Opinion ID: 2161930
Heading Depth: 2
Heading Rank: 3

Heading: Preemption and the Commerce Clause

Text: Although not raised before the Commission or the Appellate Division, it is contended before us that the Appellate Division's decision, to the extent that it prohibits a mortgage lender affiliated with the seller's broker from issuing the mortgage loan to the buyer, is preempted by the Federal Real Estate Settlement and Procedures Act (RESPA), 12 U.S.C. 2607(c)(4). RESPA expressly exempts from its provisions prohibiting the payment of kickbacks and referral fees for settlement services a transaction in which a real estate broker directly or indirectly refers the mortgage loan transaction to an affiliated mortgage company, provided the required disclosure is made to the mortgagor. [11] However, the RESPA preemption provision applies only to inconsistent state laws, and the Secretary of the Department of Housing and Urban Development may not determine that a state law is inconsistent with RESPA if the Secretary determines that such law gives greater protection to the consumer. [12] In addition, the RESPA provision containing the controlled business exemption has its own preemption provision, which provides: No provision of state law or regulation that imposes more stringent limitations on controlled business arrangements shall be construed as being inconsistent with this section. 12 U.S.C. § 2607(d)(6). Appellants argue that an outright prohibition of mortgage loans by companies affiliated with the seller's real estate broker is not merely a more stringent limitation and is therefore inconsistent with the RESPA exemption. In view of our determination that the entire matter must be remanded for further proceedings, we express no opinion on the preemption issue at this stage of the proceeding. Similarly, we need not now consider appellant's contention that the Appellate Division's interpretation of N.J.S.A. 45:15-17(i) constitutes an impermissible burden on interstate commerce and thus violates the Commerce Clause of the United States Constitution. Finally, it is apparent from the briefs submitted to this Court by the various intervenors that, in addition to the parties before us, a substantial number of other real estate brokerage companies in New Jersey are affiliated through common ownership with licensed mortgage lenders. The validity of these business arrangements could have been affected by the decision of the Appellate Division. The record before the Commission is barren of any facts describing the precise manner in which such companies operate, the nature and extent of the interrelation between the real estate brokerage company and the affiliated mortgage entity, and the impact of such enterprises upon the public served by them. In the absence of such a record, the Commission's interpretation of the Act lacks the factual and evidentiary foundation essential to sustain its conclusions. See Goodman v. London Metals Exchange, Inc. 86 N.J. 19, 28-29 (1981); Mayflower Securities v. Bureau of Securities, 64 N.J. 85, 92-93 (1973); Board of Educ. of Elizabeth v. City Council of Elizabeth, 55 N.J. 501, 507-08 (1970); see also New Jersey Ass'n of Health Care Facilities v. Klein, 182 N.J. Super. 252, 258 (App.Div. 1981) (remand appropriate when interested parties had no opportunity to appear before agency). Moreover, such deficiencies in the record preclude an informed appellate review of the Commission's findings. See Perez v. Pantasote, Inc., 95 N.J. 105, 118-120 (1984); Katz v. Township of Howell, 67 N.J. 51, 63 (1975); Carbone v. Weehawken Township Planning Bd., 175 N.J. Super. 584, 586 (Law Div. 1980).