[DOCID: f:hr441.110]
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110th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 110-441
======================================================================
MORTGAGE REFORM AND ANTI-PREDATORY LENDING ACT OF 2007
_______
November 9, 2007.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Frank of Massachusetts, from the Committee on Financial Services,
submitted the following
R E P O R T
together with
ADDITIONAL AND DISSENTING VIEWS
[To accompany H.R. 3915]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 3915) to amend the Truth in Lending Act to
reform consumer mortgage practices and provide accountability
for such practices, to establish licensing and registration
requirements for residential mortgage originators, to provide
certain minimum standards for consumer mortgage loans, and for
other purposes, having considered the same, report favorably
thereon with an amendment and recommend that the bill as
amended do pass.
CONTENTS
Page
Amendment........................................................ 2
Purpose and Summary.............................................. 35
Background and Need for Legislation.............................. 36
Hearings......................................................... 38
Committee Consideration.......................................... 42
Committee Votes.................................................. 42
Committee Oversight Findings..................................... 49
Performance Goals and Objectives................................. 49
New Budget Authority, Entitlement Authority, and Tax Expenditures 50
Committee Cost Estimate.......................................... 50
Congressional Budget Office Estimate............................. 50
Federal Mandates Statement....................................... 55
Advisory Committee Statement..................................... 55
Constitutional Authority Statement............................... 56
Applicability to Legislative Branch.............................. 56
Earmark Identification........................................... 56
Section-by-Section Analysis of the Legislation................... 56
Changes in Existing Law Made by the Bill, as Reported............ 58
Additional and Dissenting Views
<SUP><INF>orK._For purposes of this subsection, an individual ``assists a consumer in obtaining or applying to obtain a residential mortgage loan'' by, among other things, advising on loan terms (including rates, fees, other costs), preparing loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan.
I24(C) T4Administrative or clerical tasksK._The term ``administrative or clerical tasks'' means the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the mortgage industry and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan.
I24(D) T4Real estate brokerage activity definedK._The term ``real estate brokerage activity'' means any activity that involves offering or providing real estate brokerage services to the public, including_
I26(i) acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property;
I26(ii) listing or advertising real property for sale, purchase, lease, rental, or exchange;
I26(iii) providing advice in connection with sale, purchase, lease, rental, or exchange of real property;
I26(iv) bri
<SUP><INF>to loan originatorK._For purposes of this subsection, an individual ``assists a consumer in obtaining or applying to obtain a residential mortgage loan'' by, among other things, advising on loan terms (including rates, fees, other costs), preparing loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan.
I24(C) T4Administrative or clerical tasksK._The term ``administrative or clerical tasks'' means the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the mortgage industry and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan.
I24(D) T4Real estate brokerage activity definedK._The term ``real estate brokerage activity'' means any activity that involves offering or providing real estate brokerage services to the public, including_
I26(i) acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property;
I26(ii) listing or advertising real property for sale, purchase, lease, rental, or exchange;
I26(iii) providing advice in connection with sale, purchase, lease, rental, or exchange of real property;
I26(iv) bri
<SUP><INF>ng to obtain a residential mortgage loan'' by, among other things, advising on loan terms (including rates, fees, other costs), preparing loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan.
I24(C) T4Administrative or clerical tasksK._The term ``administrative or clerical tasks'' means the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the mortgage industry and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan.
I24(D) T4Real estate brokerage activity definedK._The term ``real estate brokerage activity'' means any activity that involves offering or providing real estate brokerage services to the public, including_
I26(i) acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property;
I26(ii) listing or advertising real property for sale, purchase, lease, rental, or exchange;
I26(iii) providing advice in connection with sale, purchase, lease, rental, or exchange of real property;
I26(iv) bri
<SUP><INF> other loan originator.
I24(B) T4Other definitions relating to loan originatorK._For purposes of this subsection, an individual ``assists a consumer in obtaining or applying to obtain a residential mortgage loan'' by, among other things, advising on loan terms (including rates, fees, other costs), preparing loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan.I24(C) T4Administrative or clerical tasksK._The term ``administrative or clerical tasks'' means the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the mortgage industry and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan.
I24(C) T4Administrative or clerical tasksK._The term ``administrative or clerical tasks'' means the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the mortgage industry and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan.
I24(D) T4Real estate brokerage activity definedK._The term ``real estate brokerage activity'' means any activity that involves offering or providing real estate brokerage services to the public, including_
I26(i) acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property;
I26(ii) listing or advertising real property for sale, purchase, lease, rental, or exchange;
I26(iii) providing advice in connection with sale, purchase, lease, rental, or exchange of real property;
I26(iv) bri
in accordance with applicable State law, unless the person or entity is compensated by a lender, a mortgage broker, or other loan originator or by any agent of such lender, mortgage broker, or other loan originator.
I24(B) T4Other definitions relating to loan originatorK._For purposes of this subsection, an individual ``assists a consumer in obtaining or applying to obtain a residential mortgage loan'' by, among other things, advising on loan terms (including rates, fees, other costs), preparing loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan.I24(C) T4Administrative or clerical tasksK._The term ``administrative or clerical tasks'' means the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the mortgage industry and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan.
.I24(C) T4Administrative or clerical tasksK._The term ``administrative or clerical tasks'' means the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the mortgage industry and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan.
I24(D) T4Real estate brokerage activity definedK._The term ``real estate brokerage activity'' means any activity that involves offering or providing real estate brokerage services to the public, including_
I26(i) acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property;
I26(ii) listing or advertising real property for sale, purchase, lease, rental, or exchange;
I26(iii) providing advice in connection with sale, purchase, lease, rental, or exchange of real property;
I26(iv) bri<SUP><INF>orK._For purposes of this subsection, an individual ``assists a consumer in obtaining or applying to obtain a residential mortgage loan'' by, among other things, advising on loan terms (including rates, fees, other costs), preparing loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan.
I24(C) T4Administrative or clerical tasksK._The term ``administrative or clerical tasks'' means the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the mortgage industry and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan.
I24(D) T4Real estate brokerage activity definedK._The term ``real estate brokerage activity'' means any activity that involves offering or providing real estate brokerage services to the public, including_
I26(i) acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property;
I26(ii) listing or advertising real property for sale, purchase, lease, rental, or exchange;
I26(iii) providing advice in connection with sale, purchase, lease, rental, or exchange of real property;
I26(iv) briorK._For purposes of this subsection, an individual ``assists a consumer in obtaining or applying to obtain a residential mortgage loan'' by, among other things, advising on loan terms (including rates, fees, other costs), preparing loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan.
I24(C) T4Administrative or clerical tasksK._The term ``administrative or clerical tasks'' means the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the mortgage industry and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan.
I24(D) T4Real estate brokerage activity definedK._The term ``real estate brokerage activity'' means any activity that involves offering or providing real estate brokerage services to the public, including_
I26(i) acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property;
I26(ii) listing or advertising real property for sale, purchase, lease, rental, or exchange;
I26(iii) providing advice in connection with sale, purchase, lease, rental, or exchange of real property;
I26(iv) briorK._For purposes of this subsection, an individual ``assists a consumer in obtaining or applying to obtain a residential mortgage loan'' by, among other things, advising on loan terms (including rates, fees, other costs), preparing loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan.
I24(C) T4Administrative or clerical tasksK._The term ``administrative or clerical tasks'' means the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the mortgage industry and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan.
I24(D) T4Real estate brokerage activity definedK._The term ``real estate brokerage activity'' means any activity that involves offering or providing real estate brokerage services to the public, including_
I26(i) acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property;
I26(ii) listing or advertising real property for sale, purchase, lease, rental, or exchange;
I26(iii) providing advice in connection with sale, purchase, lease, rental, or exchange of real property;
I26(iv) bri
Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Mortgage Reform and
Anti-Predatory Lending Act of 2007''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--RESIDENTIAL MORTGAGE LOAN ORIGINATION
Subtitle A--Licensing System for Residential Mortgage Loan Originators
Sec. 101. Purposes and methods for establishing a mortgage licensing
system and registry.
Sec. 102. Definitions.
Sec. 103. License or registration required.
Sec. 104. State license and registration application and issuance.
Sec. 105. Standards for State license renewal.
Sec. 106. System of registration administration by Federal banking
agencies.
Sec. 107. Secretary of Housing and Urban Development backup authority
to establish a loan originator licensing system.
Sec. 108. Backup authority to establish a nationwide mortgage licensing
and registry system.
Sec. 109. Fees.
Sec. 110. Background checks of loan originators.
Sec. 111. Confidentiality of information.
Sec. 112. Liability provisions.
Sec. 113. Enforcement under HUD backup licensing system.
Subtitle B--Residential Mortgage Loan Origination Standards
Sec. 121. Definitions.
Sec. 122. Residential mortgage loan origination.
Sec. 123. Anti-steering.
Sec. 124. Liability.
Sec. 125. Regulations.
TITLE II--MINIMUM STANDARDS FOR MORTGAGES
Sec. 201. Ability to repay.
Sec. 202. Net tangible benefit for refinancing of residential mortgage
loans.
Sec. 203. Safe harbor and rebuttable presumption.
Sec. 204. Liability.
Sec. 205. Defense to foreclosure.
Sec. 206. Additional standards and requirements.
Sec. 207. Rule of construction.
Sec. 208. Effect on State laws.
Sec. 209. Regulations.
Sec. 210. Amendments to civil liability provisions.
Sec. 211. Required disclosures.
Sec. 212. Authorization of appropriations.
Sec. 213. Effective date.
TITLE III--HIGH-COST MORTGAGES
Sec. 301. Definitions relating to high-cost mortgages.
Sec. 302. Amendments to existing requirements for certain mortgages.
Sec. 303. Additional requirements for certain mortgages.
Sec. 304. Amendment to provision governing correction of errors.
Sec. 305. Regulations.
Sec. 306. Effective date.
TITLE IV--OFFICE OF HOUSING COUNSELING
Sec. 401. Short title.
Sec. 402. Establishment of Office of Housing Counseling.
Sec. 403. Counseling procedures.
Sec. 404. Grants for housing counseling assistance.
Sec. 405. Requirements to use HUD-certified counselors under HUD
programs.
Sec. 406. Study of defaults and foreclosures.
Sec. 407. Definitions for counseling-related programs.
Sec. 408. Updating and simplification of mortgage information booklet.
TITLE V--MORTGAGE DISCLOSURES UNDER REAL ESTATE SETTLEMENT PROCEDURES
ACT OF 1974
Sec. 501. Universal mortgage disclosure in good faith estimate of
settlement services costs.
TITLE I--RESIDENTIAL MORTGAGE LOAN ORIGINATION
Subtitle A--Licensing System for Residential Mortgage Loan Originators
SEC. 101. PURPOSES AND METHODS FOR ESTABLISHING A MORTGAGE LICENSING
SYSTEM AND REGISTRY.
In order to increase uniformity, reduce regulatory burden, enhance
consumer protection, and reduce fraud, the States, through the
Conference of State Bank Supervisors and the American Association of
Residential Mortgage Regulators, are hereby encouraged to establish a
Nationwide Mortgage Licensing System and Registry for the residential
mortgage industry that accomplishes all of the following objectives:
(1) Provides uniform license applications and reporting
requirements for State-licensed loan originators.
(2) Provides a comprehensive licensing and supervisory
database.
(3) Aggregates and improves the flow of information to and
between regulators.
(4) Provides increased accountability and tracking of loan
originators.
(5) Streamlines the licensing process and reduces the
regulatory burden.
(6) Enhances consumer protections and supports anti-fraud
measures.
(7) Provides consumers with easily accessible information
regarding the employment history of, and publicly adjudicated
disciplinary and enforcement actions against, loan originators.
SEC. 102. DEFINITIONS.
For purposes of this subtitle, the following definitions shall apply:
(1) Federal banking agencies.--The term ``Federal banking
agencies'' means the Board of Governors of the Federal Reserve
System, the Comptroller of the Currency, the Director of the
Office of Thrift Supervision, the National Credit Union
Administration, and the Federal Deposit Insurance Corporation.
(2) Depository institution.--The term ``depository
institution'' has the same meaning as in section 3 of the
Federal Deposit Insurance Act and includes any credit union.
(3) Loan originator.--
(A) In general.--The term ``loan originator''--
(i) means an individual who--
(I) takes a residential mortgage loan
application;
(II) assists a consumer in obtaining
or applying to obtain a residential
mortgage loan; or
(III) offers or negotiates terms of a
residential mortgage loan, for direct
or indirect compensation or gain, or in
the expectation of direct or indirect
compensation or gain;
(ii) includes any individual who represents
to the public, through advertising or other
means of communicating or providing information
(including the use of business cards,
stationery, brochures, signs, rate lists, or
other promotional items), that such individual
can or will provide or perform any of the
activities described in clause (i);
(iii) does not include any individual who
performs purely administrative or clerical
tasks and is not otherwise described in this
subparagraph; and
(iv) does not include a person or entity that
only performs real estate brokerage activities
and is licensed or registered in accordance
with applicable State law, unless the person or
entity is compensated by a lender, a mortgage
broker, or other loan originator or by any
agent of such lender, mortgage broker, or other
loan originator.
(B) Other definitions relating to loan originator.--
For purposes of this subsection, an individual
``assists a consumer in obtaining or applying to obtain
a residential mortgage loan'' by, among other things,
advising on loan terms (including rates, fees, other
costs), preparing loan packages, or collecting
information on behalf of the consumer with regard to a
residential mortgage loan.
(C) Administrative or clerical tasks.--The term
``administrative or clerical tasks'' means the receipt,
collection, and distribution of information common for
the processing or underwriting of a loan in the
mortgage industry and communication with a consumer to
obtain information necessary for the processing or
underwriting of a residential mortgage loan.
(D) Real estate brokerage activity defined.--The term
``real estate brokerage activity'' means any activity
that involves offering or providing real estate
brokerage services to the public, including--
(i) acting as a real estate agent or real
estate broker for a buyer, seller, lessor, or
lessee of real property;
(ii) listing or advertising real property for
sale, purchase, lease, rental, or exchange;
(iii) providing advice in connection with
sale, purchase, lease, rental, or exchange of
real property;
(iv) bringing together parties interested in
the sale, purchase, lease, rental, or exchange
of real property;
(v) negotiating, on behalf of any party, any
portion of a contract relating to the sale,
purchase, lease, rental, or exchange of real
property (other than in connection with
providing financing with respect to any such
transaction);
(vi) engaging in any activity for which a
person engaged in the activity is required to
be registered or licensed as a real estate
agent or real estate broker under any
applicable law; and
(vii) offering to engage in any activity, or
act in any capacity, described in clause (i),
(ii), (iii), (iv), (v), or (vi).
(4) Loan processor or underwriter.--
(A) In general.--The term ``loan processor or
underwriter'' means an individual who performs clerical
or support duties at the direction of and subject to
the supervision and instruction of--
(i) a State-licensed loan originator; or
(ii) a registered loan originator.
(B) Clerical or support duties.--For purposes of
subparagraph (A), the term ``clerical or support
duties'' may include--
(i) the receipt, collection, distribution,
and analysis of information common for the
processing or underwriting of a residential
mortgage loan; and
(ii) communicating with a consumer to obtain
the information necessary for the processing or
underwriting of a loan, to the extent that such
communication does not include offering or
negotiating loan rates or terms, or counseling
consumers about residential mortgage loan rates
or terms.
(5) Nationwide mortgage licensing system and registry.--The
term ``Nationwide Mortgage Licensing System and Registry''
means a mortgage licensing system developed and maintained by
the Conference of State Bank Supervisors and the American
Association of Residential Mortgage Regulators for the State
licensing and registration of State-licensed loan originators
and the registration of registered loan originators or any
system established by the Secretary under section 108.
(6) Registered loan originator.--The term ``registered loan
originator'' means any individual who--
(A) meets the definition of loan originator and is an
employee of a depository institution or a subsidiary of
a depository institution; and
(B) is registered with, and maintains a unique
identifier through, the Nationwide Mortgage Licensing
System and Registry.
(7) Residential mortgage loan.--The term ``residential
mortgage loan'' means any loan primarily for personal, family,
or household use that is secured by a mortgage, deed of trust,
or other equivalent consensual security interest on a dwelling
(as defined in section 103(v) of the Truth in Lending Act) or
residential real estate upon which is constructed or intended
to be constructed a dwelling (as so defined).
(8) Secretary.--The term ``Secretary'' means the Secretary of
Housing and Urban Development.
(9) State-licensed loan originator.--The term ``State-
licensed loan originator'' means any individual who--
(A) is a loan originator;
(B) is not an employee of a depository institution or
any subsidiary of a depository institution; and
(C) is licensed by a State or by the Secretary under
section 107 and registered as a loan originator with,
and maintains a unique identifier through, the
Nationwide Mortgage Licensing System and Registry.
(10) Unique identifier.--The term ``unique identifier'' means
a number or other identifier that--
(A) permanently identifies a loan originator; and
(B) is assigned by protocols established by the
Nationwide Mortgage Licensing System and Registry and
the Federal banking agencies to facilitate electronic
tracking of loan originators and uniform identification
of, and public access to, the employment history of and
the publicly adjudicated disciplinary and enforcement
actions against loan originators.
SEC. 103. LICENSE OR REGISTRATION REQUIRED.
(a) In General.--An individual may not engage in the business of a
loan originator without first--
(1) obtaining and maintaining--
(A) a registration as a registered loan originator;
or
(B) a license and registration as a State-licensed
loan originator; and
(2) obtaining a unique identifier.
(b) Loan Processors and Underwriters.--
(1) Supervised loan processors and underwriters.--A loan
processor or underwriter who does not represent to the public,
through advertising or other means of communicating or
providing information (including the use of business cards,
stationery, brochures, signs, rate lists, or other promotional
items), that such individual can or will perform any of the
activities of a loan originator shall not be required to be a
State-licensed loan originator or a registered loan originator.
(2) Independent contractors.--A loan processor or underwriter
may not work as an independent contractor unless such processor
or underwriter is a State-licensed loan originator or a
registered loan originator.
SEC. 104. STATE LICENSE AND REGISTRATION APPLICATION AND ISSUANCE.
(a) Background Checks.--In connection with an application to any
State for licensing and registration as a State-licensed loan
originator, the applicant shall, at a minimum, furnish to the
Nationwide Mortgage Licensing System and Registry information
concerning the applicant's identity, including--
(1) fingerprints for submission to the Federal Bureau of
Investigation, and any governmental agency or entity authorized
to receive such information for a State and national criminal
history background check; and
(2) personal history and experience, including authorization
for the System to obtain--
(A) an independent credit report obtained from a
consumer reporting agency described in section 603(p)
of the Fair Credit Reporting Act; and
(B) information related to any administrative, civil
or criminal findings by any governmental jurisdiction.
(b) Issuance of License.--The minimum standards for licensing and
registration as a State-licensed loan originator shall include the
following:
(1) The applicant has not had a loan originator or similar
license revoked in any governmental jurisdiction during the 5-
year period immediately preceding the filing of the present
application.
(2) The applicant has not been convicted, pled guilty or nolo
contendere in a domestic, foreign, or military court of a
felony during the 7-year period immediately preceding the
filing of the present application.
(3) The applicant has demonstrated financial responsibility,
character, and general fitness such as to command the
confidence of the community and to warrant a determination that
the loan originator will operate honestly, fairly, and
efficiently within the purposes of this subtitle.
(4) The applicant has completed the pre-licensing education
requirement described in subsection (c).
(5) The applicant has passed a written test that meets the
test requirement described in subsection (d).
(c) Pre-Licensing Education of Loan Originators.--
(1) Minimum educational requirements.--In order to meet the
pre-licensing education requirement referred to in subsection
(b)(4), a person shall complete at least 20 hours of education
approved in accordance with paragraph (2), which shall include
at least 3 hours of Federal law and regulations and 3 hours of
ethics.
(2) Approved educational courses.--For purposes of paragraph
(1), pre-licensing education courses shall be reviewed,
approved and published by the Nationwide Mortgage Licensing
System and Registry.
(d) Testing of Loan Originators.--
(1) In general.--In order to meet the written test
requirement referred to in subsection (b)(5), an individual
shall pass, in accordance with the standards established under
this subsection, a qualified written test developed and
administered by the Nationwide Mortgage Licensing System and
Registry.
(2) Qualified test.--A written test shall not be treated as a
qualified written test for purposes of paragraph (1) unless--
(A) the test consists of a minimum of 100 questions;
and
(B) the test adequately measures the applicant's
knowledge and comprehension in appropriate subject
areas, including--
(i) ethics;
(ii) Federal law and regulation pertaining to
mortgage origination; and
(iii) State law and regulation pertaining to
mortgage origination.
(3) Minimum competence.--
(A) Passing score.--An individual shall not be
considered to have passed a qualified written test
unless the individual achieves a test score of not less
than 75 percent correct answers to questions.
(B) Initial retests.--An individual may retake a test
3 consecutive times with each consecutive taking
occurring in less than 14 days after the preceding
test.
(C) Subsequent retests.--After 3 consecutive tests,
an individual shall wait at least 14 days before taking
the test again.
(D) Retest after lapse of license.--A State-licensed
loan originator who fails to maintain a valid license
for a period of 5 years or longer shall retake the
test, not taking into account any time during which
such individual is a registered loan originator.
SEC. 105. STANDARDS FOR STATE LICENSE RENEWAL.
(a) In General.--The minimum standards for license renewal for State-
licensed loan originators shall include the following:
(1) The loan originator continues to meet the minimum
standards for license issuance.
(2) The loan originator has satisfied the annual continuing
education requirements described in subsection (b).
(b) Continuing Education for State-Licensed Loan Originators.--
(1) In general.--In order to meet the annual continuing
education requirements referred to in subsection (a)(2), a
State-licensed loan originator shall complete at least 8 hours
of education approved in accordance with paragraph (2), which
shall include at least 3 hours of Federal law and regulations
and 2 hours of ethics.
(2) Approved educational courses.--For purposes of paragraph
(1), continuing education courses shall be reviewed, approved,
and published by the Nationwide Mortgage Licensing System and
Registry.
(3) Calculation of continuing education credits.--A State-
licensed loan originator--
(A) may only receive credit for a continuing
education course in the year in which the course is
taken; and
(B) may not take the same approved course in the same
or successive years to meet the annual requirements for
continuing education.
(4) Instructor credit.--A State-licensed loan originator who
is approved as an instructor of an approved continuing
education course may receive credit for the originator's own
annual continuing education requirement at the rate of 2 hours
credit for every 1 hour taught.
SEC. 106. SYSTEM OF REGISTRATION ADMINISTRATION BY FEDERAL BANKING
AGENCIES.
(a) Development.--
(1) In general.--The Federal banking agencies shall jointly
develop and maintain a system for registering employees of
depository institutions or subsidiaries of depository
institutions as registered loan originators with the Nationwide
Mortgage Licensing System and Registry. The system shall be
implemented before the end of the 1-year period beginning on
the date of the enactment of this Act.
(2) Registration requirements.--In connection with the
registration of any loan originator who is an employee of a
depository institution or a subsidiary of a depository
institution with the Nationwide Mortgage Licensing System and
Registry, the appropriate Federal banking agency shall, at a
minimum, furnish or cause to be furnished to the Nationwide
Mortgage Licensing System and Registry information concerning
the employees's identity, including--
(A) fingerprints for submission to the Federal Bureau
of Investigation, and any governmental agency or entity
authorized to receive such information for a State and
national criminal history background check; and
(B) personal history and experience, including--
(i) an independent credit report obtained
from a consumer reporting agency described in
section 603(p) of the Fair Credit Reporting
Act; and
(ii) information related to any
administrative, civil or criminal findings by
any governmental jurisdiction.
(b) Unique Identifier.--The Federal banking agencies, through the
Financial Institutions Examination Council, shall coordinate with the
Nationwide Mortgage Licensing System and Registry to establish
protocols for assigning a unique identifier to each registered loan
originator that will facilitate electronic tracking and uniform
identification of, and public access to, the employment history of and
publicly adjudicated disciplinary and enforcement actions against loan
originators.
(c) Consideration of Factors and Procedures.--In establishing the
registration procedures under subsection (a) and the protocols for
assigning a unique identifier to a registered loan originator, the
Federal banking agencies shall make such de minimis exceptions as may
be appropriate to paragraphs (1)(A) and (2) of section 103(a), shall
make reasonable efforts to utilize existing information to minimize the
burden of registering loan originators, and shall consider methods for
automating the process to the greatest extent practicable consistent
with the purposes of this subtitle.
SEC. 107. SECRETARY OF HOUSING AND URBAN DEVELOPMENT BACKUP AUTHORITY
TO ESTABLISH A LOAN ORIGINATOR LICENSING SYSTEM.
(a) Back up Licensing System.--If, by the end of the 1-year period,
or the 2-year period in the case of a State whose legislature meets
only biennially, beginning on the date of the enactment of this Act or
at any time thereafter, the Secretary determines that a State does not
have in place by law or regulation a system for licensing and
registering loan originators that meets the requirements of sections
104 and 105 and subsection (d) or does not participate in the
Nationwide Mortgage Licensing System and Registry, the Secretary shall
provide for the establishment and maintenance of a system for the
licensing and registration by the Secretary of loan originators
operating in such State as State-licensed loan originators.
(b) Licensing and Registration Requirements.--The system established
by the Secretary under subsection (a) for any State shall meet the
requirements of sections 104 and 105 for State-licensed loan
originators.
(c) Unique Identifier.--The Secretary shall coordinate with the
Nationwide Mortgage Licensing System and Registry to establish
protocols for assigning a unique identifier to each loan originator
licensed by the Secretary as a State-licensed loan originator that will
facilitate electronic tracking and uniform identification of, and
public access to, the employment history of and the publicly
adjudicated disciplinary and enforcement actions against loan
originators.
(d) State Licensing Law Requirements.--For purposes of this section,
the law in effect in a State meets the requirements of this subsection
if the Secretary determines the law satisfies the following minimum
requirements:
(1) A State loan originator supervisory authority is
maintained to provide effective supervision and enforcement of
such law, including the suspension, termination, or nonrenewal
of a license for a violation of State or Federal law.
(2) The State loan originator supervisory authority ensures
that all State-licensed loan originators operating in the State
are registered with Nationwide Mortgage Licensing System and
Registry.
(3) The State loan originator supervisory authority is
required to regularly report violations of such law, as well as
enforcement actions and other relevant information, to the
Nationwide Mortgage Licensing System and Registry.
(e) Temporary Extension of Period.--The Secretary may extend, by not
more than 6 months, the 1-year or 2-year period, as the case may be,
referred to in subsection (a) for the licensing of loan originators in
any State under a State licensing law that meets the requirements of
sections 104 and 105 and subsection (d) if the Secretary determines
that such State is making a good faith effort to establish a State
licensing law that meets such requirements, license mortgage
originators under such law, and register such originators with the
Nationwide Mortgage Licensing System and Registry.
(f) Limitation on HUD-Licensed Loan Originators.--Any loan originator
who is licensed by the Secretary under a system established under this
section for any State may not use such license to originate loans in
any other State.
SEC. 108. BACKUP AUTHORITY TO ESTABLISH A NATIONWIDE MORTGAGE LICENSING
AND REGISTRY SYSTEM.
If at any time the Secretary determines that the Nationwide Mortgage
Licensing System and Registry is failing to meet the requirements and
purposes of this subtitle for a comprehensive licensing, supervisory,
and tracking system for loan originators, the Secretary shall establish
and maintain such a system to carry out the purposes of this subtitle
and the effective registration and regulation of loan originators.
SEC. 109. FEES.
The Federal banking agencies, the Secretary, and the Nationwide
Mortgage Licensing System and Registry may charge reasonable fees to
cover the costs of maintaining and providing access to information from
the Nationwide Mortgage Licensing System and Registry to the extent
such fees are not charged to consumers for access such system and
registry.
SEC. 110. BACKGROUND CHECKS OF LOAN ORIGINATORS.
(a) Access to Records.--Notwithstanding any other provision of law,
in providing identification and processing functions, the Attorney
General shall provide access to all criminal history information to the
appropriate State officials responsible for regulating State-licensed
loan originators to the extent criminal history background checks are
required under the laws of the State for the licensing of such loan
originators.
(b) Agent.--For the purposes of this section and in order to reduce
the points of contact which the Federal Bureau of Investigation may
have to maintain for purposes of subsection (a), the Conference of
State Bank Supervisors or a wholly owned subsidiary may be used as a
channeling agent of the States for requesting and distributing
information between the Department of Justice and the appropriate State
agencies.
SEC. 111. CONFIDENTIALITY OF INFORMATION.
(a) System Confidentiality.--Except as otherwise provided in this
section, any requirement under Federal or State law regarding the
privacy or confidentiality of any information or material provided to
the Nationwide Mortgage Licensing System and Registry or a system
established by the Secretary under section 108, and any privilege
arising under Federal or State law (including the rules of any Federal
or State court) with respect to such information or material, shall
continue to apply to such information or material after the information
or material has been disclosed to the system. Such information and
material may be shared with all State and Federal regulatory officials
with mortgage industry oversight authority without the loss of
privilege or the loss of confidentiality protections provided by
Federal and State laws.
(b) Nonapplicability of Certain Requirements.--Information or
material that is subject to a privilege or confidentiality under
subsection (a) shall not be subject to--
(1) disclosure under any Federal or State law governing the
disclosure to the public of information held by an officer or
an agency of the Federal Government or the respective State; or
(2) subpoena or discovery, or admission into evidence, in any
private civil action or administrative process, unless with
respect to any privilege held by the Nationwide Mortgage
Licensing System and Registry or the Secretary with respect to
such information or material, the person to whom such
information or material pertains waives, in whole or in part,
in the discretion of such person, that privilege.
(c) Coordination With Other Law.--Any State law, including any State
open record law, relating to the disclosure of confidential supervisory
information or any information or material described in subsection (a)
that is inconsistent with subsection (a) shall be superseded by the
requirements of such provision to the extent State law provides less
confidentiality or a weaker privilege.
(d) Public Access to Information.--This section shall not apply with
respect to the information or material relating to the employment
history of, and publicly adjudicated disciplinary and enforcement
actions against, loan originators that is included in Nationwide
Mortgage Licensing System and Registry for access by the public.
SEC. 112. LIABILITY PROVISIONS.
The Secretary, any State official or agency, any Federal banking
agency, or any organization serving as the administrator of the
Nationwide Mortgage Licensing System and Registry or a system
established by the Secretary under section 108, or any officer or
employee of any such entity, shall not be subject to any civil action
or proceeding for monetary damages by reason of the good-faith action
or omission of any officer or employee of any such entity, while acting
within the scope of office or employment, relating to the collection,
furnishing, or dissemination of information concerning persons who are
loan originators or are applying for licensing or registration as loan
originators.
SEC. 113. ENFORCEMENT UNDER HUD BACKUP LICENSING SYSTEM.
(a) Summons Authority.--The Secretary may--
(1) examine any books, papers, records, or other data of any
loan originator operating in any State which is subject to a
licensing system established by the Secretary under section
107; and
(2) summon any loan originator referred to in paragraph (1)
or any person having possession, custody, or care of the
reports and records relating to such loan originator, to appear
before the Secretary or any delegate of the Secretary at a time
and place named in the summons and to produce such books,
papers, records, or other data, and to give testimony, under
oath, as may be relevant or material to an investigation of
such loan originator for compliance with the requirements of
this subtitle.
(b) Examination Authority.--
(1) In general.--If the Secretary establishes a licensing
system under section 107 for any State, the Secretary shall
appoint examiners for the purposes of administering such
section.
(2) Power to examine.--Any examiner appointed under paragraph
(1) shall have power, on behalf of the Secretary, to make any
examination of any loan originator operating in any State which
is subject to a licensing system established by the Secretary
under section 107 whenever the Secretary determines an
examination of any loan originator is necessary to determine
the compliance by the originator with this subtitle.
(3) Report of examination.--Each examiner appointed under
paragraph (1) shall make a full and detailed report of
examination of any loan originator examined to the Secretary.
(4) Administration of oaths and affirmations; evidence.--In
connection with examinations of loan originators operating in
any State which is subject to a licensing system established by
the Secretary under section 107, or with other types of
investigations to determine compliance with applicable law and
regulations, the Secretary and examiners appointed by the
Secretary may administer oaths and affirmations and examine and
take and preserve testimony under oath as to any matter in
respect to the affairs of any such loan originator.
(5) Assessments.--The cost of conducting any examination of
any loan originator operating in any State which is subject to
a licensing system established by the Secretary under section
107 shall be assessed by the Secretary against the loan
originator to meet the Secretary's expenses in carrying out
such examination.
(c) Cease and Desist Proceeding.--
(1) Authority of secretary.--If the Secretary finds, after
notice and opportunity for hearing, that any person is
violating, has violated, or is about to violate any provision
of this subtitle, or any regulation thereunder, with respect to
a State which is subject to a licensing system established by
the Secretary under section 107, the Secretary may publish such
findings and enter an order requiring such person, and any
other person that is, was, or would be a cause of the
violation, due to an act or omission the person knew or should
have known would contribute to such violation, to cease and
desist from committing or causing such violation and any future
violation of the same provision, rule, or regulation. Such
order may, in addition to requiring a person to cease and
desist from committing or causing a violation, require such
person to comply, or to take steps to effect compliance, with
such provision or regulation, upon such terms and conditions
and within such time as the Secretary may specify in such
order. Any such order may, as the Secretary deems appropriate,
require future compliance or steps to effect future compliance,
either permanently or for such period of time as the Secretary
may specify, with such provision or regulation with respect to
any loan originator.
(2) Hearing.--The notice instituting proceedings pursuant to
paragraph (1) shall fix a hearing date not earlier than 30 days
nor later than 60 days after service of the notice unless an
earlier or a later date is set by the Secretary with the
consent of any respondent so served.
(3) Temporary order.--Whenever the Secretary determines that
the alleged violation or threatened violation specified in the
notice instituting proceedings pursuant to paragraph (1), or
the continuation thereof, is likely to result in significant
dissipation or conversion of assets, significant harm to
consumers, or substantial harm to the public interest prior to
the completion of the proceedings, the Secretary may enter a
temporary order requiring the respondent to cease and desist
from the violation or threatened violation and to take such
action to prevent the violation or threatened violation and to
prevent dissipation or conversion of assets, significant harm
to consumers, or substantial harm to the public interest as the
Secretary deems appropriate pending completion of such
proceedings. Such an order shall be entered only after notice
and opportunity for a hearing, unless the Secretary determines
that notice and hearing prior to entry would be impracticable
or contrary to the public interest. A temporary order shall
become effective upon service upon the respondent and, unless
set aside, limited, or suspended by the Secretary or a court of
competent jurisdiction, shall remain effective and enforceable
pending the completion of the proceedings.
(4) Review of temporary orders.--
(A) Review by secretary.--At any time after the
respondent has been served with a temporary cease-and-
desist order pursuant to paragraph (3), the respondent
may apply to the Secretary to have the order set aside,
limited, or suspended. If the respondent has been
served with a temporary cease-and-desist order entered
without a prior hearing before the Secretary, the
respondent may, within 10 days after the date on which
the order was served, request a hearing on such
application and the Secretary shall hold a hearing and
render a decision on such application at the earliest
possible time.
(B) Judicial review.--Within--
(i) 10 days after the date the respondent was
served with a temporary cease-and-desist order
entered with a prior hearing before the
Secretary; or
(ii) 10 days after the Secretary renders a
decision on an application and hearing under
paragraph (1), with respect to any temporary
cease-and-desist order entered without a prior
hearing before the Secretary,
the respondent may apply to the United States district
court for the district in which the respondent resides
or has its principal place of business, or for the
District of Columbia, for an order setting aside,
limiting, or suspending the effectiveness or
enforcement of the order, and the court shall have
jurisdiction to enter such an order. A respondent
served with a temporary cease-and-desist order entered
without a prior hearing before the Secretary may not
apply to the court except after hearing and decision by
the Secretary on the respondent's application under
subparagraph (A).
(C) No automatic stay of temporary order.--The
commencement of proceedings under subparagraph (B)
shall not, unless specifically ordered by the court,
operate as a stay of the Secretary's order.
(5) Authority of the secretary to prohibit persons from
serving as loan originators.--In any cease-and-desist
proceeding under paragraph (1), the Secretary may issue an
order to prohibit, conditionally or unconditionally, and
permanently or for such period of time as the Secretary shall
determine, any person who has violated this subtitle or
regulations thereunder, from acting as a loan originator if the
conduct of that person demonstrates unfitness to serve as a
loan originator.
(d) Authority of the Secretary to Assess Money Penalties.--
(1) In general.--The Secretary may impose a civil penalty on
a loan originator operating in any State which is subject to
licensing system established by the Secretary under section 107
if the Secretary finds, on the record after notice and
opportunity for hearing, that such loan originator has violated
or failed to comply with any requirement of this subtitle or
any regulation prescribed by the Secretary under this subtitle
or order issued under subsection (c).
(2) Maximum amount of penalty.--The maximum amount of penalty
for each act or omission described in paragraph (1) shall be
$5,000 for each day the violation continues.
Subtitle B--Residential Mortgage Loan Origination Standards
SEC. 121. DEFINITIONS.
Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is amended
by adding at the end the following new subsection:
``(cc) Definitions Relating to Mortgage Origination and Residential
Mortgage Loans.--
``(1) Commission.--Unless otherwise specified, the term
`Commission' means the Federal Trade Commission.
``(2) Federal banking agencies.--The term `Federal banking
agencies' means the Board of Governors of the Federal Reserve
System, the Comptroller of the Currency, the Director of the
Office of Thrift Supervision, the Federal Deposit Insurance
Corporation, and the National Credit Union Administration
Board.
``(3) Mortgage originator.--The term `mortgage originator'--
``(A) means any person who--
``(i) takes a residential mortgage loan
application;
``(ii) assists a consumer in obtaining or
applying to obtain a residential mortgage loan;
or
``(iii) offers or negotiates terms of a
residential mortgage loan, for direct or
indirect compensation or gain, or in the
expectation of direct or indirect compensation
or gain;
``(B) includes any person who represents to the
public, through advertising or other means of
communicating or providing information (including the
use of business cards, stationery, brochures, signs,
rate lists, or other promotional items), that such
person can or will provide any of the services or
perform any of the activities described in subparagraph
(A); and
``(C) does not include any person who is not
otherwise described in subparagraph (A) or (B) and who
performs purely administrative or clerical tasks on
behalf of a person who is described in any such
subparagraph.
``(4) Nationwide mortgage licensing system and registry.--The
term `Nationwide Mortgage Licensing System and Registry' has
the same meaning as in section 102(5) of the Mortgage Reform
and Anti-Predatory Lending Act of 2007.
``(5) Other definitions relating to mortgage originator.--For
purposes of this subsection, a person `assists a consumer in
obtaining or applying to obtain a residential mortgage loan'
by, among other things, advising on residential mortgage loan
terms (including rates, fees, and other costs), preparing
residential mortgage loan packages, or collecting information
on behalf of the consumer with regard to a residential mortgage
loan.
``(6) Residential mortgage loan.--The term `residential
mortgage loan' means any consumer credit transaction that is
secured by a mortgage, deed of trust, or other equivalent
consensual security interest on a dwelling or on residential
real property that includes a dwelling, other than a consumer
credit transaction under an open end credit plan or a reverse
mortgage.
``(7) Secretary.--The term `Secretary', when used in
connection with any transaction or person involved with a
residential mortgage loan, means the Secretary of Housing and
Urban Development.
``(8) Securitization vehicle.--The term `securitization
vehicle' means a trust, corporation, partnership, limited
liability entity, or special purpose entity that--
``(A) is the issuer, or is created by the issuer, of
mortgage pass-through certificates, participation
certificates, mortgage-backed securities, or other
similar securities backed by a pool of assets that
includes residential mortgage loans; and
``(B) holds such loans.
``(9) Securitizer.--The term `securitizer' means the person
that transfers, conveys, or assigns, or causes the transfer,
conveyance, or assignment of, residential mortgage loans,
including through a special purpose vehicle, to any
securitization vehicle, excluding any trustee that holds such
loans solely for the benefit of the securitization vehicle.''.
SEC. 122. RESIDENTIAL MORTGAGE LOAN ORIGINATION.
(a) In General.--Chapter 2 of the Truth in Lending Act (15 U.S.C.
1631 et seq.) is amended by inserting after section 129 the following
new section:
``Sec. 129A. Residential mortgage loan origination
``(a) Duty of Care.--
``(1) Standard.--Subject to regulations prescribed under this
subsection, each mortgage originator shall, in addition to the
duties imposed by otherwise applicable provisions of State or
Federal law--
``(A) be qualified, registered, and, when required,
licensed as a mortgage originator in accordance with
applicable State or Federal law including subtitle A of
title I of the Mortgage Reform and Anti-Predatory
Lending Act of 2007;
``(B) with respect to each consumer seeking or
inquiring about a residential mortgage loan, diligently
work to present the consumer with a range of
residential mortgage loan products for which the
consumer likely qualifies and which are appropriate to
the consumer's existing circumstances, based on
information known by, or obtained in good faith by, the
originator;
``(C) make full, complete, and timely disclosure to
each such consumer of--
``(i) the comparative costs and benefits of
each residential mortgage loan product offered,
discussed, or referred to by the originator;
``(ii) the nature of the originator's
relationship to the consumer (including the
cost of the services to be provided by the
originator and a statement that the mortgage
originator is or is not acting as an agent for
the consumer, as the case may be); and
``(iii) any relevant conflicts of interest;
``(D) certify to the creditor, with respect to any
transaction involving a residential mortgage loan, that
the mortgage originator has fulfilled all requirements
applicable to the originator under this section with
respect to the transaction; and
``(E) include the unique identifier of the originator
provided by the Nationwide Mortgage Licensing System
and Registry on all loan documents.
``(2) Clarification of extent of duty to present range of
products and appropriate products.--
``(A) No duty to offer products for which originator
is not authorized to take an application.--Paragraph
(1)(B) shall not be construed as requiring--
``(i) a mortgage originator to present to any
consumer any specific residential mortgage loan
product that is offered by a creditor which
does not accept consumer referrals from, or
consumer applications submitted by or through,
such originator; or
``(ii) a creditor to offer products that the
creditor does not offer to the general public.
``(B) Appropriate loan product.--For purposes of
paragraph (1)(B), a residential mortgage loan shall be
presumed to be appropriate for a consumer if--
``(i) the mortgage originator determines in
good faith, based on then existing information
and without undergoing a full underwriting
process, that the consumer has a reasonable
ability to repay and receives a net tangible
benefit (as determined in accordance with
regulations prescribed under section 129B(a));
and
``(ii) the loan does not have predatory
characteristics or effects (such as equity
stripping and excessive fees and abusive terms)
as determined in accordance with regulations
prescribed under paragraph (4).
``(3) Rules of construction.--No provision of this subsection
shall be construed as--
``(A) creating an agency or fiduciary relationship
between a mortgage originator and a consumer if the
originator does not hold himself or herself out as such
an agent or fiduciary; or
``(B) restricting a mortgage originator from holding
himself or herself out as an agent or fiduciary of a
consumer subject to any additional duty, requirement,
or limitation applicable to agents or fiduciaries under
any Federal or State law.
``(4) Regulations.--
``(A) In general.--The Federal banking agencies, in
consultation with the Secretary and the Commission,
shall jointly prescribe regulations to--
``(i) further define the duty established
under paragraph (1);
``(ii) implement the requirements of this
subsection;
``(iii) establish the time period within
which any disclosure required under paragraph
(1) shall be made to the consumer; and
``(iv) establish such other requirements for
any mortgage originator as such regulatory
agencies may determine to be appropriate to
meet the purposes of this subsection.
``(B) Complementary and nonduplicative disclosures.--
The agencies referred to in subparagraph (A) shall
endeavor to make the required disclosures to consumers
under this subsection complementary and nonduplicative
with other disclosures for mortgage consumers to the
extent such efforts--
``(i) are practicable; and
``(ii) do not reduce the value of any such
disclosure to recipients of such disclosures.
``(5) Compliance procedures required.--The Federal banking
agencies shall prescribe regulations requiring depository
institutions to establish and maintain procedures reasonably
designed to assure and monitor the compliance of such
depository institutions, the subsidiaries of such institutions,
and the employees of such institutions or subsidiaries with the
requirements of this section and the registration procedures
established under section 106 of the Mortgage Reform and Anti-
Predatory Lending Act of 2007.''.
(b) Clerical Amendment.--The table of sections for chapter 2 of the
Truth in Lending Act is amended by inserting after the item relating to
section 129 the following new item:
``129A. Residential mortgage loan origination.''.
SEC. 123. ANTI-STEERING.
Section 129A of the Truth in Lending Act (as added by section 122(a))
is amended by inserting after subsection (a) the following new
subsection:
``(b) Prohibition on Steering Incentives.--
``(1) In general.--No mortgage originator may receive from
any person, and no person may pay to any mortgage originator,
directly or indirectly, any incentive compensation (including
yield spread premium) that is based on, or varies with, the
terms (other than the amount of principal) of any loan that is
not a qualified mortgage (as defined in section 129B(c)(3)).
``(2) Anti-steering regulations.--The Federal banking
agencies, in consultation with the Secretary and the
Commission, shall jointly prescribe regulations to prohibit--
``(A) mortgage originators from steering any consumer
to a residential mortgage loan that--
``(i) the consumer lacks a reasonable ability
to repay;
``(ii) does not provide the consumer with a
net tangible benefit; or
``(iii) has predatory characteristics or
effects (such as equity stripping, excessive
fees, or abusive terms);
``(B) mortgage originators from steering any consumer
from a residential mortgage loan for which the consumer
is qualified that is a qualified mortgage (as defined
in section 129B(c)(3)) to a residential mortgage loan
that is not a qualified mortgage; and
``(C) abusive or unfair lending practices that
promote disparities among consumers of equal credit
worthiness but of different race, ethnicity, gender, or
age.
``(3) Rules of construction.--No provision of this subsection
shall be construed as--
``(A) limiting or affecting the ability of a mortgage
originator to sell residential mortgage loans to
subsequent purchasers;
``(B) restricting a consumer's ability to finance
origination fees to the extent that such fees were
fully disclosed to the consumer earlier in the
application process and do not vary based on the terms
of the loan or the consumer's decision about whether to
finance such fees; or
``(C) prohibiting incentive payments to a mortgage
originator based on the number of residential mortgage
loans originated within a specified period of time.''.
SEC. 124. LIABILITY.
Section 129A of the Truth in Lending Act is amended by inserting
after subsection (b) (as added by section 123) the following new
subsection:
``(c) Liability for Violations.--
``(1) In general.--For purposes of providing a cause of
action for any failure by a mortgage originator to comply with
any requirement imposed under this section and any regulation
prescribed under this section, subsections (a) and (b) of
section 130 shall be applied with respect to any such failure
by substituting `mortgage originator' for `creditor' each place
such term appears in each such subsection
``(2) Maximum.--The maximum amount of any liability of a
mortgage originator under paragraph (1) to a consumer for any
violation of this section shall not exceed an amount equal to 3
times the total amount of direct and indirect compensation or
gain accruing to the mortgage originator in connection with the
residential mortgage loan involved in the violation, plus the
costs to the consumer of the action, including a reasonable
attorney's fee.''.
SEC. 125. REGULATIONS.
The regulations required or authorized to be prescribed under this
title or the amendments made by this title--
(1) shall be prescribed in final form before the end of the
12-month period beginning on the date of the enactment of this
Act; and
(2) shall take effect not later than 18 months after the date
of the enactment of this Act
TITLE II--MINIMUM STANDARDS FOR MORTGAGES
SEC. 201. ABILITY TO REPAY.
(a) In General.--Chapter 2 of the Truth in Lending Act (15 U.S.C.
1631 et seq.) is amended by inserting after section 129A (as added by
section 122(a)) the following new section:
``Sec. 129B. Minimum standards for residential mortgage loans
``(a) Ability To Repay.--
``(1) In general.--In accordance with regulations prescribed
jointly by the Federal banking agencies, in consultation with
the Commission, no creditor may make a residential mortgage
loan unless the creditor makes a reasonable and good faith
determination based on verified and documented information
that, at the time the loan is consummated, the consumer has a
reasonable ability to repay the loan, according to its terms,
and all applicable taxes, insurance, and assessments.
``(2) Multiple loans.--If the creditor knows, or has reason
to know, that 1 or more residential mortgage loans secured by
the same dwelling will be made to the same consumer, the
creditor shall make a reasonable and good faith determination,
based on verified and documented information, that the consumer
has a reasonable ability to repay the combined payments of all
loans on the same dwelling according to the terms of those
loans and all applicable taxes, insurance, and assessments.
``(3) Basis for determination.--A determination under this
subsection of a consumer's ability to repay a residential
mortgage loan shall be based on consideration of the consumer's
credit history, current income, expected income the consumer is
reasonably assured of receiving, current obligations, debt-to-
income ratio, employment status, and other financial resources
other than the consumer's equity in the dwelling or real
property that secures repayment of the loan.
``(4) Nonstandard loans.--
``(A) Variable rate loans that defer repayment of any
principal or interest.--For purposes of determining,
under this subsection, a consumer's ability to repay a
variable rate residential mortgage loan that allows or
requires the consumer to defer the repayment of any
principal or interest, the creditor shall take into
consideration a fully amortizing repayment schedule.
``(B) Interest-only loans.--For purposes of
determining, under this subsection, a consumer's
ability to repay a residential mortgage loan that
permits or requires the payment of interest only, the
creditor shall take into consideration the payment
amount required to amortize the loan by its final
maturity.
``(C) Calculation for negative amortization.--In
making any determination under this subsection, a
creditor shall also take into consideration any balance
increase that may accrue from any negative amortization
provision.
``(D) Calculation process.--For purposes of making
any determination under this subsection, a creditor
shall calculate the monthly payment amount for
principal and interest on any residential mortgage loan
by assuming--
``(i) the loan proceeds are fully disbursed
on the date of the consummation of the loan;
``(ii) the loan is to be repaid in
substantially equal monthly amortizing payments
for principal and interest over the entire term
of the loan with no balloon payment, unless the
loan contract requires more rapid repayment
(including balloon payment), in which case the
contract's repayment schedule shall be used in
this calculation; and
``(iii) the interest rate over the entire
term of the loan is a fixed rate equal to the
fully indexed rate at the time of the loan
closing, without considering the introductory
rate.
``(5) Fully-indexed rate defined.--For purposes of this
subsection, the term `fully indexed rate' means the index rate
prevailing on a residential mortgage loan at the time the loan
is made plus the margin that will apply after the expiration of
any introductory interest rates.''.
(b) Clerical Amendment.--The table of sections for chapter 2 of the
Truth in Lending Act is amended by inserting after the item relating to
section 129A (as added by section 122(b)) the following new item:
``129B. Minimum standards for residential mortgage loans.''.
SEC. 202. NET TANGIBLE BENEFIT FOR REFINANCING OF RESIDENTIAL MORTGAGE
LOANS.
Section 129B of the Truth in Lending Act (as added by section 201(a))
is amended by inserting after subsection (a) the following new
subsection:
``(b) Net Tangible Benefit for Refinancing of Residential Mortgage
Loans.--
``(1) In general.--In accordance with regulations prescribed
under paragraph (3), no creditor may extend credit in
connection with any residential mortgage loan that involves a
refinancing of a prior existing residential mortgage loan
unless the creditor reasonably and in good faith determines, at
the time the loan is consummated and on the basis of
information known by or obtained in good faith by the creditor,
that the refinanced loan will provide a net tangible benefit to
the consumer.
``(2) Certain loans providing no net tangible benefit.--A
residential mortgage loan that involves a refinancing of a
prior existing residential mortgage loan shall not be
considered to provide a net tangible benefit to the consumer if
the costs of the refinanced loan, including points, fees and
other charges, exceed the amount of any newly advanced
principal without any corresponding changes in the terms of the
refinanced loan that are advantageous to the consumer.
``(3) Net tangible benefit.--The Federal banking agencies
shall jointly prescribe regulations defining the term `net
tangible benefit' for purposes of this subsection.''.
SEC. 203. SAFE HARBOR AND REBUTTABLE PRESUMPTION.
Section 129B of the Truth in Lending Act is amended by inserting
after subsection (b) (as added by section 202) the following new
subsection:
``(c) Presumption of Ability to Repay and Net Tangible Benefit.--
``(1) In general.--Any creditor with respect to any
residential mortgage loan, and any assignee or securitizer of
such loan, may presume that the loan has met the requirements
of subsections (a) and (b), if the loan is a qualified mortgage
or a qualified safe harbor mortgage.
``(2) Rebuttable presumption.--Any presumption established
under paragraph (1) with respect to any residential mortgage
loan shall be rebuttable only--
``(A) against the creditor of such loan; and
``(B) if such loan is a qualified safe harbor
mortgage.
``(3) Definitions.--For purposes of this section the
following definitions shall apply:
``(A) Most recent conventional mortgage rate.--The
term `most recent conventional mortgage rate' means the
contract interest rate on commitments for fixed-rate
first mortgages most recently published in the Federal
Reserve Statistical Release on selected interest rates
(daily or weekly), and commonly referred to as the H.15
release (or any successor publication), in the week
preceding a date of determination for purposes of
applying this subsection.
``(B) Qualified mortgage.--The term `qualified
mortgage' means--
``(i) any residential mortgage loan that
constitutes a first lien on the dwelling or
real property securing the loan and either--
``(I) has an annual percentage rate
that does not equal or exceed the yield
on securities issued by the Secretary
of the Treasury under chapter 31 of
title 31, United States Code, that bear
comparable periods of maturity by more
than 3 percentage points; or
``(II) has an annual percentage rate
that does not equal or exceed the most
recent conventional mortgage rate, or
such other annual percentage rate as
may be established by regulation under
paragraph (6), by more than 175 basis
points;
``(ii) any residential mortgage loan that is
not the first lien on the dwelling or real
property securing the loan and either--
``(I) has an annual percentage rate
that does not equal or exceed the yield
on securities issued by the Secretary
of the Treasury under chapter 31 of
title 31, United States Code, that bear
comparable periods of maturity by more
than 5 percentage points; or
``(II) has an annual percentage rate
that does not equal or exceed the most
recent conventional mortgage rate, or
such other annual percentage rate as
may be established by regulation under
paragraph (6), by more than 375 basis
points; and
``(iii) a loan made or guaranteed by the
Secretary of Veterans Affairs.
``(C) Qualified safe harbor mortgage.--The term
`qualified safe harbor mortgage' means any residential
mortgage loan--
``(i) for which the income and financial
resources of the consumer are verified and
documented;
``(ii) for which the residential mortgage
loan underwriting process is based on the
fully-indexed rate, and takes into account all
applicable taxes, insurance, and assessments;
``(iii) which does not provide for a
repayment schedule that results in negative
amortization at any time;
``(iv) meets such other requirements as may
be established by regulation; and
``(v) for which any of the following factors
apply with respect to such loan:
``(I) The periodic payment amount for
principal and interest are fixed for a
minimum of 5 years under the terms of
the loan.
``(II) In the case of a variable rate
loan, the annual percentage rate varies
based on a margin that is less than 3
percent over a single generally
accepted interest rate index that is
the basis for determining the rate of
interest for the mortgage.
``(III) The loan does not cause the
consumer's total monthly debts,
including amounts under the loan, to
exceed a percentage established by
regulation of his or her monthly gross
income or such other maximum percentage
of such income as may be prescribed by
regulation under paragraph (6).
``(4) Determination of comparison to treasury securities.--
``(A) In general.--Without regard to whether a
residential mortgage loan is subject to or reportable
under the Home Mortgage Disclosure Act of 1975 and
subject to subparagraph (B), the difference between the
annual percentage rate of such loan and the yield on
securities issued by the Secretary of the Treasury
under chapter 31 of title 31, United States Code,
having comparable periods of maturity shall be
determined using the same procedures and methods of
calculation applicable to loans that are subject to the
reporting requirements under the Home Mortgage
Disclosure Act of 1975.
``(B) Date of determination of yield.--The yield on
the securities referred to in subparagraph (A) shall be
determined, for purposes of such subparagraph and
paragraph (3) with respect to any residential mortgage
loan, as of the 15th day of the month preceding the
month in which a completed application is submitted for
such loan.
``(5) APR in case of introductory offer.--For purposes of
making a determination of whether a residential mortgage loan
that provides for a fixed interest rate for an introductory
period and then resets or adjusts to a variable rate is a
qualified mortgage, the determination of the annual percentage
rate, as determined in accordance with regulations prescribed
by the Board under section 107, shall be based on the greater
of the introductory rate and the fully indexed rate of
interest.
``(6) Regulations.--
``(A) In general.--The Federal banking agencies shall
jointly prescribe regulations to carry out the purposes
of this subsection.
``(B) Revision of safe harbor criteria.--The Federal
banking agencies may jointly prescribe regulations that
revise, add to, or subtract from the criteria that
define a qualified mortgage and a qualified safe harbor
mortgage to the extent necessary and appropriate to
effectuate the purposes of this subsection, to prevent
circumvention or evasion of this subsection, or to
facilitate compliance with this subsection.
``(7) Rule of construction.--No provision of this subsection
may be construed as implying that a residential mortgage loan
may be presumed to violate subsection (a) or (b) if such loan
is not a qualified mortgage or a qualified safe harbor
mortgage.''.
SEC. 204. LIABILITY.
Section 129B of the Truth in Lending Act is amended by inserting
after subsection (c) (as added by section 203) the following new
subsection:
``(d) Liability for Violations.--
``(1) In general.--
``(A) Rescission.--In addition to any other liability
under this title for a violation by a creditor of
subsection (a) or (b) (for example under section 130)
and subject to the statute of limitations in paragraph
(7), a civil action may be maintained against a
creditor for a violation of subsection (a) or (b) with
respect to a residential mortgage loan for the
rescission of the loan, and such additional costs as
the obligor may have incurred as a result of the
violation and in connection with obtaining a rescission
of the loan, including a reasonable attorney's fee.
``(B) Cure.--A creditor shall not be liable for
rescission under subparagraph (A) with respect to a
residential mortgage loan if, no later than 90 days
after the receipt of notification from the consumer
that the loan violates subsection (a) or (b), the
creditor provides a cure.
``(2) Limited assignee and securitizer liability.--
Notwithstanding sections 125(e) and 131 and except as provided
in paragraph (3), a civil action which may be maintained
against a creditor with respect to a residential mortgage loan
for a violation of subsection (a) or (b) may be maintained
against any assignee or securitizer of such residential
mortgage loan, who has acted in good faith, for the following
liabilities only:
``(A) Rescission of the loan.
``(B) Such additional costs as the obligor may have
incurred as a result of the violation and in connection
with obtaining a rescission of the loan, including a
reasonable attorney's fee.
``(3) Assignee and securitizer exemption.--No assignee or
securitizer of a residential mortgage loan shall be liable
under paragraph (2) with respect to such loan if--
``(A) no later than 90 days after the receipt of
notification from the consumer that the loan violates
subsection (a) or (b), the assignee or securitizer
provides a cure so that the loan satisfies the
requirements of subsections (a) and (b); or
``(B) each of the following conditions are met:
``(i) The assignee or securitizer--
``(I) has a policy against buying
residential mortgage loans other than
qualified mortgages or qualified safe
harbor mortgages (as defined in
subsection (c));
``(II) the policy is intended to
verify seller or assignor compliance
with the representations and warranties
required under clause (ii); and
``(III) in accordance with
regulations which the Federal banking
agencies and the Securities and
Exchange Commission shall jointly
prescribe, exercises reasonable due
diligence to adhere to such policy in
purchasing residential mortgage loans,
including through adequate, thorough,
and consistently applied sampling
procedures.
``(ii) The contract under which such assignee
or securitizer acquired the residential
mortgage loan from a seller or assignor of the
loan contains representations and warranties
that the seller or assignor--
``(I) is not selling or assigning any
residential mortgage loan which is not
a qualified mortgage or a qualified
safe harbor mortgage; or
``(II) is a beneficiary of a
representation and warranty from a
previous seller or assignor to that
effect,
and the assignee or securitizer in good faith
takes reasonable steps to obtain the benefit of
such representation or warranty.
``(4) Cure defined.--For purposes of this subsection, the
term `cure' means, with respect to a residential mortgage loan
that violates subsection (a) or (b), the modification or
refinancing, at no cost to the consumer, of the loan to provide
terms that would have satisfied the requirements of subsection
(a) and (b) if the loan had contained such terms as of the
origination of the loan.
``(5) Disagreement over cure.--If any creditor, assignee, or
securitizer and a consumer fail to reach agreement on a cure
with respect to a residential mortgage loan that violates
subsection (a) or (b), or the consumer fails to accept a cure
proffered by a creditor, assignee, or securitizer--
``(A) the creditor, assignee, or securitizer may
provide the cure; and
``(B) the consumer may challenge the adequacy of the
cure during the 6-month period beginning when the cure
is provided.
If the consumer's challenge, under this paragraph, of a cure is
successful, the creditor, assignee, or securitizer shall be
liable to the consumer for rescission of the loan and such
additional costs under paragraph (2).
``(6) Inability to provide rescission.--If a creditor,
assignee, or securitizer cannot provide rescission under
paragraph (1) or (2), the liability of such creditor, assignee,
or securitizer shall be met by providing the financial
equivalent of a rescission, together with such additional costs
as the obligor may have incurred as a result of the violation
and in connection with obtaining a rescission of the loan,
including a reasonable attorney's fee.
``(7) No class actions against assignee or securitizer under
paragraph (2).--Only individual actions may be brought against
an assignee or securitizer of a residential mortgage loan for a
violation of subsection (a) or (b).
``(8) Statute of limitations.--The liability of a creditor,
assignee, or securitizer under this subsection shall apply in
any original action against a creditor under paragraph (1) or
an assignee or securitizer under paragraph (2) which is brought
before--
``(A) in the case of any residential mortgage loan
other than a loan to which subparagraph (B) applies,
the end of the 3-year period beginning on the date the
loan is consummated; or
``(B) in the case of a residential mortgage loan that
provides for a fixed interest rate for an introductory
period and then resets or adjusts to a variable rate or
that provides for a nonamortizing payment schedule and
then converts to an amortizing payment schedule, the
earlier of--
``(i) the end of the 1-year period beginning
on the date of such reset, adjustment, or
conversion; or
``(ii) the end of the 6-year period beginning
on the date the loan is consummated.
``(9) Pools and investors in pools excluded.--In the case of
residential mortgage loans acquired or aggregated for the
purpose of including such loans in a pool of assets held for
the purpose of issuing or selling instruments representing
interests in such pools including through a securitization
vehicle, the terms `assignee' and `securitizer', as used in
this section, do not include the securitization vehicle, the
pools of such loans or any original or subsequent purchaser of
any interest in the securitization vehicle or any instrument
representing a direct or indirect interest in such pool.''.
SEC. 205. DEFENSE TO FORECLOSURE.
Section 129B of the Truth in Lending Act is amended by inserting
after subsection (d) (as added by section 204) the following new
subsection:
``(e) Defense to Foreclosure.--Notwithstanding any other provision of
law--
``(1) when the holder of a residential mortgage loan or
anyone acting for such holder initiates a judicial or
nonjudicial foreclosure--
``(A) a consumer who has the right to rescind under
this section with respect to such loan against the
creditor or any assignee or securitizer may assert such
right as a defense to foreclosure or counterclaim to
such foreclosure against the holder, or
``(B) if the foreclosure proceeding begins after the
end of the period during which a consumer may bring an
action for rescission under subsection (d), the
consumer may seek actual damages incurred by reason of
the violation which gave rise to the right of
rescission, together with costs of the action,
including a reasonable attorney's fee against the
creditor or any assignee or securitizer; and
``(2) such holder or anyone acting for such holder or any
other applicable third party may sell, transfer, convey, or
assign a residential mortgage loan to a creditor, any assignee,
or any securitizer, or their designees, to effect a rescission
or cure.''.
SEC. 206. ADDITIONAL STANDARDS AND REQUIREMENTS.
(a) In General.--Section 129B of the Truth in Lending Act is amended
by inserting after subsection (e) (as added by section 205) the
following new subsections:
``(f) Prohibition on Certain Prepayment Penalties.--
``(1) Prohibited on certain loans.--A residential mortgage
loan that is not a qualified mortgage (as defined in subsection
(c)) may not contain terms under which a consumer must pay a
prepayment penalty for paying all or part of the principal
after the loan is consummated.
``(2) Prohibited after initial period on loans with a
reset.--A qualified mortgage with a fixed interest rate for an
introductory period that adjusts or resets after such period
may not contain terms under which a consumer must pay a
prepayment penalty for paying all or part of the principal
after the beginning of the 3-month period ending on the date of
the adjustment or reset.
``(g) Single Premium Credit Insurance Prohibited.--No creditor may
finance, directly or indirectly, in connection with any residential
mortgage loan or with any extension of credit under an open end
consumer credit plan secured by the principal dwelling of the consumer
(other than a reverse mortgage), any credit life, credit disability,
credit unemployment or credit property insurance, or any other
accident, loss-of-income, life or health insurance, or any payments
directly or indirectly for any debt cancellation or suspension
agreement or contract, except that insurance premiums or debt
cancellation or suspension fees calculated and paid in full on a
monthly basis shall not be considered financed by the creditor.
``(h) Arbitration.--
``(1) In general.--No residential mortgage loan and no
extension of credit under an open end consumer credit plan
secured by the principal dwelling of the consumer, other than a
reverse mortgage, may include terms which require arbitration
or any other nonjudicial procedure as the method for resolving
any controversy or settling any claims arising out of the
transaction.
``(2) Post-controversy agreements.--Subject to paragraph (3),
paragraph (1) shall not be construed as limiting the right of
the consumer and the creditor, any assignee, or any securitizer
to agree to arbitration or any other nonjudicial procedure as
the method for resolving any controversy at any time after a
dispute or claim under the transaction arises.
``(3) No waiver of statutory cause of action.--No provision
of any residential mortgage loan or of any extension of credit
under an open end consumer credit plan secured by the principal
dwelling of the consumer (other than a reverse mortgage), and
no other agreement between the consumer and the creditor
relating to the residential mortgage loan or extension of
credit referred to in paragraph (1), shall be applied or
interpreted so as to bar a consumer from bringing an action in
an appropriate district court of the United States, or any
other court of competent jurisdiction, pursuant to section 130
or any other provision of law, for damages or other relief in
connection with any alleged violation of this section, any
other provision of this title, or any other Federal law.
``(i) Duty of Securitizer to Retain Access to Loans.--Any securitizer
shall reserve the right and preserve an ability, in any document or
contract establishing any pool of assets that includes any residential
mortgage loan--
``(1) to identify and obtain access to any such loan in the
pool; and
``(2) to provide for and obtain a remedy under this title for
the obligor under any such loan.
``(j) Effect of Foreclosure on Preexisting Lease.--
``(1) In general.--In the case of any foreclosure on any
dwelling or residential real property securing an extension of
credit made under a contract entered into after the date of the
enactment of the Mortgage Reform and Anti-Predatory Lending Act
of 2007, any successor in interest in such property pursuant to
the foreclosure shall assume such interest subject to--
``(A) any bona fide lease made to a bona fide tenant
entered into before the notice of foreclosure; and
``(B) the rights of any bona fide tenant without a
lease or with a lease terminable at will under State
law and the provision, by the successor in interest, of
a notice to vacate to the tenant at least 90 days
before the effective date of the notice.
``(2) Bona fide lease or tenancy.--For purposes of this
section, a lease or tenancy shall be considered bona fide only
if--
``(A) the lease or tenancy was the result of an arms-
length transaction; or
``(B) the lease or tenancy requires the tenant to pay
rent that is not substantially less than fair market
rent for the property.
``(k) Mortgages With Negative Amortization.--No creditor may extend
credit to a first-time borrower in connection with a consumer credit
transaction under an open or closed end consumer credit plan secured by
a dwelling or residential real property that includes a dwelling, other
than a reverse mortgage, that provides or permits a payment plan that
may, at any time over the term of the extension of credit, result in
negative amortization unless, before such transaction is consummated--
``(1) the creditor provides the consumer with a statement
that--
``(A) the pending transaction will or may, as the
case may be, result in negative amortization;
``(B) describes negative amortization in such manner
as the Federal banking agencies shall prescribe;
``(C) negative amortization increases the outstanding
principal balance of the account; and
``(D) negative amortization reduces the consumer's
equity in the dwelling or real property; and
``(2) the consumer provides the creditor with sufficient
documentation to demonstrate that the consumer received
homeownership counseling from organizations or counselors
certified by the Secretary of Housing and Urban Development as
competent to provide such counseling.
``(l) Annual Contact Information.--At least once annually and
whenever there is a change in ownership of a residential mortgage loan,
the servicer with respect to a residential mortgage loan shall provide
a written notice to the consumer identifying the name of the creditor
or any assignee or securitizer who should be contacted by the consumer
for any reason concerning the consumer's rights with respect to the
loan.''.
(b) Conforming Amendment Relating to Enforcement.--Section 108(a) of
the Truth in Lending Act (15 U.S.C. 1607(a)) is amended by inserting
after paragraph (6) the following new paragraph:
``(7) sections 21B and 21C of the Securities Exchange Act of
1934, in the case of a broker or dealer, other than a
depository institution, by the Securities and Exchange
Commission.''.
SEC. 207. RULE OF CONSTRUCTION.
Except as otherwise expressly provided in section 129A or 129B of the
Truth in Lending Act (as added by this Act), no provision of such
section 129A or 129B shall be construed as superseding, repealing, or
affecting any duty, right, obligation, privilege, or remedy of any
person under any other provision of the Truth in Lending Act or any
other provision of Federal or State law.
SEC. 208. EFFECT ON STATE LAWS.
(a) In General.--Section 129B(d) of the Truth in Lending Act (as
added by section 204) shall supersede any State law that provides
additional remedies against any assignee, securitizer, or
securitization vehicle, and the remedies described in such section
shall constitute the sole remedies against any assignee, securitizer,
or securitization vehicle, for a violation of subsection (a) or (b) of
section 129B of such Act (relating to ability to repay or net tangible
benefit) or any other State law arising out of or relating to the
specific subject matter of subsection (a) or (b) of such section 129B.
(b) Rule of Construction.--No provision of this section shall be
construed as limiting the application of any State law against a
creditor. Nor shall any provision of this section be construed as
limiting the application of any State law against any assignee,
securitizer, or securitization vehicle that does not arise out of or
relate to, or provide additional remedies in connection with, the
specific subject matter of subsection (a) or (b) of section 129B of the
Truth in Lending Act.
SEC. 209. REGULATIONS.
Regulations required or authorized to be prescribed under this title
or the amendments made by this title--
(1) shall be prescribed in final form before the end of the
12-month period beginning on the date of the enactment of this
Act; and
(2) shall take effect not later than 18 months after the date
of the enactment of this Act.
SEC. 210. AMENDMENTS TO CIVIL LIABILITY PROVISIONS.
(a) Increase in Amount of Civil Money Penalties for Certain
Violations.--Section 130(a)(2) of the Truth in Lending Act (15 U.S.C.
1640(a)(2)) is amended--
(1) by striking ``$100'' and inserting ``$200'';
(2) by striking ``$1,000'' and inserting ``$2,000''
(3) by striking ``$200'' and inserting ``$400'';
(4) by striking ``$2,000'' and inserting ``$4,000''; and
(5) by striking ``$500,000'' and inserting ``$1,000,000''.
(b) Statute of Limitations Extended for Section 129 Violations.--
Section 130(e) of the Truth in Lending Act (15 U.S.C. 1640(e)) is
amended--
(1) in the first sentence, by striking ``Any action'' and
inserting ``Except as provided in the subsequent sentence, any
action''; and
(2) by inserting after the first sentence the following new
sentence: ``Any action under this section with respect to any
violation of section 129 may be brought in any United States
district court, or in any other court of competent
jurisdiction, before the end of the 3-year period beginning on
the date of the occurrence of the violation.''.
SEC. 211. REQUIRED DISCLOSURES.
(a) Additional Information.--Section 128(a) of Truth in Lending Act
(15 U.S.C. 1638(a)) is amended by adding at the end the following new
paragraphs:
``(16) In the case of an extension of credit that is secured
by the dwelling of a consumer, under which the annual rate of
interest is variable, or with respect to which the regular
payments may otherwise be variable, in addition to the other
disclosures required under this subsection, the disclosures
provided under this subsection shall state the maximum amount
of the regular required payments on the loan, based on the
maximum interest rate allowed, introduced with the following
language in conspicuous type size and format: `Your payment can
go as high as $__', the blank to be filled in with the maximum
possible payment amount.
``(17) In the case of a residential mortgage loan for which
an escrow or impound account will be established for the
payment of all applicable taxes, insurance, and assessments,
the following statement: `Your payments will be increased to
cover taxes and insurance. In the first year, you will pay an
additional $__ [insert the amount of the monthly payment to the
account] every month to cover the costs of taxes and
insurance.'.
``(18) In the case of a variable rate residential mortgage
loan for which an escrow or impound account will be established
for the payment of all applicable taxes, insurance, and
assessments--
``(A) the amount of initial monthly payment due under
the loan for the payment of principal and interest, and
the amount of such initial monthly payment including
the monthly payment deposited in the account for the
payment of all applicable taxes, insurance, and
assessments; and
``(B) the amount of the fully indexed monthly payment
due under the loan for the payment of principal and
interest, and the amount of such fully indexed monthly
payment including the monthly payment deposited in the
account for the payment of all applicable taxes,
insurance, and assessments.
``(19) In the case of a residential mortgage loan, the
aggregate amount of settlement charges for all settlement
services provided in connection with the loan, the amount of
charges that are included in the loan and the amount of such
charges the borrower must pay at closing, the approximate
amount of the wholesale rate of funds in connection with the
loan, and the aggregate amount of other fees or required
payments in connection with the loan.
``(20) In the case of a residential mortgage loan, the
aggregate amount of fees paid to the mortgage originator in
connection with the loan, the amount of such fees paid directly
by the consumer, and any additional amount received by the
originator from the creditor based on the interest rate of the
loan.''.
(b) Timing.--Section 128(b) of the Truth in Lending Act (15 U.S.C.
1638(b)) is amended by adding at the end the following new paragraph:
``(4) Residential mortgage loan disclosures.--In the case of
a residential mortgage loan, the information required to be
disclosed under subsection (a) with respect to such loan shall
be disclosed before the earlier of--
``(A) the time required under the first sentence of
paragraph (1); or
``(B) the end of the 3-day period beginning on the
date the application for the loan from a consumer is
received by the creditor.''.
(c) Enhanced Mortgage Loan Disclosures.--Section 128(b)(2) of the
Truth in Lending Act (15 U.S.C. 1638(b)(2)) is amended--
(1) by striking ``(2) In the'' and inserting the following:
``(2) Mortgage disclosures.--
``(A) In general.--In the'';
(2) by striking ``a residential mortgage transaction, as
defined in section 103(w)'' and inserting ``any extension of
credit that is secured by the dwelling of a consumer'';
(3) by striking ``shall be made in accordance'' and all that
follows through ``extended, or'';
(4) by striking ``If the'' and all that follows through the
end of the paragraph and inserting the following new
subparagraphs:
``(B) Statement and timing of disclosures.--In the
case of an extension of credit that is secured by the
dwelling of a consumer, in addition to the other
disclosures required by subsection (a), the disclosures
provided under this paragraph shall state in
conspicuous type size and format, the following: `You
are not required to complete this agreement merely
because you have received these disclosures or signed a
loan application.'.
``(i) state in conspicuous type size and
format, the following: `You are not required to
complete this agreement merely because you have
received these disclosures or signed a loan
application.'; and
``(ii) be furnished to the borrower not later
than 7 business days before the date of
consummation of the transaction, subject to
subparagraph (D).
``(C) Variable rates or payment schedules.--In the
case of an extension of credit that is secured by the
dwelling of a consumer, under which the annual rate of
interest is variable, or with respect to which the
regular payments may otherwise be variable, in addition
to the other disclosures required by subsection (a),
the disclosures provided under this paragraph shall
label the payment schedule as follows: `Payment
Schedule: Payments Will Vary Based on Interest Rate
Changes.'.
``(D) Updating apr.--In any case in which the
disclosure statement provided 7 business days before
the date of consummation of the transaction contains an
annual percentage rate of interest that is no longer
accurate, as determined under section 107(c), the
creditor shall furnish an additional, corrected
statement to the borrower, not later than 3 business
days before the date of consummation of the
transaction.''.
SEC. 212. AUTHORIZATION OF APPROPRIATIONS.
For fiscal years 2008, 2009, 2010, 2011, and 2012, there are
authorized to be appropriated to the Attorney General a total of--
(1) $31,250,000 to support the employment of 30 additional
agents of the Federal Bureau of Investigation and 2 additional
dedicated prosecutors at the Department of Justice to
coordinate prosecution of mortgage fraud efforts with the
offices of the United States Attorneys; and
(2) $750,000 to support the operations of interagency task
forces of the Federal Bureau of Investigation in the areas with
the 15 highest concentrations of mortgage fraud.
SEC. 213. EFFECTIVE DATE.
The amendments made by this title shall apply to transactions
consummated on or after the effective date of the regulations specified
in Section 209.
TITLE III--HIGH-COST MORTGAGES
SEC. 301. DEFINITIONS RELATING TO HIGH-COST MORTGAGES.
(a) High-Cost Mortgage Defined.--Section 103(aa) of the Truth in
Lending Act (15 U.S.C. 1602(aa)) is amended by striking all that
precedes paragraph (2) and inserting the following:
``(aa) High-Cost Mortgage.--
``(1) Definition.--
``(A) In general.--The term `high-cost mortgage', and
a mortgage referred to in this subsection, means a
consumer credit transaction that is secured by the
consumer's principal dwelling, other than a reverse
mortgage transaction, if--
``(i) in the case of a credit transaction
secured--
``(I) by a first mortgage on the
consumer's principal dwelling, the
annual percentage rate at consummation
of the transaction will exceed by more
than 8 percentage points the yield on
Treasury securities having comparable
periods of maturity on the 15th day of
the month immediately preceding the
month in which the application for the
extension of credit is received by the
creditor; or
``(II) by a subordinate or junior
mortgage on the consumer's principal
dwelling, the annual percentage rate at
consummation of the transaction will
exceed by more than 10 percentage
points the yield on Treasury securities
having comparable periods of maturity
on the 15th day of the month
immediately preceding the month in
which the application for the extension
of credit is received by the creditor;
``(ii) the total points and fees payable in
connection with the transaction exceed--
``(I) in the case of a transaction
for $20,000 or more, 5 percent (8
percent if the dwelling is personal
property) of the total transaction
amount; or
``(II) in the case of a transaction
for less than $20,000, the lesser of 8
percent of the total transaction amount
or $1,000; or
``(iii) the credit transaction documents
permit the creditor to charge or collect
prepayment fees or penalties more than 36
months after the transaction closing or such
fees or penalties exceed, in the aggregate,
more than 2 percent of the amount prepaid.
``(B) Introductory rates taken into account.--For
purposes of subparagraph (A)(i), the annual percentage
rate of interest shall be determined based on the
following interest rate:
``(i) In the case of a fixed-rate transaction
in which the annual percentage rate will not
vary during the term of the loan, the interest
rate in effect on the date of consummation of
the transaction.
``(ii) In the case of a transaction in which
the rate of interest varies solely in
accordance with an index, the interest rate
determined by adding the index rate in effect
on the date of consummation of the transaction
to the maximum margin permitted at any time
during the transaction agreement.
``(iii) In the case of any other transaction
in which the rate may vary at any time during
the term of the loan for any reason, the
interest charged on the transaction at the
maximum rate that may be charged during the
term of the transaction.''.
(b) Adjustment of Percentage Points.--Section 103(aa)(2) of the Truth
in Lending Act (15 U.S.C. 1602(aa)(2)) is amended by striking
subparagraph (B) and inserting the following new subparagraph:
``(B) An increase or decrease under subparagraph
(A)--
``(i) may not result in the number of
percentage points referred to in paragraph
(1)(A)(i)(I) being less than 6 percentage
points or greater than 10 percentage points;
and
``(ii) may not result in the number of
percentage points referred to in paragraph
(1)(A)(i)(II) being less than 8 percentage
points or greater than 12 percentage points.''.
(c) Points and Fees Defined.--
(1) In general.--Section 103(aa)(4) of the Truth in Lending
Act (15 U.S.C. 1602(aa)(4)) is amended--
(A) by striking subparagraph (B) and inserting the
following:
``(B) all compensation paid directly or indirectly by
a consumer or creditor to a mortgage broker from any
source, including a mortgage originator that originates
a loan in the name of the originator in a table-funded
transaction;'';
(B) in subparagraph (C)(ii), by inserting ``except
where applied to the charges set forth in section
106(e)(1) where a creditor may receive indirect
compensation solely as a result of obtaining
distributions of profits from an affiliated entity
based on its ownership interest in compliance with
section 8(c)(4) of the Real Estate Settlement
Procedures Act of 1974'' before the semicolon at the
end;
(C) in subparagraph (C)(iii), by striking ``; and''
and inserting ``, except as provided for in clause
(ii);''.
(D) by redesignating subparagraph (D) as subparagraph
(G); and
(E) by inserting after subparagraph (C) the following
new subparagraphs:
``(D) premiums or other charges payable at or before
closing for any credit life, credit disability, credit
unemployment, or credit property insurance, or any
other accident, loss-of-income, life or health
insurance, or any payments directly or indirectly for
any debt cancellation or suspension agreement or
contract, except that insurance premiums or debt
cancellation or suspension fees calculated and paid in
full on a monthly basis shall not be considered
financed by the creditor;
``(E) except as provided in subsection (cc), the
maximum prepayment fees and penalties which may be
charged or collected under the terms of the credit
transaction;
``(F) all prepayment fees or penalties that are
incurred by the consumer if the loan refinances a
previous loan made or currently held by the same
creditor or an affiliate of the creditor; and''.
(2) Calculation of points and fees for open-end consumer
credit plans.--Section 103(aa) of the Truth in Lending Act (15
U.S.C. 1602(aa)) is amended--
(A) by redesignating paragraph (5) as paragraph (6);
and
(B) by inserting after paragraph (4) the following
new paragraph:
``(5) Calculation of points and fees for open-end consumer
credit plans.--In the case of open-end consumer credit plans,
points and fees shall be calculated, for purposes of this
section and section 129, by adding the total points and fees
known at or before closing, including the maximum prepayment
penalties which may be charged or collected under the terms of
the credit transaction, plus the minimum additional fees the
consumer would be required to pay to draw down an amount equal
to the total credit line.''.
(d) High Cost Mortgage Lender.--Section 103(f) of the Truth in
Lending Act (15 U.S.C. 1602(f)) is amended by striking the last
sentence and inserting the following new sentence: ``Any person who
originates or brokers 2 or more mortgages referred to in subsection
(aa) in any 12-month period, any person who originates 1 or more such
mortgages through a mortgage broker in any 12 month period, or, in
connection with a table funding transaction of such a mortgage, any
person to whom the obligation is initially assigned at or after
settlement shall be considered to be a creditor for purposes of this
title.''.
(e) Bona Fide Discount Loan Discount Points and Prepayment
Penalties.--Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is
amended by inserting after subsection (cc) (as added by section 121)
the following new subsection:
``(dd) Bona Fide Discount Points and Prepayment Penalties.--For the
purposes of determining the amount of points and fees for purposes of
subsection (aa), either the amounts described in paragraphs (1) or (4)
of the following paragraphs, but not both, may be excluded:
``(1) Exclusion of bona fide discount points.--The discount
points described in 1 of the following subparagraphs shall be
excluded from determining the amounts of points and fees with
respect to a high-cost mortgage for purposes of subsection
(aa):
``(A) Up to and including 2 bona fide discount points
payable by the consumer in connection with the
mortgage, but only if the interest rate from which the
mortgage's interest rate will be discounted does not
exceed by more than 1 percentage point the required net
yield for a 90-day standard mandatory delivery
commitment for a reasonably comparable loan from either
the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation, whichever is
greater.
``(B) Unless 2 bona fide discount points have been
excluded under subparagraph (A), up to and including 1
bona fide discount point payable by the consumer in
connection with the mortgage, but only if the interest
rate from which the mortgage's interest rate will be
discounted does not exceed by more than 2 percentage
points the required net yield for a 90-day standard
mandatory delivery commitment for a reasonably
comparable loan from either the Federal National
Mortgage Association or the Federal Home Loan Mortgage
Corporation, whichever is greater.
``(2) Definition.--For purposes of paragraph (1), the term
`bona fide discount points' means loan discount points which
are knowingly paid by the consumer for the purpose of reducing,
and which in fact result in a bona fide reduction of, the
interest rate or time-price differential applicable to the
mortgage.
``(3) Exception for interest rate reductions inconsistent
with industry norms.--Paragraph (1) shall not apply to discount
points used to purchase an interest rate reduction unless the
amount of the interest rate reduction purchased is reasonably
consistent with established industry norms and practices for
secondary mortgage market transactions.
``(4) Allowance of conventional prepayment penalty.--
Subsection (aa)(1)(4)(E) shall not apply so as to include a
prepayment penalty or fee that is authorized by law other than
this title and may be imposed pursuant to the terms of a high-
cost mortgage (or other consumer credit transaction secured by
the consumer's principal dwelling) if--
``(A) the annual percentage rate applicable with
respect to such mortgage or transaction (as determined
for purposes of subsection (aa)(1)(A)(i))--
``(i) in the case of a first mortgage on the
consumer's principal dwelling, does not exceed
by more than 2 percentage points the yield on
Treasury securities having comparable periods
of maturity on the 15th day of the month
immediately preceding the month in which the
application for the extension of credit is
received by the creditor; or
``(ii) in the case of a subordinate or junior
mortgage on the consumer's principal dwelling,
does not exceed by more than 4 percentage
points the yield on such Treasury securities;
and
``(B) the total amount of any prepayment fees or
penalties permitted under the terms of the high-cost
mortgage or transaction does not exceed 2 percent of
the amount prepaid.''.
SEC. 302. AMENDMENTS TO EXISTING REQUIREMENTS FOR CERTAIN MORTGAGES.
(a) Prepayment Penalty Provisions.--Section 129(c)(2) of the Truth in
Lending Act (15 U.S.C. 1639(c)(2)) is amended--
(1) by striking ``and'' after the semicolon at the end of
subparagraph (C);
(2) by redesignating subparagraph (D) as subparagraph (E);
and
(3) by inserting after subparagraph (C) the following new
subparagraph:
``(D) the amount of the principal obligation of the
mortgage exceeds the maximum principal obligation
limitation (for the applicable size residence) under
section 203(b)(2) of the National Housing Act for the
area in which the residence subject to the mortgage is
located; and''.
(b) No Balloon Payments.--Section 129(e) of the Truth in Lending Act
(15 U.S.C. 1639(e)) is amended to read as follows:
``(e) No Balloon Payments.--No high-cost mortgage may contain a
scheduled payment that is more than twice as large as the average of
earlier scheduled payments. This subsection shall not apply when the
payment schedule is adjusted to the seasonal or irregular income of the
consumer.''.
(c) No Lending Without Due Regard to Ability To Repay.--Section
129(h) of the Truth in Lending Act (15 U.S.C. 1639(h)) is amended--
(1) by striking ``Payment Ability of Consumer.--A creditor
shall not'' and inserting ``Payment Ability of Consumer.--
``(1) Pattern or practice.--
``(A) In general.--A creditor shall not'';
(2) by inserting after subparagraph (A) (as so designated by
paragraph (1) of this subsection) the following new
subparagraph:
``(B) Presumption of violation.--There shall be a
presumption that a creditor has violated this
subsection if the creditor engages in a pattern or
practice of making high-cost mortgages without
verifying or documenting the repayment ability of
consumers with respect to such mortgages.''; and
(3) by adding at the end the following new paragraph:
``(2) Prohibition on extending credit without regard to
payment ability of consumer.--
``(A) In general.--A creditor may not extend credit
to a consumer under a high-cost mortgage unless a
reasonable creditor would believe at the time the
mortgage is closed that the consumer or consumers that
are residing or will reside in the residence subject to
the mortgage will be able to make the scheduled
payments associated with the mortgage, based upon a
consideration of current and expected income, current
obligations, employment status, and other financial
resources, other than equity in the residence.
``(B) Presumption of ability.--For purposes of this
subsection, there shall be a rebuttable presumption
that a consumer is able to make the scheduled payments
to repay the obligation if, at the time the high-cost
mortgage is consummated, the consumer's total monthly
debts, including amounts under the mortgage, do not
exceed 50 percent of his or her monthly gross income as
verified by tax returns, payroll receipts, or other
third-party income verification.''.
SEC. 303. ADDITIONAL REQUIREMENTS FOR CERTAIN MORTGAGES.
(a) Additional Requirements for Certain Mortgages.--Section 129 of
the Truth in Lending Act (15 U.S.C. 1639) is amended--
(1) by redesignating subsections (j), (k) and (l) as
subsections (n), (o) and (p) respectively; and
(2) by inserting after subsection (i) the following new
subsections:
``(j) Recommended Default.--No creditor shall recommend or encourage
default on an existing loan or other debt prior to and in connection
with the closing or planned closing of a high-cost mortgage that
refinances all or any portion of such existing loan or debt.
``(k) Late Fees.--
``(1) In general.--No creditor may impose a late payment
charge or fee in connection with a high-cost mortgage--
``(A) in an amount in excess of 4 percent of the
amount of the payment past due;
``(B) unless the loan documents specifically
authorize the charge or fee;
``(C) before the end of the 15-day period beginning
on the date the payment is due, or in the case of a
loan on which interest on each installment is paid in
advance, before the end of the 30-day period beginning
on the date the payment is due; or
``(D) more than once with respect to a single late
payment.
``(2) Coordination with subsequent late fees.--If a payment
is otherwise a full payment for the applicable period and is
paid on its due date or within an applicable grace period, and
the only delinquency or insufficiency of payment is
attributable to any late fee or delinquency charge assessed on
any earlier payment, no late fee or delinquency charge may be
imposed on such payment.
``(3) Failure to make installment payment.--If, in the case
of a loan agreement the terms of which provide that any payment
shall first be applied to any past due principal balance, the
consumer fails to make an installment payment and the consumer
subsequently resumes making installment payments but has not
paid all past due installments, the creditor may impose a
separate late payment charge or fee for any principal due
(without deduction due to late fees or related fees) until the
default is cured.
``(l) Acceleration of Debt.--No high-cost mortgage may contain a
provision which permits the creditor, in its sole discretion, to
accelerate the indebtedness. This provision shall not apply when
repayment of the loan has been accelerated by default, pursuant to a
due-on-sale provision, or pursuant to a material violation of some
other provision of the loan documents unrelated to the payment
schedule.
``(m) Restriction on Financing Points and Fees.--No creditor may
directly or indirectly finance, in connection with any high-cost
mortgage, any of the following:
``(1) Any prepayment fee or penalty payable by the consumer
in a refinancing transaction if the creditor or an affiliate of
the creditor is the noteholder of the note being refinanced.
``(2) Any points or fees.''.
(b) Prohibitions on Evasions.--Section 129 of the Truth in Lending
Act (15 U.S.C. 1639) is amended by inserting after subsection (p) (as
so redesignated by subsection (a)(1)) the following new subsection:
``(q) Prohibitions on Evasions, Structuring of Transactions, and
Reciprocal Arrangements.--A creditor may not take any action in
connection with a high-cost mortgage--
``(1) to structure a loan transaction as an open-end credit
plan or another form of loan for the purpose and with the
intent of evading the provisions of this title; or
``(2) to divide any loan transaction into separate parts for
the purpose and with the intent of evading provisions of this
title.''.
(c) Modification or Deferral Fees.--Section 129 of the Truth in
Lending Act (15 U.S.C. 1639) is amended by inserting after subsection
(q) (as added by subsection (b) of this section) the following new
subsection:
``(r) Modification and Deferral Fees Prohibited.--A creditor may not
charge a consumer any fee to modify, renew, extend, or amend a high-
cost mortgage, or to defer any payment due under the terms of such
mortgage, unless the modification, renewal, extension or amendment
results in a lower annual percentage rate on the mortgage for the
consumer and then only if the amount of the fee is comparable to fees
imposed for similar transactions in connection with consumer credit
transactions that are secured by a consumer's principal dwelling and
are not high-cost mortgages.''.
(d) Payoff Statement.--Section 129 of the Truth in Lending Act (15
U.S.C. 1639) is amended by inserting after subsection (r) (as added by
subsection (c) of this section) the following new subsection:
``(s) Payoff Statement.--
``(1) Fees.--
``(A) In general.--Except as provided in subparagraph
(B), no creditor or servicer may charge a fee for
informing or transmitting to any person the balance due
to pay off the outstanding balance on a high-cost
mortgage.
``(B) Transaction fee.--When payoff information
referred to in subparagraph (A) is provided by
facsimile transmission or by a courier service, a
creditor or servicer may charge a processing fee to
cover the cost of such transmission or service in an
amount not to exceed an amount that is comparable to
fees imposed for similar services provided in
connection with consumer credit transactions that are
secured by the consumer's principal dwelling and are
not high-cost mortgages.
``(C) Fee disclosure.--Prior to charging a
transaction fee as provided in subparagraph (B), a
creditor or servicer shall disclose that payoff
balances are available for free pursuant to
subparagraph (A).
``(D) Multiple requests.--If a creditor or servicer
has provided payoff information referred to in
subparagraph (A) without charge, other than the
transaction fee allowed by subparagraph (B), on 4
occasions during a calendar year, the creditor or
servicer may thereafter charge a reasonable fee for
providing such information during the remainder of the
calendar year.
``(2) Prompt delivery.--Payoff balances shall be provided
within 5 business days after receiving a request by a consumer
or a person authorized by the consumer to obtain such
information.''.
(e) Pre-Loan Counseling Required.--Section 129 of the Truth in
Lending Act (15 U.S.C. 1639) is amended by inserting after subsection
(s) (as added by subsection (d) of this section) the following new
subsection:
``(t) Pre-Loan Counseling.--
``(1) In general.--A creditor may not extend credit to a
consumer under a high-cost mortgage without first receiving
certification from a counselor that is approved by the
Secretary of Housing and Urban Development, or at the
discretion of the Secretary, a state housing finance authority,
that the consumer has received counseling on the advisability
of the mortgage. Such counselor shall not be employed by the
creditor or an affiliate of the creditor or be affiliated with
the creditor.
``(2) Disclosures required prior to counseling.--No counselor
may certify that a consumer has received counseling on the
advisability of the high-cost mortgage unless the counselor can
verify that the consumer has received each statement required
(in connection with such loan) by this section or the Real
Estate Settlement Procedures Act of 1974 with respect to the
transaction.
``(3) Regulations.--The Secretary of Housing and Urban
Development may prescribe such regulations as the Secretary
determines to be appropriate to carry out the requirements of
paragraph (1).''.
(f) Flipping Prohibited.--Section 129 of the Truth in Lending Act (15
U.S.C. 1639) is amended by inserting after subsection (t) (as added by
subsection (e)) the following new subsection:
``(u) Flipping.--
``(1) In general.--No creditor may knowingly or intentionally
engage in the unfair act or practice of flipping in connection
with a high-cost mortgage.
``(2) Flipping defined.--For purposes of this subsection, the
term `flipping' means the making of a loan or extension of
credit in the form a high-cost mortgage to a consumer which
refinances an existing mortgage when the new loan or extension
of credit does not have reasonable, tangible net benefit to the
consumer considering all of the circumstances, including the
terms of both the new and the refinanced loans or credit, the
cost of the new loan or credit, and the consumer's
circumstances.
``(3) Tangible net benefit.--The Board may prescribe
regulations, in the discretion of the Board, defining the term
`tangible net benefit' for purposes of this subsection.''.
SEC. 304. AMENDMENT TO PROVISION GOVERNING CORRECTION OF ERRORS.
Section 130(b) of the Truth in Lending Act (15 U.S.C. 1640(b)) is
amended to read as follows:
``(b) Correction of Errors.--A creditor has no liability under this
section or section 108 or 112 for any failure to comply with any
requirement imposed under this chapter or chapter 5, if--
``(1) within 30 days of the loan closing and prior to the
institution of any action, the consumer is notified of or
discovers the violation, appropriate restitution is made, and
whatever adjustments are necessary are made to the loan to
either, at the choice of the consumer--
``(A) make the loan satisfy the requirements of this
chapter; or
``(B) in the case of a high-cost mortgage, change the
terms of the loan in a manner beneficial to the
consumer so that the loan will no longer be a high-cost
mortgage; or
``(2) within 60 days of the creditor's discovery or receipt
of notification of an unintentional violation or bona fide
error as described in subsection (c) and prior to the
institution of any action, the consumer is notified of the
compliance failure, appropriate restitution is made, and
whatever adjustments are necessary are made to the loan to
either, at the choice of the consumer--
``(A) make the loan satisfy the requirements of this
chapter; or
``(B) in the case of a high-cost mortgage, change the
terms of the loan in a manner beneficial so that the
loan will no longer be a high-cost mortgage.''.
SEC. 305. REGULATIONS.
(a) In General.--The Board of Governors of the Federal Reserve System
shall publish regulations implementing this title and the amendments
made by this title in final form before the end of the 6-month period
beginning on the date of the enactment of this Act.
(b) Consumer Mortgage Education.--
(1) Regulations.--The Board of Governors of the Federal
Reserve System may prescribe regulations requiring or
encouraging creditors to provide consumer mortgage education to
prospective customers or direct such customers to qualified
consumer mortgage education or counseling programs in the
vicinity of the residence of the consumer.
(2) Coordination with state law.--No requirement established
by the Board of Governors of the Federal Reserve System
pursuant to paragraph (1) shall be construed as affecting or
superseding any requirement under the law of any State with
respect to consumer mortgage counseling or education.
SEC. 306. EFFECTIVE DATE.
The amendments made by this title shall take effect on the date of
the enactment of this Act and shall apply to mortgages referred to in
section 103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)
consummated on or after that date.
TITLE IV--OFFICE OF HOUSING COUNSELING
SEC. 401. SHORT TITLE.
This title may be cited as the ``Expand and Preserve Home Ownership
Through Counseling Act''.
SEC. 402. ESTABLISHMENT OF OFFICE OF HOUSING COUNSELING.
Section 4 of the Department of Housing and Urban Development Act (42
U.S.C. 3533) is amended by adding at the end the following new
subsection:
``(g) Office of Housing Counseling.--
``(1) Establishment.--There is established, in the Office of
the Secretary, the Office of Housing Counseling.
``(2) Director.--There is established the position of
Director of Housing Counseling. The Director shall be the head
of the Office of Housing Counseling and shall be appointed by
the Secretary. Such position shall be a career-reserved
position in the Senior Executive Service.
``(3) Functions.--
``(A) In general.--The Director shall have ultimate
responsibility within the Department, except for the
Secretary, for all activities and matters relating to
homeownership counseling and rental housing counseling,
including--
``(i) research, grant administration, public
outreach, and policy development relating to
such counseling; and
``(ii) establishment, coordination, and
administration of all regulations,
requirements, standards, and performance
measures under programs and laws administered
by the Department that relate to housing
counseling, homeownership counseling (including
maintenance of homes), mortgage-related
counseling (including home equity conversion
mortgages and credit protection options to
avoid foreclosure), and rental housing
counseling, including the requirements,
standards, and performance measures relating to
housing counseling.
``(B) Specific functions.--The Director shall carry
out the functions assigned to the Director and the
Office under this section and any other provisions of
law. Such functions shall include establishing rules
necessary for--
``(i) the counseling procedures under section
106(g)(1) of the Housing and Urban Development
Act of 1968 (12 U.S.C. 1701x(h)(1));
``(ii) carrying out all other functions of
the Secretary under section 106(g) of the
Housing and Urban Development Act of 1968,
including the establishment, operation, and
publication of the availability of the toll-
free telephone number under paragraph (2) of
such section;
``(iii) carrying out section 5 of the Real
Estate Settlement Procedures Act of 1974 (12
U.S.C. 2604) for home buying information
booklets prepared pursuant to such section;
``(iv) carrying out the certification program
under section 106(e) of the Housing and Urban
Development Act of 1968 (12 U.S.C. 1701x(e));
``(v) carrying out the assistance program
under section 106(a)(4) of the Housing and
Urban Development Act of 1968, including
criteria for selection of applications to
receive assistance;
``(vi) carrying out any functions regarding
abusive, deceptive, or unscrupulous lending
practices relating to residential mortgage
loans that the Secretary considers appropriate,
which shall include conducting the study under
section 6 of the Expand and Preserve Home
Ownership Through Counseling Act;
``(vii) providing for operation of the
advisory committee established under paragraph
(4) of this subsection;
``(viii) collaborating with community-based
organizations with expertise in the field of
housing counseling; and
``(ix) providing for the building of capacity
to provide housing counseling services in areas
that lack sufficient services.
``(4) Advisory committee.--
``(A) In general.--The Secretary shall appoint an
advisory committee to provide advice regarding the
carrying out of the functions of the Director.
``(B) Members.--Such advisory committee shall consist
of not more than 12 individuals, and the membership of
the committee shall equally represent all aspects of
the mortgage and real estate industry, including
consumers.
``(C) Terms.--Except as provided in subparagraph (D),
each member of the advisory committee shall be
appointed for a term of 3 years. Members may be
reappointed at the discretion of the Secretary.
``(D) Terms of initial appointees.--As designated by
the Secretary at the time of appointment, of the
members first appointed to the advisory committee, 4
shall be appointed for a term of 1 year and 4 shall be
appointed for a term of 2 years.
``(E) Prohibition of pay; travel expenses.--Members
of the advisory committee shall serve without pay, but
shall receive travel expenses, including per diem in
lieu of subsistence, in accordance with applicable
provisions under subchapter I of chapter 57 of title 5,
United States Code.
``(F) Advisory role only.--The advisory committee
shall have no role in reviewing or awarding housing
counseling grants.
``(5) Scope of homeownership counseling.--In carrying out the
responsibilities of the Director, the Director shall ensure
that homeownership counseling provided by, in connection with,
or pursuant to any function, activity, or program of the
Department addresses the entire process of homeownership,
including the decision to purchase a home, the selection and
purchase of a home, issues arising during or affecting the
period of ownership of a home (including refinancing, default
and foreclosure, and other financial decisions), and the sale
or other disposition of a home.''.
SEC. 403. COUNSELING PROCEDURES.
(a) In General.--Section 106 of the Housing and Urban Development Act
of 1968 (12 U.S.C. 1701x) is amended by adding at the end the following
new subsection:
``(g) Procedures and Activities.--
``(1) Counseling procedures.--
``(A) In general.--The Secretary shall establish,
coordinate, and monitor the administration by the
Department of Housing and Urban Development of the
counseling procedures for homeownership counseling and
rental housing counseling provided in connection with
any program of the Department, including all
requirements, standards, and performance measures that
relate to homeownership and rental housing counseling.
``(B) Homeownership counseling.--For purposes of this
subsection and as used in the provisions referred to in
this subparagraph, the term `homeownership counseling'
means counseling related to homeownership and
residential mortgage loans. Such term includes
counseling related to homeownership and residential
mortgage loans that is provided pursuant to--
``(i) section 105(a)(20) of the Housing and
Community Development Act of 1974 (42 U.S.C.
5305(a)(20));
``(ii) in the United States Housing Act of
1937--
``(I) section 9(e) (42 U.S.C.
1437g(e));
``(II) section 8(y)(1)(D) (42 U.S.C.
1437f(y)(1)(D));
``(III) section 18(a)(4)(D) (42
U.S.C. 1437p(a)(4)(D));
``(IV) section 23(c)(4) (42 U.S.C.
1437u(c)(4));
``(V) section 32(e)(4) (42 U.S.C.
1437z-4(e)(4));
``(VI) section 33(d)(2)(B) (42 U.S.C.
1437z-5(d)(2)(B));
``(VII) sections 302(b)(6) and
303(b)(7) (42 U.S.C. 1437aaa-1(b)(6),
1437aaa-2(b)(7)); and
``(VIII) section 304(c)(4) (42 U.S.C.
1437aaa-3(c)(4));
``(iii) section 302(a)(4) of the American
Homeownership and Economic Opportunity Act of
2000 (42 U.S.C. 1437f note);
``(iv) sections 233(b)(2) and 258(b) of the
Cranston-Gonzalez National Affordable Housing
Act (42 U.S.C. 12773(b)(2), 12808(b));
``(v) this section and section 101(e) of the
Housing and Urban Development Act of 1968 (12
U.S.C. 1701x, 1701w(e));
``(vi) section 220(d)(2)(G) of the Low-Income
Housing Preservation and Resident Homeownership
Act of 1990 (12 U.S.C. 4110(d)(2)(G));
``(vii) sections 422(b)(6), 423(b)(7),
424(c)(4), 442(b)(6), and 443(b)(6) of the
Cranston-Gonzalez National Affordable Housing
Act (42 U.S.C. 12872(b)(6), 12873(b)(7),
12874(c)(4), 12892(b)(6), and 12893(b)(6));
``(viii) section 491(b)(1)(F)(iii) of the
McKinney-Vento Homeless Assistance Act (42
U.S.C. 11408(b)(1)(F)(iii));
``(ix) sections 202(3) and 810(b)(2)(A) of
the Native American Housing and Self-
Determination Act of 1996 (25 U.S.C. 4132(3),
4229(b)(2)(A));
``(x) in the National Housing Act--
``(I) in section 203 (12 U.S.C.
1709), the penultimate undesignated
paragraph of paragraph (2) of
subsection (b), subsection (c)(2)(A),
and subsection (r)(4);
``(II) subsections (a) and (c)(3) of
section 237 (12 U.S.C. 1715z-2); and
``(III) subsections (d)(2)(B) and
(m)(1) of section 255 (12 U.S.C. 1715z-
20);
``(xi) section 502(h)(4)(B) of the Housing
Act of 1949 (42 U.S.C. 1472(h)(4)(B)); and
``(xii) section 508 of the Housing and Urban
Development Act of 1970 (12 U.S.C. 1701z-7).
``(C) Rental housing counseling.--For purposes of
this subsection, the term `rental housing counseling'
means counseling related to rental of residential
property, which may include counseling regarding future
homeownership opportunities and providing referrals for
renters and prospective renters to entities providing
counseling and shall include counseling related to such
topics that is provided pursuant to--
``(i) section 105(a)(20) of the Housing and
Community Development Act of 1974 (42 U.S.C.
5305(a)(20));
``(ii) in the United States Housing Act of
1937--
``(I) section 9(e) (42 U.S.C.
1437g(e));
``(II) section 18(a)(4)(D) (42 U.S.C.
1437p(a)(4)(D));
``(III) section 23(c)(4) (42 U.S.C.
1437u(c)(4));
``(IV) section 32(e)(4) (42 U.S.C.
1437z-4(e)(4));
``(V) section 33(d)(2)(B) (42 U.S.C.
1437z-5(d)(2)(B)); and
``(VI) section 302(b)(6) (42 U.S.C.
1437aaa-1(b)(6));
``(iii) section 233(b)(2) of the Cranston-
Gonzalez National Affordable Housing Act (42
U.S.C. 12773(b)(2));
``(iv) section 106 of the Housing and Urban
Development Act of 1968 (12 U.S.C. 1701x);
``(v) section 422(b)(6) of the Cranston-
Gonzalez National Affordable Housing Act (42
U.S.C. 12872(b)(6));
``(vi) section 491(b)(1)(F)(iii) of the
McKinney-Vento Homeless Assistance Act (42
U.S.C. 11408(b)(1)(F)(iii));
``(vii) sections 202(3) and 810(b)(2)(A) of
the Native American Housing and Self-
Determination Act of 1996 (25 U.S.C. 4132(3),
4229(b)(2)(A)); and
``(viii) the rental assistance program under
section 8 of the United States Housing Act of
1937 (42 U.S.C. 1437f).
``(2) Standards for materials.--The Secretary, in conjunction
with the advisory committee established under subsection (g)(4)
of the Department of Housing and Urban Development Act, shall
establish standards for materials and forms to be used, as
appropriate, by organizations providing homeownership
counseling services, including any recipients of assistance
pursuant to subsection (a)(4).
``(3) Mortgage software systems.--
``(A) Certification.--The Secretary shall provide for
the certification of various computer software programs
for consumers to use in evaluating different
residential mortgage loan proposals. The Secretary
shall require, for such certification, that the
mortgage software systems take into account--
``(i) the consumer's financial situation and
the cost of maintaining a home, including
insurance, taxes, and utilities;
``(ii) the amount of time the consumer
expects to remain in the home or expected time
to maturity of the loan;
``(iii) such other factors as the Secretary
considers appropriate to assist the consumer in
evaluating whether to pay points, to lock in an
interest rate, to select an adjustable or fixed
rate loan, to select a conventional or
government-insured or guaranteed loan and to
make other choices during the loan application
process.
If the Secretary determines that available existing
software is inadequate to assist consumers during the
residential mortgage loan application process, the
Secretary shall arrange for the development by private
sector software companies of new mortgage software
systems that meet the Secretary's specifications.
``(B) Use and initial availability.--Such certified
computer software programs shall be used to supplement,
not replace, housing counseling. The Secretary shall
provide that such programs are initially used only in
connection with the assistance of housing counselors
certified pursuant to subsection (e).
``(C) Availability.--After a period of initial
availability under subparagraph (B) as the Secretary
considers appropriate, the Secretary shall take
reasonable steps to make mortgage software systems
certified pursuant to this paragraph widely available
through the Internet and at public locations, including
public libraries, senior-citizen centers, public
housing sites, offices of public housing agencies that
administer rental housing assistance vouchers, and
housing counseling centers.
``(4) National public service multimedia campaigns to promote
housing counseling.--
``(A) In general.--The Director of Housing Counseling
shall develop, implement, and conduct national public
service multimedia campaigns designed to make persons
facing mortgage foreclosure, persons considering a
subprime mortgage loan to purchase a home, elderly
persons, persons who face language barriers, low-income
persons, and other potentially vulnerable consumers
aware that it is advisable, before seeking or
maintaining a residential mortgage loan, to obtain
homeownership counseling from an unbiased and reliable
sources and that such homeownership counseling is
available, including through programs sponsored by the
Secretary of Housing and Urban Development.
``(B) Contact information.--Each segment of the
multimedia campaign under subparagraph (A) shall
publicize the toll-free telephone number and web site
of the Department of Housing and Urban Development
through which persons seeking housing counseling can
locate a housing counseling agency in their State that
is certified by the Secretary of Housing and Urban
Development and can provide advice on buying a home,
renting, defaults, foreclosures, credit issues, and
reverse mortgages.
``(C) Authorization of appropriations.--There are
authorized to be appropriated to the Secretary, not to
exceed $3,000,000 for fiscal years 2008, 2009, and
2010, for the develop, implement, and conduct of
national public service multimedia campaigns under this
paragraph.
``(5) Education programs.--The Secretary shall provide advice
and technical assistance to States, units of general local
government, and nonprofit organizations regarding the
establishment and operation of, including assistance with the
development of content and materials for, educational programs
to inform and educate consumers, particularly those most
vulnerable with respect to residential mortgage loans (such as
elderly persons, persons facing language barriers, low-income
persons, and other potentially vulnerable consumers), regarding
home mortgages, mortgage refinancing, home equity loans, and
home repair loans.''.
