The PA State House took action on five separate bills yesterday to address problems in the mortgage market. Monroe County was the epicenter of the mortgage meltdown crisis due to unscrupulous developers, appraisers and bankers hoodwinking first time home buyers, many from New York City. According to Congressman Paul Kanjorski Monroe County (Stroudsburg area) currently has 22,000 residents commuting to NYC daily.
Some of the steps taken by the State House address the crooked appraisers who told lenders homes were worth more than they were in order to get deals closed. One bill would allow the state to disclose actions taken to discipline mortgage brokers and bankers. Another provision allows transparency in reporting delinquent loans so such trends can be discovered and addressed quicker than in the past and, hopefully, avoid a full meltdown.
One of the bills addresses a particular problem associated with sub prime mortgages: prepayment penalties. These prevented many homeowners from refinancing to regular mortgages and trapped them in payments that spiraled upwards. It prohibits such penalties for mortgages under $197,000 and has an inflation escalator built in to account for future caps. All mortgage originators would have to be licensed by the state under the new law.
This package of new legislation passed the State Senate already and a few items which differ must be negotiated so the bills are identical before going to Governor Rendell's desk. These are all good, common sense bills which will solve many of the abuses which led to our economic woes.