Pennsylvania’s proposed regulation

From the Observer Reporter:

New mortgage rules sought

Pennsylvania’s acting secretary of banking told lawmakers Wednesday the state needs to toughen its regulation of mortgage companies.

But during an informational meeting with members of the state House Commerce Committee chaired by state Rep. Peter Daley, D-California, representatives of the banking and mortgage industry asked that legislators refrain from making regulations so stringent that they would be unable to compete with banks from other states.

The meeting, held at the Belle Vernon Holiday Inn, was to present proposed regulations that aim to improve oversight of home mortgage lenders on such things as fuller disclosure of terms and ensuring that borrowers understand and can afford the loans they sign.

The Department of Banking has proposed regulatory changes that would require mortgage lenders and brokers to clearly disclose key loan features, such as the presence of a prepayment penalty, balloon payment or an adjustable interest rate. It also would require companies to evaluate the borrower’s ability to pay back the loan.

Steven Kaplan, acting secretary of banking, who expects to be confirmed when the state Senate returns from its summer break, said stronger regulations are needed because of the number of foreclosures stemming from subprime mortgages, those written for people with lower credit scores or other credit problems.

“Too many people have been getting mortgages they simply can’t afford,” Kaplan said. “Clearer disclosures and better documentation will help all parties to focus on loans that are safer and more realistic.”

Several people representing the banking industry in Pennsylvania reminded the panel that banks and savings institutions are already closely regulated by several federal bodies, such as the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp.

One of the main recommendations of the banking department calls for creating a new licensing category for individual mortgage originators – those who deal directly with the consumer by soliciting, accepting or offering to accept mortgage loan applications or negotiating loan terms.

Under the current laws, first- and second-mortgage lender and broker companies, as well as consumer discount companies that originate mortgage loans, are licensed but the employees of the companies are not.

The department also wants to amend regulations for real estate appraisers to increase maximum civil penalties the board may assess from $1,000 to $10,000 for each violation for the improper inflating of home values.

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