Letter to Steve Kaplan, Pennsylvania Secretary of Banking, Re: Help Inform Public about New Mortgage Counseling

Letter

Letter to Steve Kaplan, Pennsylvania Secretary of Banking, Re: Help Inform Public about New Mortgage Counseling

Casey Urges Banking Dept to Help Inform Public about New Mortgage Counseling

U.S. Senator Bob Casey (D-PA) today wrote to Pennsylvania Secretary of Banking Steve Kaplan urging the Department to publicize the availability of foreclosure prevention counseling to struggling homeowners. Senator Casey sent the letter after Secretary Kaplan, on Friday urged homeowners who need assistance to contact lenders.

"Research conducted by NeighborWorks America suggests that even in the face of impending foreclosure, borrowers are reluctant to contact their lenders," Senator Casey wrote.

Senator Casey went on to write "I commend the Department of Banking for alerting homeowners that they should rework their loan terms to avoid default. It is imperative, however, that the Department assists in our efforts to target struggling homeowners to make them aware of the option of nonprofit counseling."

In January, Senator Casey wrote to the radio and television stations throughout Pennsylvania urging them to air public service announcements (PSAs) that direct homeowners facing mortgage default and foreclosure to a toll-free hotline where they can receive free advice from financial professionals.

The ad, sponsored by the Ad Council and NeighborWorks, highlights the effects of foreclosure on entire families and encourages homeowners to take action when facing mortgage issues. The hotline featured in the ad provides free help and guidance to callers 24 hours a day, seven days a week.

In the letter, Senator Casey also enclosed a list of the Department of Housing and Urban Development (HUD) approved counseling intermediaries serving homeowners in Pennsylvania.

Pennsylvania homeowners will face higher income payments in 2008. In November 2007, the number of foreclosures occurring nationwide increased by almost 68% compared to the same month in 2006. In Pennsylvania, one in every 2,104 households filed for foreclosure in November.

Senator Casey is an original cosponsor of the Home Ownership Preservation and Protection Act of 2007, which would crack down on the abusive lending practices that created the subprime crisis. He also helped secure $180 million for foreclosure counseling in the recently passed omnibus spending bill. Additionally in December he wrote a letter to Secretary Paulson urging him to ensure that the Administration's subprime assistance include as many borrowers as possible, ensure long-term affordability and waive all prepayment penalties for borrowers.

Full text of the letter is below.

Dear Secretary Kaplan:

I am writing in response to the news that nearly 25,000 Pennsylvania homeowners will see their home payments increase in 2008. I strongly urge you to publicize the availability of foreclosure prevention counseling to struggling homeowners. Nonprofit counseling intermediaries approved by the Department of Housing and Urban Development (HUD) are better equipped to prevent foreclosure through innovative techniques and public outreach campaigns.

Research documented by NeighborWorks America in November 2007 suggests that even in the face of impending foreclosure, borrowers are reluctant to contact their lenders. As the study details, "the legal process related to mortgages and mortgage foreclosure is intimidating for any consumer, let alone a consumer in financial distress." The report, entitled "Financial Institutions and Foreclosure Intervention: Innovative Partnerships and Strategies to Better Serve Borrowers in Default," shows that nonprofit counseling is more effective in assisting borrowers to "take control of their situation, work cooperatively with their lender and develop strategies to address the delinquency and get them back on track."

My colleagues in the Senate and I worked to include an additional $180 million in funding for foreclosure prevention counseling that NeighborWorks will begin distributing early next month. Additionally, I have written to radio stations in Pennsylvania encouraging them to run advertisements created by NeighborWorks in partnership with the Ad Council to raise awareness of a toll-free number that homeowners can call for counseling services. Consumers are likely to find counseling intermediaries a less intimidating and more accessible alternative to contacting their lenders directly.

I commend the Pennsylvania Department of Banking for alerting homeowners that they should rework their loan terms to avoid default. It is imperative, however, that the Department assists in our efforts to target struggling homeowners to make them aware of the option of nonprofit counseling. The impact of foreclosure reaches far beyond individual homeowners and affects entire communities. Foreclosure depresses property values and contributes to crime and other neighborhood decay. Even the best foreclosure prevention programs will not be effective if homeowners do not know they are available. By encouraging consumers to seek out foreclosure prevention counseling, the Pennsylvania Department of Banking can do even more to help prevent foreclosures with timely intervention, thereby assisting Pennsylvania communities in overcoming the effects of a nationwide mortgage crisis. As a member of the Senate Committee on Banking, Housing, and Urban Affairs, I welcome the opportunity to discuss additional ways that federal and state government can work together to seek solutions to the foreclosure crisis in Pennsylvania.

Enclosed is a list of HUD-approved counseling intermediaries serving homeowners in Pennsylvania. Thank you for your consideration.

Sincerely,

Robert P. Casey Jr.
United States Senator

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