Current Conditions
23°F - CLEAR
Mortgage reform
Gov. Rendell signs five bills to prevent fraud
Intelligencer Journal
Published: Jul 09, 2008
01:21 EST
Reading
By PATRICK BURNS, Staff

Gov. Rendell signs mortgage-reform legislation Tuesday as state Sen. Michael Brubaker looks on inside ...(more)
 
1 of 5
Gov. Ed Rendell " … of this package" / PA Radio News Service
 
2 of 5
Gov. Ed Rendell " … consumers as well" / PA Radio News Service
 
3 of 5
Gov. Ed Rendell " … that can help" / PA Radio News Service
 
4 of 5
Gov. Ed Rendell " … happening again" / PA Radio News Service
 
5 of 5
Gov. Ed Rendell signed five mortgage-reform bills Tuesday near the former offices of a loan broker jailed for defrauding more than 800 mortgage customers of millions of dollars.

The bills strengthen oversight of mortgage companies, tighten regulation on employees, increase fines for misconduct by real estate appraisers and restrict penalties on borrowers.

The impetus for the laws dates to 2004, when home lending abuses were identified in Monroe County. But lawmakers say the legislation gained wings through the widely publicized misdeeds of Wesley A. Snyder, owner of OPFM Inc., who received a stiff prison sentence last week for cheating customers of $29.2 million through a Ponzi scheme from his Exeter headquarters.

"The 800 families who got taken by Snyder and the OPFM issue were clearly a catalyst to allow this legislation to move forward," state Sen. Michael Brubaker said Tuesday.

Brubaker, of Warwick Township, has been a strong advocate for Snyder's victims — nearly 300 are from Lancaster County — and helped steer the mortgage-reform bills to Rendell's desk.

Snyder was sentenced last week to 12 years and 2 months in prison.

Rendell said mortgage reform — included in four state Senate bills and one state House bill — are forward-moving and won't "do anything for those people defrauded in the crisis."

"They make mortgage transactions safer for borrowers from this point forward," Rendell said before signing the bills inside Exeter Community Library.

The new laws require loan salespeople to be licensed by the Department of Banking, and they allow the department to more quickly inform the public about enforcement activities against mortgage companies.

Until now, only the companies that mortgage brokers work for were required to be licensed, which made it impossible to track individuals who are disciplined by the state and move on to new companies.

New legislation also restricts prepayment penalties and requires mortgage companies to notify the state when they intend to foreclose.

Rendell signed a new law that eliminates rules that prohibited the banking department from informing the public about enforcement actions, fines and penalties against licensees such as mortgage bankers and brokers.

Rendell, who was criticized by a group of Snyder's victims earlier this year for apparently failing to provide specific assistance to the group, acknowledged their plight Tuesday.

Future legislation, he said, would prohibit mortgage professionals from exclusively receiving notification on behalf of lenders, which is how Snyder managed to concealed his activity from customers in a scheme that lasted two decades.

"I've directed the banking department to seek laws that would help protect (people from) the kind of fraud that happened here in Berks County," Rendell said.

Brubaker said that while more work is required to effectively reform the mortgage industry, the new legislation ends key lending practices that leave homeowners vulnerable to foreclosure and provides consumers more access to information.

"The more information consumers have directly into their own investment, their own livelihood, the better off they will be in their decision making," Brubaker said.

 

Mortgage-reform measures

• House Bill 2179 — Requires mortgage sellers to pass a background check, complete training specific to state and federal mortgage laws, pass a test to prove their knowledge and be licensed by the Department of Banking.

• Senate Bill 483 — Protects homeowners from being trapped into escalating, unaffordable mortgages by certain prepayment-penalty provisions. In the past, prepayment penalties were used by some unscrupulous lenders to strip homeowners of hard-earned equity and drive up transaction costs.

• S.B. 484 — Gives homebuyers more information to evaluate potential mortgage companies or salespeople. Pennsylvania law had prohibited the banking department from telling the public about enforcement actions, fines and penalties against licensees such as mortgage bankers and brokers.

• 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 troubling trends.

 

 Gov. Rendell says new mortgage reform laws will protect homeowners, save homes

 

E-mail: pburns@lnpnews.com


Recent Posts
Showing 5 most recent comments out of 7 total TalkBack comments about this article
View full comments | Comment on this article
QUOTE(jkkf1991 @ Jul 9 2008, 03:17 PM)
it is certainly great to hold the mortgage industry a little closer to the law books. it is about time the loan salspeople become licensed and have their backgrounds checked as they do in the investment industry. At least it appears as if they have moved in that direction.
in the investment industry a consumer can at least find out the background on their rep/broker.
What i want to know is: where are the laws and tough talk about the consumers who knowingly lie about their income and/or shift assets and liabilities around to qualify for loans they cannot afford?
let's see some laws that seek to prevent the borrowers from perpetrating the lie to the mort company. i know we have laws against loan fraud but they are far more serious than the small white lie people tell while "stating" their income. This almost NEVER goes anywhere, then when the consumer cannot pay for the loan everyone screams about how bad the mortgage companies are and how sorry we must all feel for the homeowner.
enough is enough


I'd like to see some numbers too. I don't think this can happen too frequently unless a person has more than 1 social security number. Every mortgage application goes through a credit check based on SSN#.

It is more a matter of lending companies willingness to accept certain risk from consumers. It's really the consumer's decision to accept the loan offer. The US is very much a buyer beware market. But, no one (consumers and lenders alike) really anticipated this economy of rising prices. So, in essence, both parties are having problems. Banks and lenders less so because they build up reserves to cover losses.
mam0412
QUOTE(jkkf1991 @ Jul 9 2008, 03:17 PM)
it is certainly great to hold the mortgage industry a little closer to the law books. it is about time the loan salspeople become licensed and have their backgrounds checked as they do in the investment industry. At least it appears as if they have moved in that direction.
in the investment industry a consumer can at least find out the background on their rep/broker.
What i want to know is: where are the laws and tough talk about the consumers who knowingly lie about their income and/or shift assets and liabilities around to qualify for loans they cannot afford?
let's see some laws that seek to prevent the borrowers from perpetrating the lie to the mort company. i know we have laws against loan fraud but they are far more serious than the small white lie people tell while "stating" their income. This almost NEVER goes anywhere, then when the consumer cannot pay for the loan everyone screams about how bad the mortgage companies are and how sorry we must all feel for the homeowner.
enough is enough


The loan that you are referring to is a "stated income" loan. Even as recently as less than a year ago someone with less than perfect credit could obtain one of these loans. It is now virtually impossible without near perfect credit and proven assets to get a loan of this nature. The problem that you are going to see is when all these people with the less than perfect credit want to go refinance to get a lower rate the loan for them will never happen. They are stuck with it for as long as they own the home or unless they improve their credit to qualify.
Another type of borrower is going to be hit even harder. Self employed individuals who used bank statements to prove their income. This follows suit with the stated income people as well. The loan programs are no longer in place for them to refinance either. I don't think that Rendell completely thought this through. I believe there should be certain stipulations to certain types of refinances or we are going to be in a heep of sheet soon.........

I am a mortgage broker by trade...........these are my opinions only.........from my experience........

Bigmaclender2
stated income loans used to be on the fringe but over the past 5 years they became almost standard with programs like "fast and easy" which were credit score driven so you could basically state your income. it happened all the time. your credit score has nothing to do with your income.
for all the people who sympathize with the rising arm loans out there just remember they all were given documents to read and sign which clearly state the rate would hold for 2 years and likely go up. they were NOT hidden as many news reports would have people believe.
when folks re-fied their homes into these 2 year arms they were given 3 days to read and re-read the p/w and if they were not happy they could completely nullify the deal, with a loss of maybe an appraisal fee. in the years i co-owned a firm tied to the industry(title side) do you know how many people brought the p/w to cancel?????

1 out of maybe 125. most of the time they were getting cash out, skipping a payment(more specifically postponing until the end of the loan), and maybe paying off other debts. they wanted that check from the title firm by the end of the 3rd day. they were salivating for that "cash out".

maybe leasing or financing 2 cars, and racking themselves up in debt, and 2-5 cell phone numbers per family, and digital cable and flat screens and vacations have a lot to do with this as well.
you are all correct that the industry opened themselves up for risk and for that they need to eat the rotten sandwhich. that's business.

that basically leaves the consumer. if they are too stupid or greedy or lazy to read and research then they get what they deserve. (Certainly with the exception of being decived by anyone.) i read earlier in the post that the mortgage industry made it too easy.....so that means it is their fault poeple do dumb things?
owning a home is very overrated and many, many people should still be renting. almost no subprime loans automatically escrow taxes. thus when the bill comes in July guess what happens next??

Prime loans do automatically escrow, and the borrower actually has to pay to not escrow. taxes and insurance should be included in most peoples' payments as matter of safety and budgeting.
we can all blame the companies but they offered a way for people to own a home that would have NEVER qualified before. that made society very happy until it was proven these people could not handle it. for every 100 crappy credit subprime loan that went on the books there still exists almost 90. that is 90 poeple that would not have obtained a loan previously. maybe we should all focus on thos e 90. 16 years ago you just kept on renting until you could really get a loan. how were the forclosures then? i do not know but i would venture a guess they were nothing like they are now. people were financing 100+% of the value of the home. they have no reason to stay when the going gets tough. at that level they are nothing more than renters with their name on a deed and a ton of responsibility. if you put 20-25% down at closing i promise you will fight annd scratch to save the home. equity is everything. when borrowers have nothing to lose guess what happens????? lastly, if these folks have no equity, and too much responsibility why should we feel so bad for them? everyone else is losing money on their transaction, BUT THEM!!
thanks for reading. back to my regularly scheduled life.
jkkf1991
QUOTE(jkkf1991 @ Jul 10 2008, 10:32 AM)
stated income loans used to be on the fringe but over the past 5 years they became almost standard with programs like "fast and easy" which were credit score driven so you could basically state your income. it happened all the time. your credit score has nothing to do with your income.
for all the people who sympathize with the rising arm loans out there just remember they all were given documents to read and sign which clearly state the rate would hold for 2 years and likely go up. they were NOT hidden as many news reports would have people believe.
when folks re-fied their homes into these 2 year arms they were given 3 days to read and re-read the p/w and if they were not happy they could completely nullify the deal, with a loss of maybe an appraisal fee. in the years i co-owned a firm tied to the industry(title side) do you know how many people brought the p/w to cancel?????

