New Approaches in Pennsylvania

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New Approaches in Pennsylvania

• David Bleicken
• Director
• Bureau of Licensing, Investigation and Consumer
  Services
• Pennsylvania Department of Banking

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Safety and Soundness Approach to Mortgage
Regulation

• Beyond compliance
• Focus
• Licensees responsibilities
• Financial strength
• Fraud

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• Licensing
• Enhanced use of character, reputation and fitness
  requirements
• Additional criminal checks for employees with
  consumer contact and underwriting authority under
  MBBCEPA
• Use of broad array of data bases to check
  individuals including
• Criminal Records
• Federal Trade Commission
• Federal Banking Regulators
• MARI
• PA Securities Commission/NASD
• Others
• Business plans
• Hiring practices
• Third party due diligence
• Underwriting controls/default rates
• Privacy
• Compliance

4

• Examinations
• Risk focused
• Consumer complaints
• Industry tips
• Consumer group tips
• Referrals from regulators and law enforcement
• Default rate information
• Pre-Examination Review
• Consumer complaints
• Criminal records
• Prior examinations

5

• Examinations
• Operations
• Internal controls
• Consumer complaints
• Hiring/background checks
• Training
• Targeted marketing
• Due diligence on third parties
• Compliance
• State
• Federal
• Fraud

6

• Investigations
• Focus on
• Consumer harm
• Financial crimes
• Chief is a 20 year veteran of U.S. Postal
  Inspection Service, a CPA, CFE, CIA, CMA
• Data mining software
• Computer Forensics capability
• Intelligence analysis function

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Foreclosures
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Foreclosures

• The Reinvestment Fund of Philadelphia was
  commissioned to study mortgage foreclosures in
  Pennsylvania.
• On a statewide basis, it is estimated that
  Pennsylvania has experienced a 14 increase in
  Sheriff sales from 2000 through 2003.
• An estimated 55,163 homes have been sold at
  Sheriff sale across the Commonwealth from 2000
  through 2003.
• Pennsylvanias prime foreclosure rate was 9th in
  the nation but Pennsylvanias sub-prime
  foreclosure rate is 4th in the nation.
• In Pennsylvania, the percent of prime loans in
  foreclosure in 2003 was .85 however, the
  percent of Subprime loans in foreclosure was
  11.9.
• 60 to 75 of all sampled loans in foreclosure
  were by Subprime lenders.

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Foreclosures

• The TRF Study found that a disproportionate
  number of Subprime loans made in Pennsylvania
  went to foreclosure. The TRF also discovered
  that
• Traditional factors of foreclosure do not account
  for Pennsylvanias rising foreclosure rates from
  2000 through 2003, i.e. the result of an
  expanding mortgage market, divorce, unemployment
  and/or medical costs.
• If traditional factors were the sole reasons for
  the large Subprime foreclosure rate, the
  percentage of Subprime loans in foreclosure would
  be 8.9 instead of 11.9.

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Legislation, Regulations and Guidance

• Working on introducing legislation
• Licensing for loan originators
• Drafting regulations
• Defining the proper conduct of the mortgage
  business
• Drafting statement of policy
• Defining illegal, dishonest, unfair and unethical
  practices

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Nontraditional Mortgage Products

• Emerging area of serious concern
• State financial regulators reviewing proposed
  guidance issued by federal regulators in December
  2005
• Public discussion of the next SL crisis