(b) Conforming Amendments to Grant Program for Homeownership
Counseling Organizations.--Section 106(c)(5)(A)(ii) of the Housing and
Urban Development Act of 1968 (12 U.S.C. 1701x(c)(5)(A)(ii)) is
amended--
(1) in subclause (III), by striking ``and'' at the end;
(2) in subclause (IV) by striking the period at the end and
inserting ``; and''; and
(3) by inserting after subclause (IV) the following new
subclause:
``(V) notify the housing or mortgage
applicant of the availability of
mortgage software systems provided
pursuant to subsection (g)(3).''.
SEC. 404. GRANTS FOR HOUSING COUNSELING ASSISTANCE.
Section 106(a) of the Housing and Urban Development Act of 1968 (12
U.S.C. 1701x(a)(3)) is amended by adding at the end the following new
paragraph:
``(4) Homeownership and Rental Counseling Assistance.--
``(A) In general.--The Secretary shall make financial
assistance available under this paragraph to States, units of
general local governments, and nonprofit organizations
providing homeownership or rental counseling (as such terms are
defined in subsection (g)(1)).
``(B) Qualified entities.--The Secretary shall establish
standards and guidelines for eligibility of organizations
(including governmental and nonprofit organizations) to receive
assistance under this paragraph.
``(C) Distribution.--Assistance made available under this
paragraph shall be distributed in a manner that encourages
efficient and successful counseling programs.
``(D) Authorization of appropriations.--There are authorized
to be appropriated $45,000,000 for each of fiscal years 2008
through 2011 for--
``(i) the operations of the Office of Housing
Counseling of the Department of Housing and Urban
Development;
``(ii) the responsibilities of the Secretary under
paragraphs (2) through (5) of subsection (g); and
``(iii) assistance pursuant to this paragraph for
entities providing homeownership and rental
counseling.''.
SEC. 405. REQUIREMENTS TO USE HUD-CERTIFIED COUNSELORS UNDER HUD
PROGRAMS.
Section 106(e) of the Housing and Urban Development Act of 1968 (12
U.S.C. 1701x(e)) is amended--
(1) by striking paragraph (1) and inserting the following new
paragraph:
``(1) Requirement for assistance.--An organization may not
receive assistance for counseling activities under subsection
(a)(1)(iii), (a)(2), (a)(4), (c), or (d) of this section, or
under section 101(e), unless the organization, or the
individuals through which the organization provides such
counseling, has been certified by the Secretary under this
subsection as competent to provide such counseling.'';
(2) in paragraph (2)--
(A) by inserting ``and for certifying organizations''
before the period at the end of the first sentence; and
(B) in the second sentence by striking ``for
certification'' and inserting ``, for certification of
an organization, that each individual through which the
organization provides counseling shall demonstrate,
and, for certification of an individual,'';
(3) in paragraph (3), by inserting ``organizations and''
before ``individuals'';
(4) by redesignating paragraph (3) as paragraph (5); and
(5) by inserting after paragraph (2) the following new
paragraphs:
``(3) Requirement under hud programs.--Any homeownership
counseling or rental housing counseling (as such terms are
defined in subsection (g)(1)) required under, or provided in
connection with, any program administered by the Department of
Housing and Urban Development shall be provided only by
organizations or counselors certified by the Secretary under
this subsection as competent to provide such counseling.
``(4) Outreach.--The Secretary shall take such actions as the
Secretary considers appropriate to ensure that individuals and
organizations providing homeownership or rental housing
counseling are aware of the certification requirements and
standards of this subsection and of the training and
certification programs under subsection (f).''.
SEC. 406. STUDY OF DEFAULTS AND FORECLOSURES.
The Secretary of Housing and Urban Development shall conduct an
extensive study of the root causes of default and foreclosure of home
loans, using as much empirical data as are available. The study shall
also examine the role of escrow accounts in helping prime and nonprime
borrowers to avoid defaults and foreclosures. Not later than 12 months
after the date of the enactment of this Act, the Secretary shall submit
to the Congress a preliminary report regarding the study. Not later
than 24 months after such date of enactment, the Secretary shall submit
a final report regarding the results of the study, which shall include
any recommended legislation relating to the study, and recommendations
for best practices and for a process to identify populations that need
counseling the most.
SEC. 407. DEFINITIONS FOR COUNSELING-RELATED PROGRAMS.
Section 106 of the Housing and Urban Development Act of 1968 (12
U.S.C. 1701x), as amended by the preceding provisions of this title, is
further amended by adding at the end the following new subsection:
``(h) Definitions.--For purposes of this section:
``(1) Nonprofit organization.--The term `nonprofit
organization' has the meaning given such term in section 104(5)
of the Cranston-Gonzalez National Affordable Housing Act (42
U.S.C. 12704(5)), except that subparagraph (D) of such section
shall not apply for purposes of this section.
``(2) State.--The term `State' means each of the several
States, the Commonwealth of Puerto Rico, the District of
Columbia, the Commonwealth of the Northern Mariana Islands,
Guam, the Virgin Islands, American Samoa, the Trust Territories
of the Pacific, or any other possession of the United States.
``(3) Unit of general local government.--The term `unit of
general local government' means any city, county, parish, town,
township, borough, village, or other general purpose political
subdivision of a State.''.
SEC. 408. UPDATING AND SIMPLIFICATION OF MORTGAGE INFORMATION BOOKLET.
Section 5 of the Real Estate Settlement Procedures Act of 1974 (12
U.S.C. 2604) is amended--
(1) in the section heading, by striking ``special'' and
inserting ``home buying'' ;
(2) by striking subsections (a) and (b) and inserting the
following new subsections:
``(a) Preparation and Distribution.--The Secretary shall prepare, at
least once every 5 years, a booklet to help consumers applying for
federally related mortgage loans to understand the nature and costs of
real estate settlement services. The Secretary shall prepare the
booklet in various languages and cultural styles, as the Secretary
determines to be appropriate, so that the booklet is understandable and
accessible to homebuyers of different ethnic and cultural backgrounds.
The Secretary shall distribute such booklets to all lenders that make
federally related mortgage loans. The Secretary shall also distribute
to such lenders lists, organized by location, of homeownership
counselors certified under section 106(e) of the Housing and Urban
Development Act of 1968 (12 U.S.C. 1701x(e)) for use in complying with
the requirement under subsection (c) of this section.
``(b) Contents.--Each booklet shall be in such form and detail as the
Secretary shall prescribe and, in addition to such other information as
the Secretary may provide, shall include in plain and understandable
language the following information:
``(1) A description and explanation of the nature and purpose
of the costs incident to a real estate settlement or a
federally related mortgage loan. The description and
explanation shall provide general information about the
mortgage process as well as specific information concerning, at
a minimum--
``(A) balloon payments;
``(B) prepayment penalties; and
``(C) the trade-off between closing costs and the
interest rate over the life of the loan.
``(2) An explanation and sample of the uniform settlement
statement required by section 4.
``(3) A list and explanation of lending practices, including
those prohibited by the Truth in Lending Act or other
applicable Federal law, and of other unfair practices and
unreasonable or unnecessary charges to be avoided by the
prospective buyer with respect to a real estate settlement.
``(4) A list and explanation of questions a consumer
obtaining a federally related mortgage loan should ask
regarding the loan, including whether the consumer will have
the ability to repay the loan, whether the consumer
sufficiently shopped for the loan, whether the loan terms
include prepayment penalties or balloon payments, and whether
the loan will benefit the borrower.
``(5) An explanation of the right of rescission as to certain
transactions provided by sections 125 and 129 of the Truth in
Lending Act.
``(6) A brief explanation of the nature of a variable rate
mortgage and a reference to the booklet entitled `Consumer
Handbook on Adjustable Rate Mortgages', published by the Board
of Governors of the Federal Reserve System pursuant to section
226.19(b)(1) of title 12, Code of Federal Regulations, or to
any suitable substitute of such booklet that such Board of
Governors may subsequently adopt pursuant to such section.
``(7) A brief explanation of the nature of a home equity line
of credit and a reference to the pamphlet required to be
provided under section 127A of the Truth in Lending Act.
``(8) Information about homeownership counseling services
made available pursuant to section 106(a)(4) of the Housing and
Urban Development Act of 1968 (12 U.S.C. 1701x(a)(4)), a
recommendation that the consumer use such services, and
notification that a list of certified providers of
homeownership counseling in the area, and their contact
information, is available.
``(9) An explanation of the nature and purpose of escrow
accounts when used in connection with loans secured by
residential real estate and the requirements under section 10
of this Act regarding such accounts.
``(10) An explanation of the choices available to buyers of
residential real estate in selecting persons to provide
necessary services incidental to a real estate settlement.
``(11) An explanation of a consumer's responsibilities,
liabilities, and obligations in a mortgage transaction.
``(12) An explanation of the nature and purpose of real
estate appraisals, including the difference between an
appraisal and a home inspection.
``(13) Notice that the Office of Housing of the Department of
Housing and Urban Development has made publicly available a
brochure regarding loan fraud and a World Wide Web address and
toll-free telephone number for obtaining the brochure.
The booklet prepared pursuant to this section shall take into
consideration differences in real estate settlement procedures that may
exist among the several States and territories of the United States and
among separate political subdivisions within the same State and
territory.'';
(3) in subsection (c), by inserting at the end the following
new sentence: ``Each lender shall also include with the booklet
a reasonably complete or updated list of homeownership
counselors who are certified pursuant to section 106(e) of the
Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(e))
and located in the area of the lender.''; and
(4) in subsection (d), by inserting after the period at the
end of the first sentence the following: ``The lender shall
provide the HUD-issued booklet in the version that is most
appropriate for the person receiving it.''.
TITLE V--MORTGAGE DISCLOSURES UNDER REAL ESTATE SETTLEMENT PROCEDURES
ACT OF 1974
SEC. 501. UNIVERSAL MORTGAGE DISCLOSURE IN GOOD FAITH ESTIMATE OF
SETTLEMENT SERVICES COSTS.
(a) In General.--Section 5 of the Real Estate Settlement Procedures
Act of 1974 (12 U.S.C. 2604) is amended--
(1) in subsection (c), by adding after the period at the end
the following: ``Each such good faith estimate shall include
the disclosure required under subsection (f) in the form
prescribed by the Secretary pursuant to such subsection, except
that if the Secretary at any time issues any regulations
requiring the use of a standard or uniform form or statement in
providing the good faith estimate required under this
subsection and prescribing such standard or uniform form or
statement, such disclosure shall not be required after the
effective date of such regulations.''; and
(2) by adding at the end the following new subsection:
``(f) Universal Mortgage Disclosure Requirement for Good Faith
Estimates.--
``(1) Disclosure.--The disclosure required under this
subsection is a written statement regarding the federally
related mortgage loan for which the good faith estimate under
subsection (c) is made, that consists of the following
statements, appropriately and in good faith completed by the
lender in accordance with the terms of the federally related
mortgage loan involved in the settlement:
``(A) `Your Loan Amount will be' and `$____', each
statement appearing in a separate column of the
disclosure.
``(B) `Your Loan is', `A Fixed Rate Loan', and `An
Adjustable Rate Loan', each statement appearing in a
separate column and each of the last two such
statements preceded by a checkbox.
``(C) `Your Loan Term is', `___ years', and `___
years', each statement appearing in a separate column,
and the second such statement shall appear in the same
column as the statement required by subparagraph (B)
regarding fixed rate loans and the third such statement
shall appear in the same column as the statement
required by subparagraph (B) regarding adjustable rate
loans;
``(D) `Your Estimated Interest Rate (APR) is',
`___%', and `___% initially, then it will adjust. In
___ months, Your rate may adjust to a maximum of ___%',
each statement appearing in a separate column, the
second such statement shall appear in the same column
as the statement required by subparagraph (B) regarding
fixed rate loans and the third such statement shall
appear in the same column as the statement required by
subparagraph (B) regarding adjustable rate loans, and
the blanks relating to estimated interest rate shall be
completed by the lender using an annual percentage rate
determined in accordance with the Truth in Lending Act.
``(E) `Your Total Estimated Monthly Payment
(Including loan Principal and Interest, and property
Taxes (based on current rates) and Insurance (PITI))
is', `$____ which represents ___% of Your estimated
monthly income', and `$____ which represents ___% of
Your estimated monthly income. When Your interest rate
initially adjusts, Your maximum monthly payment may be
as high as $____ which represents ___% of Your
estimated monthly income', each statement appearing in
a separate column, and the second such statement shall
appear in the same column as the statement required by
subparagraph (B) regarding fixed rate loans and the
third such statement shall appear in the same column as
the statement required by subparagraph (B) regarding
adjustable rate loans.
``(F) `Your Rate Lock Period is' and `___ days. After
You lock into Your interest rate, You must go to
settlement within this number of days to be guaranteed
this interest rate.', each statement appearing in a
separate column.
``(G) `Does Your loan have a prepayment penalty?',
`YES, Your maximum prepayment penalty is $____', and
`NO', the first such statement and the last two such
statements appearing in a separate column, and each of
the last two such statements preceded by a checkbox.
``(H) `Does Your loan have a balloon payment?', `YES,
Your balloon payment of $____ is due in ___ months',
and `NO', the first such statement and the last two
such statements appearing in a separate column, and
each of the last two such statements preceded by a
checkbox.
``(I) `Your Total Estimated Settlement Charges Will
be $____ (a)' and `Your Total Estimated Down Payment
will be $____ (b)', each statement appearing in a
separate column.
``(J) `Your Total Estimated Cash Needed at Closing
Will Be' and `$____ (a+b)', each statement appearing in
a separate column.
``(K) `This represents a simple summary of Your Good
Faith Estimate (GFE). To understand the terms of Your
loan, You must see disclosure forms and the Truth in
Lending Act.', such statement appearing directly below
the entirety of the remainder of the disclosure.
``(2) Standard form.--
``(A) Development and use.--The Secretary, in
consultation with the Secretary of Veterans Affairs,
the Federal Deposit Insurance Corporation, and the
Director of the Office of Thrift Supervision, shall
develop and prescribe a standard form for the
disclosure required under this subsection, which shall
be used without variation in all transactions in the
United States that involve federally related mortgage
loans.
``(B) Appearance.--The standard form developed
pursuant to this paragraph shall--
``(i) set forth each statement required under
a separate subparagraph under paragraph (1) on
a separate row of the disclosure;
``(ii) be set forth in 8-point type;
``(iii) be not more than 6 inches in width or
3.5 inches in height;
``(iv) include such boldface type and shading
as the Secretary considers appropriate;
``(v) include such parenthetical statements
directing the borrower to the terms of the loan
(such as `see terms') as the Secretary
considers appropriate, in such places as the
Secretary considers appropriate; and
``(vi) be located in the upper one-third of
the first page of the good faith estimate
required under subsection (c) in a manner that
allows the identity, address, phone number, and
other relevant information of the lender, the
identity, address, phone number, and other
relevant information of the borrower, and the
address of the property for which the federally
related mortgage loan is to be made, to be
located above the standard form.''.
(b) Regulations.--The Secretary of Housing and Urban Development
shall issue regulations prescribing the standard form and the use of
such form, as required by the amendment made by subsection (a), not
later than the expiration of the 180-day period beginning upon the date
of the enactment of this Act, and such regulations shall take effect
upon issuance.
Purpose and Summary
H.R. 3915, the Mortgage Reform and Anti-Predatory Lending
Act of 2007, is intended to reform mortgage lending practices
to avert a recurrence of the current situation of rising
defaults and foreclosures, especially in the subprime market.
H.R. 3915, as reported, establishes a Federal duty of care
for mortgage originators; prohibits steering consumers to
mortgages with predatory characteristics and steering consumers
who qualify for prime mortgages to subprime mortgages;
establishes a licensing and registration regime for loan
originators; sets minimum standards for mortgages requiring
that consumers must have a reasonable ability to repay at the
time the mortgage is consummated and that the mortgage must
provide a net tangible benefit to the consumer; attaches
limited liability to those who securitize mortgages that
violate the minimum standards; expands and enhances consumer
protections for ``high-cost loans'' under the Home Ownership
and Equity Protection Act; requires additional disclosures to
consumers; establishes an Office of Housing Counseling within
the Department of Housing and Urban Development; and includes
protections for renters of foreclosed properties.
Background and Need for Legislation
Many American families are facing or are at risk of
foreclosure. The Mortgage Bankers Association (MBA) estimates
that more than 286,000 mortgage loans entered the foreclosure
process in the second quarter of 2007, a record high.
The increase in foreclosures and delinquencies can be
traced in part to the proliferation of subprime mortgages,
especially in refinancing. Subprime mortgages generally refer
to loans that differ materially from ``prime'' loans (e.g.,
they may have higher interest rates, additional fees, or
prepayment penalties). Some of these loans are made to
consumers who pose higher credit risk that disqualifies them
from prime loans. They may have weakened credit histories that
include delinquencies, charge-offs, judgments, and
bankruptcies. Other subprime consumers may qualify for prime
loans, but do not receive them for various reasons ranging from
the benign (such as an inability to produce full income
documentation) to predatory practices (such as loan
``steering'').
Subprime lenders include banks, bank affiliates, and non-
bank mortgage companies. According to MBA, 52 percent of
subprime mortgages are made by mortgage brokers and lenders
with no Federal supervision; 25 percent are made by finance
companies that are affiliates of bank holding companies and
indirectly regulated by the Federal Reserve Board; and 23
percent are made by institutions directly regulated by Federal
financial regulators such as banks, thrifts, and credit unions.
Attention has been drawn recently to hybrid adjustable-rate
mortgages (ARM), for which the interest rate on the note is
fixed at a low introductory (or ``teaser'') rate for a period
of time before adjusting upward. The term ``hybrid'' refers to
the blend of fixed-rate and adjustable-rate characteristics
found in such ARMs. Like other adjustable-rate products, hybrid
ARMs transfer some interest rate risk from the lender to the
consumer, thus allowing the lender to offer a lower initial
rate.
Hybrid ARMs are referred to by their initial fixed period
and adjustment periods, for example 3/1 for an ARM with a 3-
year fixed period and subsequent 1-year rate adjustment
periods. Two products that have drawn particular attention are
2/28s and 3/27s. For these loans, the rate resets every six
months after the initial teaser rate period for the remaining
28 or 27 years of the loan at a margin over a particular
designated short-term interest rate, such as the London
Interbank Offered Rate (LIBOR). Interest-only, no-principal
balloon loans often result in even steeper increases as a
result of deferred unpaid principal.
Many of these loans also have prepayment penalties that may
extend beyond the low initial payment period. When these loans
reset, consumers may face penalties for refinancing or have a
very short time in which to refinance. Prepayment penalties
can, however, sometimes provide consumers with lower interest
rates because they provide a more stable revenue stream and
thus increase the value of the loan on the secondary market.
The number of hybrid ARMs and other subprime loans--and
their share of the mortgage market--has significantly increased
in the past few years. According to press reports, in 1998, the
percentage of hybrids relative to 30-year fixed rate mortgages
was less than 2 percent. By 2004, this percentage had risen to
27.5 percent. The most recent National Delinquency Survey by
MBA shows the number of subprime loans increasing ten percent
in the last year alone. In some areas, they make up a quarter
to half the market (e.g., 40 percent of mortgages in Salinas,
California; 26 percent in Naples, Florida; at least 51 percent
of mortgages in West Virginia; and 26 percent in Wyoming).
Origination volumes of subprime mortgages grew from $100
billion in 2001 to $800 billion in 2005.
In some transactions brokers receive ``yield spread
premiums''--up-front payments for persuading consumers to agree
to a higher rate than the lender requires. Even if the consumer
later defaults, servicing fees and costs provide a stream of
income to the servicer, who can be the original lender or an
entity that has acquired the servicing rights.
Many observers comment that the growth of mortgage
securitization and the market in mortgage-backed securities--
investment instruments backed by pools of loans purchased by
investment firms--increased the number of lenders and propelled
the sale of subprime products. Investors' demand for high-yield
mortgage bonds in turn may have driven brokers and lenders to
push borrowers to high-risk loans, loosening underwriting
standards.
According to the FDIC, between January and September of
2007, $150 billion in ARMs reset. With an estimated 2 million
residential loans (1.3 million subprime ARMs) due to reset
between now and the end of 2008, many observers expect the
foreclosure problem to worsen.An October 2007 Joint Economic
Committee (JEC) report estimates that between 2007 and 2009, 2 million
homes with subprime mortgages will be lost to foreclosure.
Foreclosures not only harm homeowners, who can lose their
homes and the equity in them and suffer from tarnished credit
records, but also can have negative effects on the broader
community and the economy. Foreclosures can trigger domino
effects that result in housing abandonment and declining
property values in surrounding neighborhoods. In 2005, the
Woodstock Institute found that each foreclosure in a
neighborhood lowers the property value of surrounding homes by
0.9 percent to 1.136 percent on average. The JEC study
estimates that more than $32 billion in housing wealth will be
indirectly destroyed and that State and local governments will
lose more than $917 million in property tax revenue due to
increased foreclosures. Recent Home Mortgage Disclosure Act
data and academic studies by the Center for Responsible Lending
and the National Community Reinvestment Coalition suggest that
a disproportionate amount of higher priced subprime lending is
concentrated in the minority population and in minority
neighborhoods.
Many observers cite a widespread apprehension over exposure
to subprime mortgage-backed bonds as the root cause for the
tightening of the credit markets this past summer. Concerns
initially surfaced when lenders to two leveraged hedge funds
demanded additional security as collateral against the hedge
funds' subprime-backed investments. The subsequent closure of
these hedge funds put pressure on other market participants to
reprice similar securities. The general threat of such
repricing of subprime mortgage risk subsequently led to the
present conditions largely for one reason: No credit provider,
bond dealer, or investor knows the extent to which other
parties are exposed to subprime residential mortgage-backed
securities.
Congress has enacted a number of consumer protection laws
in the financial sector over the last few decades. These
statutes include the Truth in Lending Act (TILA), the Fair
Credit Reporting Act (FCRA), the Fair Debt Collection Practices
Act (FDCPA), and the Equal Credit Opportunity Act (ECOA). Most
of these statutes have sought to address particular consumer
problems in particular sub-sectors. TILA, for example, requires
that consumers receive critical disclosures in a uniform manner
before entering into credit transactions. In response to
reports of predatory lending practices in home equity lending
in the early 1990s, Congress enacted the Home Ownership and
Equity Protection Act (HOEPA) in 1994, which covers home equity
loans but not purchase-money mortgages. Loans classified as
``high-cost home loans'' under HOEPA because of their high
annual percentage rates (APRs) or points and fees trigger
certain prohibitions or disclosures or both. Under HOEPA, the
Federal Reserve Board has the authority to prevent ``unfair and
deceptive'' lending by writing regulations governing all
lenders, State and Federal.
Many States have enacted statutes modeled after HOEPA.
Currently, at least thirty States, the District of Columbia,
and roughly a dozen municipalities have enacted either
comprehensive statutes or other limited statutory protections
aimed at predatory lending practices, some addressing a
specific practice, some generally tracking HOEPA, and others
going far beyond it.
Hearings
During the 110th Congress, the Committee on Financial
Services and its subcommittees held several hearings to examine
the need for legislation and policy alternatives, culminating
in the Committee markup on November 6, 2007.
The Subcommittee on Financial Institutions and Consumer
Credit held a hearing on March 27, 2007, entitled ``Subprime
and Predatory Mortgage Lending: New Regulatory Guidance,
Current Market Conditions and Effects on Regulated Financial
Institutions.'' The following witnesses testified: Panel One:
The Honorable Sheila Bair, Chairman, Federal Deposit Insurance
Corporation; The Honorable John Reich, Director, Office of
Thrift Supervision; The Honorable JoAnn Johnson, Chairman,
National Credit Union Administration; Mr. E. Wayne Rushton,
Senior Deputy Comptroller, Office of the Comptroller of the
Currency; Ms. Sandra F. Braunstein, Director, Division of
Consumer and Community Affairs, Federal Reserve Board; and Mr.
Steve Antonakes, Commissioner of Banks, Massachusetts Division
of Banks, on behalf of Conference of State Banking Supervisors;
Panel Two: Mr. Michael Calhoun, President, Center for
Responsible Lending; Mr. John Taylor, President and CEO,
National Community Reinvestment Coalition; Mr. Allen Fishbein,
Director of Housing and Credit Policy, Consumer Federation of
America; Mr. John Robbins, Chairman, Mortgage Bankers
Association; Mr. Harry H. Dinham, CMC, President, National
Association of Mortgage Brokers; and Mr. Alex J. Pollock,
Resident Fellow, American Enterprise Institute.
The Subcommittee on Housing and Community Opportunity held
a hearing on April 17, 2007, entitled ``Possible Responses to
Rising Mortgage Foreclosures.'' The following witnesses
testified: Panel One: The Honorable Marcy Kaptur; The Honorable
Michael R. Turner; Panel Two: The Honorable Sheila Bair,
Chairman, Federal Deposit Insurance Corporation; The Honorable
Brian Montgomery, Assistant Secretary for Housing, Department
of Housing and Urban Development; Mr. Daniel Mudd, President
and CEO, Fannie Mae; and Mr. Richard F. Syron, Chairman and
CEO, Freddie Mac; Panel Three: Mr. David Berenbaum, Executive
Vice President, National Community Reinvestment Coalition; Ms.
Janis Bowdler, Senior Policy Analyst, National Council of La
Raza; The Honorable John H. Dalton, President, Housing Policy
Council, The Financial Services Roundtable; Mr. George Miller,
Executive Director, American Securitization Forum, also
representing the Securities Industry and Financial Markets
Association; Mr. Douglas A. Garver, Executive Director, Ohio
Housing Finance Agency; and Mr. Kenneth D. Wade, CEO,
NeighborWorks America.
The Subcommittee on Financial Institutions and Consumer
Credit held a hearing on May 8, 2007, entitled ``The Role of
the Secondary Market in Subprime Lending.'' The following
witnesses testified: Ms. Cara Heiden, Division President, Wells
Fargo Home Mortgage; Mr. Warren Kornfeld, Managing Director,
Moody's Investors Service; Mr. Howard Mulligan, Attorney at
Law, McDermott, Will and Emery; Mr. Donald C. Lampe, Womble
Carlyle Sandridge & Rice, PLLC; Mr. Michael Calhoun, President
and Chief Operating Officer, Center for Responsible Lending;
Mr. Larry B. Litton, Jr., President and CEO, Litton Loan
Servicing; and Ms. Judy Kennedy, Executive Director, National
Association of Affordable Housing Lenders.
The Committee on Financial Services held a hearing on June
13, 2007, entitled ``Improving Federal Consumer Protection in
Financial Services.'' The following witnesses testified: The
Honorable Randall S. Kroszner, Governor, Federal Reserve Board;
The Honorable John C. Dugan, Comptroller of the Currency,
Office of the Comptroller of the Currency; The Honorable Sheila
C. Bair, Chairman, Federal Deposit Insurance Corporation; The
Honorable Deborah Platt Majoras, Chairman, Federal Trade
Commission; Mr. Scott M. Polakoff, Deputy Director and Chief
Operating Officer, Office of Thrift Supervision; The Honorable
Tom Miller, Attorney General, State of Iowa; andMr. Steven L.
Antonakes, Commissioner of Banks, Commonwealth of Massachusetts, on
behalf of the Conference of State Bank Supervisors.
The Subcommittee on Oversight and Investigations held a
hearing on July 25, 2007, entitled ``Rooting Out Discrimination
in Mortgage Lending: Using HMDA as a Tool for Fair Lending
Enforcement.'' The following witnesses testified: Panel One:
Mr. John Taylor, President and CEO, National Community
Reinvestment Coalition; Ms. Ginny Hamilton, Executive Director,
Fair Housing Center of Greater Boston; Mr. Hilary O. Shelton,
Director, Washington Bureau, National Association for the
Advancement of Colored People; Mr. Saul Solorzano, Executive
Director, Central American Resource Center; Mr. Michael LaCour-
Little, Professor of Finance, California State University--
Fullerton; Mr. Bill Himpler, Executive Vice President, American
Financial Services Association; Panel Two: Ms. Sandra F.
Braunstein, Director, Division of Consumer and Community
Affairs, Board of Governors of the Federal Reserve Board; Ms.
Sandra L. Thompson, Director, Division of Supervision and
Consumer Protection, Federal Deposit Insurance Corporation; Ms.
Montrice Yakimov, Managing Director, Compliance and Consumer
Protection, Office of Thrift Supervision; Mr. David M. Marquis,
Director, Office of Examination and Insurance, National Credit
Union Administration; Mr. Calvin R. Hagins, Director for
Compliance Policy, Office of the Comptroller of the Currency;
Ms. Grace Chung Becker, Deputy Assistant Attorney General,
Civil Rights Division, U.S. Department of Justice; Ms. Kim
Kendrick, Assistant Secretary, Office of Fair Housing and Equal
Opportunity, U.S. Department of Housing and Urban Development;
and Ms. Lydia B. Parnes, Director, Bureau of Consumer
Protection, Federal Trade Commission.
The Committee on Financial Services held a hearing on July
25, 2007, entitled ``Improving Federal Consumer Protection in
Financial Services--Consumer and Industry Perspectives.'' The
following witnesses testified: Mr. Travis Plunkett, Legislative
Director, Consumer Federation of America; Mr. Raul Gonzalez,
Legislative Director, National Council of La Raza; Mr. George
Gaberlavage, Director, Policy Research & Development, Consumer
and State Affairs, Public Policy Institute, AARP; Mr. Arthur
Johnson, Vice President, American Bankers Association, Chairman
and Chief Executive Officer of United Bank of Michigan; and Mr.
Jim Sivon, Partner, Barnett, Sivon & Natter PC.
The Committee on Financial Services held a field hearing on
August 9, 2007, in Minneapolis, Minnesota, entitled ``The
Effect of Predatory Lending and the Foreclosure Crisis on Twin
Cities' Communities and Neighborhoods.'' The following
witnesses testified: Panel One: The Honorable R. T. Rybak,
Mayor, Minneapolis, Minnesota; The Honorable Chris Coleman,
Mayor, St. Paul, Minnesota; The Honorable Lori Swanson,
Attorney General, State of Minnesota; Mr. Richard M. Todd,
Minneapolis Federal Reserve Chair Vice President, Federal
Reserve Bank of Minneapolis; Panel Two: Ms. Sharon Glover,
Golden Valley, Minnesota; Mr. Dante Rivera, St. Paul,
Minnesota; Panel Three: Ms. Dorothy Bridges, President,
Franklin Avenue Bank, Minneapolis, Minnesota; Mr. Paul
Satriano, ACORN National Treasurer, MN ACORN State Board
Director, St. Paul, Minnesota; Ms. Patricia Hanson, President,
Community Development and Specialized Lending, Wells Fargo,
Minneapolis, Minnesota; Ms. Sheri Pugh Sullivan, Executive
Director, Northside Residents Resource Council, Minneapolis,
Minnesota; Mr. Tim Marx, Commissioner, Minnesota Housing
Finance Agency, St. Paul, Minnesota; and Ms. Julie Gugin,
Executive Director, Minnesota Home Ownership Center.
The Committee on Financial Services held a hearing on
September 5, 2007, entitled ``Recent Events in the Credit and
Mortgage Markets and Possible Implications for U.S. Consumers
and the Global Economy.'' The following witnesses testified:
The Honorable Robert K. Steel, Under Secretary of Domestic
Finance, Department of the Treasury; The Honorable John C.
Dugan, Comptroller of the Currency; Mr. Erik R. Sirri, Director
of the Division of Market Regulation, Securities and Exchange
Commission; and The Honorable Sheila Bair, Chair, Federal
Deposit Insurance Corporation.
The Committee on Financial Services held a hearing on
September 20, 2007, entitled ``Legislative and Regulatory
Options for Minimizing and Mitigating Mortgage Foreclosures.''
The following witnesses testified: Panel One: The Honorable
Henry M. Paulson, Jr., Secretary of the Treasury, United States
Department of the Treasury; The Honorable Alphonso Jackson,
Secretary of Housing and Urban Development, United States
Department of Housing and Urban Development; The Honorable Ben
S. Bernanke, Chairman, Board of Governors of the Federal
Reserve System; Panel Two: Mr. Daniel H. Mudd, President and
Chief Executive Officer, Fannie Mae; Dr. Richard F. Syron,
Chairman and Chief Executive Officer, Freddie Mac; Ms. Judith
Liben, Massachusetts Law Reform Institute; Mr. John M. Robbins,
Chairman, Mortgage Bankers Association; Mr. Harry H. Dinham,
CMC, Past-President, National Association of Mortgage Brokers
(NAMB), The Dinham Companies; Mr. Bruce Marks, Chief Executive
Officer, Neighborhood Assistance Corporation of America; and
Mr. Alex J. Pollock, Resident Fellow, American Enterprise
Institute.
The Committee on Financial Services held a field hearing on
October 15, 2007, in Roxbury Crossing, Massachusetts, entitled
``Mortgage Lending Disparities.'' The following witnesses
testified: Panel One: The Honorable Deval Patrick, Governor of
the Commonwealth of Massachusetts; The Honorable Thomas M.
Menino, Mayor of the City of Boston; and The Honorable Martha
Coakley, Attorney General of the Commonwealth of Massachusetts;
Panel Two: Mr. Chuck Turner, Councilor, City of Boston; Mr. Sam
Yoon, At-Large City Councilor, City of Boston; Panel Three: Mr.
Jim Campen, Executive Director, Americans for Fairness in
Lending; Ms. Ginny Hamilton, Executive Director, Fair Housing
Center of Greater Boston; Ms. Acia Adams-Heath, President,
Massachusetts Affordable Housing Alliance; Mr. Leonard Alkins,
President Emeritus, NAACP Boston Branch; Mr. Thomas B. Kennedy,
Senior Vice President, Sovereign Bank; and Ms. Lynn Browne,
Executive Vice President and Senior Economist, Federal Reserve
Bank of Boston.
The Committee on Financial Services held a hearing on
October 24, 2007, entitled ``Legislative Proposals on Reforming
Mortgage Practices.'' The following witnesses testified: Panel
One: The Honorable Martin J. Gruenberg, Vice Chairman, Federal
Deposit Insurance Corporation; The Honorable John C. Dugan,
Comptroller, Office of the Comptroller of the Currency; The
Honorable John M. Reich, Director, Office of Thrift
Supervision; The Honorable JoAnn Johnson, Chairman, National
Credit Union Administration; The Honorable Randall S. Kroszner,
Governor, Board of Governors of the Federal Reserve System; The
Honorable Steven L. Antonakes, Commissioner, Massachusetts
Division of Banks; Panel Two: Mr. Michael D. Calhoun, President
and Chief Operating Officer, Center for Responsible Lending;
Ms. Janis Bowdler, Senior Housing Policy Analyst, National
Council of La Raza; Mr. Hilary Shelton, Director, NAACP
Washington Bureau; Mr. John Taylor, President and Chief
Executive Officer, National Community Reinvestment Coalition;
Mr. John Hope Bryant, Founder, Chairman and Chief Executive
Officer, Operation HOPE, Inc.; Panel Three: Mr. Bradley E.
Rock, Chairman, President and Chief Executive Officer, Bank of
Smithtown, on behalf of the AmericanBankers Association and
America's Community Bankers; Mr. Kurt Pfotenhauer, Senior Vice
President for Government Affairs and Public Policy, Mortgage Bankers
Association; Mr. Marc Lackritz, President and Chief Executive Officer,
Securities Industry and Financial Markets Association; Mr. Marc S.
Savitt, President, The Mortgage Center, President-Elect, National
Association of Mortgage Brokers; and Mr. Donald C. Lampe, Womble
Carlyle Sandridge & Rice, PLLC.
The Committee on Financial Service held a hearing on
November 2, 2007, entitled ``Progress in Administration and
Other Efforts to Coordinate and Enhance Mortgage Foreclosure
Prevention.'' The following witnesses testified: Panel One: The
Honorable Robert K. Steel, Under Secretary for Domestic
Finance, U.S. Department of the Treasury; and The Honorable
Brian D. Montgomery, Assistant Secretary for Housing--Federal
Housing Commissioner, U.S. Department of Housing and Urban
Development; Panel Two: The Honorable Tom Miller, Attorney
General, State of Iowa; Mr. Kenneth Wade, Chief Executive
Officer, NeighborWorks America; Mr. Bruce Marks, Chief
Executive Officer, Neighborhood Assistance Corporation of
America; Mr. Bill Longbrake, Anthony T. Cluff Senior Policy
Advisor, The Financial Services Roundtable; and Mr. Sandor
Samuels, Executive Managing Director, Countrywide Financial
Corporation.
Committee Consideration
The Committee on Financial Services met in open session on
November 6, 2007, and ordered H.R. 3915, the Mortgage Reform
and Anti-Predatory Lending Act of 2007, as amended, reported
with a favorable recommendation by a record vote of 45 yeas and
19 nays.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. A
motion by Mr. Frank to report the bill, as amended, to the
House with a favorable recommendation was agreed to by a record
vote of 45 yeas and 19 nays (Record vote FC-80). The names of
Members voting for and against follow:
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank....................... X ........ ........ Mr. Bachus......... X ........ ........
Mr. Kanjorski................... X ........ ........ Mr. Baker.......... ........ ........ ........
Ms. Waters...................... X ........ ........ Ms. Pryce (OH)..... ........ ........ ........
Mrs. Maloney.................... X ........ ........ Mr. Castle......... X ........ ........
Mr. Gutierrez................... X ........ ........ Mr. King (NY)...... X ........ ........