1 out of maybe 125. most of the time they were getting cash out, skipping a payment(more specifically postponing until the end of the loan), and maybe paying off other debts. they wanted that check from the title firm by the end of the 3rd day. they were salivating for that "cash out".

maybe leasing or financing 2 cars, and racking themselves up in debt, and 2-5 cell phone numbers per family, and digital cable and flat screens and vacations have a lot to do with this as well.
you are all correct that the industry opened themselves up for risk and for that they need to eat the rotten sandwhich. that's business.

that basically leaves the consumer. if they are too stupid or greedy or lazy to read and research then they get what they deserve. (Certainly with the exception of being decived by anyone.) i read earlier in the post that the mortgage industry made it too easy.....so that means it is their fault poeple do dumb things?
owning a home is very overrated and many, many people should still be renting. almost no subprime loans automatically escrow taxes. thus when the bill comes in July guess what happens next??

Prime loans do automatically escrow, and the borrower actually has to pay to not escrow. taxes and insurance should be included in most peoples' payments as matter of safety and budgeting.
we can all blame the companies but they offered a way for people to own a home that would have NEVER qualified before. that made society very happy until it was proven these people could not handle it. for every 100 crappy credit subprime loan that went on the books there still exists almost 90. that is 90 poeple that would not have obtained a loan previously. maybe we should all focus on thos e 90. 16 years ago you just kept on renting until you could really get a loan. how were the forclosures then? i do not know but i would venture a guess they were nothing like they are now. people were financing 100+% of the value of the home. they have no reason to stay when the going gets tough. at that level they are nothing more than renters with their name on a deed and a ton of responsibility. if you put 20-25% down at closing i promise you will fight annd scratch to save the home. equity is everything. when borrowers have nothing to lose guess what happens????? lastly, if these folks have no equity, and too much responsibility why should we feel so bad for them? everyone else is losing money on their transaction, BUT THEM!!
thanks for reading. back to my regularly scheduled life.

That is an excellent post. I can tell that you have really thought about the issues. Nice job!!!!

Bigmaclender2
I'd bet 99% of consumers do not read the paperwork in front of them. I'd bet of that 99% 25% probably wouldn't understand it all if they did, being that financing paperwork is written by lawyers to be enforced by former lawyers read by different lawyers. The loan companies pay these lawyers to make the contracts bulletproof and in doing so they use materials (words/terms) that the layman doesn't understand.

I've never had a loan application that didn't require my providing at least my last two paychecks. I understand if you're self employed or stinking rich (on paper) that this wouldn't be the case, but I had never seen an app for the average joe that allowed such an option.
I don't agree with the rotten sandwhich exmple though, Wells Fargo, the lender in the case of the house a few blocks from me, has no rotten sandwhich, it's just missing the tomatoes. If I had money to lend (sorry, don't PM me and ask for money, I don't), I would be quite happy with a 10% return over seven years. And I would at least pay somebody to mow the yard after kicking out the deadbeat debtor.
This is especially true when you consider most of the interest made is on the beginning of the loan, not the end.
As time goes by, the lender is making less and less on the life of the loan.
My brother has a mortgage on his house, I think his first payment everything but $1 was interest his last payment everything but $1 is principal. We had this discussion a few months back and it's been 10 years since I signed the mortgage on the house I sold, so I do not remember what the specific breakdown on payments was for that place.
I'm not feeling bad for lenders eating a club sandwhich minus the tomatoes. I'm not saying I feel bad for all the people eating peanut butter either, but there are a good number who were preyed upon by unscrupulous lenders and builders.
Back when I sold my house, I looked at a few newly built places to buy and many existing homes before deciding that right now is the time to rent for me, there was too much instabilty -- will we stay? what are we willing to sacrifice if we need to, are the home values going to go up or are we headed for a real estate meltdown?
One home, going for $139,000 talking to the builder -- one of his reps actually, something was very very fishy. I didn't buy it as stated. This guy is also in jail. For the life of me, I don't remember his name, but he was a York County builder.
solitary
Photo Gallery
Top Ads
Home | News | Sports | Business | Entertainment | Lifestyle | Opinion | Spanish | Classifieds | Jobs | Homes | Autos
Terms of Service | Contact Us | Ephrata Review | Lititz Record | Lancaster Farming
Copyright 2004-2008