With an estimated 1.5 million adjustable-rate mortgages across the nation scheduled to reset to higher monthly payments this year, Secretary of Banking Steve Kaplan is urging Pennsylvania homeowners to take action before their loans become unaffordable.

"One of the most common mistakes made by homeowners who fall behind on their mortgages is not talking to their lender," said Kaplan. "It is absolutely critical that borrowers take the time now to determine if their payments are going to rise and whether they'll be able to meet the new obligation. In many cases, the lenders want to avoid foreclosure as much as the homeowners.

"A homeowner who is concerned about falling behind on their mortgage should call and ask for help," said Kaplan. "Homeowners who are not sure what to say to their lenders should call 1-800-PA-BANKS and a trained professional will help."

According to the Mortgage Bankers Association, nearly 200,000 Pennsylvania families have adjustable-rate mortgages. Nearly 25,000 of those loans are scheduled to reset this year, with an additional 15,000 resetting in 2009. Research shows that in about half of all foreclosures, borrowers did not respond to letters and phone calls from their lenders.

Kaplan said that the Pennsylvania Housing Finance Agency has several programs for homeowners in danger of foreclosure, including the Homeowners' Emergency Mortgage Assistance Program, or HEMAP; the REfinance to an Affordable Loan, or REAL; and Homeowner Equity Recover Opportunity, or HERO.

Adjustable-rate mortgages, or ARMs, soared in popularity during the recent housing boom, accounting for more than one-third of all mortgages in mid-2005, according to the Mortgage Bankers Association. A typical ARM features a lower monthly payment for the first two or three years. After that, the interest rate adjusts -- usually upward -- based on an index. The difference between the initial fixed payment and the new adjustable payment can result in payments higher than the borrower can afford and lead to loan delinquency and foreclosure.

The Banking Department is currently working with the General Assembly to tighten regulations on the mortgage industry to ensure that clearer disclosures and better documentation is available to help avoid future problems in the mortgage industry.

The department is supporting legislation to strengthen licensing and education requirements for mortgage professionals; allow the department to more quickly notify the public about fines and other actions against companies; protect more borrowers under the state interest law; require companies to notify the state when they attempt to foreclose on borrowers and improve oversight of real estate appraisers by the state's Appraisers Board. The six bills (SB 483-488) were approved by the Senate Appropriations Committee last week, setting the stage for a final vote in the full Senate.

As part of the department's public education initiative, Kaplan distributed public service announcements this week to radio and television stations across the state to encourage borrowers with adjustable rate loans to contact their lenders or the department's toll-free consumer helpline, 1-800-PA-BANKS.

Release link: 

Related: