By Alan J. Heavens
RISMEDIA, August 14, 2008-(MCT)-For Philadelphia Rep. W. Curtis Thomas, the problem of mortgage originators running around Pennsylvania uncontrolled hit a little too close to home.His father, W. Curtis Sr., 87, needed a new heater for the Musgrave Street house he has owned for 47 years. A friend had a friend who worked for a mortgage broker and put them in touch.
As a result, the elder Thomas ended up with a $40,000 mortgage that has been passed among four servicers-the current one in Florida.
“If you try to get them on the phone, you can’t,” Thomas said at a news conference yesterday at the Philadelphia Sheriff’s Office. “If he’s a day late sending in the payment, they immediately add interest and penalties.”
Thomas was a sponsor of a new law that requires licensing and testing of individual loan officers and solicitors working for mortgage brokers in the commonwealth.
Until now, only the brokerage company had to be licensed in Pennsylvania.
“In effect, the brokerage company could have hired 100 convicted felons that committed fraud and that was OK,” said Fred Glick, a Center City mortgage broker and Realtor.
Now under the law that took effect July 8, according to Brett Warren, president of Buyers Home Mortgage in Abington, all loan officers and solicitors operating in the state have to pass a test and be licensed.
New Jersey long has had such a law, which requires the brokerage to be licensed and at least one individual in the company to pass a state test, said Warren, who operates in that state, too.
“New Jersey also requires lenders and brokers to register their loan officers and solicitors; however, the solicitors did not have to pass a test,” Warren said.
A federal law also has been proposed in Congress.
Thomas said the Pennsylvania law will make “mortgage-referral agents think twice about having consumers accept or buy into predatory loans.”
Pennsylvania mortgage brokers generally welcome the new law. Glick said such legislation had been proposed for the last eight years by the Pennsylvania Association of Mortgage Brokers, “even before the crisis occurred, but Harrisburg failed to act.”
“There were some bad mortgage brokers, just as there are some bad people in every industry,” said Jerome Scarpello of Leo Mortgage in Ambler.
This was because “becoming a mortgage originator was too easy-pay the fee, fill out the paperwork, and you could start originating loans,” he said. “The law is a welcome change that will weed out many of the bad originators.”
“I think it is about time that licensing has been addressed,” said Peter Buchsbaum, of Arlington Capital Mortgage Corp. in Jenkintown. “Every loan officer should need to comply with certain standards to conduct business.”
Buchsbaum said he believed there should be a federal license and a state registry for mortgage brokers. He is licensed in several states, requiring “a lot of reputation” in testing and continuing education.
According to some industry experts, the number of mortgage licenses are down 25% in Pennsylvania this year over last.
“With the changes in the law, the brokers’ association is changing membership levels,” Glick said. “There will now be brokers and originators, with originators paying a reduced fee, but have the same services from the association as the broker.”
Besides licensing, testing and continuing education for loan officers and originators, other new Pennsylvania laws will:
- Require lenders to send mortgage-foreclosure notices to the Pennsylvania Housing Finance Authority to help the state track delinquencies. The law already requires lenders to notify borrowers.
- Cut the interest rate on emergency loans to homeowners facing foreclosure from 9% to market rates.
- Allow the Banking Department to release news about fines and prosecution of lenders.
- Increase the amount of mortgages exempt from prepayment penalties to $217,000 from $50,000.
Curtis’ message to consumers: “Put your pride aside and get help. A lot of people are not taking steps needed to avert foreclosure until it is too late. It’s more difficult to overturn a foreclosure than avert one.”
Copyright © 2008, The Philadelphia Inquirer
Distributed by McClatchy-Tribune Information Services.
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