Monday, March 28, 2005


Fri, Mar. 25, 2005


IN PENNSYLVANIA in the past three years, an alarming number of homeowners - about 55,000 - have had their American Dream sold at Sheriff's sale.

In fact, Pennsylvania ranks fourth in the nation in the rates of foreclosures for "subprime" mortgages, according to a recent study prepared by The Reinvestment Fund for state Banking Secretary William Schenk. (For loans at prime, it ranks ninth in the United States.)

As this editorial page has pointed out frequently - and despairingly - Philadelphia is particularly vulnerable, with the second-highest rate of foreclosures in the counties studied.

Home foreclosure rates are reminiscent of the Great Depression, but not all the reasons are the same. These days, Pennsylvanians who lose their homes are victims, not only of hard luck like losing their jobs, but also of "abusive" practices by some mortgage lenders.

"Subprime" loans are those made at higher rates to borrowers with weak credit histories. These mortgages have made owning a home possible for many who could not afford it otherwise.

But they also can be a trap, especially when the loans are made to people who realistically won't be able to make the payments.

Also contributing to the problem are lenders who hide the true costs of the loans or don't fully explain the terms of the loans. Many people get caught in the downward spiral by taking on second mortgages for home repairs that could have been financed in other ways.

The result is seen in these chilling numbers: 11.9 percent of subprime borrowers lose their homes to foreclosure, 1,400 times the rate of foreclosures of "prime" mortgage holders. As usual, these abuses impact low-income, minority and elderly homeowners the most.

This was a problem hiding in plain sight for too long, with more handwringing than hands-on action. Now, though, Pennsylvania appears geared up to attack it from a range of different angles.

State government is limited in what it can do to change the traditional reasons for foreclosures like unemployment, divorce, or unwise personal decisions. It can and should do more to protect consumers.

On the legislative side, the General Assembly will be asked to pass a number of laws to protect consumers, including a requirement that all individuals who provide mortgages be licensed, like individual real estate agents. (Now, only the companies need be licensed and unethical individuals avoid detection by moving from one to another.)

Also on the docket: proposals to requiring pre-closing credit counseling for subprime borrowers and establishment of an emergency fund for victims of abusive lending.

On the administrative front, the Banking Department will be restructured to take on the job of policing tougher regulations. The staff will be increased from the 108 who worked there when Schenk took office to 175 by next year. Eleven of those employees will form an investigative unit to go after dishonest and unethical businesses.

As important, the Banking Department is increasing financial education in schools so Pennsylvanians will be better able to protect themselves from being conned.

It's a scandal that the immoral exploitation of consumers was allowed to grow into the current foreclosure crisis - but it's heartening that Pennsylvania's leadership finally is starting to wake up to its obligations.


At 8:10 AM, Anonymous Anonymous said...

The "Government" has no obligation to help people that loose their homes due to the inability of those same people who dont understand or wish not to, their ability to pay off their debts. There is an old saying: "Dont bite off more than you can chew" that goes for everything!

At 10:31 PM, Anonymous Anonymous said...

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