FOR IMMEDIATE RELEASE           
Oct. 16, 2007
Contact: Abigail McDonough               
202-225-6511       

WASHINGTON - Congressman Paul E. Kanjorski (PA-11), the chairman of the House Financial Services Capital Markets, Insurance, and Government Sponsored Enterprises Subcommittee, today introduced H.R. 3837, the Escrow, Appraisal, and Mortgage Servicing Improvements Act.  The bill reacts to the dramatic increase in foreclosures in Monroe County at the beginning of the decade that directly affected thousands of homeowners in Northeastern Pennsylvania.  It also tackles growing complaints across the nation of abusive and deceptive practices related to mortgage servicing and appraisals, particularly in the subprime market. 

"Far too many residents in Northeastern Pennsylvania have personally seen the detrimental effects that abusive and deceptive mortgage lending practices unfortunately had on new homeowners in the area," stated Congressman Kanjorski.  "To prevent these abuses from occurring again, this bill offers a comprehensive, balanced, and progressive set of solutions to solve a number of perplexing policy issues."

"I am very grateful for the continued interest and leadership that Congressman Kanjorski has demonstrated to improve mortgage servicing and protect against inflated appraisals.  I commend him for introducing this bill," said Maureen McGrath, who lives in Monroe County and represents the National Advocacy Against Mortgage Servicing Fraud.  Mrs. McGrath testified at the 2004 congressional hearing at East Stroudsburg University on the problems in the Poconos housing market.

Over the last decade, Monroe County experienced tremendous population growth.  Many of these new homeowners, however, experienced problems with inflated appraisals and mortgage servicing.  Some of them also acquired subprime mortgages.  The subprime marketplace allows borrowers with less-than-perfect credit to purchase homes and establish better credit reports, but it also increases the likelihood of encountering mortgage originator abuse.As a result of these abuses, many of the homeowners faced foreclosures.  The number of foreclosures in Monroe County jumped from 120 in 1990 to 925 foreclosures in 2002, resulting in an increase of nearly 700% over twelve years.  The Congressman aims to rectify these problematic practices by creating higher standards for appraisers and other parties involved in the real estate transactions to prevent further homeownership problems from occurring in Pennsylvania or elsewhere in the country.  "In light of the collapse of the subprime market in the past few months and in Pennsylvania earlier in the decade, it is necessary to prevent borrowers from encountering mortgage lending and appraisal fraud which results in these dramatic yet preventable outcomes.  This bill addresses the undeniable need for improved lending standards and appraisal independence," noted Congressman Kanjorski.  "It helps protect consumers by improving mortgage servicing, enhancing appraisal quality and oversight, and requiring escrows for certain mortgage loans."H.R. 3837 targets the abusive lending practices previously encountered in Northeastern Pennsylvania by incorporating such elements as: Enhanced Appraiser Independence and OversightStudies by Pennsylvania officials have determined that many of the foreclosures in Monroe County affected homes with inflated property values.  For example, one family purchased a home for slightly more than $150,000 and moved from Brooklyn to the Poconos.  Fourteen months later when they decided to sell their house, the same property was appraised at just $77,000.  The legislation helps to ensure that a home's worth is properly estimated through the following provisions:

• Establishes strong, new Federal standards to protect appraisal independence;
• Enhances the authority of the Appraisal Subcommittee (housed within the Financial Institutions Examination Council and consisting of representatives from the Federal financial regulators) to monitor State appraisal regulators;
• Requires the Appraisal Subcommittee to evaluate whether State agencies process complaints, complete examinations, and report claims on a timely basis; and
• Improves appraiser licensing and educational standards.

• Requires lenders and servicers to set up escrow accounts for certain borrowers;
• Creates new disclosures for all consumers who opt out of establishing escrow accounts; and
• Ensures that escrows amount to the actual assessed taxable value of the property.

• Prohibits a number of unfair practices such as the forced-placement of insurance without a reasonable basis for doing so and the charging of fees for responding to consumer written requests to correct errors;
• Requires the prompt crediting of payments and increases penalties for mortgage servicing violations; and
• Shortens statutory response times and requires two studies relating to mortgage servicing fraud.