Mortgage laws in Pennsylvania: closing, disclosures, costs, prepayment and foreclosure

Ask a Pennsylvania closing attorney or escrow officer what makes this state different and the answer is usually a list. Pennsylvania couples uniform filed title rates and a transfer tax split down the middle with Act 6 and Act 91 — a penalty-free prepayment right, a 30-day cure notice, and a state emergency mortgage loan before any sheriff’s sale.

How a Pennsylvania closing is conducted

Pennsylvania closings are conducted by title agents and settlement companies; attorneys are optional and more common in Philadelphia and Pittsburgh than in rural counties. Title insurance premiums are all-inclusive rates filed by the Title Insurance Rating Bureau of Pennsylvania and approved by the Insurance Department, so the same rate applies whichever insurer is used, and it bundles the search and examination. Pennsylvania is a wet-funding state, with funds collected before the settlement agent records the deed and mortgage at the county recorder of deeds.

Pennsylvania homestead and spousal rules

Pennsylvania is a separate-property, equitable-distribution state; a spouse who is not a borrower is not underwritten. Married owners hold as tenants by the entirety unless the deed says otherwise, which blocks one spouse’s creditors from reaching the home and requires both spouses to sign any mortgage. A non-titled spouse is not normally asked to sign, because Pennsylvania abolished dower and curtesy.

Pennsylvania offers no homestead exemption from creditors: outside bankruptcy the only protections are tenancy by the entirety for married owners and a general $300 exemption under 42 Pa.C.S. § 8123. For property tax, the Taxpayer Relief Act of 2006 funds a homestead and farmstead exclusion, applied by each school district in an amount that varies with gaming revenue and must be claimed by filing with the county assessor, and the Property Tax/Rent Rebate program refunds part of the bill to lower-income seniors and people with disabilities. None of this limits a mortgage lender’s remedies.

What Pennsylvania charges on the note and the deed

Pennsylvania does not tax the mortgage; it is recorded for a per-document fee at the county recorder of deeds. The realty transfer tax on the deed is 1 percent to the state plus a local share that is usually another 1 percent — Philadelphia’s combined rate is well above 4 percent — and by custom buyer and seller split it equally. A refinance therefore avoids transfer tax altogether.

Pennsylvania’s realty transfer tax is 2% in most of the state (1% state plus 1% local), customarily split equally between buyer and seller; Philadelphia’s local rate is higher, bringing the total there above 4%.

Prepayment penalty law in Pennsylvania

Act 6 of 1974, the Loan Interest and Protection Law at 41 P.S. § 405, lets a borrower prepay a residential mortgage loan at any time without penalty when the original principal is at or below the Act’s base figure, which the Department of Banking and Securities indexes every year and which has stood well above $250,000 in recent years — check the current figure. Larger loans fall outside Act 6 and rely on the note and federal qualified-mortgage limits. Act 6 also caps late charges at 4 percent of the overdue payment.

Usury and predatory-lending protections in Pennsylvania

Pennsylvania has no statewide high-cost loan statute and in 2001 preempted Philadelphia’s attempt to adopt one, so HOEPA supplies the triggers. Act 6 nonetheless regulates residential mortgages below its base figure — limiting attorney fees and late charges and requiring notice before foreclosure — and the Mortgage Licensing Act, 7 Pa.C.S. chapter 61, bars licensees from fraud, misrepresentation, and steering, with Department of Banking and Securities enforcement. The Unfair Trade Practices and Consumer Protection Law adds treble damages for deceptive lending.

Pennsylvania’s 6% general limit (Act 6) does not apply to business loans above $10,000, to loans above $50,000, or to loans secured by real estate other than residential owner-occupied property under certain thresholds; hard money lenders operate under the business and loan-size exemptions with contractual freedom on rate.

Checking a Pennsylvania lender’s license

The Pennsylvania Department of Banking and Securities licenses mortgage lenders, brokers, loan correspondents, servicers and originators under the Mortgage Licensing Act, 7 Pa.C.S. chapter 61, through the NMLS. Banks, credit unions and their employees are exempt, and a person financing the sale of a handful of his own properties in a year is generally excluded. Licenses and enforcement orders are searchable on NMLS Consumer Access and the Department’s website.

Disclosures and cure periods under Pennsylvania law

Pennsylvania’s distinctive notices are the Act 6 notice, a 30-day written notice of intention to foreclose that gives the owner of an Act 6 residential mortgage a right to cure up to one hour before the sheriff’s sale, and the Act 91 notice under the Homeowners’ Emergency Mortgage Assistance Program, which tells the owner how to apply to the Pennsylvania Housing Finance Agency for an emergency loan and pauses foreclosure while the application is pending. Foreclosure is judicial, and several counties run court-ordered conciliation conferences. The state adds no rescission period to TRID.

Foreclosure in Pennsylvania, briefly

The state’s foreclosure path is judicial; budget 6 to 14 months to a sale in an ordinary case, longer if contested. The Act 91 notice and HEMAP, the right to cure up to one hour before the sale, county conciliation programs (Philadelphia’s Residential Mortgage Foreclosure Diversion Program is the best known), and the six-month fair-value deficiency rule are Pennsylvania’s protections. The full timeline, redemption and mediation rules are on foreclosure in Pennsylvania; the investor view — usury, licensing exemptions, recovery speed — on hard money in Pennsylvania.

Frequently asked questions

Do I need a lawyer to close a mortgage in Pennsylvania?

Pennsylvania closings are conducted by title agents and settlement companies; attorneys are optional and more common in Philadelphia and Pittsburgh than in rural counties. Even where the state does not require one, a borrower may hire independent counsel to review the note, the security instrument and the title commitment.

Does Pennsylvania allow prepayment penalties on home loans?

Act 6 of 1974, the Loan Interest and Protection Law at 41 P.S. § 405, lets a borrower prepay a residential mortgage loan at any time without penalty when the original principal is at or below the Act’s base figure, which the Department of Banking and Securities indexes every year and which has stood well above $250,000 in recent years — check the current figure. Check the Loan Estimate: the “Prepayment penalty” line on page 1 must say yes or no, and the amount and term if yes.

What does Pennsylvania charge to record a mortgage?

Pennsylvania does not tax the mortgage; it is recorded for a per-document fee at the county recorder of deeds. Pennsylvania’s realty transfer tax is 2% in most of the state (1% state plus 1% local), customarily split equally between buyer and seller; Philadelphia’s local rate is higher, bringing the total there above 4%.

Who licenses mortgage lenders in Pennsylvania?

The Pennsylvania Department of Banking and Securities licenses mortgage lenders, brokers, loan correspondents, servicers and originators under the Mortgage Licensing Act, 7 Pa.C.S. chapter 61, through the NMLS. Every individual originator must also hold an NMLS identifier, printed on the application and the Loan Estimate; it can be checked on NMLS Consumer Access.

Federal layer: TILA / Reg Z · RESPA · TRID disclosures · ECOA · Fair Housing Act · all federal regulations. Buying here: first-time buyer programs in Pennsylvania.