Pennsylvania next state to mess with foreclosure process
Pennsylvania Governor Ed Rendell will sign a package of mortgage reform bills today at noon. The five bills are designed to protect homebuyers, strengthen oversight of the mortgage industry and end key lending practices that leave homeowners vulnerable to foreclosure. Pennsylvania will join a number of states that have already moved to complicate or freeze the default management process.
Those of you who lived through the predatory lending legislative fix in Georgia and the Carolinas will recall how it impacted mortgage lending in those states. When lenders can't force borrowers to repay the debt, investors don't give lenders money to lend.
Those of you who lived through the predatory lending legislative fix in Georgia and the Carolinas will recall how it impacted mortgage lending in those states. When lenders can't force borrowers to repay the debt, investors don't give lenders money to lend.
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-- H.B. 2179 assures Pennsylvania homebuyers that the person selling them a mortgage has successfully passed a background check, completed training specific to state and federal mortgage laws, passed a test to prove their knowledge and is licensed by the Department of Banking. In the past, only mortgage companies had to be licensed in Pennsylvania, not their employees. With this new law consumers can be confident that the individual who handles their mortgage transaction meets certain standards.
-- S.B. 483 makes sure that hard-working Pennsylvanians who buy typical family homes cannot be trapped in escalating, unaffordable mortgages by certain prepayment penalty provisions. In the past, prepayment penalties had been used by some unscrupulous lenders to strip homeowners of hard-earned equity and drive up transaction costs. This law bans licensees from including prepayment penalties on mortgages of $217,873 or less, a figure that will be adjusted for inflation every year from now on.
-- S.B. 484 gives homebuyers more information to evaluate potential mortgage companies or sales people. Until now, Pennsylvania law actually prohibited the Banking Department from telling the public about enforcement actions, fines and penalties against licensees such as mortgage bankers and brokers. This new law allows the Banking Department to release more information more quickly.
-- S.B. 485 increases a homebuyer's confidence that the appraised value of the home is sound. In the run up to the housing boom, there was significant pressure on appraisers to set values to make certain types of mortgages more attractive and attainable, making it possible for buyers to borrow more than the home was actually worth. This new law extends the consumer protection and lending expertise of the state's appraisers' board by adding the Attorney General and the Secretary of Banking to its membership. It also increases the maximum penalty for appraiser misconduct to $10,000 per violation.
-- S.B. 486 puts individual homeowners' struggles into a statewide context. Currently, foreclosure notices are sent only to the homeowner and filed in the borrower's home county. The new law requires that a copy of every foreclosure notice be sent to the Pennsylvania Housing Finance Agency so that foreclosure activity can be monitored in real time. With this data, state government will be able to identify potentially troubling trends, making it possible to intervene more quickly and strategically to help save people's homes.
"These new laws are crucial steps forward," the Governor said, "but they are one component of a complex strategy to combat lending abuse and fraud."