PHILADELPHIA – Homeowners across the state who are facing foreclosure because of unaffordable adjustable rate mortgages and predatory lending practices will have two new resources to help them keep their homes, Gov. Edward G. Rendell said Monday.
“We have a mortgage crisis in Pennsylvania and the nation that threatens our economic stability,” Rendell said. “There are thousands of hardworking homeowners caught in mortgages they can no longer afford.
“We must tackle the mortgage crisis on two fronts,” Rendell said. “The two new loan programs — REfinance to an Affordable Loan, or REAL; and Homeowner Equity Recovery Opportunity, or HERO — will help thousands of
homeowners facing foreclosure. The legislative mortgage reforms proposed by the Banking Department will help us avoid a crisis like this in the future if the legislature takes action now.
“This announcement would not be possible without the impressive cooperation between the commonwealth, the Pennsylvania Housing Finance Agency, the city of Philadelphia and PNC Bank. I commend them for their partnership,” the governor said. “I urge congress and the White House to aggressively work on large scale
solutions to help working families keep their homes due to the failure of federal and state laws to ensure their protection.”
The REAL program offers refinancing to homeowners whose adjustable-rate or other exotic mortgage has become unaffordable. By combining 100 percent financing with flexible credit underwriting, REAL provides relief for homeowners with good credit who can’t otherwise qualify for typical refinance programs.
A network of 72 lending institutions will handle REAL program loans for the Pennsylvania Housing Finance Agency, or PHFA, which will manage both programs statewide.
HERO offers loans for homeowners who, because of credit or other issues, can’t afford their current mortgage payments and are not eligible for other programs that could save their homes from foreclosure. Unlike the REAL program, HERO loans are directly made by PHFA, which may negotiate with current mortgage-holders to reduce the amount owed on applicants’ properties.
Start-up funding for the HERO program is being provided by PNC Bank, the City of Philadelphia, and PHFA. PNC is offering a low-interest loan of $5 million as a loan-loss reserve in southeastern Pennsylvania. Philadelphia is
contributing $1 million to support HERO loans made within the City limits.
PNC’s below-market interest rate funding will be used by PHFA to originate HERO loans and to leverage a planned bond issue of $25 million that will provide the actual financing for loans.
Credit counseling and financial management education are part of the programs.
Meanwhile, the Banking Department is currently working with the General Assembly to tighten regulations on the mortgage industry to ensure that clearer disclosures and better documentation is available to help avoid future problems in the mortgage industry.
Last December, the Banking Department issued a statement of policy to clearly define dishonest, fraudulent, illegal, unfair, unethical, negligent or incompetent conduct for mortgage companies under existing laws.
The department is also supporting a package of six bills in the General Assembly that is aimed at curbing abusive lending practices. The proposed legislation will give the department the tools it needs to effectively weed out abuses in the residential mortgage marketplace.
“With the programs we are announcing today, homeowners will have new options to prevent foreclosure,” Rendell said. “Now, we need legislative action to prevent future mortgage problems.”
More information about HERO and REAL programs are available on the PHFA Web site.