By Dan Miller, Patriot News
U.S. Sen. Bob Casey Jr., D-Pa., says the federal government must "crack down" on the mortgage-lending industry.
Casey said he is co-sponsoring legislation in the Senate to "force" mortgage originators or brokers "to comply with truth-in-lending requirements."
Some lenders have failed to properly escrow insurance and tax payments, Casey said. He also accused some appraisers of inflating the value of a property, leading to mortgage transactions based on "fraud."
"We shouldn't have to legislate this," Casey said. "These brokers and originators have been unregulated entities in the market and it's about time that we crack down on them and also hold all lenders accountable."
Casey made the comments on Friday in Harrisburg after an event to mark $100 million in affordable-housing grants from the Federal Home Loan Bank Pittsburgh. The projects are statewide, with $1.3 million in grants to support five housing projects in south-central Pennsylvania.
Federal Home Loan Bank Pittsburgh is one of 12 regional banks chartered by Congress in 1932 to help homeowners who were losing their homes during the Great Depression.
The regional banks raise money privately to make low-cost and at-cost loans to local member banks, which in turn use the money to help meet community housing needs. Public tax dollars are not used.
In 1990, Congress created the Affordable Housing Program, requiring that each year 10 percent of a regional federal home loan bank's profits be distributed as grants to nonprofit sponsors of housing projects.
Casey did not call for massive federal assistance to respond to the nation's current housing and credit problems stemming from failing mortgages in the subprime market. He said Congress succeeded in getting the Bush administration to provide $100 million to increase resources for nonprofit counselors to assist low-income borrowers. Congress had asked for $300 million, Casey said.
Subprime loans had been made to people with weak credit.
Casey referred to the credit crunch and subprime mess as "a huge problem for the country" that is now becoming an international problem.
"It happened because some people got greedy, some brokers and originators got greedy and they committed acts of fraud, and we've got to throw the book at them," he said.
The subprime debacle isn't having as big an impact in the midstate. Local analysts say the number of subprime and otherwise exotic mortgage loans made as a percentage of all home loans is lower here, reflecting what is characterized as a more conservative approach by midstate lenders.
