PRINTER'S NO. 561
No. 500 Session of 1983
INTRODUCED BY IRVIS, KUKOVICH, EVANS, GEORGE, AFFLERBACH,
LINTON, WAMBACH, CARN, WOZNIAK, McHALE, FREEMAN, CALTAGIRONE,
COLE, GALLAGHER, PISTELLA, PRATT, OLIVER, HARPER, CLARK,
O'DONNELL, D. R. WRIGHT, WILSON, LETTERMAN, SWEET,
J. L. WRIGHT, LEHR, PETRARCA, WIGGINS, HALUSKA, MICHLOVIC,
RYBAK, KOWALYSHYN, STEIGHNER, DAWIDA, TRELLO, MORRIS, DALEY,
ALDERETTE, OLASZ, JAROLIN, PRESTON, BELFANTI, GAMBLE, SALOOM,
CORDISCO, GANNON AND LUCYK, MARCH 21, 1983
REFERRED TO COMMITTEE ON BUSINESS AND COMMERCE, MARCH 21, 1983
AN ACT
1 Providing for emergency mortgage assistance for homeowners.
2 The General Assembly of the Commonwealth of Pennsylvania
3 hereby enacts as follows:
4 Section 1. Short title.
5 This act shall be known and may be cited as the Homeowners'
6 Emergency Mortgage Assistance Act.
7 Section 2. Findings and purpose.
8 (a) Findings.--The General Assembly finds that:
9 (1) the Commonwealth is in a severe recession and that
10 the sharp downturn in economic activity has driven large
11 numbers of workers into unemployment and has reduced the
12 incomes of many others;
13 (2) as a result of these adverse economic conditions the
14 capacity of many homeowners to continue to make mortgage
1 payments has deteriorated and may further deteriorate in the
2 months ahead, leading to the possibility of widespread
3 mortgage foreclosures and distress sales of homes; and
4 (3) many of these homeowners could retain their homes if
5 they received temporary financial assistance until economic
6 conditions improve.
7 (b) Purpose.--It is the purpose of this act to establish a
8 program which will, through emergency mortgage assistance
9 payments, prevent widespread mortgage foreclosures and distress
10 sales of homes which result from default caused by circumstances
11 beyond a homeowner's control.
12 Section 3. Administration.
13 (a) Administration.--The Secretary of the Department of
14 Community Affairs, hereinafter referred to as the "secretary,"
15 shall carry out the program established by this act.
16 (b) Regulations.--The secretary may make rules and
17 regulations which are consistent with the provisions of this act
18 and are necessary to carry out the provisions of this act.
19 Section 4. Eligibility for assistance.
20 (a) Requirements.--No assistance may be made with respect to
21 a mortgage under this act unless:
22 (1) The property securing the mortgage, or other
23 security interest in the case of units in cooperative or
24 condominium projects, is a one-family or two-family
25 residence, including one-family units in a condominium
26 project or a membership interest and occupancy agreement in a
27 cooperative housing project, and is the principal residence
28 of the mortgagor.
29 (2) (i) the mortgagee has indicated to the mortgagor
30 its intention to foreclose; or
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1 (ii) payments under the mortgage have been
2 delinquent for at least 90 days.
3 (3) The mortgage is not insured by the Federal Housing
4 Administration under Title II of the National Housing Act.
5 (4) The mortgagor is suffering financial hardship due to
6 circumstances beyond the mortgagor's control which render the
7 mortgagor unable to correct the delinquency within a
8 reasonable time or make full mortgage payments.
9 (5) The secretary has determined that there is a
10 reasonable prospect that the mortgagor will be able to resume
11 full mortgage payments within 36 months after the beginning
12 of the period for which such payments are provided and pay
13 the mortgage in full by its maturity date or by a later date
14 agreed to by the mortgagee for completing mortgage payments.
15 (b) Determination of eligibility.--Upon a determination that
16 the conditions of eligibility described in subsection (a) have
17 been met by a mortgagor, the mortgagor shall become eligible for
18 the assistance described in section 5.
19 Section 5. Assistance payments.
20 (a) Payments.--Assistance under this act shall be provided
21 in the form of emergency mortgage assistance payments made by
22 the secretary to mortgagees on behalf of mortgagors.
23 (b) Amount.--Payments under this act shall be in an amount
24 determined by the secretary as set forth herein up to the amount
25 of the principal, interest, taxes, assessments, ground rents,
26 hazard insurance and any mortgage insurance premiums due under
27 the mortgage, and the initial payment shall include an amount
28 necessary to make the payments on the mortgage current and to
29 pay reasonable costs and attorney fees already incurred by the
30 mortgagee. Late charges shall not be due for unpaid mortgage
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1 payments from mortgagors determined eligible under this act.
2 After a mortgagor has been determined eligible for mortgage
3 assistance, the monthly mortgage assistance payments shall at a
4 minimum be in an amount which will cause the mortgagor's total
5 housing expense not to exceed 35% of net effective income. This
6 is the maximum amount the mortgagor can be required to pay
7 during the 36 months a mortgagor is eligible for emergency
8 mortgage assistance. Housing expense shall be defined as the sum
9 of the mortgagor's monthly maintenance, utility and hazard
10 insurance expense and the required mortgage payment, including
11 escrows. Net effective income shall be defined as gross income
12 less city, State and Federal income and social security taxes.
13 The monthly mortgage assistance payments may not exceed the
14 mortgagor's total payment to principal, interest, taxes, hazard
15 insurance, mortgage insurance premiums, assessments and ground
16 rents.