Ms. Velazquez................... X ........ ........ Mr. Royce.......... ........ X ........
Mr. Watt........................ X ........ ........ Mr. Lucas.......... ........ X ........
Mr. Ackerman.................... X ........ ........ Mr. Paul........... ........ ........ ........
Ms. Carson...................... ....... ........ ........ Mr. LaTourette..... X ........ ........
Mr. Sherman..................... X ........ ........ Mr. Manzullo....... ........ X ........
Mr. Meeks....................... X ........ ........ Mr. Jones.......... X ........ ........
Mr. Moore (KS).................. X ........ ........ Mrs. Biggert....... ........ ........ ........
Mr. Capuano..................... X ........ ........ Mr. Shays.......... X ........ ........
Mr. Hinojosa.................... X ........ ........ Mr. Miller (CA).... X ........ ........
Mr. Clay........................ X ........ ........ Mrs. Capito........ X ........ ........
Mrs. McCarthy................... X ........ ........ Mr. Feeney......... ........ X ........
Mr. Baca........................ X ........ ........ Mr. Hensarling..... ........ X ........
Mr. Lynch....................... X ........ ........ Mr. Garrett (NJ)... ........ X ........
Mr. Miller (NC)................. X ........ ........ Ms. Brown-Waite.... X ........ ........
Mr. Scott....................... X ........ ........ Mr. Barrett (SC)... ........ X ........
Mr. Green....................... X ........ ........ Mr. Gerlach........ ........ ........ ........
Mr. Cleaver..................... X ........ ........ Mr. Pearce......... ........ X ........
Ms. Bean........................ X ........ ........ Mr. Neugebauer..... ........ X ........
Ms. Moore (WI).................. X ........ ........ Mr. Price (GA)..... ........ X ........
Mr. Davis (TN).................. X ........ ........ Mr. Davis (KY)..... ........ X ........
Mr. Sires....................... X ........ ........ Mr. McHenry........ ........ X ........
Mr. Hodes....................... X ........ ........ Mr. Campbell....... ........ X ........
Mr. Ellison..................... X ........ ........ Mr. Putnam......... ........ X ........
Mr. Klein....................... X ........ ........ Mrs. Bachmann...... ........ X ........
Mr. Mahoney (FL)................ X ........ ........ Mr. Roskam......... ........ X ........
Mr. Wilson...................... X ........ ........ Mr. Marchant....... ........ X ........
Mr. Perlmutter.................. X ........ ........ Mr. McCotter....... ........ X ........
Mr. Murphy...................... X ........ ........ Mr. McCarthy....... ........ X ........
Mr. Donnelly.................... X ........ ........
Mr. Wexler...................... X ........ ........
Mr. Marshall.................... X ........ ........
Mr. Boren....................... X ........
----------------------------------------------------------------------------------------------------------------
The following amendments were disposed of by record votes.
The names of Members voting for and against follow:
An amendment to the amendment in the nature of a substitute
by Mr. Pearce, No. 1e, striking section 123 (Anti-steering),
was not agreed to by a record vote of 22 yeas and 38 nays
(Record vote FC-72):
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank....................... ....... X ........ Mr. Bachus......... ........ X ........
Mr. Kanjorski................... ....... X ........ Mr. Baker.......... ........ ........ ........
Ms. Waters...................... ....... X ........ Ms. Pryce (OH)..... ........ ........ ........
Mrs. Maloney.................... ....... X ........ Mr. Castle......... ........ ........ ........
Mr. Gutierrez................... ....... X ........ Mr. King (NY)...... ........ X ........
Ms. Velazquez................... ....... X ........ Mr. Royce.......... X ........ ........
Mr. Watt........................ ....... X ........ Mr. Lucas.......... X ........ ........
Mr. Ackerman.................... ....... X ........ Mr. Paul........... ........ ........ ........
Ms. Carson...................... ....... ........ ........ Mr. LaTourette..... ........ X ........
Mr. Sherman..................... ....... X ........ Mr. Manzullo....... X ........ ........
Mr. Meeks....................... ....... X ........ Mr. Jones.......... ........ X ........
Mr. Moore (KS).................. ....... X ........ Mrs. Biggert....... ........ X ........
Mr. Capuano..................... ....... X ........ Mr. Shays.......... X ........ ........
Mr. Hinojosa.................... ....... ........ ........ Mr. Miller (CA).... X ........ ........
Mr. Clay........................ ....... X ........ Mrs. Capito........ ........ X ........
Mrs. McCarthy................... ....... X ........ Mr. Feeney......... X ........ ........
Mr. Baca........................ ....... X ........ Mr. Hensarling..... X ........ ........
Mr. Lynch....................... ....... ........ ........ Mr. Garrett (NJ)... X ........ ........
Mr. Miller (NC)................. ....... X ........ Ms. Brown-Waite X ........ ........
(FL).
Mr. Scott....................... ....... X ........ Mr. Barrett (SC)... X ........ ........
Mr. Green....................... ....... X ........ Mr. Gerlach........ ........ ........ ........
Mr. Cleaver..................... ....... X ........ Mr. Pearce......... X ........ ........
Ms. Bean........................ ....... ........ ........ Mr. Neugebauer..... X ........ ........
Ms. Moore (WI).................. ....... X ........ Mr. Price (GA)..... X ........ ........
Mr. Davis (TN).................. ....... X ........ Mr. Davis (KY)..... X ........ ........
Mr. Sires....................... ....... X ........ Mr. McHenry........ X ........ ........
Mr. Hodes....................... ....... ........ ........ Mr. Campbell....... X ........ ........
Mr. Ellison..................... ....... X ........ Mr. Putnam......... X ........ ........
Mr. Klein....................... ....... X ........ Mrs. Bachmann...... X ........ ........
Mr. Mahoney (FL)................ ....... X ........ Mr. Roskam......... X ........ ........
Mr. Wilson...................... ....... X ........ Mr. Marchant....... X ........ ........
Mr. Perlmutter.................. ....... X ........ Mr. McCotter....... X ........ ........
Mr. Murphy...................... ....... X ........ Mr. McCarthy....... X ........ ........
Mr. Donnelly.................... ....... X ........
Mr. Wexler...................... ....... X ........
Mr. Marshall.................... ....... X ........
Mr. Boren....................... ....... X
----------------------------------------------------------------------------------------------------------------
An amendment to the amendment in the nature of a substitute
by Mr. McHenry, No. 1m, striking title III (High-Cost
Mortgages), was not agreed to by a record vote of 25 yeas and
36 nays (Record vote FC-73):
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank....................... ....... X ........ Mr. Bachus......... X ........ ........
Mr. Kanjorski................... ....... X ........ Mr. Baker.......... ........ ........ ........
Ms. Waters...................... ....... X ........ Ms. Pryce (OH)..... ........ ........ ........
Mrs. Maloney.................... ....... X ........ Mr. Castle......... ........ ........ ........
Mr. Gutierrez................... ....... X ........ Mr. King (NY)...... X ........ ........
Ms. Velazquez................... ....... X ........ Mr. Royce.......... X ........ ........
Mr. Watt........................ ....... X ........ Mr. Lucas.......... X ........ ........
Mr. Ackerman.................... ....... X ........ Mr. Paul........... ........ ........ ........
Ms. Carson...................... ....... ........ ........ Mr. LaTourette..... ........ X ........
Mr. Sherman..................... ....... X ........ Mr. Manzullo....... X ........ ........
Mr. Meeks....................... ....... X ........ Mr. Jones.......... X ........ ........
Mr. Moore (KS).................. ....... X ........ Mrs. Biggert....... ........ ........ ........
Mr. Capuano..................... ....... X ........ Mr. Shays.......... ........ X ........
Mr. Hinojosa.................... ....... X ........ Mr. Miller (CA).... X ........ ........
Mr. Clay........................ ....... X ........ Mrs. Capito........ X ........ ........
Mrs. McCarthy................... ....... X ........ Mr. Feeney......... X ........ ........
Mr. Baca........................ ....... X ........ Mr. Hensarling..... X ........ ........
Mr. Lynch....................... ....... ........ ........ Mr. Garrett (NJ)... X ........ ........
Mr. Miller (NC)................. ....... X ........ Ms. Brown-Waite X ........ ........
(FL).
Mr. Scott....................... ....... X ........ Mr. Barrett (SC)... X ........ ........
Mr. Green....................... ....... X ........ Mr. Gerlach........ ........ ........ ........
Mr. Cleaver..................... ....... X ........ Mr. Pearce......... X ........ ........
Ms. Bean........................ ....... ........ ........ Mr. Neugebauer..... X ........ ........
Ms. Moore (WI).................. ....... X ........ Mr. Price (GA)..... X ........ ........
Mr. Davis (TN).................. ....... X ........ Mr. Davis (KY)..... X ........ ........
Mr. Sires....................... ....... X ........ Mr. McHenry........ X ........ ........
Mr. Hodes....................... ....... X ........ Mr. Campbell....... X ........ ........
Mr. Ellison..................... ....... X ........ Mr. Putnam......... X ........ ........
Mr. Klein....................... ....... X ........ Mrs. Bachmann...... X ........ ........
Mr. Mahoney (FL)................ ....... X ........ Mr. Roskam......... X ........ ........
Mr. Wilson...................... ....... X ........ Mr. Marchant....... X ........ ........
Mr. Perlmutter.................. ....... X ........ Mr. McCotter....... X ........ ........
Mr. Murphy...................... ....... X ........ Mr. McCarthy....... X ........ ........
Mr. Donnelly.................... ....... X ........
Mr. Wexler...................... ....... X ........
Mr. Marshall.................... ....... X ........
Mr. Boren....................... ....... X ........
----------------------------------------------------------------------------------------------------------------
An amendment to the amendment in the nature of a substitute
by Mr. Garrett, No. 1n, striking rebuttable presumption, was
not agreed to by a record vote of 26 yeas and 37 nays (Record
vote FC-74):
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank....................... ....... X ........ Mr. Bachus......... X ........ ........
Mr. Kanjorski................... ....... X ........ Mr. Baker.......... ........ ........ ........
Ms. Waters...................... ....... X ........ Ms. Pryce (OH)..... ........ ........ ........
Mrs. Maloney.................... ....... X ........ Mr. Castle......... ........ ........ ........
Mr. Gutierrez................... ....... X ........ Mr. King (NY)...... X ........ ........
Ms. Velazquez................... ....... X ........ Mr. Royce.......... X ........ ........
Mr. Watt........................ ....... X ........ Mr. Lucas.......... X ........ ........
Mr. Ackerman.................... ....... X ........ Mr. Paul........... ........ ........ ........
Ms. Carson...................... ....... ........ ........ Mr. LaTourette..... ........ X ........
Mr. Sherman..................... ....... X ........ Mr. Manzullo....... X ........ ........
Mr. Meeks....................... ....... X ........ Mr. Jones.......... X ........ ........
Mr. Moore (KS).................. ....... X ........ Mrs. Biggert....... ........ ........ ........
Mr. Capuano..................... ....... X ........ Mr. Shays.......... X ........ ........
Mr. Hinojosa.................... ....... X ........ Mr. Miller (CA).... X ........ ........
Mr. Clay........................ ....... X ........ Mrs. Capito........ X ........ ........
Mrs. McCarthy................... ....... X ........ Mr. Feeney......... X ........ ........
Mr. Baca........................ ....... X ........ Mr. Hensarling..... X ........ ........
Mr. Lynch....................... ....... X ........ Mr. Garrett (NJ)... X ........ ........
Mr. Miller (NC)................. ....... X ........ Ms. Brown-Waite X ........ ........
(FL).
Mr. Scott....................... ....... X ........ Mr. Barrett (SC)... X ........ ........
Mr. Green....................... ....... X ........ Mr. Gerlach........ ........ ........ ........
Mr. Cleaver..................... ....... X ........ Mr. Pearce......... X ........ ........
Ms. Bean........................ ....... X ........ Mr. Neugebauer..... X ........ ........
Ms. Moore (WI).................. ....... X ........ Mr. Price (GA)..... X ........ ........
Mr. Davis (TN).................. ....... X ........ Mr. Davis (KY)..... X ........ ........
Mr. Sires....................... ....... X ........ Mr. McHenry........ X ........ ........
Mr. Hodes....................... ....... X ........ Mr. Campbell....... X ........ ........
Mr. Ellison..................... ....... X ........ Mr. Putnam......... X ........ ........
Mr. Klein....................... ....... X ........ Mrs. Bachmann...... X ........ ........
Mr. Mahoney (FL)................ ....... X ........ Mr. Roskam......... X ........ ........
Mr. Wilson...................... ....... X ........ Mr. Marchant....... X ........ ........
Mr. Perlmutter.................. ....... X ........ Mr. McCotter....... X ........ ........
Mr. Murphy...................... ....... X ........ Mr. McCarthy....... X ........ ........
Mr. Donnelly.................... ....... X ........
Mr. Wexler...................... ....... X ........
Mr. Marshall.................... ....... X ........
Mr. Boren....................... ....... X ........
----------------------------------------------------------------------------------------------------------------
An amendment to the amendment in the nature of a substitute
by Mr. Price (GA), No. 1o, excepting certain qualified loans,
was not agreed to by a record vote of 19 yeas and 44 nays
(Record vote FC-75):
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank....................... ....... X ........ Mr. Bachus......... ........ ........ ........
Mr. Kanjorski................... ....... X ........ Mr. Baker.......... ........ ........ ........
Ms. Waters...................... ....... X ........ Ms. Pryce (OH)..... ........ ........ ........
Mrs. Maloney.................... ....... X ........ Mr. Castle......... ........ X ........
Mr. Gutierrez................... ....... X ........ Mr. King (NY)...... ........ X ........
Ms. Velazquez................... ....... X ........ Mr. Royce.......... X ........ ........
Mr. Watt........................ ....... X ........ Mr. Lucas.......... X ........ ........
Mr. Ackerman.................... ....... X ........ Mr. Paul........... ........ ........ ........
Ms. Carson...................... ....... ........ ........ Mr. LaTourette..... ........ X ........
Mr. Sherman..................... ....... X ........ Mr. Manzullo....... X ........ ........
Mr. Meeks....................... ....... X ........ Mr. Jones.......... ........ X ........
Mr. Moore (KS).................. ....... X ........ Mrs. Biggert....... ........ ........ ........
Mr. Capuano..................... ....... X ........ Mr. Shays.......... ........ X ........
Mr. Hinojosa.................... ....... X ........ Mr. Miller (CA).... ........ X ........
Mr. Clay........................ ....... X ........ Mrs. Capito........ ........ X ........
Mrs. McCarthy................... ....... X ........ Mr. Feeney......... X ........ ........
Mr. Baca........................ ....... X ........ Mr. Hensarling..... X ........ ........
Mr. Lynch....................... ....... X ........ Mr. Garrett (NJ)... X ........ ........
Mr. Miller (NC)................. ....... X ........ Ms. Brown-Waite X ........ ........
(FL).
Mr. Scott....................... ....... X ........ Mr. Barrett (SC)... X ........ ........
Mr. Green....................... ....... X ........ Mr. Gerlach........ ........ ........ ........
Mr. Cleaver..................... ....... X ........ Mr. Pearce......... X ........ ........
Ms. Bean........................ ....... X ........ Mr. Neugebauer..... X ........ ........
Ms. Moore (WI).................. ....... X ........ Mr. Price (GA)..... X ........ ........
Mr. Davis (TN).................. ....... X ........ Mr. Davis (KY)..... X ........ ........
Mr. Sires....................... ....... X ........ Mr. McHenry........ X ........ ........
Mr. Hodes....................... ....... X ........ Mr. Campbell....... ........ X ........
Mr. Ellison..................... ....... X ........ Mr. Putnam......... X ........ ........
Mr. Klein....................... ....... X ........ Mrs. Bachmann...... X ........ ........
Mr. Mahoney (FL)................ ....... X ........ Mr. Roskam......... X ........ ........
Mr. Wilson...................... ....... X ........ Mr. Marchant....... X ........ ........
Mr. Perlmutter.................. ....... X ........ Mr. McCotter....... X ........ ........
Mr. Murphy...................... ....... X ........ Mr. McCarthy....... X ........ ........
Mr. Donnelly.................... ....... X ........
Mr. Wexler...................... ....... X ........
Mr. Marshall.................... ....... X ........
Mr. Boren....................... ....... X ........
----------------------------------------------------------------------------------------------------------------
An amendment to the amendment in the nature of a substitute
by Mr. Campbell, No. 1p, striking section 204 (Liability), was
not agreed to by a record vote of 22 yeas and 42 nays (Record
vote FC-76):
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank....................... ....... X ........ Mr. Bachus......... ........ X ........
Mr. Kanjorski................... ....... X ........ Mr. Baker.......... ........ ........ ........
Ms. Waters...................... ....... X ........ Ms. Pryce (OH)..... ........ ........ ........
Mrs. Maloney.................... ....... X ........ Mr. Castle......... ........ X ........
Mr. Gutierrez................... ....... X ........ Mr. King (NY)...... ........ X ........
Ms. Velazquez................... ....... X ........ Mr. Royce.......... X ........ ........
Mr. Watt........................ ....... X ........ Mr. Lucas.......... X ........ ........
Mr. Ackerman.................... ....... X ........ Mr. Paul........... ........ ........ ........
Ms. Carson...................... ....... ........ ........ Mr. LaTourette..... ........ X ........
Mr. Sherman..................... ....... X ........ Mr. Manzullo....... X ........ ........
Mr. Meeks....................... ....... X ........ Mr. Jones.......... ........ X ........
Mr. Moore (KS).................. ....... X ........ Mrs. Biggert....... ........ ........ ........
Mr. Capuano..................... ....... X ........ Mr. Shays.......... X ........ ........
Mr. Hinojosa.................... ....... X ........ Mr. Miller (CA).... X ........ ........
Mr. Clay........................ ....... X ........ Mrs. Capito........ ........ X ........
Mrs. McCarthy................... ....... X ........ Mr. Feeney......... X ........ ........
Mr. Baca........................ ....... X ........ Mr. Hensarling..... X ........ ........
Mr. Lynch....................... ....... X ........ Mr. Garrett (NJ)... X ........ ........
Mr. Miller (NC)................. ....... X ........ Ms. Brown-Waite X ........ ........
(FL).
Mr. Scott....................... ....... X ........ Mr. Barrett (SC)... X ........ ........
Mr. Green....................... ....... X ........ Mr. Gerlach........ ........ ........ ........
Mr. Cleaver..................... ....... X ........ Mr. Pearce......... X ........ ........
Ms. Bean........................ ....... X ........ Mr. Neugebauer..... X ........ ........
Ms. Moore (WI).................. ....... X ........ Mr. Price (GA)..... X ........ ........
Mr. Davis (TN).................. ....... X ........ Mr. Davis (KY)..... X ........ ........
Mr. Sires....................... ....... X ........ Mr. McHenry........ X ........ ........
Mr. Hodes....................... ....... X ........ Mr. Campbell....... X ........ ........
Mr. Ellison..................... ....... X ........ Mr. Putnam......... X ........ ........
Mr. Klein....................... ....... X ........ Mrs. Bachmann...... X ........ ........
Mr. Mahoney (FL)................ ....... X ........ Mr. Roskam......... X ........ ........
Mr. Wilson...................... ....... X ........ Mr. Marchant....... X ........ ........
Mr. Perlmutter.................. ....... X ........ Mr. McCotter....... X ........ ........
Mr. Murphy...................... ....... X ........ Mr. McCarthy....... X ........ ........
Mr. Donnelly.................... ....... X ........
Mr. Wexler...................... ....... X ........
Mr. Marshall.................... ....... X ........
Mr. Boren....................... ....... X ........
----------------------------------------------------------------------------------------------------------------
An amendment to the amendment in the nature of a substitute
by Mr. Garrett, No. 1r, regarding delayed effective date, was
not agreed to by a record vote of 20 yeas and 44 nays (Record
vote FC-77):
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank....................... ....... X ........ Mr. Bachus......... ........ X ........
Mr. Kanjorski................... ....... X ........ Mr. Baker.......... ........ ........ ........
Ms. Waters...................... ....... X ........ Ms. Pryce (OH)..... ........ ........ ........
Mrs. Maloney.................... ....... X ........ Mr. Castle......... ........ X ........
Mr. Gutierrez................... ....... X ........ Mr. King (NY)...... ........ X ........
Ms. Velazquez................... ....... X ........ Mr. Royce.......... X ........ ........
Mr. Watt........................ ....... X ........ Mr. Lucas.......... X ........ ........
Mr. Ackerman.................... ....... X ........ Mr. Paul........... ........ ........ ........
Ms. Carson...................... ....... ........ ........ Mr. LaTourette..... ........ X ........
Mr. Sherman..................... ....... X ........ Mr. Manzullo....... X ........ ........
Mr. Meeks....................... ....... X ........ Mr. Jones.......... ........ X ........
Mr. Moore (KS).................. ....... X ........ Mrs. Biggert....... ........ ........ ........
Mr. Capuano..................... ....... X ........ Mr. Shays.......... ........ X ........
Mr. Hinojosa.................... ....... X ........ Mr. Miller (CA).... X ........ ........
Mr. Clay........................ ....... X ........ Mrs. Capito........ ........ X ........
Mrs. McCarthy................... ....... X ........ Mr. Feeney......... X ........ ........
Mr. Baca........................ ....... X ........ Mr. Hensarling..... X ........ ........
Mr. Lynch....................... ....... X ........ Mr. Garrett (NJ)... X ........ ........
Mr. Miller (NC)................. ....... X ........ Ms. Brown-Waite ........ X ........
(FL).
Mr. Scott....................... ....... X ........ Mr. Barrett (SC)... X ........ ........
Mr. Green....................... ....... X ........ Mr. Gerlach........ ........ ........ ........
Mr. Cleaver..................... ....... X ........ Mr. Pearce......... X ........ ........
Ms. Bean........................ ....... X ........ Mr. Neugebauer..... X ........ ........
Ms. Moore (WI).................. ....... X ........ Mr. Price (GA)..... X ........ ........
Mr. Davis (TN).................. ....... X ........ Mr. Davis (KY)..... X ........ ........
Mr. Sires....................... ....... X ........ Mr. McHenry........ X ........ ........
Mr. Hodes....................... ....... X ........ Mr. Campbell....... X ........ ........
Mr. Ellison..................... ....... X ........ Mr. Putnam......... X ........ ........
Mr. Klein....................... ....... X ........ Mrs.Bachmann....... X ........ ........
Mr. Mahoney (FL)................ ....... X ........ Mr. Roskam......... X ........ ........
Mr. Wilson...................... ....... X ........ Mr. Marchant....... X ........ ........
Mr. Perlmutter.................. ....... X ........ Mr. McCotter....... X ........ ........
Mr. Murphy...................... ....... X ........ Mr. McCarthy....... X ........ ........
Mr. Donnelly.................... ....... X ........
Mr. Wexler...................... ....... X ........
Mr. Marshall.................... ....... X ........
Mr. Boren....................... ....... X ........
----------------------------------------------------------------------------------------------------------------
An amendment to the amendment in the nature of a substitute
by Mr. Hensarling, No. 1s, regarding a termination provision,
was not agreed to by a record vote of 21 yeas and 43 nays
(Record vote FC-78):
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank....................... ....... X ........ Mr. Bachus......... ........ X ........
Mr. Kanjorski................... ....... X ........ Mr. Baker.......... ........ ........ ........
Ms. Waters...................... ....... X ........ Ms. Pryce (OH)..... ........ ........ ........
Mrs. Maloney.................... ....... X ........ Mr. Castle......... ........ X ........
Mr. Gutierrez................... ....... X ........ Mr. King (NY)...... ........ X ........
Ms. Velazquez................... ....... X ........ Mr. Royce.......... X ........ ........
Mr. Watt........................ ....... X ........ Mr. Lucas.......... X ........ ........
Mr. Ackerman.................... ....... X ........ Mr. Paul........... ........ ........ ........
Ms. Carson...................... ....... ........ ........ Mr. LaTourette..... ........ X ........
Mr. Sherman..................... ....... X ........ Mr. Manzullo....... X ........ ........
Mr. Meeks....................... ....... X ........ Mr. Jones.......... ........ X ........
Mr. Moore (KS).................. ....... X ........ Mrs. Biggert....... ........ ........ ........
Mr. Capuano..................... ....... X ........ Mr. Shays.......... ........ X ........
Mr. Hinojosa.................... ....... X ........ Mr. Miller (CA).... X ........ ........
Mr. Clay........................ ....... X ........ Mrs. Capito........ ........ X ........
Mrs. McCarthy................... ....... X ........ Mr. Feeney......... X ........ ........
Mr. Baca........................ ....... X ........ Mr. Hensarling..... X ........ ........
Mr. Lynch....................... ....... X ........ Mr. Garrett (NJ)... X ........ ........
Mr. Miller (NC)................. ....... X ........ Ms. Brown-Waite X ........ ........
(FL).
Mr. Scott....................... ....... X ........ Mr. Barrett (SC)... X ........ ........
Mr. Green....................... ....... X ........ Mr. Gerlach........ ........ ........ ........
Mr. Cleaver..................... ....... X ........ Mr. Pearce......... X ........ ........
Ms. Bean........................ ....... X ........ Mr. Neugebauer..... X ........ ........
Ms. Moore (WI).................. ....... X ........ Mr. Price (GA)..... X ........ ........
Mr. Davis (TN).................. ....... X ........ Mr. Davis (KY)..... X ........ ........
Mr. Sires....................... ....... X ........ Mr. McHenry........ X ........ ........
Mr. Hodes....................... ....... X ........ Mr. Campbell....... X ........ ........
Mr. Ellison..................... ....... X ........ Mr. Putnam......... X ........ ........
Mr. Klein....................... ....... X ........ Mrs.Bachmann....... X ........ ........
Mr. Mahoney (FL)................ ....... X ........ Mr. Roskam......... X ........ ........
Mr. Wilson...................... ....... X ........ Mr. Marchant....... X ........ ........
Mr. Perlmutter.................. ....... X ........ Mr. McCotter....... X ........ ........
Mr. Murphy...................... ....... X ........ Mr. McCarthy....... X ........ ........
Mr. Donnelly.................... ....... X ........
Mr. Wexler...................... ....... X ........
Mr. Marshall.................... ....... X ........
Mr. Boren....................... ....... X ........
----------------------------------------------------------------------------------------------------------------
An amendment to the amendment in the nature of a substitute
by Mr. McHenry, No. 1u, delaying effective date pending
certification, was not agreed to by a record vote of 20 yeas
and 44 nays (Record vote FC-79):
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank....................... ....... X ........ Mr. Bachus......... ........ X ........
Mr. Kanjorski................... ....... X ........ Mr. Baker.......... ........ ........ ........
Ms. Waters...................... ....... X ........ Ms. Pryce (OH)..... ........ ........ ........
Mrs. Maloney.................... ....... X ........ Mr. Castle......... ........ X ........
Mr. Gutierrez................... ....... X ........ Mr. King (NY)...... ........ X ........
Ms. Velazquez................... ....... X ........ Mr. Royce.......... X ........ ........
Mr. Watt........................ ....... X ........ Mr. Lucas.......... X ........ ........
Mr. Ackerman.................... ....... X ........ Mr. Paul........... ........ ........ ........
Ms. Carson...................... ....... ........ ........ Mr. LaTourette..... ........ X ........
Mr. Sherman..................... ....... X ........ Mr. Manzullo....... X ........ ........
Mr. Meeks....................... ....... X ........ Mr. Jones.......... ........ X ........
Mr. Moore (KS).................. ....... X ........ Mrs. Biggert....... ........ ........ ........
Mr. Capuano..................... ....... X ........ Mr. Shays.......... ........ X ........
Mr. Hinojosa.................... ....... X ........ Mr. Miller (CA).... X ........ ........
Mr. Clay........................ ....... X ........ Mrs. Capito........ ........ X ........
Mrs. McCarthy................... ....... X ........ Mr. Feeney......... X ........ ........
Mr. Baca........................ ....... X ........ Mr. Hensarling..... X ........ ........
Mr. Lynch....................... ....... X ........ Mr. Garrett (NJ)... X ........ ........
Mr. Miller (NC)................. ....... X ........ Ms. Brown-Waite ........ X ........
(FL).
Mr. Scott....................... ....... X ........ Mr. Barrett (SC)... X ........ ........
Mr. Green....................... ....... X ........ Mr. Gerlach........ ........ ........ ........
Mr. Cleaver..................... ....... X ........ Mr. Pearce......... X ........ ........
Ms. Bean........................ ....... X ........ Mr. Neugebauer..... X ........ ........
Ms. Moore (WI).................. ....... X ........ Mr. Price (GA)..... X ........ ........
Mr. Davis (TN).................. ....... X ........ Mr. Davis (KY)..... X ........ ........
Mr. Sires....................... ....... X ........ Mr. McHenry........ X ........ ........
Mr. Hodes....................... ....... X ........ Mr. Campbell....... X ........ ........
Mr. Ellison..................... ....... X ........ Mr. Putnam......... X ........ ........
Mr. Klein....................... ....... X ........ Mrs. Bachmann...... X ........ ........
Mr. Mahoney (FL)................ ....... X ........ Mr. Roskam......... X ........ ........
Mr. Wilson...................... ....... X ........ Mr. Marchant....... X ........ ........
Mr. Perlmutter.................. ....... X ........ Mr. McCotter....... X ........ ........
Mr. Murphy...................... ....... X ........ Mr. McCarthy....... X ........ ........
Mr. Donnelly.................... ....... X ........
Mr. Wexler...................... ....... X ........
Mr. Marshall.................... ....... X ........
Mr. Boren....................... ....... X ........
----------------------------------------------------------------------------------------------------------------
The following other amendments were also considered by the
Committee:
An amendment in the nature of a substitute by Mr. Frank
(and Mr. Bachus, Mr. Miller (NC), Mr. Watt, Mrs. Biggert and
Mrs. Capito), No. 1, manager's amendment, as amended, was
agreed to by a voice vote.
An amendment to the amendment in the nature of a substitute
by Mr. Baker, No. 1a, regarding effect on state laws, was not
agreed to by a voice vote.
An amendment to the amendment in the nature of a substitute
by Mr. Capuano, No. 1b, regarding notice to tenants, was not
agreed to by a voice vote.
An amendment to the amendment in the nature of a substitute
by Mrs. Biggert (and Mr. LaTourette and Mr. Castle), No. 1c,
authorizing appropriations for mortgage fraud enforcement, was
agreed to by a voice vote.
An amendment to the amendment in the nature of a substitute
by Mr. Clay, No. 1d, regarding HOEPA points and fees, was
agreed to by a voice vote.
An amendment to the amendment in the nature of a substitute
by Mr. Green (and Mr. McHenry and Mr. Neugebauer), No. 1f,
requiring disclosures, as amended by the amendment by Mr. Baca
regarding enhanced mortgage loan disclosures, No. 1f(a), was
agreed to by a voice vote.
An amendment to the amendment in the nature of a substitute
by Ms. Brown-Waite (and Mr. Garrett), No. 1g, regarding
Veterans Affairs' loans, was agreed to by a voice vote.
An amendment to the amendment in the nature of a substitute
by Mr. Watt (and Mr. Miller (NC)), No. 1h, establishing an
effective date, was agreed to by a voice vote.
An amendment to the amendment in the nature of a substitute
by Mr. Marchant, No. 1i, excepting single-family units, was not
agreed to by a voice vote.
An amendment to the amendment in the nature of a substitute
by Mr. Sherman, No. 1j, exempting certain individuals and
entities, was agreed to by a voice vote.
An amendment to the amendment in the nature of a substitute
by Mr. Miller (CA), No. 1k, regarding incentive compensation,
was offered and withdrawn.
An amendment to the amendment in the nature of a substitute
by Mr. Miller (CA), No. 1l, dealing with high-cost mortgages,
was offered and withdrawn.
An amendment to the amendment in the nature of a substitute
by Mr. Feeney, No. 1q, striking rescission provisions, was not
agreed to by a voice vote.
An amendment to the amendment in the nature of a substitute
by Mr. Castle, No. 1t, regarding safe harbor, was offered and
withdrawn.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee has held hearings and
made findings that are reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
H.R. 3915, the Mortgage Reform and Anti-Predatory Lending
Act of 2007, is intended to reform mortgage lending practices
to avert a recurrence of the current situation of rising
defaults and foreclosures, especially in the subprime market.
As reported, H.R. 3915 establishes a Federal duty of care for
mortgage originators; prohibits steering any consumer to a
predatory mortgage and prime consumers to subprime mortgages;
establishes a licensing and registration regime for loan
originators, including brokers and bank loan officers; sets
minimum standards for mortgages requiring that consumers must
have a reasonable ability to repay and that mortgages must
provide a net tangible benefit; attaches limited liability to
those who securitize mortgage loans that violate the minimum
standards; expands and enhances consumer protections for
``high-cost loans'' under the Home Ownership and Equity
Protection Act; requires additional disclosures to consumers;
establishes within the Department of Housing and Urban
Development an Office of Housing Counseling; and includes
protections for renters of foreclosed properties.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate of the Director of the Congressional Budget
Office pursuant to section 402 of the Congressional Budget Act.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
November 9, 2007.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3915, the Mortgage
Reform and Anti-Predatory Lending Act of 2007.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Susanne S.
Mehlman and Kathleen Gramp (for federal costs), Mark Booth (for
federal revenues), Elizabeth Cove (for the state and local
impact), and Paige Piper/Bach (for the private-sector impact).
Sincerely,
Peter R. Orszag.
Enclosure.
H.R. 3915--Mortgage Reform and Anti-Predatory Lending Act of 2007
Summary: H.R. 3915 would make numerous changes to federal
laws that regulate mortgage practices with the aim of combating
predatory lending practices and providing certain protections
to borrowers and investors. Those changes include subjecting
all mortgage originators to licensing and registration
requirements, establishing minimum standards for creditors, and
establishing various consumer protections, such as prohibiting
excessive fees for certain types of mortgages.
This legislation also would authorize the appropriation of
$221 million over the 2008-2012 period for the Department of
Housing and Urban Development (HUD) to support efforts to
promote homeownership counseling and for the Department of
Justice (DOJ) to support efforts to combat mortgage fraud.
Furthermore, CBO estimates that $115 million would be required
over the 2008-2012 period for HUD to establish an Office of
Housing Counseling and support the development of regulations
and provide monitoring and oversight of the Nationwide Mortgage
Licensing System and Registry (NMLSR). CBO estimates that
implementing H.R. 3915 would cost $316 million over the 2008-
2012 period, subject to the appropriation of the necessary
amounts.
H.R. 3915 would require loan originators to participate in
a Nationwide Mortgage Licensing System and Registry that would
be administered by nonfederal entities or HUD in coordination
with the federal banking regulatory agencies. H.R. 3915 would
set the standards for this system, require HUD to determine if
state licensing procedures have met such standards, and
authorize the registry administrators to assess fees (revenues)
to cover the costs of maintaining and providing access to
information from the NMLSR. In CBO's view, the cash flows of
the NMLSR related to its regulatory and assessment authorities
should appear in the federal budget because they would stem
from an exercise of the sovereign power of the federal
government. We expect that it would take about three months for
those cash flows to begin. Under this legislation, CBO
estimates that over the 2008-2012 period, direct spending would
total $65 million and revenues would total $72 million. Over
the 2008-2017 period, we estimate that direct spending would
total $120 million and revenue collections would total $137
million. Any costs incurred by federal banking regulators to
issue regulations and coordinate with the NMLSR would affect
net direct spending and revenues, but CBO estimates that the
net impacts would be insignificant.
H.R. 3915 contains several intergovernmental mandates as
defined in the Unfunded Mandates Reform Act (UMRA). CBO
estimates that the costs to state, local, and tribal
governments of complying with the mandates would not exceed the
annual threshold for intergovernmental mandates established in
UMRA ($66 million in 2007, adjusted annually for inflation).
H.R. 3915 would impose several private-sector mandates as
defined in UMRA on the mortgage finance industry, by creating a
licensing and registration system for mortgage loan
originators, setting new mortgage origination standards, and
establishing requirements for high-cost mortgages. The
incremental costs to comply with those mandates are uncertain,
and CBO cannot determine whether the aggregate direct cost of
those mandates would exceed the annual threshold established in
UMRA ($131 million in 2007, adjusted annually for inflation).
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 3915 is shown in the following table.
The costs of this legislation fall within budget functions 370
(commerce and housing credit) and 750 (administration of
justice).
Basis of Estimate: For this estimate, CBO assumes that the
bill will be enacted by the end of calendar year 2007. We also
assume that the cash flows of the NMLSR would appear on the
federal budget because of the governmental nature of its
activities and the degree of governmental control over the
registry system.
TABLE 1.--ESTIMATED BUDGETARY IMPACT OF H.R. 3915
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-------------------------------------------------------------
2008 2009 2010 2011 2012 2008-2012 2008-2017
----------------------------------------------------------------------------------------------------------------
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Estimated Authorization Level..................... 74 76 75 75 30 330 n.a.
Estimated Outlays................................. 25 70 76 75 70 316 n.a.
CHANGES IN REVENUES
Estimated Revenues................................ 15 15 14 14 14 72 137
CHANGES IN DIRECT SPENDING
Estimated Budget Authority........................ 15 15 12 12 11 65 120
Estimated Outlays................................. 15 15 12 12 11 65 120
----------------------------------------------------------------------------------------------------------------
Note: n.a. = not applicable.
