Appraisers' Free Forum

Developments of the last four days make clear that the extent of damage caused by sub-prime mortgages has yet to be fully measured. The Treasury Department and the Federal Reserve are planning unprecedented steps to protect Freddie Mac and Fannie Mae, U.S.-backed companies that guarantee almost half of all U.S. mortgages. If Congress approves, the actions proposed by the Bush adminstration will open the door to sizable taxpayer exposure in the widening credit crisis.

That ominous atmosphere makes all the more noteworthy a development in Harrisburg. While the problem is national, most of the pertinent regulating falls to the states. Last week, Gov. Ed Rendell signed five bills into law that address the current sub-prime mortgage crisis. They bring to fruition a process begun over five years ago by Allentown Republican Pat Browne, a state senator who helped to define a wise state response to the sub-prime mess: not a bailout, but better protection in the future.

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These five bills will be a major legacy of the 2007-08 Legislature. The commonwealth now will require anyone who sells a mortgage, not just officers of traditional banks, to be trained and licensed by the Department of Banking. It reduces lenders' ability to prevent homeowners from refinancing their mortgages. (This restriction is capped at $217,873, which means that lenders may still penalize borrowers for refinancing homes that roughly cost more than the median sale price in the Lehigh Valley.) It empowers the Banking Department to penalize and publicize those who violate these regulations. It broadens the authority of the state appraiser's board to prevent properties from being overvalued as a way to secure a higher mortgage. It increases the fine 10-fold, to $10,000, for any appraiser who engages in fraud. And, finally, it requires all lending institutions to send foreclosure notices to the Pennsylvania Housing Finance Authority, rather than hide these data, so that state economists can assess trends and propose policy in the public interest.

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It empowers the Banking Department to penalize and publicize those who violate these regulations. It broadens the authority of the state appraiser's board to prevent properties from being overvalued as a way to secure a higher mortgage. It increases the fine 10-fold, to $10,000, for any appraiser who engages in fraud. And, finally, it requires all lending institutions to send foreclosure notices to the Pennsylvania Housing Finance Authority, rather than hide these data, so that state economists can assess trends and propose policy in the public interest. (emphasis added)

Alan Jennings, executive director of the Community Action Committee of the Lehigh Valley himself ''wish(ed) that the legislative process wasn't so slow.'' But he also noted that more timely regulation, not market forces, would have saved many from the pain of foreclosure.