Pa. House acts on mortgage crisis

April 8, 2008 6:01:19 PM PDT
The state House of Representatives took steps Tuesday to ease the financial crunch that has left thousands of families scrambling to avoid losing their homes. The chamber approved five bills to address how mortgages are sold in the state. They would tighten oversight of real-estate appraisers and let banking regulators disclose discipline taken against mortgage brokers and bankers more quickly.

Information about delinquent loans would become more readily available to officials monitoring foreclosure trends and looking for areas that see a spike in foreclosures.

The legislation would ban prepayment penalties for loans of $197,000 or less, an amount that will be adjusted for inflation. The existing limit of $50,000 was established in 1974.

It also would create a single type of license for all mortgage originators, so anyone who sells mortgages to the public will have to be tested and licensed.

"Over the past year, witness after witness after witness has come to the Commerce Committee and told members of the committee about being misinformed or even blatantly misled," said Rep. Peter J. Daley II, the committee's chairman.

The only bill that encountered opposition concerned real-estate appraisers. It would establish new grounds for denying certification to an appraiser and increase the maximum per-violation civil penalty for those who do not follow state standards from $1,000 to $10,000.

Rep. Dick Stevenson, R-Mercer, a certified real estate appraiser, said designating a seat on the state board for a banker would run counter to long-standing practice.

"To name one seat specifically for someone in another profession is a big variation from what we've done traditionally in professional boards," Stevenson said. He also argued the bill should have gone through the committee that oversees professional licensing, instead of Commerce.

Despite the objections, the bill passed 126-77.

A similar package of mortgage-related bills advanced out of the state Senate unanimously last month, and Banking Department spokeswoman Heather Tyler described the two approaches as substantially similar.

"We believe that it shouldn't be that hard to reconcile them," she said.

Pennsylvania's foreclosures in February rose 43 percent from the prior month and were 22 percent higher than they were in February 2007, Tyler said. The state recorded 34,000 foreclosures last year, a slight drop from 2006 but well above the 2005 figure.

"From our perspective, this cannot be enacted soon enough," she said. "We've been working on it for three years. The governor is ready to sign it, and it needs to happen now."

The Banking Department said Tuesday it was developing a regulation that would force mortgage companies to verify that borrowers can repay their loans and to make loan terms easier to understand.

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