Spending subject to appropriation
CBO estimates that implementing H.R. 3915 would cost $316
million over the 2008-2012 period, subject to appropriation of
the necessary amounts. Table 2 details the components of this
estimated discretionary spending.
Funding for the Department of Justice. Section 211 would
authorize the appropriation of $32 million over the 2008-2012
period for DOJ to support efforts to combat mortgage fraud.
Most of this funding would be used to hire additional agents of
the Federal Bureau of Investigation (FBI) and additional
prosecutors with the offices ofthe United States Attorneys.
Assuming that appropriations would be spread evenly over fiscal
years 2008 through 2012, CBO estimates that enacting those
provisions would cost $30 million over that period.
Public Service Campaign, Grants for Housing Counseling, and
Administrative Support for the Office of Counseling. This
legislation would establish the Office of Housing Counseling
within HUD to support various activities relating to
homeownership and rental housing counseling. Section 403 would
authorize the appropriation of $3 million over the 2008-2010
period to support a national campaign to publicize the
existence of counseling services for home buyers, homeowners,
and renters. In addition, section 404 would authorize the
appropriation of $45 million annually over the 2008-2011 period
to provide grants to states, local governments, and nonprofit
organizations to support counseling services. In total, CBO
estimates that implementing those provisions would cost $176
million over the 2008-2012 period.
Furthermore, based on information from HUD, funds for
additional personnel, contractors, and information technology
would be required to run the Office of Housing Counseling. CBO
estimates that support would cost $73 million over the 2008-
2012 period.
Other Administrative Support. Based on information from
HUD, CBO estimates that it would cost $37 million over the
2008-2012 period to support the development of various
regulations, mostly related to mortgage standards required
under this legislation and the oversight and monitoring of the
NMLSR.
Nationwide registry for licensing
Background. Since 2004, the Conference of State Bank
Supervisors (CSBS) and the American Association of Residential
Mortgage Regulators (AARMR) have been developing a nationwide
licensing system for the residential mortgage industry. The
system, which is set to begin operations on January 2, 2008,
will increase and centralize information about loan originators
and will be avi1able to the public. As of October 2008,
agencies in 37 states have signed statements of intent to
participate in the nationwide system. Both the CSBS and AARMR
anticipate that the remaining 13 states and the District of
Columbia and Puerto Rico will eventually commit to
participating in the system.
Assuming participation by all the states and that the
states meet the minimum standards established under H.R. 3915,
CBO does not expect HUD to develop separate systems, though HUD
would conduct some monitoring and oversight of the system.
Enacting this legislation would impose a new requirement on
loan originators to register with a nationwide registry and
would authorize the assessment of fees for the cost of that
registration. Although private entities are currently
developing and maintaining a registry, participation in that
system is voluntary. Under H.R. 3915, participation by loan
originators is mandatory (i.e., a loan originator must register
to be state-licensed), and HUD would have the authority to
enforce that requirement. Thus, CBO expects that the NMLSR
would be acting as an agent of the federal government;
consequently, the cash flows associated with the NMLSR's
regulatory and assessment authorities should be recorded in the
federal budget.
TABLE 2.--ESTIMATED EFFECTS OF H.R. 3915 ON SPENDING SUBJECT TO
APPROPRIATION
------------------------------------------------------------------------
By fiscal year, in millions of
dollars--
---------------------------------------
2008 2009 2010 2011 2012
------------------------------------------------------------------------
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Funding for the Department of
Justice:
Authorization Level......... 7 7 6 6 6
Estimated Outlays........... 4 7 7 6 6
Public Service Campaign:
Authorization Level......... 3 0 0 0 0
Estimated Outlays........... 1 2 0 0 0
Housing Counseling Grants:
Authorization Level......... 45 45 45 45 0
Estimated Outlays........... 5 38 45 45 40
Administrative Support for the
Office of Counseling:
Estimated Authorization 13 16 16 16 16
Level......................
Estimated Outlays........... 10 15 16 16 16
Other Administrative Support:
Estimated Authorization 6 8 8 8 8
Level......................
Estimated Outlays........... 5 8 8 8 8
Total Changes:
Estimated Authorization 74 76 75 75 30
Level..................
Estimated Outlays....... 25 70 76 75 70
------------------------------------------------------------------------
a. H.R. 3915 also would require HUD to appoint an advisory committee to
support the mission of the Office of Counseling. Members of the
committee would not be paid, but would be reimbursed for any travel
expenses. CBO estimates that such travel expenses would cost less than
$500,000 annually.
NMLSR Assessments. The bill would increase federal revenues
by authorizing the NMLSR to collect assessments from loan
originators (i.e., individual loan officers, branches of
lending institutions, and lending companies). Based on
information from the CSBS, CBO estimates that those individuals
and entities would likely be charged an initial fee and an
annual fee. Moreover, fees could be reduced over time as
expenses decrease and more loan originators register with the
system.
Based on fee schedules for similar activities and assuming
that more than 300,000 entities and individuals would register
with the NMLSR over the next five years, CBO estimates that
about $72 million in fees would be collected by the NMLSR over
the 2008-2012 period. Over the 2008-2017 period, we estimate
that about $137 million in fees would be collected.
Funds collected through such assessments would be spent
without further appropriation, and thus, the expenditures would
be classified as direct spending. CBO estimates that the NMLSR
would spend about $65 million over the 2008-2012 period and
$120 million over the 2008-2017 period to develop and maintain
the registry system. While CBO estimates a lag between the
recording of federal revenues and spending, we estimate that
over the long run, the net cash flows associated with the NMLSR
would be insignificant.
Penalties. Under this legislation, certain civil penalties
(which are recorded as revenues) currently applicable under the
Truth in Lending Act would be increased and new civil penalties
would be created for violations under this bill. CBO estimates
that any increase in revenues resulting from those civil
penalties would not be significant.
Spending by Federal Bank Regulators. H.R. 3915 also would
direct federal bank regulators to issue new regulations and to
work jointly with the NMLSR to register individuals associated
with depository institutions who originate loans. According to
agency officials, implementing this bill would have no
significant effect on their workload or budgets. In addition,
any additional direct spending by the Office of the Comptroller
of the Currency, the Office of Thrift Supervision, and the
National Credit Union Administration would be offset by income
from annual fees covering their administrative expenses.
Similarly, the FDIC would recover any added costs when it
adjusts the insurance premiums paid by insured depository
institutions. Budgetary effects of spending by the Federal
Reserve are recorded as changes in revenues, but current law
requires the Federal Reserve to recover direct and indirect
costs incurred in providing such services. Thus, CBO estimates
that the activities of the agencies that regulate banks would
have no significant net effect on direct spending or revenues.
Budgetary effects on the Federal Reserve are recorded as
changes in revenues.
Impact on State, local, and tribal governments: H.R. 3915
contains intergovernmental mandates as defined in UMRA because
it would impose new requirements on state regulators and would
preempt state laws. Specifically, the bill would require states
to ensure that mortgage originators who apply for state
licenses or renewals meet minimum standards. According to
industry sources and state banking and real estate agencies, in
order to comply with those requirements, states would need to
license employees of some financial institutions that are not
currently required to be licensed under state law, perform
ongoing administrative tasks related to the new mortgage
licensing system, and train employees in federal mortgage law
and the licensing system. The bill also would preempt state
laws that allow individuals to seek compensation from entities
that issue certain securities. CBO estimates that the cost to
state and local governments of that preemption and the new
requirements would average less than $500,000 annually per
state; therefore, the total costs would not exceed the
threshold established in UMRA ($66 million in 2007, adjusted
annually for inflation). The bill would benefit state and local
governments by authorizing grants to provide homeownership and
rental counseling.
Impact on the private sector: H.R. 3915 would impose
several private-sector mandates as defined in UMRA on the
mortgage finance industry, by creating a licensing and
registration system for mortgage loan originators, setting new
mortgage origination standards, and establishing requirements
for high-cost mortgages. The incremental costs to comply those
mandates are uncertain for several reasons. Many industry
participants already comply with some of the bill's
requirements. In addition, the cost of some of the requirements
would depend on federal regulations to be issued under the
bill. CBO does not have sufficient information about current
business practices or how the standards in the bill would
affect industry income. Consequently, CBO cannot determine
whether the aggregate direct cost of those mandates would
exceed the annual threshold established in UMRA ($131 million
in 2007, adjusted annually for inflation).
Estimate prepared by: Federal Spending: Susanne S. Mehlman
and Kathleen Gramp; Federal Revenues: Mark Booth; Impact on
State, Local, and Tribal Governments: Elizabeth Cove; Impact on
the Private Sector: Paige Piper/Bach.
Estimate approved by: Peter H. Fontaine, Assistant Director
for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
general welfare of the United States) and clause 3 (relating to
the power to regulate interstate commerce).
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
H.R. 3915 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Section-by-Section Analysis of the Legislation
Section 1. Short Title; Table of Contents
This section establishes the short title of the bill as the
``Mortgage Reform and Anti-Predatory Lending Act of 2007'' (the
Act).
TITLE I--RESIDENTIAL MORTGAGE LOAN ORIGINATION
Subtitle A--Licensing System for Residential Mortgage Loan Originators
Section 101. Purposes and methods for establishing a mortgage licensing
system and registry
This section sets forth objectives for a Nationwide
Mortgage Licensing System and Registry (NMLSR) for the
residential mortgage industry to be established by the States
through the Conference of State Bank Supervisors and the
American Association of Residential Mortgage Regulators.
Section 102. Definitions
This section establishes definitions for various terms for
this subtitle, including: ``loan originator,'' ``loan processor
or underwriter,'' ``nationwide mortgage licensing system and
registry,'' ``registered loan originator,'' ``residential
mortgage loan,'' ``State-licensed loan originator,'' and
``unique identifier.''
Section 103. License or registration required
This section provides that an individual may not engage in
the business of a loan originator without obtaining and
maintaining registration as a registered loan originator or a
license and registration as a State-licensed loan originator,
and obtaining a unique identifier, and makes clarifications
regarding administrative and clerical workers, as well as loan
processors and underwriters.
Section 104. State license and registration application and issuance
This section provides that the applicant to any State for
licensing and registration as a State-licensed loan originator
has the obligation to furnish certain information to the NMLSR,
including fingerprints and personal history and experience.
Minimum standards for license issuance include no revocation of
loan originator license in the past 5 years, no felony
conviction in the past 7 years, demonstration of financial
responsibility, completing pre-licensing education reviewed,
approved, and published by the NMLSR (at least 20 hours), and
passing a written test developed and administered by the NMLSR
(at least 75% correct answers out of minimum 100 questions).
Section 105. Standards for State license renewal
This section provides minimum standards for license renewal
include the State-licensed loan originator continuing to meet
the minimum standards for license issuance and satisfying
continuing education requirements.
Section 106. System of registration administration by Federal banking
agencies
This section provides that, within one year of the Act's
enactment, the Federal banking agencies will jointly develop
and maintain a system for registering the employees of banks
and their subsidiaries as registered loan originators with the
NMLSR, and will furnish or cause to be furnished to the NMLSR
certain information including fingerprints and personal history
and experience. Under this regime, the Federal banking
agencies, at their discretion, may either develop a system to
collect registration information from depository institutions
and their subsidiary loan originators and furnish that
information to the NMLSR, or the Federal banking agencies may
arrange for the employee of the depository institution or its
subsidiary to supply that information directly to the NMLSR.
The Federal banking agencies, through the Federal Financial
Institutions Examination Council, will coordinate with the
NMLSR to establish a unique identifier for all registered loan
originators.
Section 107. Secretary of Housing and Urban Development backup
authority to establish a loan originator licensing system
This section provides that if a State does not have in
place a system that meets the minimum standards set forth in
this section for State-licensed loan originators, or does not
participate in the NMLSR, within 1 year of enactment (2 years
for those States with legislatures that meet biennially) or any
time thereafter, the Secretary of Housing and Urban Development
(Secretary) will establish a backup licensing system and
maintain and administer a system of licensing and registering
loan originators operating in such a State as State-licensed
loan originators. The Secretary may grant an extension up to 6
months to those States making a good faith effort to meet the
minimum standards. A loan originator licensed by the Secretary
can only use the license to originate loans in the State for
which it was granted.
Section 108. Backup authority to establish a nationwide mortgage
licensing and registry system
This section directs the Secretary to develop and maintain
a system for registration and regulation of loan originators if
it determines the NMLSR is failing to meet the requirements of
the Act.
Section 109. Fees
This section provides that the Federal banking agencies,
the Secretary, and the NMLSR may charge reasonable fees to
cover costs for maintaining and providing access to the NMLSR,
to the extent such fees are not charged to the consumers for
accessing the information.
Section 110. Background checks of loan originators
This section provides that the Attorney General will
provide access to all criminal history information to States
for regulating State-licensed loan originators to the extent
criminal background checks are required under State law for
licensing loan originators. The Conference of State Bank
Supervisors or a wholly owned subsidiary may be used as
channeling agent of States for requesting and distributing
information between the Department of Justice and the State
agencies.
Section 111. Confidentiality of information
This section provides that, except as otherwise provided,
requirements under Federal or State privacy or confidentiality
laws, and any privilege arising under Federal or State law,
will continue to apply after information has been disclosed to
the NMLSR or the Department of Housing and Urban Development
(HUD) system. Such information may be shared with all State and
Federal regulatory officials with mortgage industry oversight
authority without loss of privilege or loss of confidentiality
protections provided by such laws.
Section 112. Liability provisions
This section provides that the Secretary or any State
official or agency or organization serving as the administrator
of the NMLSR or the HUD system, or any officer or employee
thereof, will not be subject to any civil action for monetary
damages for good-faith action or omission while acting within
the scope of office or employment.
Section 113. HUD enforcement
This section provides that if the Secretary establishes a
backup licensing system pursuant to section 107, then the
Secretary will have regulatory authority over the licensees of
such backup licensing system (e.g., summons authority,
examination authority, and other enforcement authority
including the ability to issue cease-and-desist orders and to
assess civil money penalties).
Subtitle B--Residential Mortgage Loan Origination Standards
Section 121. Definitions
This section establishes definitions for various terms,
including: ``Federal banking agencies,'' ``mortgage
originator,'' ``qualified nationwide registration regime,''
``qualifying state licensing law,'' ``residential mortgage
loan,'' ``securitization vehicle,'' and ``securitizer.''
Section 122. Residential mortgage loan origination
This section provides that all mortgage originators
(including mortgage brokers and depository institutions that
originate mortgages) will be subject to a Federal duty of care
that requires (1) licensing and registration under State or
Federal law (including subtitle A of title I of this Act), (2)
diligently working to present the consumer with a range of
residential mortgage loan products for which the consumer
likely qualifies and are appropriate to the consumer's existing
circumstances (i.e., consumer has reasonable ability to repay
and receives net tangible benefit, and loan does not have
predatory characteristics), (3) making full, complete, and
timely disclosures to consumers, (4) certifying to creditors
compliance with mortgage origination requirements under this
section, and (5) including in all loan documents the unique
identifier of the mortgage originator. Mortgage originators are
not required, however, to present residential mortgage loan
products of creditors that do not accept consumer referrals or
applications from the mortgage originator, and creditors are
not required to offer products that the creditor does not offer
to the general public. The Act expressly does not create an
agency or fiduciary relationship, but mortgage originators are
free to become an agent or a fiduciary if they so desire. The
Federal banking agencies, in consultation with the Secretary
and the Federal Trade Commission (Commission), will jointly
prescribe regulations to further define the Federal duty of
care. The Federal banking agencies will prescribe regulations
requiring depository institutions to establish procedures for
monitoring compliance with the requirements of this section and
the registration procedures of section 106 of the Act.
Section 123. Anti-steering
This section provides that no mortgage originator can
receive, and no person can pay, any incentive compensation
(including yield spread premium) that is based on or varies
with the terms of such loans (other than amount of principal)
for loans that are not qualified mortgages (i.e., not prime
loans). The Federal banking agencies, in consultation with the
Secretary and the Commission, will jointly prescribe
regulations to prohibit (1) mortgage originators from steering
any consumer to a residential mortgage loan that the consumer
lacks a reasonable ability to repay, that does not provide net
tangible benefit, or that has predatory characteristics, (2)
mortgage originators from steering any consumer from a
qualified mortgage (prime loan) to a loan that is not a
qualified mortgage, and (3) abusive or unfair lending practices
that promote disparities among consumers of equal credit
worthiness but of different race, ethnicity, gender, or age.
However, nothing in the Act should be construed as limiting the
ability of a mortgage originator to sell residential mortgage
loans to subsequent purchasers, restricting a consumer's
ability to finance origination fees if they were disclosed to
the consumer and do not vary with the consumer's decision to
finance such fees, or prohibiting incentive payments to a
mortgage originator based on the number of loans originated.
Section 124. Liability
This section provides that a cause of action will exist
under section 130(a) and 130(b) of the Truth in Lending Act
(TILA) for a mortgage originator's failure to comply with this
section. The maximum liability of a mortgage originator for
violation of this section will not exceed three times the total
amount of mortgage originator fees, plus the consumer's costs
including reasonable attorney's fees.
Section 125. Regulations
This section provides that regulations under this title
will be promulgated within 12 months of the enactment of the
Act and take effect no later than 18 months after the enactment
of the Act.
TITLE II--MINIMUM STANDARDS FOR MORTGAGES
Section 201. Ability to Repay
This section provides that no creditor may make a
residential mortgage loan unless the creditor makes a
reasonable and good faith determination based on verified and
documented information that, at the time the loan is
consummated, the consumer has a reasonable ability to repay the
loan (including all applicable taxes, insurance, and
assessments). The Federal banking agencies, in consultation
with the Commission, will jointly prescribe regulations
regarding this provision. A determination of reasonable ability
to repay will be based on the consumer's credit history,
current income, expected income the consumer is reasonably
assured of receiving, current obligations, debt-to-income
ratio, employment status, and other financial resources other
than the consumer's equity in the real property securing the
loan.
Section 202. Net Tangible Benefit for Refinancing of Residential
Mortgage Loans
This section provides that no creditor may extend credit
for refinancing unless the creditor reasonably and in good
faith determines, at the time the loan is consummated and on
the basis of information known by or obtained in good faith by
the creditor, that the refinanced loan will provide a net
tangible benefit to the consumer. The refinanced loan will not
be considered to provide net tangible benefit if the costs of
the loan, including points, fees, and other charges, exceed the
amount of newly advanced principal without any corresponding
changes in the terms of the refinanced loan that are
advantageous tothe consumer. The Federal banking agencies will
jointly prescribe regulations further defining the term ``net tangible
benefit.''
Section 203. Safe harbor and rebuttable presumption
This section provides that a presumption can be made that
the minimum standards (reasonable ability to repay and net
tangible benefit) are met for ``qualified mortgages'' and
``qualified safe harbor mortgages.'' Qualified mortgages are
presumed to meet the minimum standards and this presumption may
not be rebutted. For qualified safe harbor loans, the
presumption may be rebutted only against creditors. Qualified
mortgages are loans with annual percentage rates (APRs) that
are not equal to or greater than 3 percent over comparable
securities issued by the Secretary of Treasury (Treasuries) or
175 basis points over the Federal Reserve Board's H.15 rate for
first lien loans, and 5 percent over comparable Treasuries or
375 basis points over the Federal Reserve Board's H.15 rate for
non-first lien loans, or loans made or guaranteed by the
Secretary of Veterans Affairs. Qualified safe harbor mortgages
are loans with (1) documented consumer income, (2) underwriting
process based on fully indexed rate (and taking into account
taxes, insurance, and assessments), (3) no negative
amortization, (4) other requirements that may be established by
regulation, and (5) one of the following: (i) fixed payment for
at least five years, (ii) for variable-rate loans, the APR
varies based on a margin that is less than 3 percent over a
single interest rate index, or (iii) the loan does not cause
the consumer's total monthly debts, including amounts under the
loan, to exceed a percentage (to be established by regulation)
of monthly gross income.
The Federal banking agencies may jointly prescribe
regulations to revise, add to, or subtract from these safe
harbor provisions to the extent necessary and appropriate to
effectuate the purposes of this subsection, to prevent
circumvention or evasion of this subsection, or to facilitate
compliance with this subsection.
Section 204. Liability
This section provides that a consumer has a cause of action
against a creditor for rescission of the loan and the
consumer's costs for a loan that violates the minimum standards
for reasonable ability to repay or net tangible benefits as set
forth by regulation. A creditor will not be liable for such
rescission if the creditor provides a cure to make the loan
conform to the minimum standards within 90 days of receiving
notice from the consumer. In addition, for a loan that violates
the minimum standards, a consumer has an individual cause of
action against any assignee or securitizer for rescission of
the loan and the consumer's costs. An assignee or securitizer
will not be liable for a loan that violates the minimum
standards if the assignee or securitizer: (1) provides a cure
to make the loan conform to the minimum standards within 90
days of receiving notice from the consumer, or (2) (a) has a
policy against buying mortgage loans that are not qualified
mortgages or qualified safe harbor mortgages and, in accordance
with regulations that the Federal banking agencies and
Securities and Exchange Commission will jointly prescribe,
exercises reasonable due diligence to adhere to such policy,
including through sampling, and (b) has obtained
representations and warranties from the seller or assignor of
the loan regarding not selling or assigning loans that violate
the minimum standards and takes reasonable steps to obtain the
benefit of such representations or warranties. If any creditor,
assignee or securitizer and a consumer fail to agree on a cure,
or if the consumer fails to accept a cure, the creditor,
assignee, or securitizer may provide the cure and the consumer
may challenge the adequacy of the cure within six months of the
cure. If a creditor, assignee, or securitizer cannot provide
rescission, they can provide the financial equivalent.
Liability of a creditor, assignee, or securitizer will apply
for three years after consummation of the loan or, for a
variable rate loan or a negative amortization loan, the earlier
of one year after the loan resets or six years after
consummation of the loan. Liability will not apply to pools of
loans, including the securitization vehicle, or investors in
pools of loans. It is not intended that liability will apply to
trustees or titleholders who in their capacity hold loans
solely for the benefit of the securitization vehicle.
Section 205. Defense to foreclosure
This section provides that, when the holder (including the
securitization vehicle) of a residential mortgage loan or
anyone acting on such holder's behalf initiates a judicial or
non-judicial foreclosure, (1) a consumer who has a rescission
right under this section may assert such right as a defense to
foreclosure or counterclaim to foreclosure against the holder
to forestall such foreclosure, or (2) if the foreclosure
proceeding begins after the rescission right expires, the
consumer may seek actual damages plus costs against the
creditor or any assignee or securitizer. Such holder, anyone
acting on behalf of such holder, or any other applicable third
party may sell or assign a residential mortgage loan to a
creditor, any assignee, or any securitizer, or their designee,
to effect a rescission or a cure.
Section 206. Additional standards and requirements
This section prohibits prepayment penalties on loans that
are not qualified mortgages as defined in section 203 of the
Act and requires that all remaining prepayment penalties expire
three months before a loan resets.
This section also provides that, in case of foreclosure,
any successor in interest will take over the property subject
to any bona fide lease made to bona fide tenant entered into
before the notice of foreclosure. Bona fide tenants without a
lease will receive at least a 90-day notice before being
required to vacate. A lease or tenancy is bona fide if it is
the result of arms-length transaction or if the rent is not
substantially less than fair market rent.
Single-premium credit insurance and mandatory arbitration
on mortgage loans are prohibited. Securitizers must reserve the
right in any document or contract establishing pools of loans
to obtain access to such loans and to provide for and obtain a
remedy under this title. A servicer of a residential mortgage
loan must provide annual notice (or whenever there is change in
ownership of the loan) to the consumer of the identity of the
creditor or assignee who should be contacted concerning the
consumer's rights with respect to the loan. Negative
amortization loans to a first-time borrower are prohibited
unless the creditor makes certain disclosures to the consumer
and the consumer has received homeownership counseling from a
HUD-certified organization or counselor.
Section 207. Rule of construction
This section provides that, except as otherwise expressly
provided, no provisions of the new TILA sections 129A and 129B
added by the Act will be construed as superseding, repealing,
or affecting any duty, right, obligation, privilege, or remedy
of any person under any other provision of TILA or any other
provision of Federal or State law.
Section 208. Effect on State laws
This section provides that the provisions of section 204 of
the Act will supersede any State law that provides additional
remedies against any assignee, securitizer, or securitization
vehicle, and the remedies in section 204 of the Act will
constitute the sole remedies against any assignee, securitizer,
or securitization vehicle for a violation of section 201 or 202
of the Act or any other State law arising out of or relating to
the specific subject matter of section 201 and 202 of the Act.
No provision of this section will be construed as limiting the
application of any State law against a creditor. Nor will any
provision of this section be construed as limiting the
application of any State law against any assignee, securitizer,
or securitization vehicle that does not arise out of or relate
to, or provide additional remedies in connection with, the
specific subject matter of section 201 or 202 of the Act.
Section 209. Regulations
This section provides that regulations under this title
will be promulgated within 12 months of the enactment of the
Act, and take effect no later than 18 months after the
enactment of the Act.
Section 210. Amendments to civil liability provisions
This section doubles the amount of certain statutory civil
liability penalties currently applicable under TILA and extends
the statute of limitations from one year to three years.
Section 211. Required disclosures
This section provides additional required disclosures under
TILA. A creditor must disclose the maximum amount of regular
payment a consumer has to make on a variable rate or otherwise
variable payment mortgage. For a residential mortgage loan with
an escrow or impound account for the payment of taxes,
insurance, and assessments, a creditor must disclose that
mortgage payments will be increased to cover taxes and
insurance and the monthly dollar amount a consumer will pay to
cover taxes and insurance in the first year of the mortgage.
For a variable rate residential mortgage with an escrow or
impound account, a creditor is required to disclose (1) the
amount of initial monthly payment for principal and interest;
(2) the amount of initial monthly payment including the amount
deposited in an escrow or impound to pay for taxes, insurance,
and assessments; (3) the amount of the fully indexed monthly
payment for principal and interest; and (4) the amount of fully
indexed monthly payment deposited in an escrow or impound to
pay for taxes, insurance, and assessments. A creditor must also
disclose the aggregate amount of settlement charges, the amount
of charges included in a mortgage, the amount of charges a
consumer must pay at closing, the approximate amount of the
wholesale rate of funds, the aggregate amount of other fees or
required payments, the aggregate amount of fees paid to a
mortgage originator, the amount of fees paid directly by a
consumer, and any additional amounts received by a mortgage
originator from a creditor based on the interest rate of the
loan. Required disclosures must be made at the earlier of the
extension of credit or three days before the closing.
A creditor must provide a consumer who applies for variable
rate or variable payment mortgage with a warning that payments
will vary based on interest rate changes. A creditor is also
required to disclose that a consumer is not required to
consummate a mortgage transaction merely because a consumer
received disclosures or signed a loan application.
Section 212. Authorization of appropriations
This section provides that for fiscal years 2008, 2009,
2010, 2011, and 2012, there are authorized to be appropriated
to the Attorney General a total of (1) $31,250,000 to support
the employment of 30 additional FBI agents 2 additional
dedicated prosecutors at the Department of Justice to
coordinate prosecution of mortgage fraud efforts with the
offices of the United States Attorneys, and (2) $750,000 to
support the operations of interagency task forces of the FBI in
the areas with the 15 highest concentration of mortgage fraud.
Section 213. Effective date
This section provides that the amendments made by this
title shall apply to transactions consummated on or after the
effective date of the regulations specified in section 209.
TITLE III--HIGH-COST MORTGAGES
Section 301. Definitions relating to high-cost mortgages
This section expands the scope of the Home Ownership and
Equity Protection Act (HOEPA) to also cover purchase money
loans and open-end loans. The section also codifies the
existing Federal Reserve standard for the APR trigger which is
set at 8 percent above comparable Treasuries for first
mortgages and Treasuries plus 10 percent for subordinate
mortgages. The points and fees trigger (total points and fees
payable in connection with the loan transaction) is lowered
from 8 percent to 5 percent for most loans. The points and fees
trigger stays at 8 percent for loans secured by a dwelling that
is personal property. A third trigger is established for loans
with prepayment penalties that exceed 2 percent or 36 months
duration. The definition of points and fees is expanded to
include all compensation paid directly or indirectly by a
consumer or creditor to a mortgage broker from any source
(including table-funded transactions), certain insurance
premiums, prepayment penalty charges under the loan, and
prepayment penalties actually charged in a refinance by the
original creditor or the original creditor's affiliate. Certain
bona fide discount points and prepayment penalties (up to two
points for near-market interest rate loans) are excluded from
the determination of the amount of points and fees that trigger
HOEPA protections.
Section 302. Amendments to existing requirements for certain mortgages
This section prohibits prepayment penalties on HOEPA loans
with principal amounts below the Federal Housing Administration
loan limit for a given geographical area. Balloon payments on
high-cost mortgages are prohibited unless the payment schedule
is adjusted to the seasonal or irregular income of the
consumer. Additional high-cost mortgage ``ability to repay''
protections are provided. A creditor may not extend credit to a
consumer under a high-cost mortgage unless a reasonable
creditor would believe at the time the mortgage is closed that
the consumer will be able to make the scheduled payments
associated with the mortgage, based on a consideration of
current and expected income, current obligations, employment
status, and other financial resources other than equity in the
residence. There will be a rebuttable presumption of ability to
repay if, at the time the high-cost mortgage is consummated,
the consumer's total monthly debts, including amounts under the
mortgage, do not exceed 50 percent of monthlygross income as
verified by tax returns, payroll receipts, or other third-party income
verification.
Section 303. Additional Requirements for Certain Mortgages
This section prohibits creditors from (1) encouraging that
borrowers default on an existing loan when refinancing such
existing loan with a high-cost mortgage, (2) charging multiple
late fees for a high-cost mortgage on the same delinquent
payment and caps any given late fee at 4 percent, (3)
unilaterally accelerating a high-cost mortgage, (4) directly or
indirectly financing points and fees for high-cost mortgages
(the restriction applies to prepayment penalties if the
creditor or an affiliate is the noteholder of the note being
refinanced), (5) structuring a high-cost mortgage to evade
HOEPA protections, (6) modifying or deferring fees unless they
can be proven beneficial to the consumer, (7) providing a high-
cost mortgage to a consumer unless the creditor has received a
certification that the consumer received pre-loan counseling
from a HUD-approved entity, and (8) knowingly or intentionally
engaging in flipping in connection with a high-cost mortgage.
Creditors and servicers are required to disclose and provide
free access to payoff amounts.
It is intended that the counseling certification by a HUD-
approved entity will indicate that the consumer received
counseling, and thus received a written document (i.e.,
certificate) stating the consumer received counseling. This
certificate and certification are intended as evidence that the
borrower has received counseling and not that the HUD-approved
entity has made a determination on the suitability or
affordability of the loan.
Section 304. Amendment to Provision Governing Correction of Errors
This section permits creditors to correct non-bona fide
errors within 30 days of the loan closing and prior to the
institution of any action. Creditors are permitted to correct
bona fide errors within 60 days of the creditors' discovery or
receipt of notification and prior to the institution of any
action. A creditor may correct an error by making the loan
satisfy the applicable requirements of TILA (including
requirements of the Act) or, in the case of a high-cost
mortgage, changing the terms of the loan so the loan is no
longer a high-cost mortgage.
Section 305. Regulations
This section requires the Federal Reserve Board to
implement regulations under this title within six months of
enactment of the Act.
Section 306. Effective date
The amendments made by this title will be effective upon
enactment and will apply to high-cost mortgages consummated on
or after that date.
TITLE IV--OFFICE OF HOUSING COUNSELING
Section 401. Short title
This section provides that this title may be cited as the
``Expand and Preserve Home Ownership Through Counseling Act.''
Section 402. Establishment of Office of Housing Counseling
This section establishes the Office of Housing Counseling
under the Office of the Secretary, headed by a Director of
Housing Counseling (Director) appointed by the Secretary. The
Director will be responsible for all homeownership and rental
housing counseling programs for HUD, and will establish,
coordinate and administer all regulations, requirements,
standards, and performance measures under the programs that
relate to housing counseling, homeownership counseling,
mortgage-related counseling, and rental housing counseling. The
Director shall establish rules for (1) counseling procedures,
(2) carrying out all other related functions, including
establishing a toll-free number, (3) information booklets, (4)
carrying out the certification of counseling service providers,
(5) providing assistance in the provision of counseling
services, (6) carrying out functions the Secretary deems
appropriate with regard to unscrupulous lending practices in
the home mortgage business, (7) support the advisory committee
created under this act, (8) collaborate with community-based
organizations, and (9) provide for building capacity to provide
housing counseling services in areas that lack sufficient
services. The Secretary shall appoint an advisory committee
composed of no more than 12 individuals representing all
aspects of the mortgage and real estate industry, including
consumers. Advisory committee members appointed by the
Secretary will serve 3-year terms, except that initially, four
will be appointed for 1-year terms and four will be appointed
for 2-year terms. The Secretary may reappoint members at his
discretion. Members will not be paid, but may receive travel
expenses. The advisory committee has no role in reviewing or
awarding housing counseling grants. Counseling services will
cover the entire process of homeownership, including
refinancing and foreclosure.
Section 403. Counseling procedures
This section directs the Secretary to establish,
coordinate, and monitor all HUD counseling procedures,
including requirements, standards, and performance measures
that relate to homeownership and rental housing.
``Homeownership counseling'' is defined as counseling related
to homeownership and residential mortgage loans. ``Rental
housing counseling'' is defined as counseling related to rental
of residential property, which may include counseling regarding
future homeownership opportunities and providing referral for
renters and prospective renters to entities providing
counseling. The Secretary shall establish standards for
materials and forms used by counseling service providers, and
provide for the certification of various computer software
programs for consumers to use in evaluating different
residential mortgage loan proposals. The mortgage software
system shall take into account (1) the consumer's financial
situation and the cost of maintaining a home, including
insurance, taxes, and utilities, (2) the amount of time the
consumer expects to remain in the home or expected time to
maturity of the loan, and (3) any other factors to assist the
consumer in making choices during the loan application process.
The certified software programs shall be used to supplement,
not replace, housing counseling, and the software programs
initially will be used only in connection with the assistance
of certified housing counselors. The Secretary shall develop,
implement, and conduct national public service multimedia
campaigns to make potentially vulnerable consumers aware of the
existence of homeownership counseling. Appropriations not to
exceed $3 million are authorized for national public service
multimedia campaigns for fiscal years 2008, 2009, and 2010. The
Secretary shall provide advice and technical assistance to
States, units of local government, and non-profit organizations
regarding provisions of counseling services.
Section 404. Grants for housing counseling assistance
This section directs the Secretary to make financial
assistance available for homeownership or rental counseling to
States, units of local government, and non-profit
organizations. The Secretary shall establish standards and
guidelines for assistance eligibility. Appropriations of $45
million are authorized for each of fiscal years 2008 through
2011 for the operations of the Office of Housing Counseling;
homeownership and rental counseling assistance grants; and the
establishment of materials and forms standards, computer
software certification, and the national public service
multimedia campaigns created in section 403 of the Act.
Section 405. Requirements to use HUD-certified counselors under HUD
programs
This section requires any homeownership counseling or
rental housing counseling administered by HUD to be provided
solely by organizations or counselors certified by the
Secretary.
Section 406. Study of defaults and foreclosures
This section directs the Secretary to submit to Congress
not later than 12 months after the enactment of the Act a
preliminary report on the root causes of default and
foreclosure of home loans and the role of escrow accounts in
helping prime and nonprime borrowers to avoid defaults and
foreclosures. No later than 24 months after the enactment of
the Act, the Secretary will submit a final report regarding the
results of the study, which will include any recommended
legislation relating to the study and recommendations for best
practices and for a process to identify populations that need
counseling the most.
Section 407. Definitions for counseling-related programs
This section provides definitions of ``nonprofit
organization,'' ``State,'' and ``unit of general local
government.''
Section 408. Updating and simplification of mortgage information
booklet
This section directs the Secretary to prepare a booklet at
least once every 5 years to help consumers applying for
Federally related mortgage loans to understand the nature and
costs of real estate settlement services. The Secretary must
include specific topics in the information booklet in plain and
understandable language, including explanation of (1) costs
incident to real estate settlement or Federally related
mortgage loan (including at a minimum balloon payments,
prepayment penalties, and trade-off between closing costs and
the interest rate over the life of the loan); (2) the uniform
settlement statement; (3) unfair lending practices and
unreasonable or unnecessary charges to be avoided by the
prospective buyer with respect to a real estate settlement; (4)
questions that the consumer should ask about a loan; (5) the
right of rescission; (6) variable rate mortgages; (7) home
equity line of credit; (8) the availability and the value of
homeownership counseling services; (9) escrow accounts; (10)
available choices for providers of incidental services; (11)
the buyer's responsibilities, liabilities, and obligations;
(12) appraisals; and (13) HUD brochure regarding loan fraud.
TITLE V--MORTGAGE DISCLOSURES UNDER REAL ESTATE SETTLEMENT PROCEDURES
ACT OF 1974
Section 501. Universal mortgage disclosure in good faith estimate of
settlement services costs
This section provides additional disclosures in a good
faith estimate (GFE) under the Real Estate Settlement
Procedures Act. A GFE must include the loan amount, whether the
loan is a fixed- or variable rate loan, the estimated interest
rate, the total estimated monthly payment, the rate lock
period, any prepayment penalty, any balloon payment, the total
estimated settlement charge, and the total estimated cash
needed at closing.
