New Mortgage Rules Take Effect in Pennsylvania

As Congress considers its own national options for regulating the mortgage industry, states have already begun to clamp down on key lending practices in response to the nation’s mortgage and housing crisis. Pennsylvania is the latest state, with new regulations going into effect this month governing mortgage disclosures and practices. “These rules will help to ensure that Pennsylvanians get mortgages that they can understand and repay,” said Secretary of Banking Steven Kaplan, in a press statement recently. “We’re trying to prevent a repeat of some of the practices that contributed to the home foreclosure crisis.” The rules are contained in a new regulation that requires mortgage companies to document income, fixed expenses and other relevant financial information to determine if the borrower has the ability to repay the loan; the new regulation effectively outlaws stated income lending within the state. “Stated income loans present opportunities for abuse on both sides of the transaction,” Kaplan said. “The new documentation requirements will go a long way in reducing the potential for fraud and dishonesty.” The new set of regulations wer published in the Pennsylvania Bulletin on December 20, but most mortgage companies were given 90 days to begin complying with the new documentation and disclosure requirements. Violators now face fines of up to $10,000 per offense which, according to Kaplan, are some of the stiffest penalties in the country. The new laws don’t just limit stated income lending; they also restrict the use of prepayment penalties, and require mortgage companies to notify the Pennsylvania Housing Finance Agency whenever they intend to foreclose. In addition, all mortgage lenders, brokers and salespeople in Pennsylvania must now enroll in the Nationwide Mortgage Licensing System, an online registry that allows regulators in different states to more effectively monitor and share information about the industry. HousingWire first reported on the new laws when they were signed by Pennsylvania governor Edward Rendell in July of last year; the state has seen some of the most aggressive consumer lobbying against the mortgage lending industry in the nation. In April 2008, the city of Philadelphia attempted to pass a blanket six-month moratorium on all foreclosures. Write to Paul Jackson at

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