NJ DEPARTMENT OF BANKING AND INSURANCE PROVIDES GUIDANCE TO FINANCIAL INSTITUTIONS ON ALLOWING MORTGAGE HOLDERS PAYMENT FLEXIBILITY

The following information was released by the New Jersey Department of Banking and Insurance:

In a bulletin issued today, the New Jersey Department of Banking and Insurance advised financial institutions of their obligations to permit any mortgage holder in good standing the option to make either biweekly or semi-monthly mortgage payments. In addition, the Department shared information on new requirements to enhance transparency around escrow accounts.

The requirements were established under amendments to the New Jersey Residential Mortgage Lending Act. The amendments apply to mortgage loan agreements entered into on or after November 1, 2025. It allows mortgage holders the option of making either biweekly or semi-monthly mortgage payments. Mortgagors may also make additional payments toward their loan principal at any time without penalty. The Department is also encouraging financial institutions to implement the same updates for existing mortgage loans.

"These new requirements allow homeowners to accelerate mortgage repayment, reducing overall interest expenses, which can result in substantial savings," said Commissioner Justin Zimmerman. "This important consumer protection gives residents greater control in managing their mortgage and strengthening their financial position through home equity."

"Ensuring that mortgage holders in good standing have flexibility in their payments help to make buying a house significantly more accessible and more lucrative," said Senator Angela V. McKnight (D- Hudson County). "Often, it is difficult for mortgage holders to make one, large payment at the end of the month. Now that financial institutions will give their customers an option to pay in smaller installments throughout the month, the burden of making mortgage payments will be greatly eased for New Jersey residents. Furthermore, this helps to decrease mortgage terms for homeowners and allows them to build equity faster in their property by paying down the principal more often."

The amendments also clarify requirements relating to escrow accounts, including for biweekly and semi-monthly mortgage payment plans.

"I am proud to see the bill I sponsored, now signed into law, will take effect on November 1st. It's a critical step toward empowering New Jersey homeowners to take greater control over their financial futures and creating a pathway to the American Dream of homeownership. This law ensures that families can make biweekly or semi-monthly mortgage payments, pay down their loans faster, and do so without fear of penalties or hidden fees," said Assemblywoman Tennille R. McCoy (D-Mercer, Middlesex) . "By making our mortgage system more transparent and flexible, we are not only easing the financial burden on working families but also helping them build equity and generational wealth that creates lasting stability for years to come. This is about giving homeowners real tools to strengthen their financial footing, protect their investments, and move one step closer to true economic security."

The Department reminds financial institutions that the law requires servicers to make the necessary systems and operational changes to ensure compliance with the new payment options by the November 1, 2025, effective date. In addition, servicers should review their policies and procedures in order to update disclosures, loan documents and servicing guides to reflect new payment options; train customer service staff to provide information to borrowers regarding available mortgage payment options and how extra payments are applied; and provide clear notices if escrow adjustments change a borrower's monthly plan.