goal of attracting new business is Senate Bill 2249 (Sweeney). The bill would require all employers to provide 12 weeks of paid family disability leave to employees to take time off to participate in the providing of care for a family member suffering from a serious health condition; or to be with a child during the first 12 months of birth or adoption. While it is well-intentioned, NJBankers believes it will have a dramatic impact on small businesses in New Jersey because it will require employers with two or more employees to provide these benefits.
The legislation does not guarantee job protection as does the federal Family and Medical Leave Act (FMLA) or the New Jersey Family Leave Act (NJFLA). Both the FMLA and the NJFLA apply to employers with 50 or more employees and permit employees to receive 12 weeks of unpaid leave for certain serious health conditions. The FMLA provides for 12 weeks in a 12-month period and applies to an employee’s own serious health condition, as well as to the serious health condition of a family member. The NJFLA provides for 12 weeks of leave in a 24-month period and only applies to the serious health conditions of the employee’s family member.
NJBankers strongly opposes the bill and believes it is nothing more than a new employee tax! The bill has moved out of the Senate Labor Committee and cleared the Senate Budget and Appropriations Committee on May 24, where rumor has it that Sen. Sweeney will try to move it before summer recess.
Trade Names and Trademarks
Assembly Bill 1665/Senate Bill 722 (Barnes/Inverso), Chapter 51 prohibits deceptive use of depository institution’s trade name or trademark. It was signed into law on March 15 and went into effect on June 13. NJBankers supported the legislation and was particularly interested in its passage, as we’ve had a number of members who have been targets of unscrupulous people looking to benefit from our member banks’ trade names or Web sites.
Among other things, the law prohibits a person from:
• Using or referencing the trade name or trademark of a depository institution or a trade name or trademark similar to that of a depository institution in any solicitation for services or products without the consent of the depository institution;
• Using or referencing a consumer’s loan number, loan amount or other specific loan information, in any solicitation for services or products without the consent of the depository institution; and
• Using the trade name or trademark of a depository institution or a trade name or trademark similar to that of a depository institution in any advertisement or solicitation for services when the use could confuse a reasonable person as to the affiliation of the depository institution to the person using the trade name or trade mark.
ABC Meetings Resuming
The NJBankers Action Banker Council meetings are starting up again and we have a meeting scheduled with Assemblymen Kip Bateman and Jack Conners in the near future. The ABC meetings are a great way for our members to interact with the members of the Legislature on issues important to our industry.
Robert J. Tartaglia is director of government relations for NJBankers. He can be reached by e-mail at firstname.lastname@example.org.