The Secretary, in consultation with the Secretary of
Veterans Affairs, the Federal Deposit Insurance Corporation,
and the Director of the Office of Thrift Supervision, shall
develop and prescribe a standard form for GFE disclosures be
used in all transactions in the United States that involve
Federally related mortgage loans.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
TRUTH IN LENDING ACT
TITLE I--CONSUMER CREDIT COST DISCLOSURE
Sec. 101. Short title
This title may be cited as the Truth in Lending Act.
* * * * * * *
Sec. 103. Definitions and rules of construction
(a) * * *
* * * * * * *
(f) The term ``creditor'' refers only to a person who both
(1) regularly extends, whether in connection with loans, sales
of property or services, or otherwise, consumer credit which is
payable by agreement in more than four installments or for
which the payment of a finance charge is or may be required,
and (2) is the person to whom the debt arising from the
consumer credit transaction is initially payable on the face of
the evidence of indebtedness or, if there is no such evidence
of indebtedness, by agreement. Notwithstanding the preceding
sentence, in the case of an open-end credit plan involving a
credit card, the card issuer and any person who honors the
credit card and offers a discount which is a finance charge are
creditors. For the purpose of the requirements imposed under
chapter 4 and sections 127(a)(5), 127(a)(6), 127(a)(7),
127(b)(1), 127(b)(2), 127(b)(3), 127(b)(8), and 127(b)(10) of
chapter 2 of this title, the term ``creditor'' shall also
include card issuers whether or not the amount due is payable
by agreement in more than four installments or the payment of a
finance charge is or may be required, and the Board shall, by
regulation, apply these requirements to such card issuers, to
the extent appropriate, even though the requirements are by
their terms applicable only to creditors offering open-end
credit plans. [Any person who originates 2 or more mortgages
referred to in subsection (aa) in any 12-month period or any
person who originates 1 or more such mortgages through a
mortgage broker shall be considered to be a creditor for
purposes of this title.] Any person who originates or brokers 2
or more mortgages referred to in subsection (aa) in any 12-
month period, any person who originates 1 or more such
mortgages through a mortgage broker in any 12 month period, or,
in connection with a table funding transaction of such a
mortgage, any person to whom the obligation is initially
assigned at or after settlement shall be considered to be a
creditor for purposes of this title.
* * * * * * *
[(aa)(1) A mortgage referred to in this subsection means a
consumer credit transaction that is secured by the consumer's
principal dwelling, other than a residential mortgage
transaction, a reverse mortgage transaction, or a transaction
under an open end credit plan, if--
[(A) the annual percentage rate at consummation of
the transaction will exceed by more than 10 percentage
points the yield on Treasury securities having
comparable periods of maturity on the fifteenth day of
the month immediately preceding the month in which the
application for the extension of credit is received by
the creditor; or
[(B) the total points and fees payable by the
consumer at or before closing will exceed the greater
of--
[(i) 8 percent of the total loan amount; or
[(ii) $400.]
(aa) High-Cost Mortgage.--
(1) Definition.--
(A) In general.--The term ``high-cost
mortgage'', and a mortgage referred to in this
subsection, means a consumer credit transaction
that is secured by the consumer's principal
dwelling, other than a reverse mortgage
transaction, if--
(i) in the case of a credit
transaction secured--
(I) by a first mortgage on
the consumer's principal
dwelling, the annual percentage
rate at consummation of the
transaction will exceed by more
than 8 percentage points the
yield on Treasury securities
having comparable periods of
maturity on the 15th day of the
month immediately preceding the
month in which the application
for the extension of credit is
received by the creditor; or
(II) by a subordinate or
junior mortgage on the
consumer's principal dwelling,
the annual percentage rate at
consummation of the transaction
will exceed by more than 10
percentage points the yield on
Treasury securities having
comparable periods of maturity
on the 15th day of the month
immediately preceding the month
in which the application for
the extension of credit is
received by the creditor;
(ii) the total points and fees
payable in connection with the
transaction exceed--
(I) in the case of a
transaction for $20,000 or
more, 5 percent (8 percent if
the dwelling is personal
property) of the total
transaction amount; or
(II) in the case of a
transaction for less than
$20,000, the lesser of 8
percent of the total
transaction amount or $1,000;
or
(iii) the credit transaction
documents permit the creditor to charge
or collect prepayment fees or penalties
more than 36 months after the
transaction closing or such fees or
penalties exceed, in the aggregate,
more than 2 percent of the amount
prepaid.
(B) Introductory rates taken into account.--
For purposes of subparagraph (A)(i), the annual
percentage rate of interest shall be determined
based on the following interest rate:
(i) In the case of a fixed-rate
transaction in which the annual
percentage rate will not vary during
the term of the loan, the interest rate
in effect on the date of consummation
of the transaction.
(ii) In the case of a transaction in
which the rate of interest varies
solely in accordance with an index, the
interest rate determined by adding the
index rate in effect on the date of
consummation of the transaction to the
maximum margin permitted at any time
during the transaction agreement.
(iii) In the case of any other
transaction in which the rate may vary
at any time during the term of the loan
for any reason, the interest charged on
the transaction at the maximum rate
that may be charged during the term of
the transaction.
(2)(A) * * *
[(B) An increase or decrease under subparagraph (A) may not
result in the number of percentage points referred to in
subparagraph (A) being--
[(i) less that 8 percentage points; or
[(ii) greater than 12 percentage points.]
(B) An increase or decrease under
subparagraph (A)--
(i) may not result in the number of
percentage points referred to in
paragraph (1)(A)(i)(I) being less than
6 percentage points or greater than 10
percentage points; and
(ii) may not result in the number of
percentage points referred to in
paragraph (1)(A)(i)(II) being less than
8 percentage points or greater than 12
percentage points.
* * * * * * *
(4) For purposes of paragraph (1)(B), points and fees shall
include--
(A) all items included in the finance charge, except
interest or the time-price differential;
[(B) all compensation paid to mortgage brokers;]
(B) all compensation paid directly or
indirectly by a consumer or creditor to a
mortgage broker from any source, including a
mortgage originator that originates a loan in
the name of the originator in a table-funded
transaction;
(C) each of the charges listed in section 106(e)
(except an escrow for future payment of taxes),
unless--
(i) the charge is reasonable;
(ii) the creditor receives no direct or
indirect compensation except where applied to
the charges set forth in section 106(e)(1)
where a creditor may receive indirect
compensation solely as a result of obtaining
distributions of profits from an affiliated
entity based on its ownership interest in
compliance with section 8(c)(4) of the Real
Estate Settlement Procedures Act of 1974; and
(iii) the charge is paid to a third party
unaffiliated with the creditor[; and], except
as provided for in clause (ii);
(D) premiums or other charges payable at or
before closing for any credit life, credit
disability, credit unemployment, or credit
property insurance, or any other accident,
loss-of-income, life or health insurance, or
any payments directly or indirectly for any
debt cancellation or suspension agreement or
contract, except that insurance premiums or
debt cancellation or suspension fees calculated
and paid in full on a monthly basis shall not
be considered financed by the creditor;
(E) except as provided in subsection (cc),
the maximum prepayment fees and penalties which
may be charged or collected under the terms of
the credit transaction;
(F) all prepayment fees or penalties that are
incurred by the consumer if the loan refinances
a previous loan made or currently held by the
same creditor or an affiliate of the creditor;
and
[(D)] (G) such other charges as the Board determines
to be appropriate.
(5) Calculation of points and fees for open-end
consumer credit plans.--In the case of open-end
consumer credit plans, points and fees shall be
calculated, for purposes of this section and section
129, by adding the total points and fees known at or
before closing, including the maximum prepayment
penalties which may be charged or collected under the
terms of the credit transaction, plus the minimum
additional fees the consumer would be required to pay
to draw down an amount equal to the total credit line.
[(5)] (6) This subsection shall not be construed to
limit the rate of interest or the finance charge that a
person may charge a consumer for any extension of
credit.
* * * * * * *
(cc) Definitions Relating to Mortgage Origination and
Residential Mortgage Loans.--
(1) Commission.--Unless otherwise specified, the term
``Commission'' means the Federal Trade Commission.
(2) Federal banking agencies.--The term ``Federal
banking agencies'' means the Board of Governors of the
Federal Reserve System, the Comptroller of the
Currency, the Director of the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation,
and the National Credit Union Administration Board.
(3) Mortgage originator.--The term ``mortgage
originator''--
(A) means any person who--
(i) takes a residential mortgage loan
application;
(ii) assists a consumer in obtaining
or applying to obtain a residential
mortgage loan; or
(iii) offers or negotiates terms of a
residential mortgage loan, for direct
or indirect compensation or gain, or in
the expectation of direct or indirect
compensation or gain;
(B) includes any person who represents to the
public, through advertising or other means of
communicating or providing information
(including the use of business cards,
stationery, brochures, signs, rate lists, or
other promotional items), that such person can
or will provide any of the services or perform
any of the activities described in subparagraph
(A); and
(C) does not include any person who is not
otherwise described in subparagraph (A) or (B)
and who performs purely administrative or
clerical tasks on behalf of a person who is
described in any such subparagraph.
(4) Nationwide mortgage licensing system and
registry.--The term ``Nationwide Mortgage Licensing
System and Registry'' has the same meaning as in
section 102(5) of the Mortgage Reform and Anti-
Predatory Lending Act of 2007.
(5) Other definitions relating to mortgage
originator.--For purposes of this subsection, a person
``assists a consumer in obtaining or applying to obtain
a residential mortgage loan'' by, among other things,
advising on residential mortgage loan terms (including
rates, fees, and other costs), preparing residential
mortgage loan packages, or collecting information on
behalf of the consumer with regard to a residential
mortgage loan.
(6) Residential mortgage loan.--The term
``residential mortgage loan'' means any consumer credit
transaction that is secured by a mortgage, deed of
trust, or other equivalent consensual security interest
on a dwelling or on residential real property that
includes a dwelling, other than a consumer credit
transaction under an open end credit plan or a reverse
mortgage.
(7) Secretary.--The term ``Secretary'', when used in
connection with any transaction or person involved with
a residential mortgage loan, means the Secretary of
Housing and Urban Development.
(8) Securitization vehicle.--The term
``securitization vehicle'' means a trust, corporation,
partnership, limited liability entity, or special
purpose entity that--
(A) is the issuer, or is created by the
issuer, of mortgage pass-through certificates,
participation certificates, mortgage-backed
securities, or other similar securities backed
by a pool of assets that includes residential
mortgage loans; and
(B) holds such loans.
(9) Securitizer.--The term ``securitizer'' means the
person that transfers, conveys, or assigns, or causes
the transfer, conveyance, or assignment of, residential
mortgage loans, including through a special purpose
vehicle, to any securitization vehicle, excluding any
trustee that holds such loans solely for the benefit of
the securitization vehicle.
(dd) Bona Fide Discount Points and Prepayment Penalties.--For
the purposes of determining the amount of points and fees for
purposes of subsection (aa), either the amounts described in
paragraphs (1) or (4) of the following paragraphs, but not
both, may be excluded:
(1) Exclusion of bona fide discount points.--The
discount points described in 1 of the following
subparagraphs shall be excluded from determining the
amounts of points and fees with respect to a high-cost
mortgage for purposes of subsection (aa):
(A) Up to and including 2 bona fide discount
points payable by the consumer in connection
with the mortgage, but only if the interest
rate from which the mortgage's interest rate
will be discounted does not exceed by more than
1 percentage point the required net yield for a
90-day standard mandatory delivery commitment
for a reasonably comparable loan from either
the Federal National Mortgage Association or
the Federal Home Loan Mortgage Corporation,
whichever is greater.
(B) Unless 2 bona fide discount points have
been excluded under subparagraph (A), up to and
including 1 bona fide discount point payable by
the consumer in connection with the mortgage,
but only if the interest rate from which the
mortgage's interest rate will be discounted
does not exceed by more than 2 percentage
points the required net yield for a 90-day
standard mandatory delivery commitment for a
reasonably comparable loan from either the
Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation,
whichever is greater.
(2) Definition.--For purposes of paragraph (1), the
term ``bona fide discount points'' means loan discount
points which are knowingly paid by the consumer for the
purpose of reducing, and which in fact result in a bona
fide reduction of, the interest rate or time-price
differential applicable to the mortgage.
(3) Exception for interest rate reductions
inconsistent with industry norms.--Paragraph (1) shall
not apply to discount points used to purchase an
interest rate reduction unless the amount of the
interest rate reduction purchased is reasonably
consistent with established industry norms and
practices for secondary mortgage market transactions.
(4) Allowance of conventional prepayment penalty.--
Subsection (aa)(1)(4)(E) shall not apply so as to
include a prepayment penalty or fee that is authorized
by law other than this title and may be imposed
pursuant to the terms of a high-cost mortgage (or other
consumer credit transaction secured by the consumer's
principal dwelling) if--
(A) the annual percentage rate applicable
with respect to such mortgage or transaction
(as determined for purposes of subsection
(aa)(1)(A)(i))--
(i) in the case of a first mortgage
on the consumer's principal dwelling,
does not exceed by more than 2
percentage points the yield on Treasury
securities having comparable periods of
maturity on the 15th day of the month
immediately preceding the month in
which the application for the extension
of credit is received by the creditor;
or
(ii) in the case of a subordinate or
junior mortgage on the consumer's
principal dwelling, does not exceed by
more than 4 percentage points the yield
on such Treasury securities; and
(B) the total amount of any prepayment fees
or penalties permitted under the terms of the
high-cost mortgage or transaction does not
exceed 2 percent of the amount prepaid.
Sec. 108. Administrative enforcement
(a) Compliance with the requirements imposed under this title
shall be enforced under
(1) * * *
* * * * * * *
(7) sections 21B and 21C of the Securities Exchange
Act of 1934, in the case of a broker or dealer, other
than a depository institution, by the Securities and
Exchange Commission.
* * * * * * *
CHAPTER 2--CREDIT TRANSACTIONS
Sec.
121. General requirement of disclosure.
* * * * * * *
129A.Residential mortgage loan origination.
129B.Minimum standards for residential mortgage loans.
* * * * * * *
Sec. 128. Consumer credit not under open end credit plans
(a) For each consumer credit transaction other than under an
open end credit plan, the creditor shall disclose each of the
following items, to the extent applicable:
(1) * * *
* * * * * * *
(16) In the case of an extension of credit that is
secured by the dwelling of a consumer, under which the
annual rate of interest is variable, or with respect to
which the regular payments may otherwise be variable,
in addition to the other disclosures required under
this subsection, the disclosures provided under this
subsection shall state the maximum amount of the
regular required payments on the loan, based on the
maximum interest rate allowed, introduced with the
following language in conspicuous type size and format:
``Your payment can go as high as $__'', the blank to be
filled in with the maximum possible payment amount.
(17) In the case of a residential mortgage loan for
which an escrow or impound account will be established
for the payment of all applicable taxes, insurance, and
assessments, the following statement: ``Your payments
will be increased to cover taxes and insurance. In the
first year, you will pay an additional $__ [insert the
amount of the monthly payment to the account] every
month to cover the costs of taxes and insurance.''.
(18) In the case of a variable rate residential
mortgage loan for which an escrow or impound account
will be established for the payment of all applicable
taxes, insurance, and assessments--
(A) the amount of initial monthly payment due
under the loan for the payment of principal and
interest, and the amount of such initial
monthly payment including the monthly payment
deposited in the account for the payment of all
applicable taxes, insurance, and assessments;
and
(B) the amount of the fully indexed monthly
payment due under the loan for the payment of
principal and interest, and the amount of such
fully indexed monthly payment including the
monthly payment deposited in the account for
the payment of all applicable taxes, insurance,
and assessments.
(19) In the case of a residential mortgage loan, the
aggregate amount of settlement charges for all
settlement services provided in connection with the
loan, the amount of charges that are included in the
loan and the amount of such charges the borrower must
pay at closing, the approximate amount of the wholesale
rate of funds in connection with the loan, and the
aggregate amount of other fees or required payments in
connection with the loan.
(20) In the case of a residential mortgage loan, the
aggregate amount of fees paid to the mortgage
originator in connection with the loan, the amount of
such fees paid directly by the consumer, and any
additional amount received by the originator from the
creditor based on the interest rate of the loan.
(b)(1) * * *
[(2) In the]
(2) Mortgage disclosures.--
(A) In general.--In the case of [a
residential mortgage transaction, as defined in
section 103(w)] any extension of credit that is
secured by the dwelling of a consumer, which is
also subject to the Real Estate Settlement
Procedures Act, good faith estimates of the
disclosures required under subsection (a)
[shall be made in accordance with regulations
of the Board under section 121(c) before the
credit is extended, or] shall be delivered or
placed in the mail not later than three
business days after the creditor receives the
consumer's written application, whichever is
earlier. [If the disclosure statement furnished
within three days of the written application
contains an annual percentage rate which is
subsequently rendered inaccurate within the
meaning of section 107(c), the creditor shall
furnish another statement at the time of
settlement or consummation.]
(B) Statement and timing of disclosures.--In
the case of an extension of credit that is
secured by the dwelling of a consumer, in
addition to the other disclosures required by
subsection (a), the disclosures provided under
this paragraph shall state in conspicuous type
size and format, the following: ``You are not
required to complete this agreement merely
because you have received these disclosures or
signed a loan application.''.
(i) state in conspicuous type size
and format, the following: ``You are
not required to complete this agreement
merely because you have received these
disclosures or signed a loan
application.''; and
(ii) be furnished to the borrower not
later than 7 business days before the
date of consummation of the
transaction, subject to subparagraph
(D).
(C) Variable rates or payment schedules.--In
the case of an extension of credit that is
secured by the dwelling of a consumer, under
which the annual rate of interest is variable,
or with respect to which the regular payments
may otherwise be variable, in addition to the
other disclosures required by subsection (a),
the disclosures provided under this paragraph
shall label the payment schedule as follows:
``Payment Schedule: Payments Will Vary Based on
Interest Rate Changes.''.
(D) Updating apr.--In any case in which the
disclosure statement provided 7 business days
before the date of consummation of the
transaction contains an annual percentage rate
of interest that is no longer accurate, as
determined under section 107(c), the creditor
shall furnish an additional, corrected
statement to the borrower, not later than 3
business days before the date of consummation
of the transaction.
* * * * * * *
(4) Residential mortgage loan disclosures.--In the
case of a residential mortgage loan, the information
required to be disclosed under subsection (a) with
respect to such loan shall be disclosed before the
earlier of--
(A) the time required under the first
sentence of paragraph (1); or
(B) the end of the 3-day period beginning on
the date the application for the loan from a
consumer is received by the creditor.
* * * * * * *
SEC. 129. REQUIREMENTS FOR CERTAIN MORTGAGES.
(a) * * *
* * * * * * *
(c) No Prepayment Penalty.--
(1) * * *
(2) Exception.--Notwithstanding paragraph (1), a
mortgage referred to in section 103(aa) may contain a
prepayment penalty (including terms calculating a
refund by a method that is not prohibited under section
933(b) of the Housing and Community Development Act of
1992 for the transaction in question) if--
(A) * * *
* * * * * * *
(C) the penalty does not apply after the end
of the 5-year period beginning on the date on
which the mortgage is consummated; [and]
(D) the amount of the principal obligation of
the mortgage exceeds the maximum principal
obligation limitation (for the applicable size
residence) under section 203(b)(2) of the
National Housing Act for the area in which the
residence subject to the mortgage is located;
and
[(D)] (E) the penalty is not prohibited under
other applicable law.
* * * * * * *
[(e) No Balloon Payments.--A mortgage referred to in section
103(aa) having a term of less than 5 years may not include
terms under which the aggregate amount of the regular periodic
payments would not fully amortize the outstanding principal
balance.]
(e) No Balloon Payments.--No high-cost mortgage may contain a
scheduled payment that is more than twice as large as the
average of earlier scheduled payments. This subsection shall
not apply when the payment schedule is adjusted to the seasonal
or irregular income of the consumer.
* * * * * * *
(h) Prohibition on Extending Credit Without Regard to
[Payment Ability of Consumer.--A creditor shall not] Payment
Ability of Consumer.--
(1) Pattern or practice.--
(A) In general.--A creditor shall not engage
in a pattern or practice of extending credit to
consumers under mortgages referred to in
section 103(aa) based on the consumers'
collateral without regard to the consumers'
repayment ability, including the consumers'
current and expected income, current
obligations, and employment.
(B) Presumption of violation.--There shall be
a presumption that a creditor has violated this
subsection if the creditor engages in a pattern
or practice of making high-cost mortgages
without verifying or documenting the repayment
ability of consumers with respect to such
mortgages.
(2) Prohibition on extending credit without regard to
payment ability of consumer.--
(A) In general.--A creditor may not extend
credit to a consumer under a high-cost mortgage
unless a reasonable creditor would believe at
the time the mortgage is closed that the
consumer or consumers that are residing or will
reside in the residence subject to the mortgage
will be able to make the scheduled payments
associated with the mortgage, based upon a
consideration of current and expected income,
current obligations, employment status, and
other financial resources, other than equity in
the residence.
(B) Presumption of ability.--For purposes of
this subsection, there shall be a rebuttable
presumption that a consumer is able to make the
scheduled payments to repay the obligation if,
at the time the high-cost mortgage is
consummated, the consumer's total monthly
debts, including amounts under the mortgage, do
not exceed 50 percent of his or her monthly
gross income as verified by tax returns,
payroll receipts, or other third-party income
verification.
* * * * * * *
(j) Recommended Default.--No creditor shall recommend or
encourage default on an existing loan or other debt prior to
and in connection with the closing or planned closing of a
high-cost mortgage that refinances all or any portion of such
existing loan or debt.
(k) Late Fees.--
(1) In general.--No creditor may impose a late
payment charge or fee in connection with a high-cost
mortgage--
(A) in an amount in excess of 4 percent of
the amount of the payment past due;
(B) unless the loan documents specifically
authorize the charge or fee;
(C) before the end of the 15-day period
beginning on the date the payment is due, or in
the case of a loan on which interest on each
installment is paid in advance, before the end
of the 30-day period beginning on the date the
payment is due; or
(D) more than once with respect to a single
late payment.
(2) Coordination with subsequent late fees.--If a
payment is otherwise a full payment for the applicable
period and is paid on its due date or within an
applicable grace period, and the only delinquency or
insufficiency of payment is attributable to any late
fee or delinquency charge assessed on any earlier
payment, no late fee or delinquency charge may be
imposed on such payment.
(3) Failure to make installment payment.--If, in the
case of a loan agreement the terms of which provide
that any payment shall first be applied to any past due
principal balance, the consumer fails to make an
installment payment and the consumer subsequently
resumes making installment payments but has not paid
all past due installments, the creditor may impose a
separate late payment charge or fee for any principal
due (without deduction due to late fees or related
fees) until the default is cured.
(l) Acceleration of Debt.--No high-cost mortgage may contain
a provision which permits the creditor, in its sole discretion,
to accelerate the indebtedness. This provision shall not apply
when repayment of the loan has been accelerated by default,
pursuant to a due-on-sale provision, or pursuant to a material
violation of some other provision of the loan documents
unrelated to the payment schedule.
(m) Restriction on Financing Points and Fees.--No creditor
may directly or indirectly finance, in connection with any
high-cost mortgage, any of the following:
(1) Any prepayment fee or penalty payable by the
consumer in a refinancing transaction if the creditor
or an affiliate of the creditor is the noteholder of
the note being refinanced.
(2) Any points or fees.
[(j)] (n) Consequence of Failure To Comply.--Any mortgage
that contains a provision prohibited by this section shall be
deemed a failure to deliver the material disclosures required
under this title, for the purpose of section 125.
[(k)] (o) Definition.--For purposes of this section, the term
``affiliate'' has the same meaning as in section 2(k) of the
Bank Holding Company Act of 1956.
[(l)] (p) Discretionary Regulatory Authority of Board.--
(1) * * *
* * * * * * *
(q) Prohibitions on Evasions, Structuring of Transactions,
and Reciprocal Arrangements.--A creditor may not take any
action in connection with a high-cost mortgage--
(1) to structure a loan transaction as an open-end
credit plan or another form of loan for the purpose and
with the intent of evading the provisions of this
title; or
(2) to divide any loan transaction into separate
parts for the purpose and with the intent of evading
provisions of this title.
(r) Modification and Deferral Fees Prohibited.--A creditor
may not charge a consumer any fee to modify, renew, extend, or
amend a high-cost mortgage, or to defer any payment due under
the terms of such mortgage, unless the modification, renewal,
extension or amendment results in a lower annual percentage
rate on the mortgage for the consumer and then only if the
amount of the fee is comparable to fees imposed for similar
transactions in connection with consumer credit transactions
that are secured by a consumer's principal dwelling and are not
high-cost mortgages.
(s) Payoff Statement.--
(1) Fees.--
(A) In general.--Except as provided in
subparagraph (B), no creditor or servicer may
charge a fee for informing or transmitting to
any person the balance due to pay off the
outstanding balance on a high-cost mortgage.
(B) Transaction fee.--When payoff information
referred to in subparagraph (A) is provided by
facsimile transmission or by a courier service,
a creditor or servicer may charge a processing
fee to cover the cost of such transmission or
service in an amount not to exceed an amount
that is comparable to fees imposed for similar
services provided in connection with consumer
credit transactions that are secured by the
consumer's principal dwelling and are not high-
cost mortgages.
(C) Fee disclosure.--Prior to charging a
transaction fee as provided in subparagraph
(B), a creditor or servicer shall disclose that
payoff balances are available for free pursuant
to subparagraph (A).
(D) Multiple requests.--If a creditor or
servicer has provided payoff information
referred to in subparagraph (A) without charge,
other than the transaction fee allowed by
subparagraph (B), on 4 occasions during a
calendar year, the creditor or servicer may
thereafter charge a reasonable fee for
providing such information during the remainder
of the calendar year.
(2) Prompt delivery.--Payoff balances shall be
provided within 5 business days after receiving a
request by a consumer or a person authorized by the
consumer to obtain such information.
(t) Pre-Loan Counseling.--
(1) In general.--A creditor may not extend credit to
a consumer under a high-cost mortgage without first
receiving certification from a counselor that is
approved by the Secretary of Housing and Urban
Development, or at the discretion of the Secretary, a
state housing finance authority, that the consumer has
received counseling on the advisability of the
mortgage. Such counselor shall not be employed by the
creditor or an affiliate of the creditor or be
affiliated with the creditor.
(2) Disclosures required prior to counseling.--No
counselor may certify that a consumer has received
counseling on the advisability of the high-cost
mortgage unless the counselor can verify that the
consumer has received each statement required (in
connection with such loan) by this section or the Real
Estate Settlement Procedures Act of 1974 with respect
to the transaction.
(3) Regulations.--The Secretary of Housing and Urban
Development may prescribe such regulations as the
Secretary determines to be appropriate to carry out the
requirements of paragraph (1).
(u) Flipping.--
(1) In general.--No creditor may knowingly or
intentionally engage in the unfair act or practice of
flipping in connection with a high-cost mortgage.
(2) Flipping defined.--For purposes of this
subsection, the term ``flipping'' means the making of a
loan or extension of credit in the form a high-cost
mortgage to a consumer which refinances an existing
mortgage when the new loan or extension of credit does
not have reasonable, tangible net benefit to the
consumer considering all of the circumstances,
including the terms of both the new and the refinanced
loans or credit, the cost of the new loan or credit,
and the consumer's circumstances.
(3) Tangible net benefit.--The Board may prescribe
regulations, in the discretion of the Board, defining
the term ``tangible net benefit'' for purposes of this
subsection.
* * * * * * *
Sec. 129A. Residential mortgage loan origination
(a) Duty of Care.--
(1) Standard.--Subject to regulations prescribed
under this subsection, each mortgage originator shall,
in addition to the duties imposed by otherwise
applicable provisions of State or Federal law--
(A) be qualified, registered, and, when
required, licensed as a mortgage originator in
accordance with applicable State or Federal law
including subtitle A of title I of the Mortgage
Reform and Anti-Predatory Lending Act of 2007;
(B) with respect to each consumer seeking or
inquiring about a residential mortgage loan,
diligently work to present the consumer with a
range of residential mortgage loan products for
which the consumer likely qualifies and which
are appropriate to the consumer's existing
circumstances, based on information known by,
or obtained in good faith by, the originator;
(C) make full, complete, and timely
disclosure to each such consumer of--
(i) the comparative costs and
benefits of each residential mortgage
loan product offered, discussed, or
referred to by the originator;
(ii) the nature of the originator's
relationship to the consumer (including
the cost of the services to be provided
by the originator and a statement that
the mortgage originator is or is not
acting as an agent for the consumer, as
the case may be); and
(iii) any relevant conflicts of
interest;
(D) certify to the creditor, with respect to
any transaction involving a residential
mortgage loan, that the mortgage originator has
fulfilled all requirements applicable to the
originator under this section with respect to
the transaction; and
(E) include the unique identifier of the
originator provided by the Nationwide Mortgage
Licensing System and Registry on all loan
documents.
(2) Clarification of extent of duty to present range
of products and appropriate products.--
(A) No duty to offer products for which
originator is not authorized to take an
application.--Paragraph (1)(B) shall not be
construed as requiring--
(i) a mortgage originator to present
to any consumer any specific
residential mortgage loan product that
is offered by a creditor which does not
accept consumer referrals from, or
consumer applications submitted by or
through, such originator; or
(ii) a creditor to offer products
that the creditor does not offer to the
general public.
(B) Appropriate loan product.--For purposes
of paragraph (1)(B), a residential mortgage
loan shall be presumed to be appropriate for a
consumer if--
(i) the mortgage originator
determines in good faith, based on then
existing information and without
undergoing a full underwriting process,
that the consumer has a reasonable
ability to repay and receives a net
tangible benefit (as determined in
accordance with regulations prescribed
under section 129B(a)); and
(ii) the loan does not have predatory
characteristics or effects (such as
equity stripping and excessive fees and
abusive terms) as determined in
accordance with regulations prescribed
under paragraph (4).
(3) Rules of construction.--No provision of this
subsection shall be construed as--
(A) creating an agency or fiduciary
relationship between a mortgage originator and
a consumer if the originator does not hold
himself or herself out as such an agent or
fiduciary; or
(B) restricting a mortgage originator from
holding himself or herself out as an agent or
fiduciary of a consumer subject to any
additional duty, requirement, or limitation
applicable to agents or fiduciaries under any
Federal or State law.
(4) Regulations.--
(A) In general.--The Federal banking
agencies, in consultation with the Secretary
and the Commission, shall jointly prescribe
regulations to--
(i) further define the duty
established under paragraph (1);
(ii) implement the requirements of
this subsection;
(iii) establish the time period
within which any disclosure required
under paragraph (1) shall be made to
the consumer; and
(iv) establish such other
requirements for any mortgage
originator as such regulatory agencies
may determine to be appropriate to meet
the purposes of this subsection.
(B) Complementary and nonduplicative
disclosures.--The agencies referred to in
subparagraph (A) shall endeavor to make the
required disclosures to consumers under this
subsection complementary and nonduplicative
with other disclosures for mortgage consumers
to the extent such efforts--
(i) are practicable; and
(ii) do not reduce the value of any
such disclosure to recipients of such
disclosures.
(5) Compliance procedures required.--The Federal
banking agencies shall prescribe regulations requiring
depository institutions to establish and maintain
procedures reasonably designed to assure and monitor
the compliance of such depository institutions, the
subsidiaries of such institutions, and the employees of
such institutions or subsidiaries with the requirements
of this section and the registration procedures
established under section 106 of the Mortgage Reform
and Anti-Predatory Lending Act of 2007.
(b) Prohibition on Steering Incentives.--
(1) In general.--No mortgage originator may receive
from any person, and no person may pay to any mortgage
originator, directly or indirectly, any incentive
compensation (including yield spread premium) that is
based on, or varies with, the terms (other than the
amount of principal) of any loan that is not a
qualified mortgage (as defined in section 129B(c)(3)).
(2) Anti-steering regulations.--The Federal banking
agencies, in consultation with the Secretary and the
Commission, shall jointly prescribe regulations to
prohibit--
(A) mortgage originators from steering any
consumer to a residential mortgage loan that--
(i) the consumer lacks a reasonable
ability to repay;
(ii) does not provide the consumer
with a net tangible benefit; or
(iii) has predatory characteristics
or effects (such as equity stripping,
excessive fees, or abusive terms);
(B) mortgage originators from steering any
consumer from a residential mortgage loan for
which the consumer is qualified that is a
qualified mortgage (as defined in section
129B(c)(3)) to a residential mortgage loan that
is not a qualified mortgage; and
(C) abusive or unfair lending practices that
promote disparities among consumers of equal
credit worthiness but of different race,
ethnicity, gender, or age.
(3) Rules of construction.--No provision of this
subsection shall be construed as--
(A) limiting or affecting the ability of a
mortgage originator to sell residential
mortgage loans to subsequent purchasers;
(B) restricting a consumer's ability to
finance origination fees to the extent that
such fees were fully disclosed to the consumer
earlier in the application process and do not
vary based on the terms of the loan or the
consumer's decision about whether to finance
such fees; or
(C) prohibiting incentive payments to a
mortgage originator based on the number of
residential mortgage loans originated within a
specified period of time.
(c) Liability for Violations.--
(1) In general.--For purposes of providing a cause of
action for any failure by a mortgage originator to
comply with any requirement imposed under this section
and any regulation prescribed under this section,
subsections (a) and (b) of section 130 shall be applied
with respect to any such failure by substituting
``mortgage originator'' for ``creditor'' each place
such term appears in each such subsection
(2) Maximum.--The maximum amount of any liability of
a mortgage originator under paragraph (1) to a consumer
for any violation of this section shall not exceed an
amount equal to 3 times the total amount of direct and
indirect compensation or gain accruing to the mortgage
originator in connection with the residential mortgage
loan involved in the violation, plus the costs to the
consumer of the action, including a reasonable
attorney's fee.
Sec. 129B. Minimum standards for residential mortgage loans
(a) Ability To Repay.--
(1) In general.--In accordance with regulations
prescribed jointly by the Federal banking agencies, in
consultation with the Commission, no creditor may make
a residential mortgage loan unless the creditor makes a
reasonable and good faith determination based on
verified and documented information that, at the time
the loan is consummated, the consumer has a reasonable
ability to repay the loan, according to its terms, and
all applicable taxes, insurance, and assessments.
(2) Multiple loans.--If the creditor knows, or has
reason to know, that 1 or more residential mortgage
loans secured by the same dwelling will be made to the
same consumer, the creditor shall make a reasonable and
good faith determination, based on verified and
documented information, that the consumer has a
reasonable ability to repay the combined payments of
all loans on the same dwelling according to the terms
of those loans and all applicable taxes, insurance, and
assessments.
(3) Basis for determination.--A determination under
this subsection of a consumer's ability to repay a
residential mortgage loan shall be based on
consideration of the consumer's credit history, current
income, expected income the consumer is reasonably
assured of receiving, current obligations, debt-to-
income ratio, employment status, and other financial
resources other than the consumer's equity in the
dwelling or real property that secures repayment of the
loan.
(4) Nonstandard loans.--
(A) Variable rate loans that defer repayment
of any principal or interest.--For purposes of
determining, under this subsection, a
consumer's ability to repay a variable rate
residential mortgage loan that allows or
requires the consumer to defer the repayment of
any principal or interest, the creditor shall
take into consideration a fully amortizing
repayment schedule.
(B) Interest-only loans.--For purposes of
determining, under this subsection, a
consumer's ability to repay a residential
mortgage loan that permits or requires the
payment of interest only, the creditor shall
take into consideration the payment amount
required to amortize the loan by its final
maturity.
(C) Calculation for negative amortization.--
In making any determination under this
subsection, a creditor shall also take into
consideration any balance increase that may
accrue from any negative amortization
provision.
(D) Calculation process.--For purposes of
making any determination under this subsection,
a creditor shall calculate the monthly payment
amount for principal and interest on any
residential mortgage loan by assuming--
(i) the loan proceeds are fully
disbursed on the date of the
consummation of the loan;
(ii) the loan is to be repaid in
substantially equal monthly amortizing
payments for principal and interest
over the entire term of the loan with
no balloon payment, unless the loan
contract requires more rapid repayment
(including balloon payment), in which
case the contract's repayment schedule
shall be used in this calculation; and
(iii) the interest rate over the
entire term of the loan is a fixed rate
equal to the fully indexed rate at the
time of the loan closing, without
considering the introductory rate.
(5) Fully-indexed rate defined.--For purposes of this
subsection, the term ``fully indexed rate'' means the
index rate prevailing on a residential mortgage loan at
the time the loan is made plus the margin that will
apply after the expiration of any introductory interest
rates.
(b) Net Tangible Benefit for Refinancing of Residential
Mortgage Loans.--
(1) In general.--In accordance with regulations
prescribed under paragraph (3), no creditor may extend
credit in connection with any residential mortgage loan
that involves a refinancing of a prior existing
residential mortgage loan unless the creditor
reasonably and in good faith determines, at the time
the loan is consummated and on the basis of information
known by or obtained in good faith by the creditor,
that the refinanced loan will provide a net tangible
benefit to the consumer.
