Is Pennsylvania a Wet or Dry Funding State?
Wet funding and dry funding states handle mortgage loans differently. So, what is Pennsylvania, a wet or dry funding state?
Wet funding is a faster lending process, allowing borrowers to receive mortgage funds on the day mortgage documents are signed in Pennsylvania. While it is faster than dry funding, wet funding is also riskier. Predatory lending practices and bad faith acts are more common with wet loans. If you have fallen behind on mortgage payments after getting a wet loan, you can defend yourself against foreclosure with proof of predatory lending. Suppose you do not have a defense against foreclosure. In that case, you can file for bankruptcy, allowing you to repay your lender according to a more manageable payment schedule in Pennsylvania.
Call our Pennsylvania bankruptcy lawyers at 215-639-5297 to have Young, Marr, Mallis & Associates review your case for free today.
Is Pennsylvania a Wet Funding State?
Pennsylvania is a wet funding state, meaning prospective homeowners will receive funds immediately after a loan is approved, allowing them to purchase a home right away. All other processes and documentation regarding a property are completed after the funds are dispersed.
Wet funding states are more common than dry funding states. With a wet loan, borrowers will receive funds more quickly. With dry loans, the process is slower. Although that can seem less preferable initially, it does provide additional protections for borrowers. That is why some states prohibit wet funding altogether.
If you get a wet loan in Pennsylvania, your mortgage will be closed faster. This means you will be tied to a mortgage more immediately, which can become risky in certain situations. Because Pennsylvania is a wet funding state, borrowers do not have the increased protections that come with getting loans in dry funding states.
What Are the Risks with a Wet Funding State Like Pennsylvania?
Although wet loans can speed up the process of getting a mortgage and purchasing a property, there are risks involved. It is important to understand the lack of protections afforded with wet loans so that you do not become the victim of fraud or predatory lending in Pennsylvania.
In dry funding states, the loan is not officially closed when mortgage documents are signed, and funds are not dispersed at that time. Although receiving a dry loan is a longer process, it allows borrowers to do their due diligence and ensure they are not being taken advantage of.
The same is not true of wet funding states. Because the loan will be closed the same day you sign mortgage documents, it is crucial to review the terms of your loan before that date. Our Philadelphia bankruptcy lawyers can assess the proposed mortgage agreement to ensure that you are not agreeing to an arrangement that causes you financial distress.
With wet loans, it is easier for banks and lenders to prey on borrowers. Because the process is much faster, borrowers might be more likely to agree to high-interest rates and mortgage payments that are outside of their financial ability just so they can purchase a property as soon as possible. This can lead to homeowners defaulting on their mortgages in the future, causing them to lose their homes. When this happens, the bank can foreclose on your property. If predatory lending practices were involved in you receiving your wet loan in Pennsylvania, you may be able to prevent mortgage foreclosure.
Identifying Predatory Lending Practices with Wet Loans in Pennsylvania
With wet loans, there is an increased risk of predatory lending practices. To better protect yourself from such activity, it is important that you are able to identify predatory lending practices so that you do not fall victim to them in Pennsylvania.
Federal and state laws protect borrowers from predatory lending practices and govern the rules banks must follow when lending funds to borrowers. Those laws might be broken when lenders use bad faith in giving loans.
Tell-tale signs of bad lending practices include balloon payments, excessive fees, high-interest rates, expensive monthly payments, and pressure from a lender to agree to a mortgage. If you feel your lender is urging you to sign a mortgage agreement too quickly and that unnecessary fees are involved in the process, consult our attorneys.
Sometimes, predatory lending is unclear, and homeowners might be left with a mortgage they cannot pay based on their incomes. This is more common in wet funding states like Pennsylvania because the process is much quicker. Fortunately, our lawyers can use proof of predatory lending as a defense against mortgage foreclosure, allowing you to keep your home even though you have fallen behind on payments.
Dealing with a Bad Wet Loan in Pennsylvania
If you got a wet loan to purchase your home in Pennsylvania and cannot repay it according to your current agreement with your bank, you can protect your home from foreclosure with bankruptcy.
The first step will be negotiating with your lender. Our attorneys may be able to restructure your current mortgage agreement to make monthly payments more manageable for you. You can defend yourself in court if your lender is not open to negotiations and plans to foreclose upon your home because you have entered into mortgage default. However, you may have to file for bankruptcy if you cannot prove predatory lending practices.
With bankruptcy, homeowners can combat bad wet loans by consolidating all of their debts under the same low-interest rate. This can reduce the interest on your missed mortgage payments, allowing you to catch up without paying too much additional interest. This is achievable through Chapter 13 bankruptcy.
With Chapter 7 bankruptcy, dischargeable debts will be erased. This can allow you to focus on repaying a wet loan. If you have other assets you can liquidate, doing so can settle your outstanding mortgage payments in Pennsylvania.
Call Our Lawyers to Learn About Bankruptcy in Pennsylvania
The Allentown, PA bankruptcy lawyers at Young, Marr, Mallis & Associates can assess your case for free when you call 215-639-5297.