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HB2391 , sponsored by Scott Conklin (D), amends Pennsylvania’s Loan Interest and Protection Law, also known as the Usury Law. It is a targeted change to non-primary residential mortgages. This legislation would replace freedom of contractual choice with a government mandate without demonstrating in the bill text that a blanket prohibition is necessary. Read the text of the Bill.
Provisions of the bill:
- Government interference in private contracts.
If a prepayment provision is disclosed, lawful, and voluntarily accepted, the government should be cautious about prohibiting it categorically. - Restrictions on lenders’ ability to price risk.
Some lenders might respond with higher interest rates, different fees, or stricter underwriting. - Possible unintended effects on housing affordability.
Legislators should ask whether the bill’s net effect on housing costs has been demonstrated, rather than assuming that eliminating one fee necessarily makes mortgages cheaper overall. - A blanket prohibition rather than targeted consumer protection.
Targeted rules addressing deceptive practices, excessive penalties, or inadequate disclosures instead of a categorical prohibition, is preferable to blanket prohibition. - Counterintuitively, this bill will likely result in an increase to rental rates.
When a small landlord has to pay a penalty to refinance or sell, that cost shows up in the rent. - First-time buyers pay more.
Flippers who restore older homes will build the penalty risk into their sale prices, so starter homes cost more. - Small business loses ground.
Large investment firms buying up homes have the size and lawyers to negotiate around these costs. The local landlord with a few units, or the contractor fixing up one house at a time, doesn’t.
Call to Action
- Call your *state* senator and tell them to vote NO on this legislation. Alternatively, you can demand an amendment that would provide prepayment penalty protection for ALL residential mortgages.
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