U.S. Sen. Bob Casey is urging the federal government to step in to solve problems with mortgages in neighborhoods with low property values.
During a Friday visit to Philadelphia’s Kensington neighborhood, where many homes cost $50,000 or less, he said he’s been in contact with the U.S. Consumer Financial Protection Bureau on the issue.
Many banks don’t offer mortgages that small, even if the buyer is otherwise qualified.
But Casey says allowing for mortgages on these homes will boost the area economically.
“One of the things we’re trying to do is make sure that when the Financial Protection Bureau finalizes its rules, that they’ve taken into consideration the dynamic we saw here — which is people being qualified but still can’t get a mortgage because of the low property values in the community they live in,” Casey said. “If you qualify for a mortgage, you ought to be able to get it no matter where you live.”
Banks are reluctant to make such loans because federal rules limit the fees they can charge for originating loans as a percentage of the total loan.
Bank officials say that, for such a small amount, that percentage won’t cover their costs.
Casey’s office anticipates a policy to be issued in January by the Financial Protection Bureau will address the problem.