HARRISBURG, Pa. – The days of no-doc mortgages are running short in the state of Pennsylvania.
New regulations announced last week by Steve Kaplan, the state's secretary of banking, requires mortgage lenders and brokers to document and verify a borrower's income, fixed expenses and other relevant factors, greatly restricting low- and no-documentation mortgages that lack proof of income, employment and other information.
The regulation also requires mortgage companies to disclose in a new form, available early next year, whether a loan has a variable interest rate, prepayment penalty or balloon payment, property taxes and hazard insurance included in the monthly payment, or a negative amortization feature in which the payments are set so low they do not cover the interest or principal of the loan.
Recommended For You
The ability to repay and disclosure requirements will go into effect March 20. The regulation also contains new rules regarding loan funding, payoff statements, advertising and advice to borrowers, all of which take effect immediately.
"There is ample evidence that many borrowers do not understand the disclosures currently provided to them under federal law and that disclosures have failed to keep up with product innovation in the marketplace," Kaplan said. "The form developed by the department for use in Pennsylvania will go a long way towards bridging these gaps."
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
