HARRISBURG – Acting Secretary of Banking Steve Kaplan told lawmakers today that Pennsylvania needs better laws to protect consumers from abusive mortgage lending.
“There’s no question that there are serious problems in the mortgage industry,” said Kaplan. “Borrowers have been getting loans they can’t afford – and on terms they don’t fully understand. Now, many of them are struggling to keep their homes. I urge the General Assembly to act swiftly to give the Banking Department the tools it needs to address the current situation and ensure it never happens again.”
Kaplan testified before the Senate Banking and Insurance Committee this morning on four bills that would allow the Department of Banking to strengthen licensing and education requirements; to more quickly notify the public about fines and other actions against companies; and protect more borrowers under the state interest law.
“Pennsylvania licenses real estate professionals, securities dealers and even barbers, but not the person brokering what may be the largest financial transaction of your life,” said Kaplan. “We must join the 30 other states that require mortgage professionals to be tested and licensed.”
The department is also backing two additional bills to require companies to notify the state when they attempt to foreclose on borrowers and improve oversight of real estate appraisers by the state’s Appraisers Board. All six bills (Senate Bills 483-488 and House Bills 1079-1084) were introduced earlier this year.
The legislation is the result of a 2005 foreclosure study by Department of Banking which found that abusive lending practices, particularly in the subprime market, were pushing Pennsylvania’s foreclosure rate above the national average.
The department is also pursuing a new regulation to require mortgage companies to better verify a mortgage applicant’s income and ability to repay a loan and to more clearly disclose certain loan features such as a prepayment penalty, a variable interest rate, or a balloon payment. The regulation was published in the Pennsylvania Bulletin in July and is under review by the state’s Independent Regulatory Review Commission.