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FOR IMMEDIATE RELEASE |
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State
Rep. Matt Smith |
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House passes Rep. Matt Smith's plan to protect homeowners
from unfair lenders
HARRISBURG, April 8 – Today, state House lawmakers overwhelmingly passed a bill sponsored by state Rep. Matt Smith, D-Allegheny, that would protect Pennsylvania homeowners from unfair home-loan practices.
"With today's housing market slump, we need to be protecting homeowners from unfair lenders," Smith explained. "One way we can do that is by revising an outdated state law that was supposed to protect borrowers, but is now so old that it's actually working in favor of the mortgage industry. We also need to give the state Banking Department -- the experts -- the legal power to investigate and fight unfair lenders."
Homeowners can get locked into a temporarily affordable mortgage rate. Later, once the permanent – and much higher – rate kicks in, it can be too expensive for the borrower to afford, so they often attempt to switch to a more affordable loan.
Current law allows borrowers to be penalized with a hefty up-front fee if their loan was fore more than a certain amount. The penalty can be so large it prevents the homeowner from escaping the unaffordable mortgage and can drive them into foreclosure.
Thirty-three years ago, state lawmakers established a law to protect lower-income borrowers by preventing lenders from imposing that kind of penalty if the loan was no more than $50,000. However, the law hasn't been updated to keep up with inflation in three decades and, according to Smith, it's no longer protecting borrowers.
Smith's bill (H.B. 1084), would update the outdated $50,000 threshold to a more realistic $197,000 based on inflation. House Bill 1084 would also give the state Banking Department subpoena power to effectively investigate reports of fraudulent and improper mortgage loans.
The bill now heads to the Senate for its consideration.
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