HARRISBURG, Pa., March 16 /PRNewswire/ -- A report released today by the
Department of Banking, "Losing the American Dream: A Report on Residential
Mortgage Foreclosures and Abusive Lending Practices in Pennsylvania," confirms
a high foreclosure rate in Pennsylvania and finds that "subprime" mortgages
represent the majority of loans that result in foreclosure action.
The report also outlines a series of steps by which the Commonwealth can
better protect vulnerable consumers, mirroring some recent recommendations for
financial education and dialogue between financial service providers and
consumer groups in a report by Governor Edward G. Rendell's Task Force for
Working Families.
The subprime loan market is designed to serve people who do not qualify
for "prime" loans, primarily due to impaired or limited credit histories.
Eight states have rates higher than Pennsylvania's 2003 prime foreclosure rate
of 0.85 percent. However, only three states have higher subprime foreclosure
rates, with Pennsylvania's standing at 11.9 percent, according to figures
reported by the Mortgage Bankers Association. A statewide study of
foreclosures by The Reinvestment Fund (TRF), also released today, found that
Pennsylvania experienced an estimated 14 percent increase in sheriff sales, or
approximately 55,000 homes, between 2000 and 2003.
The Department of Banking was asked by the state House of Representatives
to study residential lending practices in Pennsylvania, trends in
foreclosures, and lending practices, which are abusive to consumers.
"Our study revealed reasons for much concern in the Commonwealth - abusive
lending practices happen every day and we have one of the highest foreclosure
rates in the nation," said Pennsylvania Banking Secretary Bill Schenck. "But
our investigation also revealed reasons for hope. Policymakers, financial
industry leaders and consumer advocates recognize the problem and are united
in their commitment to protecting vulnerable consumers."
Abusive lending practices usually involve some form of deception, fraud or
manipulation of borrowers and may include but are not limited to: making a
loan without regard to a borrower's ability to repay; charging excessive fees;
using aggressive and deceptive marketing; and operating home improvement
scams.
"The Department of Banking has several recommendations - some already
underway - to address abusive lending practices and bring down the number of
foreclosures," said Secretary Schenck. "Our report offers significant
administrative and legislative changes as well as several topics for ongoing
study."
"We are building the enforcement capability of the Banking Department,
initiated and fully supported by Governor Rendell, by adding an investigative
unit and increasing the staff in the licensing and examinations bureaus to
provide more consumer protection," said Secretary Schenck.
The Banking Department will also issue new policies to define dishonest,
fraudulent, unfair, unethical and illegal mortgage lending practices. The
Department will institute a "best practices" program for mortgage brokers,
lenders and servicers. In addition, the Department has identified several ways
in which the General Assembly can strengthen laws to protect consumers,
including creating a new licensing category for individual mortgage loan
solicitors.
Over the course of the investigation, the Department of Banking worked
with consumer and financial industry leaders in the development of the report.
"It is the intent of the Department of Banking and, I believe, all other
representative groups, to work together to solve the foreclosure problems in
the Commonwealth," said Secretary Schenck. "We need to commit to ensure that
the American dream of homeownership does not become the American nightmare of
foreclosure and financial ruin for a growing number of Pennsylvanians."
Secretary Schenck is grateful for the many volunteers who spent hours
sharing their expertise about mortgage issues in Pennsylvania. In particular,
The Coalition for Responsible Lending including the Pittsburgh Community
Reinvestment Group, ACORN, Community Legal Services and the Community Action
Committee of the Lehigh Valley, along with the Mortgage Bankers Association,
the Association of Mortgage Brokers and the Pennsylvania Bankers Association,
among others that shared their insights.
CONTACT: Carol Gifford
(717) 772-2318
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SOURCE Pennsylvania Department of Banking
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Related links:
http://www.banking.state.pa.us
CONTACT:
Carol Gifford, Pennsylvania Department of
Banking, +1-717-772-2318
NOTE TO EDITORS: Copies of the Department of Banking report and
the TRF study are available on the Pennsylvania Department of
Banking Web site at http://www.banking.state.pa.us. Charts are
also available on the Web site that provides statewide and
county-specific data for the 14 counties included in the TRF
study (Allegheny, Berks, Bucks, Chester, Dauphin, Delaware, Erie,
Lancaster, Lehigh, Monroe, Montgomery, Northampton, Philadelphia
and Washington).
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