Legislators consider bills over mortgages

HARRISBURG, Pa. (AP) -- A state senator from western Pennsylvania has introduced a package of bills designed to give consumers greater protection against predatory mortgage lending practices and lower the number of homes being lost to foreclosure.
Sen. Jane Clare Orie, R-Allegheny, sponsored the three bills as a result of the rising number of sheriff's sales of properties and a run-up in the foreclosure rate in recent years, said Lee Derr, chief counsel for the Senate Republican Policy Office.
Allegheny County set a record for sheriff's sales last year and is on pace to break it again in 2004, and sheriffs in other parts of the state also report a growing number of homes being auctioned off. Pennsylvania has the sixth-highest foreclosure rate in the nation, and consumer advocates say its lending laws are among the weakest.
Despite those problems, the legislation got a cautious reception from the Senate leadership, the banking industry and state regulators, who are conducting a study of the state's foreclosure woes. Orie's bills, written with the help of the Coalition for Responsible Lending, a consumer advocacy group, would result in sweeping changes to the mortgage-lending market.
Major elements include limits on finance and service charges loaded into a loan's principal; a requirement that all residential mortgages -- not just high-cost loans -- reflect a borrower's ability to repay; and limits on balloon payments that can lock homeowners into a costly refinancing cycle.
Would ban practice
The legislation would also ban the practice of mortgage brokers accepting money from lenders and borrowers for brokering a single transaction.
"The idea is that a broker, if [he or she] is getting money from a borrower, then the broker is representing the borrower, and has responsibilities to actually get a suitable product for the borrower," said Irv Acklesberg, an attorney with Community Legal Services in Philadelphia who worked on the bills.
Orie also wants tighter regulation of mortgage brokers in general and an expansion of the Homeowner's Emergency Assistance Program, which provides loans to people facing foreclosure.
Jim Biery, president of the Pennsylvania Bankers Association, said his organization would be studying the proposals but in general does not believe further changes to the state's lending law, revised in 2001, are necessarily warranted.
"I just don't know what the provisions are in there that would be damaging to organizations, maybe not even banks, that do subprime lending and even regular mortgage lending," Biery said.
Orie's bills are "a great place to start the discussion" but there is a danger of overreaching, said Erik Arneson, an aide to Senate Majority Leader David J. Brightbill, R-Lebanon.
"The experience in some other states has been that when you go too far you really dry up the lending market," Arneson said. "You can't force people to lend money, so you need to make sure you strike the right balance."
The state Banking Department expects to roll out proposed legislative changes of its own later this year, following the completion of a statewide study it commissioned examining the foreclosure problem. In the meantime, spokesman Paul H. Wentzel Jr. said, the department has no comment on Orie's bills.
"We don't think we're in a position now to support or oppose a piece of legislation," Wentzel said. "We don't think the time is right on that."
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