Mortgage Daily Logo

States Seek Stiffer Subprime Statutes

Mortgage News


States Seek Stiffer Subprime Statutes

Recent regulatory activity

September 28, 2007



photo of Patrick Crowley
State governments, largely reactionary by nature, are enacting or close to passing a rash of new laws inspired by the fallout of the subprime mortgage market.

The last round of legislation came in the wake of mortgage fraud that was sweeping in industry over the last few years. Now, legislatures are moving to tighten regulations on the mortgage industry as foreclosures have hit record highs across the country, job losses have mounted and concerns have grown about the ease that unqualified buyers are getting loans.

In Pennsylvania, banking regulators are pushing lawmakers to pass laws designed to “protect consumers from abusive mortgage lending,” the state’s top financial regulator said in a statement.

Acting Secretary of Banking Steve Kaplan wants laws that would allow his department to strengthen license and education requirements, move more quickly in notifying the public about fines and other actions against companies and put more borrowers under the state’s interest laws.

“Borrowers have been getting loans they can’t afford, and on terms they don’t fully understand,” Kaplan said in the statement. “Now, many of them are struggling to keep their homes.

“Pennsylvania licenses real estate professionals, securities dealers and even barbers, but not the person brokering what may be the largest financial transaction of your life,” he said. “We must join the 30 other states that require mortgage professionals to be tested and licensed.”

North Carolina lawmakers have passed a law regulating rate spread home loans and broadening the duties of mortgage brokers.

Rate spreads are defined as 3% on first mortgages and 5% on second mortgages and a spread of 1.75% for firsts and 3.75% for seconds when compared to the “conventional mortgage rate” for fixed-rate first mortgages published by the Fed, according to an analysis of the law by Nelson Mullins, a North Carolina law firm.

The law also eliminates prepayment fees and penalties on the loans and stipulates that a lender must reasonably believe the borrower has the ability to repay the loan.

New duties for brokers under the law include notifying lenders about the specifics of loans securing the same piece of property; providing more information to the borrower, including the expected commission on the transaction; and a prohibition on lending without regard to repayment ability.

North Carolina does not make a lender liable for a broker’s actions, according to Nelson Mullins.

In the first half of this year the state’s foreclosure filings nearly doubled to 17,248, according to a study by RealtyTrac cited in the analysis.

A new Arizona mortgage law that went into effect Sept. 20. makes mortgage fraud a felony, according to a statement from Lotstein Buckman.

New Mexico has formed a task force on subprime lending. According to an executive order signed by Gov. Bill Richardson — a Democrat running for president — the task force will focus on the ability of the borrower to repay the loan, excessive fees, prepayment penalties and the terms of subprime loans.

The task force is due to report its findings by Oct. 31.

“Although subprime mortgage lending may have contributed to increased home ownership rates in recent years, there is widespread concern that subprime mortgage lending … have enabled unsound lending practices,” Richardson said in his executive order.

And finally in Michigan, a law designed to assist members of the military includes a provision dealing with foreclosures.

Under the law, which was introduced in early September, lenders could not foreclose on the property of military personnel for non-payment while they are serving and for six months after they return from active duty.

“When veterans come home and begin rebuilding their lives, it is critical that we give them the tools and support necessary to get the job done,” Sen. Dennis Olshove, a Democrat, said in a statement.

Patrick Crowley is a feature journalist and blogger for He is also a reporter, blogger and columnist for The Cincinnati Enquirer.
e-mail Patrick at:

Related Posts

NewDay USA CEO Rob Posner Expects 10% Increase in 2019 Mortgage Loan Volume

There is No Such Thing as a Free House …

Over the past several years, those who service loans in the State of Washington(1) have seen a dramatic rise in the number of lawsuits in which delinquent borrowers seek to quiet title to their homes on the grounds that lenders are barred from foreclosing based on...

NewDay USA CEO Rob Posner Expects 10% Increase in 2019 Mortgage Loan Volume

Mortgage Servicer Portfolios

servicing news | mortgages outstanding statistics | foreclosure news   Servicing Portfolios as of 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 Residential Servicing Portfolios by Servicer Last Updated December 14, 2018...

NewDay USA CEO Rob Posner Expects 10% Increase in 2019 Mortgage Loan Volume

Fannie Mae Profile

Last Updated December 27, 2018 7:38 PM Central   full list | other directories | bank search | SEC filings | execs | m&a | production   Government Takes Over Fannie, Freddie Sept. 8, 2008 The government has seized control of Fannie Mae and Freddie Mac. The move --...

NewDay USA CEO Rob Posner Expects 10% Increase in 2019 Mortgage Loan Volume

Freddie Mac Profile

Government Takes Over Fannie, Freddie Sept. 8, 2008 The government has seized control of Fannie Mae and Freddie Mac. The move -- which is likely to push mortgage rates lower and provide a sense of stability for the more than 10,000 employees at both companies -- is a...

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming home closing documents have been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand new mortgage loan can be a difficult task, especially for first time homeowners. After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first mortgage...


Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI