Rumor has it that one of the candidates expected to challenge incumbent Senator Arlen Specter may propose a change to mortgage regulations as part of his campaign platform.
One of the most interesting components of the rumored proposals is one to give lenders more leeway in issuing bridge loans. As many in the mortgage industry have complained, the constricted economy has created a domino effect, in which people out of work or tight on cash find it harder to get the bridge loans they need to buy a new home while they sell their existing home, which usually results in them buying a new home.
Properly handled, loosening restrictions on bridge loans could be done in such a way that lenders wouldn't be subjecting themselves to undue risk. There are a variety of ways to handle this, each with its positives and negatives.
What's most important, though, is that something be done soon. The real estate market is coming back, but it could come back sooner if borrowers can have easier access to bridge loans. Whether we're talking Pennsylvania or California, the industry still needs help.
Wednesday, July 22, 2009
Wednesday, June 17, 2009
Changes in Pennsylvania Mortgage Laws
The meltdown of the mortgage market led many states to pass legislation aimed at giving consumers more clearly defined explanations of the mortgage product they're purchasing, and to reduce the chances of unqualified buyers getting mortgages. The new legislation will require Pennsylvania mortgage lenders to adhere to even more strict guidelines.
Effective for 2009, Pennsylvania mortgage brokers will be required to verify an applicant's ability to repay a home loan. Previously, it was no secret that some mortgage brokers turned a blind eye to the fact that an applicant didn't have sufficient income to repay a mortgage. In some cases, mortgage lenders actually fudged the numbers on loan applications so that the borrowers would qualify.
Under the new legislation, Pennsylvania mortgage lenders are required to verify and document the income and fixed expenses of applicants. Lenders cannot primarily rely on the home as collateral, and may not ignore facts or circumstances that the lender knows or would reasonably know would indicate the applicant doesn't have the means to repay the loan. In other words, no more "no doc" mortgages.
Because the language in mortgage documents can be confusing, the new legislation requires Pennsylvania mortgage lenders to provide loan applicants with a one page form that discloses if the lender will escrow taxes and insurance, if the lender has the ability to lock in an interest rate, if the mortgage has a variable rate or balloon payment feature, and whether the loan has a negative amortization feature.
The new legislation also addresses the potential for abuse by prohibiting Pennsylvania mortgage lenders from suggesting to an applicant that the applicant's income isn't relevant to the loan transaction, advising the applicant to ignore or not sign certain papers, leaving blank spaces where signatures are required, attempting to influence appraisers or trying to "fix" the appraised value of a property, or committing other acts which thwart proper underwriting procedures.
There's plenty of blame to be spread regarding the meltdown of the mortgage market, and certainly a great deal of that blame can be directed at certain members of congress in DC who are now trying to mask their culpability by blaming the financial industry. Still, it can't be denied that some lenders played fast and loose with mortgage applications. The result is legislation that impacts everyone, such as the cumbersome laws now affecting California mortgage lenders when dealing with foreclosures.
Effective for 2009, Pennsylvania mortgage brokers will be required to verify an applicant's ability to repay a home loan. Previously, it was no secret that some mortgage brokers turned a blind eye to the fact that an applicant didn't have sufficient income to repay a mortgage. In some cases, mortgage lenders actually fudged the numbers on loan applications so that the borrowers would qualify.
Under the new legislation, Pennsylvania mortgage lenders are required to verify and document the income and fixed expenses of applicants. Lenders cannot primarily rely on the home as collateral, and may not ignore facts or circumstances that the lender knows or would reasonably know would indicate the applicant doesn't have the means to repay the loan. In other words, no more "no doc" mortgages.
Because the language in mortgage documents can be confusing, the new legislation requires Pennsylvania mortgage lenders to provide loan applicants with a one page form that discloses if the lender will escrow taxes and insurance, if the lender has the ability to lock in an interest rate, if the mortgage has a variable rate or balloon payment feature, and whether the loan has a negative amortization feature.
The new legislation also addresses the potential for abuse by prohibiting Pennsylvania mortgage lenders from suggesting to an applicant that the applicant's income isn't relevant to the loan transaction, advising the applicant to ignore or not sign certain papers, leaving blank spaces where signatures are required, attempting to influence appraisers or trying to "fix" the appraised value of a property, or committing other acts which thwart proper underwriting procedures.
There's plenty of blame to be spread regarding the meltdown of the mortgage market, and certainly a great deal of that blame can be directed at certain members of congress in DC who are now trying to mask their culpability by blaming the financial industry. Still, it can't be denied that some lenders played fast and loose with mortgage applications. The result is legislation that impacts everyone, such as the cumbersome laws now affecting California mortgage lenders when dealing with foreclosures.
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