There are new mortgage rules taking effect in the state of Pennsylvania that will have a definite effect on both the city of Philadelphia as well as the amount of foreclosures being seen in the city.

Congress will be clamping down on key lending practices in response to the nations mortgage and housing crisis.  Pennsylvania is the latest state, and the rules should go into effect this month that is beginning to govern mortgage disclosures and practices.

The new rules require mortgage companies to document income, certain expenses and other relevant financial information that will help determine if a potential borrower have the ability to repay a loan.

The new set of regulations was published in December of 2008, but mortgage companies were given 3 months to begin practicing the new restrictions.  At this point, if any mortgage company is not abiding by the new set of guidelines they are subject to a hefty $10K fine per offense.  This is said to be one of the stiffest penalties in the country.

In addition, all parties involved in a lending transaction must now register in a new state wide mortgage licensing system which will allow regulators to have more information about the industry, hopefully resulting in more informed decisions on their behalf.