How does New Jersey law regard the practice of “steering” borrowers to certain products?

How does New Jersey law regard the practice of “steering” borrowers to certain products?

• A. It is encouraged to enhance sales
• B. It is permitted under specific conditions
• C. It is prohibited as it may constitute a conflict of interest
• D. It is only allowed if done transparently

Answer: (C)

New Jersey law explicitly prohibits the practice of steering borrowers to specific products, as it can create a conflict of interest. Steering occurs when a lender or mortgage broker directs a borrower toward particular loan products, often based on the potential financial gain for the lender rather than the best interests of the borrower. This practice undermines the principles of fair lending by potentially leading borrowers to unsuitable products that may not match their financial needs or situations. By prohibiting steering, New Jersey aims to protect consumers and ensure that they receive unbiased advice that prioritizes their financial well-being. This regulation helps maintain the integrity of the mortgage lending process, promoting a fair and competitive marketplace where borrowers can make informed decisions without undue influence.

New Jersey law explicitly prohibits the practice of steering borrowers to specific products, as it can create a conflict of interest. Steering occurs when a lender or mortgage broker directs a borrower toward particular loan products, often based on the potential financial gain for the lender rather than the best interests of the borrower. This practice undermines the principles of fair lending by potentially leading borrowers to unsuitable products that may not match their financial needs or situations.

By prohibiting steering, New Jersey aims to protect consumers and ensure that they receive unbiased advice that prioritizes their financial well-being. This regulation helps maintain the integrity of the mortgage lending process, promoting a fair and competitive marketplace where borrowers can make informed decisions without undue influence.