17 (c) Duration of loan.--Payments under this act shall be
18 provided for a period not to exceed 36 months plus any period of
19 default. The secretary shall establish procedures for periodic
20 review of the mortgagor's financial circumstances for the
21 purpose of determining the necessity for continuation,
22 termination or adjustment of the amount of the payments.
23 Payments shall be discontinued when the secretary determines
24 that, because of the changes in the mortgagor's financial
25 circumstances, the payments are no longer necessary in
26 accordance with the standards set forth in section 5(b).
27 (d) Lien.--All payments shall be secured by a lien on the
28 property and by such other obligation as the secretary may
29 require. The secretary shall allow subordination of the mortgage
30 assistance lien if such subordination is necessary to permit the
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1 mortgagor to obtain a home improvement loan or for other good
2 cause.
3 (e) Repayment.--Upon termination of mortgage assistance, the
4 secretary shall enter into a forbearance agreement with the
5 mortgagor for repayment of all mortgage assistance made by the
6 secretary. The forbearance agreement shall provide for monthly
7 payments by the mortgagor as follows:
8 (1) If the mortgagor's total housing expense as defined
9 in section 5(b) is less than 35% of his or her net effective
10 income, the mortgagor shall pay to the secretary the
11 difference between 35% of the mortgagor's net effective
12 income and the mortgagor's total housing expense unless
13 otherwise determined by the secretary after examining the
14 mortgagor's financial circumstances and ability to contribute
15 to repayment of the mortgage assistance.
16 (2) If the mortgagor's total housing expense is more
17 than 35% of his or her net effective income, repayment of the
18 mortgage assistance shall be deferred until the mortgagor's
19 total housing expense is less than 35% of his or her net
20 effective income.
21 (3) If repayment of mortgage assistance is not made by
22 the maturity date of the mortgage or if the mortgage is paid
23 prior to its maturity date, the mortgagor shall make mortgage
24 assistance repayments in an amount equal to at least the
25 mortgage payment until the mortgage assistance is repaid.
26 (4) The secretary shall establish procedures for
27 periodic review of the mortgagor's financial circumstances to
28 determine the amounts of repayment required under this
29 section.
30 (5) Interest shall accrue on all mortgage assistance
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1 made by the secretary at the rate on the mortgage for which
2 the mortgage assistance was made. Interest shall not begin to
3 accrue on all mortgage assistance made by the secretary until
4 the mortgage for which mortgage assistance was made is paid.
5 Interest shall then accrue only on the portion of mortgage
6 assistance then due and owed.
7 Section 6. Processing of applications.
8 The secretary shall process applications for assistance under
9 this act in as expeditious a manner as is practicable. In
10 carrying out this act, the secretary shall provide that, within
11 not more than 30 calendar days from the receipt of an
12 application for assistance under this act, the mortgagor and
13 mortgagee will be notified by the secretary of the determination
14 to approve or disapprove such application for assistance.
15 Section 7. Notice and institution of foreclosure.
16 (a) Acceleration of maturity.--Before any mortgagee may
17 accelerate the maturity of any mortgage obligation covered under
18 this act, commence any legal action including mortgage
19 foreclosure to recover under such obligation, or take possession
20 of any security of the mortgage debtor for such mortgage
21 obligation, such mortgagee shall give the mortgagor at least 45
22 days in advance of such action, notice of the right to apply to
23 the Department of Community Affairs for emergency mortgage
24 assistance payments. Such notice shall be given in a form and
25 manner prescribed by the secretary. The notice may be given at
26 the same time as that required under section 403 of the act of
27 January 30, 1974 (P.L.13, No.6), referred to as the Loan
28 Interest and Protection Law.
29 (b) Limits on legal actions.--A mortgagee shall not
30 accelerate the maturity of any mortgage obligation covered under
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1 this act, commence any legal action including mortgage
2 foreclosure to recover under such obligation, or take possession
3 of any security of the mortgage debtor for such mortgage
4 obligation, until the mortgagor has had an opportunity to
5 request the secretary for mortgage assistance under this act and
6 a determination has been made on such request pursuant to
7 procedures prescribed by the secretary.
8 (c) Pending legal actions.--All pending legal actions by
9 mortgagees on mortgages covered under this act in which
10 sheriffs' sales have not been consummated on the effective date
11 of this act shall be temporarily stayed in order to give the
12 mortgagor the opportunity to request the secretary for
13 assistance under this act and have a determination made by the
14 secretary on such request pursuant to procedures prescribed by
15 the secretary. Such stay shall extend until 30 days after a
16 mortgagor is first able to apply for assistance under this act
17 and, in the case of a mortgagor who files for such assistance,
18 the stay shall be in effect until the secretary makes a
19 determination on the request for assistance.
20 Section 8. Funds for payment of mortgage assistance.
21 All expenditures made under this act shall be paid from the
22 State Homeowners' Emergency Mortgage Assistance Fund. All moneys
23 received from repayment of mortgage assistance shall be
24 deposited in the State Homeowners' Emergency Mortgage Assistance
25 Fund.
26 Section 9. Expiration.
27 This act shall expire in five years, except that mortgage
28 assistance shall continue to be made available to mortgagors who
29 were deemed eligible for mortgage assistance prior to the
30 expiration of this act, in accordance with the terms of this
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1 act.
2 Section 10. Effective date.
3 This act shall take effect immediately.
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