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Mortgage Bankers Ass'n of New Jersey v. New Jersey Real Estate Com'n

July 25, 1995

MORTGAGE BANKERS ASSOCIATION OF NEW JERSEY, A NOT-FOR-PROFIT CORPORATION OF THE STATE OF NEW JERSEY, PETITIONER-APPELLANT/CROSS-RESPONDENT,
v.
NEW JERSEY REAL ESTATE COMMISSION AND NEW JERSEY DEPARTMENT OF BANKING, RESPONDENTS-RESPONDENTS/CROSS-RESPONDENTS, AND WEICHERT CO. REALTORS AND MORTGAGE ACCESS CORP., COLDWELL BANKER SCHLOTT AND SEARS MORTGAGE CORP., FOX & LAZO, INC., AND SHELTER MORTGAGE SERVICES, INC., INTERVENORS/CROSS-APPELLANTS, AND NEW JERSEY ASSOCIATION OF REALTORS, AMICUS CURIAE/CROSS-APPELLANT.



On appeal from New Jersey Real Estate Commission and from New Jersey Department of Banking.

Approved for Publication July 25, 1995.

Before Judges Brody, Long and P.g. Levy.

The opinion of the court was delivered by: Brody

The opinion of the court was delivered by

BRODY, P.J.A.D.

This matter is before us again following a remand by the Supreme Court. Mortgage Bankers Ass'n v. New Jersey Real Estate Comm'n, 102 N.J. 176, 506 A.2d 733 (1986). In our earlier opinion, reported at 200 N.J. Super. 584 (App. Div. 1985), the panel split in its interpretation of N.J.S.A. 45:15-17(i) (statute), which prohibits a real estate broker, broker-salesperson or salesperson from:

Collecting a commission as a real estate broker in a transaction, when at the same time representing either party in a transaction in a different capacity for a consideration;

The matter had come before us to review a declaratory ruling of the New Jersey Real Estate Commission (Commission), made, pursuant to N.J.S.A. 52:14B-8, at the request of First Boston Capital Group, Inc. (First Boston), a mortgage investor.

The Commission had ruled that the statute did not bar a real estate broker from collecting a commission from a seller of property even if the buyer or lender paid the broker a fee for providing the mortgage the buyer needed to complete the purchase. The real estate broker was able to perform this service through access to an interactive computer program that quickly informed the broker whether First Boston would fund the mortgage loan and outlined the loan's essential terms. The ruling was challenged by the Mortgage Bankers Association of New Jersey (MBA), whose members originate and issue real estate mortgages.

The majority of the panel held that the statute barred receipt of a real estate broker's commission from the seller, viewing the mortgage loan as part of the sale transaction and viewing the broker's services to the buyer as representing the buyer "at the same time" in the overall transaction. The Dissenting Judge viewed the real estate broker's sale of a mortgage to the buyer as a different transaction from the sale of the real estate, and concluded that the broker would not be representing the buyer by selling him or her the mortgage.

The Supreme Court recognized that the statute's meaning was not self-evident. After considering the arguments of intervenors and amici, it found itself unable to interpret the statute without a record describing how the real estate market operates when residential property is sold. More particularly, the Court wanted to consider evidence of the various functions of and relationships among the real estate broker, the mortgage lender and intermediate bankers, brokers and salespeople. Aware that the way the statute is interpreted would have a major effect on the way real estate is bought and sold, the Court remanded the matter to the Commission and to the Commissioner of the Department of Banking, who had not been called upon previously to exercise his regulatory authority over the marketing and sale of real estate mortgages. The Court directed that the agencies conduct joint hearings, that the Commission reconsider its interpretation of the statute in light of the evidence adduced at those hearings, and that both agencies consider adopting appropriate regulations on the subject. Mortgage Bankers, supra, 102 N.J. at 192.

The Commission and the Commissioner carried out the Court's mandate by first referring the matter to the Office of Administrative Law. An Administrative Law Judge (ALJ) was directed to conduct evidentiary hearings and make findings describing the avenues available to a buyer interested in obtaining a residential mortgage loan. The ALJ was also directed to suggest to the Commission a proper interpretation of the statute in light of those findings. Finally, the ALJ was charged with the task of recommending to both the Commission and to the Commissioner the substance of new regulations that each agency might adopt to enforce the statute in a way that would complement the Commission's interpretation.

The ALJ, Judge Arnold Samuels, discharged his assignment with care and patience. After extensive hearings he issued an initial decision and report that is comprehensive, detailed, clear, and sensitive to the viewpoints of all parties. The Commission adopted the ALJ's initial decision *fn1 and both agencies drew heavily on his report when they enacted new regulations. First Boston had withdrawn from the litigation before the hearings began. Its particular relationship with real estate brokers, i.e., providing them with funds to issue a mortgage loan to a buyer, was not duplicated by the remaining parties. These parties presented the usual ways in which real estate brokers merely aid buyers in obtaining mortgages from others, a service they have performed since before enactment of the statute in 1953, and before the development of modern computer technology.

What has changed over the years is that real estate brokers now have a much greater incentive to aid the buyer, and computer technology has made it easier for them to do so. Real estate brokers became more eager to help the buyer obtain a mortgage in 1967 after the Supreme Court held that they are not entitled to a commission if the buyer is financially unable to complete the purchase. Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 548, 236 A.2d 843 (1967). Computer technology now enables real estate brokers to present a buyer immediately with one or more choices for mortgage financing. The broker naturally expects to ...


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