FOR IMMEDIATE RELEASE:
December 17, 2002

FOR FURTHER INFORMATION CONTACT:
Genene Morris (973)504-6327

NEWARK - A landmark, multi-state, multi-million dollar agreement that New Jersey helped to negotiate with Household International has been finalized, providing for more than $17 million in restitution to New Jersey consumers, Attorney General David Samson and Department of Banking and Insurance Commissioner Holly C. Bakke announced today. Joining in today's announcement are Consumer Affairs Director Reni Erdos and Division of Banking Director H. Robert Tillman.

Nationwide, Household will pay a record-breaking $484 million in restitution to consumers. The restitution amount is believed to be the largest ever in a state or federal consumer case.

New Jersey's consent judgment with Household was filed today along with a two-count complaint against the company alleging violations of the State's Consumer Fraud Act and Licensed Lenders Act. The complaint alleges, Household committed deceptive acts and misrepresentations during the course of its dealing with New Jersey consumers. The complaint also alleges that Household failed to provide New Jersey borrowers with timely, good faith estimates and disclosures on settlement costs based on the best information reasonably available, resulting in borrowers being misled as to closing costs. The filing of the consent judgment resolves the allegations outlined in New Jersey's complaint. Household has denied the allegations in the State's complaint.

Under New Jersey's agreement with Household, New Jersey will receive $253,000 in costs. The company will also pay $354,504 toward New Jersey's share of a fund which will be used to pay the administrative fees and expenses of an administrator who will implement and oversee the process of providing restitution to qualified New Jersey borrowers.

In October, New Jersey and several other states announced an "agreement in principle" with Household that was designed to significantly alter the company's mortgage lending practices as well as the practices of its subsidiaries and related entities. The finalization of the settlement depended upon whether enough states signed onto the agreement representing 80 percent of Household's real estate loans generated between January 1, 1999 and September 30, 2002.

"New Jersey was part of the original 19 states to negotiate this monumental agreement," Governor James E. McGreevey said. "This agreement offers unsuspecting borrowers who entered into costly loan agreements with Household a second chance at a getting better deal " one that is affordable, fair and honest."

"We are pleased we were able to negotiate an agreement that truly benefits consumers who were negatively impacted by Household's alleged business practices," Attorney General Samson said. "The agreement was designed to ensure that Household customers are not burdened by unfair, deceptive and predatory loans."

"This settlement not only returns funds to New Jersey consumers, it also forces Household to change its ways," Commissioner Bakke said. "Today's announcement, coupled with the Administration's commitment to a strong law against predatory lending, show a determination to prevent other consumers from becoming victims in the first place. This will help raise the standard of business practices followed by lenders that have engaged in unfair and deceptive acts."

"The agreement provides that Household and its affiliates will engage in honest and fair business practices that will ensure consumers are not stuck paying for loans they cannot afford because of deceptive and misleading representations made by Household," Director Erdos said.

"This landmark agreement represents a turning point," Director Tillman said. "Lenders that previously felt comfortable engaging in unfair and deceptive practices should begin improving their practices immediately. We will not tolerate deceptive lending activities."

As part of the agreement, Household agrees to amend all of its mortgage agreements entered into nationwide between January 1, 1999 and September 30, 2002, to change the pre-payment penalty provision on loans. Specifically, Household will limit pre-payment penalties on these loans to only the first two years of a loan.

The agreement also requires Household to, among other things:

• Ensure that new loans actually provide a tangible net benefit to consumers prior to making the loans.
  
  
• Limit up-front points and origination fees to 5 percent.
  
  
• Reform and improve disclosures to consumers so that all representations regarding loan terms are fair, accurate and not deceptive. For example, Household may not make oral or written representations about rates other than the contract rate and the true Annual Percentage Rate. It is prohibited from making representations about accelerated payments plans without making accurate and clear disclosures to the consumer that any accelerated amortization of the loan only occurs by the borrower making extra or larger payments.
  
  
• Eliminate "piggyback" second mortgages.

Household will also hire an independent monitor, subject to approval by the states, who will prepare several reports over a five-year period to ensure compliance with the terms of the agreement.

For more information, Consumers may call Consumer Affairs at 973-504-6200 or the Department of Banking and Insurance at 609-984-2777.

Deputy Attorneys General Carol G. Jacobson and Sharon L. Young of the Division of Law handled this matter for the State.