(2) Certain loans providing no net tangible
benefit.--A residential mortgage loan that involves a
refinancing of a prior existing residential mortgage
loan shall not be considered to provide a net tangible
benefit to the consumer if the costs of the refinanced
loan, including points, fees and other charges, exceed
the amount of any newly advanced principal without any
corresponding changes in the terms of the refinanced
loan that are advantageous to the consumer.
(3) Net tangible benefit.--The Federal banking
agencies shall jointly prescribe regulations defining
the term ``net tangible benefit'' for purposes of this
subsection.
(c) Presumption of Ability to Repay and Net Tangible
Benefit.--
(1) In general.--Any creditor with respect to any
residential mortgage loan, and any assignee or
securitizer of such loan, may presume that the loan has
met the requirements of subsections (a) and (b), if the
loan is a qualified mortgage or a qualified safe harbor
mortgage.
(2) Rebuttable presumption.--Any presumption
established under paragraph (1) with respect to any
residential mortgage loan shall be rebuttable only--
(A) against the creditor of such loan; and
(B) if such loan is a qualified safe harbor
mortgage.
(3) Definitions.--For purposes of this section the
following definitions shall apply:
(A) Most recent conventional mortgage rate.--
The term ``most recent conventional mortgage
rate'' means the contract interest rate on
commitments for fixed-rate first mortgages most
recently published in the Federal Reserve
Statistical Release on selected interest rates
(daily or weekly), and commonly referred to as
the H.15 release (or any successor
publication), in the week preceding a date of
determination for purposes of applying this
subsection.
(B) Qualified mortgage.--The term ``qualified
mortgage'' means--
(i) any residential mortgage loan
that constitutes a first lien on the
dwelling or real property securing the
loan and either--
(I) has an annual percentage
rate that does not equal or
exceed the yield on securities
issued by the Secretary of the
Treasury under chapter 31 of
title 31, United States Code,
that bear comparable periods of
maturity by more than 3
percentage points; or
(II) has an annual percentage
rate that does not equal or
exceed the most recent
conventional mortgage rate, or
such other annual percentage
rate as may be established by
regulation under paragraph (6),
by more than 175 basis points;
(ii) any residential mortgage loan
that is not the first lien on the
dwelling or real property securing the
loan and either--
(I) has an annual percentage
rate that does not equal or
exceed the yield on securities
issued by the Secretary of the
Treasury under chapter 31 of
title 31, United States Code,
that bear comparable periods of
maturity by more than 5
percentage points; or
(II) has an annual percentage
rate that does not equal or
exceed the most recent
conventional mortgage rate, or
such other annual percentage
rate as may be established by
regulation under paragraph (6),
by more than 375 basis points;
and
(iii) a loan made or guaranteed by
the Secretary of Veterans Affairs.
(C) Qualified safe harbor mortgage.--The term
``qualified safe harbor mortgage'' means any
residential mortgage loan--
(i) for which the income and
financial resources of the consumer are
verified and documented;
(ii) for which the residential
mortgage loan underwriting process is
based on the fully-indexed rate, and
takes into account all applicable
taxes, insurance, and assessments;
(iii) which does not provide for a
repayment schedule that results in
negative amortization at any time;
(iv) meets such other requirements as
may be established by regulation; and
(v) for which any of the following
factors apply with respect to such
loan:
(I) The periodic payment
amount for principal and
interest are fixed for a
minimum of 5 years under the
terms of the loan.
(II) In the case of a
variable rate loan, the annual
percentage rate varies based on
a margin that is less than 3
percent over a single generally
accepted interest rate index
that is the basis for
determining the rate of
interest for the mortgage.
(III) The loan does not cause
the consumer's total monthly
debts, including amounts under
the loan, to exceed a
percentage established by
regulation of his or her
monthly gross income or such
other maximum percentage of
such income as may be
prescribed by regulation under
paragraph (6).
(4) Determination of comparison to treasury
securities.--
(A) In general.--Without regard to whether a
residential mortgage loan is subject to or
reportable under the Home Mortgage Disclosure
Act of 1975 and subject to subparagraph (B),
the difference between the annual percentage
rate of such loan and the yield on securities
issued by the Secretary of the Treasury under
chapter 31 of title 31, United States Code,
having comparable periods of maturity shall be
determined using the same procedures and
methods of calculation applicable to loans that
are subject to the reporting requirements under
the Home Mortgage Disclosure Act of 1975.
(B) Date of determination of yield.--The
yield on the securities referred to in
subparagraph (A) shall be determined, for
purposes of such subparagraph and paragraph (3)
with respect to any residential mortgage loan,
as of the 15th day of the month preceding the
month in which a completed application is
submitted for such loan.
(5) APR in case of introductory offer.--For purposes
of making a determination of whether a residential
mortgage loan that provides for a fixed interest rate
for an introductory period and then resets or adjusts
to a variable rate is a qualified mortgage, the
determination of the annual percentage rate, as
determined in accordance with regulations prescribed by
the Board under section 107, shall be based on the
greater of the introductory rate and the fully indexed
rate of interest.
(6) Regulations.--
(A) In general.--The Federal banking agencies
shall jointly prescribe regulations to carry
out the purposes of this subsection.
(B) Revision of safe harbor criteria.--The
Federal banking agencies may jointly prescribe
regulations that revise, add to, or subtract
from the criteria that define a qualified
mortgage and a qualified safe harbor mortgage
to the extent necessary and appropriate to
effectuate the purposes of this subsection, to
prevent circumvention or evasion of this
subsection, or to facilitate compliance with
this subsection.
(7) Rule of construction.--No provision of this
subsection may be construed as implying that a
residential mortgage loan may be presumed to violate
subsection (a) or (b) if such loan is not a qualified
mortgage or a qualified safe harbor mortgage.
(d) Liability for Violations.--
(1) In general.--
(A) Rescission.--In addition to any other
liability under this title for a violation by a
creditor of subsection (a) or (b) (for example
under section 130) and subject to the statute
of limitations in paragraph (7), a civil action
may be maintained against a creditor for a
violation of subsection (a) or (b) with respect
to a residential mortgage loan for the
rescission of the loan, and such additional
costs as the obligor may have incurred as a
result of the violation and in connection with
obtaining a rescission of the loan, including a
reasonable attorney's fee.
(B) Cure.--A creditor shall not be liable for
rescission under subparagraph (A) with respect
to a residential mortgage loan if, no later
than 90 days after the receipt of notification
from the consumer that the loan violates
subsection (a) or (b), the creditor provides a
cure.
(2) Limited assignee and securitizer liability.--
Notwithstanding sections 125(e) and 131 and except as
provided in paragraph (3), a civil action which may be
maintained against a creditor with respect to a
residential mortgage loan for a violation of subsection
(a) or (b) may be maintained against any assignee or
securitizer of such residential mortgage loan, who has
acted in good faith, for the following liabilities
only:
(A) Rescission of the loan.
(B) Such additional costs as the obligor may
have incurred as a result of the violation and
in connection with obtaining a rescission of
the loan, including a reasonable attorney's
fee.
(3) Assignee and securitizer exemption.--No assignee
or securitizer of a residential mortgage loan shall be
liable under paragraph (2) with respect to such loan
if--
(A) no later than 90 days after the receipt
of notification from the consumer that the loan
violates subsection (a) or (b), the assignee or
securitizer provides a cure so that the loan
satisfies the requirements of subsections (a)
and (b); or
(B) each of the following conditions are met:
(i) The assignee or securitizer--
(I) has a policy against
buying residential mortgage
loans other than qualified
mortgages or qualified safe
harbor mortgages (as defined in
subsection (c));
(II) the policy is intended
to verify seller or assignor
compliance with the
representations and warranties
required under clause (ii); and
(III) in accordance with
regulations which the Federal
banking agencies and the
Securities and Exchange
Commission shall jointly
prescribe, exercises reasonable
due diligence to adhere to such
policy in purchasing
residential mortgage loans,
including through adequate,
thorough, and consistently
applied sampling procedures.
(ii) The contract under which such assignee
or securitizer acquired the residential
mortgage loan from a seller or assignor of the
loan contains representations and warranties
that the seller or assignor--
(I) is not selling or
assigning any residential
mortgage loan which is not a
qualified mortgage or a
qualified safe harbor mortgage;
or
(II) is a beneficiary of a
representation and warranty
from a previous seller or
assignor to that effect,
and the assignee or securitizer in good
faith takes reasonable steps to obtain
the benefit of such representation or
warranty.
(4) Cure defined.--For purposes of this subsection,
the term ``cure'' means, with respect to a residential
mortgage loan that violates subsection (a) or (b), the
modification or refinancing, at no cost to the
consumer, of the loan to provide terms that would have
satisfied the requirements of subsection (a) and (b) if
the loan had contained such terms as of the origination
of the loan.
(5) Disagreement over cure.--If any creditor,
assignee, or securitizer and a consumer fail to reach
agreement on a cure with respect to a residential
mortgage loan that violates subsection (a) or (b), or
the consumer fails to accept a cure proffered by a
creditor, assignee, or securitizer--
(A) the creditor, assignee, or securitizer
may provide the cure; and
(B) the consumer may challenge the adequacy
of the cure during the 6-month period beginning
when the cure is provided.
If the consumer's challenge, under this paragraph, of a
cure is successful, the creditor, assignee, or
securitizer shall be liable to the consumer for
rescission of the loan and such additional costs under
paragraph (2).
(6) Inability to provide rescission.--If a creditor,
assignee, or securitizer cannot provide rescission
under paragraph (1) or (2), the liability of such
creditor, assignee, or securitizer shall be met by
providing the financial equivalent of a rescission,
together with such additional costs as the obligor may
have incurred as a result of the violation and in
connection with obtaining a rescission of the loan,
including a reasonable attorney's fee.
(7) No class actions against assignee or securitizer
under paragraph (2).--Only individual actions may be
brought against an assignee or securitizer of a
residential mortgage loan for a violation of subsection
(a) or (b).
(8) Statute of limitations.--The liability of a
creditor, assignee, or securitizer under this
subsection shall apply in any original action against a
creditor under paragraph (1) or an assignee or
securitizer under paragraph (2) which is brought
before--
(A) in the case of any residential mortgage
loan other than a loan to which subparagraph
(B) applies, the end of the 3-year period
beginning on the date the loan is consummated;
or
(B) in the case of a residential mortgage
loan that provides for a fixed interest rate
for an introductory period and then resets or
adjusts to a variable rate or that provides for
a nonamortizing payment schedule and then
converts to an amortizing payment schedule, the
earlier of--
(i) the end of the 1-year period
beginning on the date of such reset,
adjustment, or conversion; or
(ii) the end of the 6-year period
beginning on the date the loan is
consummated.
(9) Pools and investors in pools excluded.--In the
case of residential mortgage loans acquired or
aggregated for the purpose of including such loans in a
pool of assets held for the purpose of issuing or
selling instruments representing interests in such
pools including through a securitization vehicle, the
terms ``assignee'' and ``securitizer'', as used in this
section, do not include the securitization vehicle, the
pools of such loans or any original or subsequent
purchaser of any interest in the securitization vehicle
or any instrument representing a direct or indirect
interest in such pool.
(e) Defense to Foreclosure.--Notwithstanding any other
provision of law--
(1) when the holder of a residential mortgage loan or
anyone acting for such holder initiates a judicial or
nonjudicial foreclosure--
(A) a consumer who has the right to rescind
under this section with respect to such loan
against the creditor or any assignee or
securitizer may assert such right as a defense
to foreclosure or counterclaim to such
foreclosure against the holder, or
(B) if the foreclosure proceeding begins
after the end of the period during which a
consumer may bring an action for rescission
under subsection (d), the consumer may seek
actual damages incurred by reason of the
violation which gave rise to the right of
rescission, together with costs of the action,
including a reasonable attorney's fee against
the creditor or any assignee or securitizer;
and
(2) such holder or anyone acting for such holder or
any other applicable third party may sell, transfer,
convey, or assign a residential mortgage loan to a
creditor, any assignee, or any securitizer, or their
designees, to effect a rescission or cure.
(f) Prohibition on Certain Prepayment Penalties.--
(1) Prohibited on certain loans.--A residential
mortgage loan that is not a qualified mortgage (as
defined in subsection (c)) may not contain terms under
which a consumer must pay a prepayment penalty for
paying all or part of the principal after the loan is
consummated.
(2) Prohibited after initial period on loans with a
reset.--A qualified mortgage with a fixed interest rate
for an introductory period that adjusts or resets after
such period may not contain terms under which a
consumer must pay a prepayment penalty for paying all
or part of the principal after the beginning of the 3-
month period ending on the date of the adjustment or
reset.
(g) Single Premium Credit Insurance Prohibited.--No creditor
may finance, directly or indirectly, in connection with any
residential mortgage loan or with any extension of credit under
an open end consumer credit plan secured by the principal
dwelling of the consumer (other than a reverse mortgage), any
credit life, credit disability, credit unemployment or credit
property insurance, or any other accident, loss-of-income, life
or health insurance, or any payments directly or indirectly for
any debt cancellation or suspension agreement or contract,
except that insurance premiums or debt cancellation or
suspension fees calculated and paid in full on a monthly basis
shall not be considered financed by the creditor.
(h) Arbitration.--
(1) In general.--No residential mortgage loan and no
extension of credit under an open end consumer credit
plan secured by the principal dwelling of the consumer,
other than a reverse mortgage, may include terms which
require arbitration or any other nonjudicial procedure
as the method for resolving any controversy or settling
any claims arising out of the transaction.
(2) Post-controversy agreements.--Subject to
paragraph (3), paragraph (1) shall not be construed as
limiting the right of the consumer and the creditor,
any assignee, or any securitizer to agree to
arbitration or any other nonjudicial procedure as the
method for resolving any controversy at any time after
a dispute or claim under the transaction arises.
(3) No waiver of statutory cause of action.--No
provision of any residential mortgage loan or of any
extension of credit under an open end consumer credit
plan secured by the principal dwelling of the consumer
(other than a reverse mortgage), and no other agreement
between the consumer and the creditor relating to the
residential mortgage loan or extension of credit
referred to in paragraph (1), shall be applied or
interpreted so as to bar a consumer from bringing an
action in an appropriate district court of the United
States, or any other court of competent jurisdiction,
pursuant to section 130 or any other provision of law,
for damages or other relief in connection with any
alleged violation of this section, any other provision
of this title, or any other Federal law.
(i) Duty of Securitizer to Retain Access to Loans.--Any
securitizer shall reserve the right and preserve an ability, in
any document or contract establishing any pool of assets that
includes any residential mortgage loan--
(1) to identify and obtain access to any such loan in
the pool; and
(2) to provide for and obtain a remedy under this
title for the obligor under any such loan.
(j) Effect of Foreclosure on Preexisting Lease.--
(1) In general.--In the case of any foreclosure on
any dwelling or residential real property securing an
extension of credit made under a contract entered into
after the date of the enactment of the Mortgage Reform
and Anti-Predatory Lending Act of 2007, any successor
in interest in such property pursuant to the
foreclosure shall assume such interest subject to--
(A) any bona fide lease made to a bona fide
tenant entered into before the notice of
foreclosure; and
(B) the rights of any bona fide tenant
without a lease or with a lease terminable at
will under State law and the provision, by the
successor in interest, of a notice to vacate to
the tenant at least 90 days before the
effective date of the notice.
(2) Bona fide lease or tenancy.--For purposes of this
section, a lease or tenancy shall be considered bona
fide only if--
(A) the lease or tenancy was the result of an
arms-length transaction; or
(B) the lease or tenancy requires the tenant
to pay rent that is not substantially less than
fair market rent for the property.
(k) Mortgages with Negative Amortization.--No creditor may
extend credit to a first-time borrower in connection with a
consumer credit transaction under an open or closed end
consumer credit plan secured by a dwelling or residential real
property that includes a dwelling, other than a reverse
mortgage, that provides or permits a payment plan that may, at
any time over the term of the extension of credit, result in
negative amortization unless, before such transaction is
consummated--
(1) the creditor provides the consumer with a
statement that--
(A) the pending transaction will or may, as
the case may be, result in negative
amortization;
(B) describes negative amortization in such
manner as the Federal banking agencies shall
prescribe;
(C) negative amortization increases the
outstanding principal balance of the account;
and
(D) negative amortization reduces the
consumer's equity in the dwelling or real
property; and
(2) the consumer provides the creditor with
sufficient documentation to demonstrate that the
consumer received homeownership counseling from
organizations or counselors certified by the Secretary
of Housing and Urban Development as competent to
provide such counseling.
(l) Annual Contact Information.--At least once annually and
whenever there is a change in ownership of a residential
mortgage loan, the servicer with respect to a residential
mortgage loan shall provide a written notice to the consumer
identifying the name of the creditor or any assignee or
securitizer who should be contacted by the consumer for any
reason concerning the consumer's rights with respect to the
loan.
Sec. 130. Civil liability
(a) Except as otherwise provided in this section, any
creditor who fails to comply with any requirement imposed under
this chapter, including any requirement under section 125, or
chapter 4 or 5 of this title with respect to any person is
liable to such person in an amount equal to the sum of--
(1) * * *
(2)(A)(i) in the case of an individual action twice
the amount of any finance charge in connection with the
transaction, (ii) in the case of an individual action
relating to a consumer lease under chapter 5 of this
title, 25 per centum of the total amount of monthly
payments under the lease, except that the liability
under this subparagraph shall not be less than [$100]
$200 nor greater than [$1,000] $2,000, or (iii) in the
case of an individual action relating to a credit
transaction not under an open end credit plan that is
secured by real property or a dwelling, not less than
[$200] $400 or greater than [$2,000] $4,000; or
(B) in the case of a class action, such amount as the
court may allow, except that as to each member of the
class no minimum recovery shall be applicable, and the
total recovery under this subparagraph in any class
action or series of class actions arising out of the
same failure to comply by the same creditor shall not
be more than the lesser of [$500,000] $1,000,000 or 1
per centum of the net worth of the creditor;
* * * * * * *
[(b) A creditor or assignee has no liability under this
section or section 108 or section 112 for any failure to comply
with any requirement imposed under this chapter or chapter 5,
if within sixty days after discovering an error, whether
pursuant to a final written examination report or notice issued
under section 108(e)(1) or through the creditor's or assignee's
own procedures, and prior to the institution of an action under
this section or the receipt of written notice of the error from
the obligor, the creditor or assignee notifies the person
concerned of the error and makes whatever adjustments in the
appropriate account are necessary to assure that the person
will not be required to pay an amount in excess of the charge
actually disclosed, or the dollar equivalent of the annual
percentage rate actually disclosed, whichever is lower.]
(b) Correction of Errors.--A creditor has no liability under
this section or section 108 or 112 for any failure to comply
with any requirement imposed under this chapter or chapter 5,
if--
(1) within 30 days of the loan closing and prior to
the institution of any action, the consumer is notified
of or discovers the violation, appropriate restitution
is made, and whatever adjustments are necessary are
made to the loan to either, at the choice of the
consumer--
(A) make the loan satisfy the requirements of
this chapter; or
(B) in the case of a high-cost mortgage,
change the terms of the loan in a manner
beneficial to the consumer so that the loan
will no longer be a high-cost mortgage; or
(2) within 60 days of the creditor's discovery or
receipt of notification of an unintentional violation
or bona fide error as described in subsection (c) and
prior to the institution of any action, the consumer is
notified of the compliance failure, appropriate
restitution is made, and whatever adjustments are
necessary are made to the loan to either, at the choice
of the consumer--
(A) make the loan satisfy the requirements of
this chapter; or
(B) in the case of a high-cost mortgage,
change the terms of the loan in a manner
beneficial so that the loan will no longer be a
high-cost mortgage.
* * * * * * *
(e) [Any action] Except as provided in the subsequent
sentence, any action under this section may be brought in any
United States district court, or in any other court of
competent juridisdiction, within one year from the date of the
occurrence of the violation. Any action under this section with
respect to any violation of section 129 may be brought in any
United States district court, or in any other court of
competent jurisdiction, before the end of the 3-year period
beginning on the date of the occurrence of the violation. This
subsection does not bar a person from asserting a violation of
this title in an action to collect the debt which was brought
more than one year from the date of the occurrence of the
violation as a matter of defense by recoupment or set-off in
such action, except as otherwise provided by State law. An
action to enforce a violation of section 129 may also be
brought by the appropriate State attorney general in any
appropriate United States district court, or any other court of
competent jurisdiction, not later than 3 years after the date
on which the violation occurs. The State attorney general shall
provide prior written notice of any such civil action to the
Federal agency responsible for enforcement under section 108
and shall provide the agency with a copy of the complaint. If
prior notice is not feasible, the State attorney general shall
provide notice to such agency immediately upon instituting the
action. The Federal agency may--
(1) intervene in the action;
(2) upon intervening--
(A) remove the action to the appropriate
United States district court, if it was not
originally brought there; and
(B) be heard on all matters arising in the
action; and
(3) file a petition for appeal.
* * * * * * *
----------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT ACT
* * * * * * *
UNDER SECRETARY AND OTHER OFFICERS AND OFFICES
Sec. 4. (a) * * *
* * * * * * *
(g) Office of Housing Counseling.--
(1) Establishment.--There is established, in the
Office of the Secretary, the Office of Housing
Counseling.
(2) Director.--There is established the position of
Director of Housing Counseling. The Director shall be
the head of the Office of Housing Counseling and shall
be appointed by the Secretary. Such position shall be a
career-reserved position in the Senior Executive
Service.
(3) Functions.--
(A) In general.--The Director shall have
ultimate responsibility within the Department,
except for the Secretary, for all activities
and matters relating to homeownership
counseling and rental housing counseling,
including--
(i) research, grant administration,
public outreach, and policy development
relating to such counseling; and
(ii) establishment, coordination, and
administration of all regulations,
requirements, standards, and
performance measures under programs and
laws administered by the Department
that relate to housing counseling,
homeownership counseling (including
maintenance of homes), mortgage-related
counseling (including home equity
conversion mortgages and credit
protection options to avoid
foreclosure), and rental housing
counseling, including the requirements,
standards, and performance measures
relating to housing counseling.
(B) Specific functions.--The Director shall
carry out the functions assigned to the
Director and the Office under this section and
any other provisions of law. Such functions
shall include establishing rules necessary
for--
(i) the counseling procedures under
section 106(g)(1) of the Housing and
Urban Development Act of 1968 (12
U.S.C. 1701x(h)(1));
(ii) carrying out all other functions
of the Secretary under section 106(g)
of the Housing and Urban Development
Act of 1968, including the
establishment, operation, and
publication of the availability of the
toll-free telephone number under
paragraph (2) of such section;
(iii) carrying out section 5 of the
Real Estate Settlement Procedures Act
of 1974 (12 U.S.C. 2604) for home
buying information booklets prepared
pursuant to such section;
(iv) carrying out the certification
program under section 106(e) of the
Housing and Urban Development Act of
1968 (12 U.S.C. 1701x(e));
(v) carrying out the assistance
program under section 106(a)(4) of the
Housing and Urban Development Act of
1968, including criteria for selection
of applications to receive assistance;
(vi) carrying out any functions
regarding abusive, deceptive, or
unscrupulous lending practices relating
to residential mortgage loans that the
Secretary considers appropriate, which
shall include conducting the study
under section 6 of the Expand and
Preserve Home Ownership Through
Counseling Act;
(vii) providing for operation of the
advisory committee established under
paragraph (4) of this subsection;
(viii) collaborating with community-
based organizations with expertise in
the field of housing counseling; and
(ix) providing for the building of
capacity to provide housing counseling
services in areas that lack sufficient
services.
(4) Advisory committee.--
(A) In general.--The Secretary shall appoint
an advisory committee to provide advice
regarding the carrying out of the functions of
the Director.
(B) Members.--Such advisory committee shall
consist of not more than 12 individuals, and
the membership of the committee shall equally
represent all aspects of the mortgage and real
estate industry, including consumers.
(C) Terms.--Except as provided in
subparagraph (D), each member of the advisory
committee shall be appointed for a term of 3
years. Members may be reappointed at the
discretion of the Secretary.
(D) Terms of initial appointees.--As
designated by the Secretary at the time of
appointment, of the members first appointed to
the advisory committee, 4 shall be appointed
for a term of 1 year and 4 shall be appointed
for a term of 2 years.
(E) Prohibition of pay; travel expenses.--
Members of the advisory committee shall serve
without pay, but shall receive travel expenses,
including per diem in lieu of subsistence, in
accordance with applicable provisions under
subchapter I of chapter 57 of title 5, United
States Code.
(F) Advisory role only.--The advisory
committee shall have no role in reviewing or
awarding housing counseling grants.
(5) Scope of homeownership counseling.--In carrying
out the responsibilities of the Director, the Director
shall ensure that homeownership counseling provided by,
in connection with, or pursuant to any function,
activity, or program of the Department addresses the
entire process of homeownership, including the decision
to purchase a home, the selection and purchase of a
home, issues arising during or affecting the period of
ownership of a home (including refinancing, default and
foreclosure, and other financial decisions), and the
sale or other disposition of a home.
* * * * * * *
----------
HOUSING AND URBAN DEVELOPMENT ACT OF 1968
* * * * * * *
TECHNICAL ASSISTANCE, COUNSELING TO TENANTS AND HOMEOWNERS, AND LOANS
TO SPONSORS OF LOW- AND MODERATE-INCOME HOUSING
Sec. 106. (a)(1) * * *
* * * * * * *
(4) Homeownership and rental counseling assistance.--
(A) In general.--The Secretary shall make financial
assistance available under this paragraph to States,
units of general local governments, and nonprofit
organizations providing homeownership or rental
counseling (as such terms are defined in subsection
(g)(1)).
(B) Qualified entities.--The Secretary shall
establish standards and guidelines for eligibility of
organizations (including governmental and nonprofit
organizations) to receive assistance under this
paragraph.
(C) Distribution.--Assistance made available under
this paragraph shall be distributed in a manner that
encourages efficient and successful counseling
programs.
(D) Authorization of appropriations.--There are
authorized to be appropriated $45,000,000 for each of
fiscal years 2008 through 2011 for--
(i) the operations of the Office of Housing
Counseling of the Department of Housing and
Urban Development;
(ii) the responsibilities of the Secretary
under paragraphs (2) through (5) of subsection
(g); and
(iii) assistance pursuant to this paragraph
for entities providing homeownership and rental
counseling.
* * * * * * *
(c) Grants for Homeownership Counseling Organizations.--
(1) * * *
* * * * * * *
(5) Notification of availability of homeownership
counseling.--
(A) Notification of availability of
homeownership counseling.--
(i) * * *
(ii) Content.--Notification under
this subparagraph shall--
(I) * * *
* * * * * * *
(III) notify the homeowner or
mortgage applicant of the
availability of homeownership
counseling provided by
nonprofit organizations
approved by the Secretary and
experienced in the provision of
homeownership counseling, or
provide the toll-free telephone
number described in
subparagraph (D)(i); [and]
(IV) notify the homeowner by
a statement or notice, written
in plain English by the
Secretary of Housing and Urban
Development, in consultation
with the Secretary of Defense
and the Secretary of the
Treasury, explaining the
mortgage and foreclosure rights
of servicemembers, and the
dependents of such
servicemembers, under the
Servicemembers Civil Relief Act
(50 U.S.C. App. 501 et seq.),
including the toll-free
military one source number to
call if servicemembers, or the
dependents of such
servicemembers, require further
assistance[.]; and
(V) notify the housing or
mortgage applicant of the
availability of mortgage
software systems provided
pursuant to subsection (g)(3).
* * * * * * *
(e) Certification.--
[(1) Requirement for assistance.--An organization may
not receive assistance for counseling activities under
subsection (a)(1)(iii), (a)(2), (c), or (d), unless the
organization provides such counseling, to the extent
practicable, by individuals who have been certified by
the Secretary under this subsection as competent to
provide such counseling.]
(1) Requirement for assistance.--An organization may
not receive assistance for counseling activities under
subsection (a)(1)(iii), (a)(2), (a)(4), (c), or (d) of
this section, or under section 101(e), unless the
organization, or the individuals through which the
organization provides such counseling, has been
certified by the Secretary under this subsection as
competent to provide such counseling.
(2) Standards and examination.--The Secretary shall,
by regulation, establish standards and procedures for
testing and certifying counselors and for certifying
organizations. Such standards and procedures shall
require [for certification], for certification of an
organization, that each individual through which the
organization provides counseling shall demonstrate,
and, for certification of an individual, that the
individual shall demonstrate, by written examination
(as provided under subsection (f)(4)), competence to
provide counseling in each of the following areas:
(A) * * *
* * * * * * *
(3) Requirement under hud programs.--Any
homeownership counseling or rental housing counseling
(as such terms are defined in subsection (g)(1))
required under, or provided in connection with, any
program administered by the Department of Housing and
Urban Development shall be provided only by
organizations or counselors certified by the Secretary
under this subsection as competent to provide such
counseling.
(4) Outreach.--The Secretary shall take such actions
as the Secretary considers appropriate to ensure that
individuals and organizations providing homeownership
or rental housing counseling are aware of the
certification requirements and standards of this
subsection and of the training and certification
programs under subsection (f).
[(3)] (5) Encouragement.--The Secretary shall
encourage organizations engaged in providing
homeownership and rental counseling that do not receive
assistance under this section to employ organizations
and individuals to provide such counseling who are
certified under this subsection or meet the
certification standards established under this
subsection.
* * * * * * *
(g) Procedures and Activities.--
(1) Counseling procedures.--
(A) In general.--The Secretary shall
establish, coordinate, and monitor the
administration by the Department of Housing and
Urban Development of the counseling procedures
for homeownership counseling and rental housing
counseling provided in connection with any
program of the Department, including all
requirements, standards, and performance
measures that relate to homeownership and
rental housing counseling.
(B) Homeownership counseling.--For purposes
of this subsection and as used in the
provisions referred to in this subparagraph,
the term ``homeownership counseling'' means
counseling related to homeownership and
residential mortgage loans. Such term includes
counseling related to homeownership and
residential mortgage loans that is provided
pursuant to--
(i) section 105(a)(20) of the Housing
and Community Development Act of 1974
(42 U.S.C. 5305(a)(20));
(ii) in the United States Housing Act
of 1937--
(I) section 9(e) (42 U.S.C.
1437g(e));
(II) section 8(y)(1)(D) (42
U.S.C. 1437f(y)(1)(D));
(III) section 18(a)(4)(D) (42
U.S.C. 1437p(a)(4)(D));
(IV) section 23(c)(4) (42
U.S.C. 1437u(c)(4));
(V) section 32(e)(4) (42
U.S.C. 1437z-4(e)(4));
(VI) section 33(d)(2)(B) (42
U.S.C. 1437z-5(d)(2)(B));
(VII) sections 302(b)(6) and
303(b)(7) (42 U.S.C. 1437aaa-
1(b)(6), 1437aaa-2(b)(7)); and
(VIII) section 304(c)(4) (42
U.S.C. 1437aaa-3(c)(4));
(iii) section 302(a)(4) of the
American Homeownership and Economic
Opportunity Act of 2000 (42 U.S.C.
1437f note);
(iv) sections 233(b)(2) and 258(b) of
the Cranston-Gonzalez National
Affordable Housing Act (42 U.S.C.
12773(b)(2), 12808(b));
(v) this section and section 101(e)
of the Housing and Urban Development
Act of 1968 (12 U.S.C. 1701x,
1701w(e));
(vi) section 220(d)(2)(G) of the Low-
Income Housing Preservation and
Resident Homeownership Act of 1990 (12
U.S.C. 4110(d)(2)(G));
(vii) sections 422(b)(6), 423(b)(7),
424(c)(4), 442(b)(6), and 443(b)(6) of
the Cranston-Gonzalez National
Affordable Housing Act (42 U.S.C.
12872(b)(6), 12873(b)(7), 12874(c)(4),
12892(b)(6), and 12893(b)(6));
(viii) section 491(b)(1)(F)(iii) of
the McKinney-Vento Homeless Assistance
Act (42 U.S.C. 11408(b)(1)(F)(iii));
(ix) sections 202(3) and 810(b)(2)(A)
of the Native American Housing and
Self-Determination Act of 1996 (25
U.S.C. 4132(3), 4229(b)(2)(A));
(x) in the National Housing Act--
(I) in section 203 (12 U.S.C.
1709), the penultimate
undesignated paragraph of
paragraph (2) of subsection
(b), subsection (c)(2)(A), and
subsection (r)(4);
(II) subsections (a) and
(c)(3) of section 237 (12
U.S.C. 1715z-2); and
(III) subsections (d)(2)(B)
and (m)(1) of section 255 (12
U.S.C. 1715z-20);
(xi) section 502(h)(4)(B) of the
Housing Act of 1949 (42 U.S.C.
1472(h)(4)(B)); and
(xii) section 508 of the Housing and
Urban Development Act of 1970 (12
U.S.C. 1701z-7).
(C) Rental housing counseling.--For purposes
of this subsection, the term ``rental housing
counseling'' means counseling related to rental
of residential property, which may include
counseling regarding future homeownership
opportunities and providing referrals for
renters and prospective renters to entities
providing counseling and shall include
counseling related to such topics that is
provided pursuant to--
(i) section 105(a)(20) of the Housing
and Community Development Act of 1974
(42 U.S.C. 5305(a)(20));
(ii) in the United States Housing Act
of 1937--
(I) section 9(e) (42 U.S.C.
1437g(e));
(II) section 18(a)(4)(D) (42
U.S.C. 1437p(a)(4)(D));
(III) section 23(c)(4) (42
U.S.C. 1437u(c)(4));
(IV) section 32(e)(4) (42
U.S.C. 1437z-4(e)(4));
(V) section 33(d)(2)(B) (42
U.S.C. 1437z-5(d)(2)(B)); and
(VI) section 302(b)(6) (42
U.S.C. 1437aaa-1(b)(6));
(iii) section 233(b)(2) of the
Cranston-Gonzalez National Affordable
Housing Act (42 U.S.C. 12773(b)(2));
(iv) section 106 of the Housing and
Urban Development Act of 1968 (12
U.S.C. 1701x);
(v) section 422(b)(6) of the
Cranston-Gonzalez National Affordable
Housing Act (42 U.S.C. 12872(b)(6));
(vi) section 491(b)(1)(F)(iii) of the
McKinney-Vento Homeless Assistance Act
(42 U.S.C. 11408(b)(1)(F)(iii));
(vii) sections 202(3) and
810(b)(2)(A) of the Native American
Housing and Self-Determination Act of
1996 (25 U.S.C. 4132(3),
4229(b)(2)(A)); and
(viii) the rental assistance program
under section 8 of the United States
Housing Act of 1937 (42 U.S.C. 1437f).
(2) Standards for materials.--The Secretary, in
conjunction with the advisory committee established
under subsection (g)(4) of the Department of Housing
and Urban Development Act, shall establish standards
for materials and forms to be used, as appropriate, by
organizations providing homeownership counseling
services, including any recipients of assistance
pursuant to subsection (a)(4).
(3) Mortgage software systems.--
(A) Certification.--The Secretary shall
provide for the certification of various
computer software programs for consumers to use
in evaluating different residential mortgage
loan proposals. The Secretary shall require,
for such certification, that the mortgage
software systems take into account--
(i) the consumer's financial
situation and the cost of maintaining a
home, including insurance, taxes, and
utilities;
(ii) the amount of time the consumer
expects to remain in the home or
expected time to maturity of the loan;
(iii) such other factors as the
Secretary considers appropriate to
assist the consumer in evaluating
whether to pay points, to lock in an
interest rate, to select an adjustable
or fixed rate loan, to select a
conventional or government-insured or
guaranteed loan and to make other
choices during the loan application
process.
If the Secretary determines that available
existing software is inadequate to assist
consumers during the residential mortgage loan
application process, the Secretary shall
arrange for the development by private sector
software companies of new mortgage software
systems that meet the Secretary's
specifications.
(B) Use and initial availability.--Such
certified computer software programs shall be
used to supplement, not replace, housing
counseling. The Secretary shall provide that
such programs are initially used only in
connection with the assistance of housing
counselors certified pursuant to subsection
(e).
(C) Availability.--After a period of initial
availability under subparagraph (B) as the
Secretary considers appropriate, the Secretary
shall take reasonable steps to make mortgage
software systems certified pursuant to this
paragraph widely available through the Internet
and at public locations, including public
libraries, senior-citizen centers, public
housing sites, offices of public housing
agencies that administer rental housing
assistance vouchers, and housing counseling
centers.
(4) National public service multimedia campaigns to
promote housing counseling.--
(A) In general.--The Director of Housing
Counseling shall develop, implement, and
conduct national public service multimedia
campaigns designed to make persons facing
mortgage foreclosure, persons considering a
subprime mortgage loan to purchase a home,
elderly persons, persons who face language
barriers, low-income persons, and other
potentially vulnerable consumers aware that it
is advisable, before seeking or maintaining a
residential mortgage loan, to obtain
homeownership counseling from an unbiased and
reliable sources and that such homeownership
counseling is available, including through
programs sponsored by the Secretary of Housing
and Urban Development.
(B) Contact information.--Each segment of the
multimedia campaign under subparagraph (A)
shall publicize the toll-free telephone number
and web site of the Department of Housing and
Urban Development through which persons seeking
housing counseling can locate a housing
counseling agency in their State that is
certified by the Secretary of Housing and Urban
Development and can provide advice on buying a
home, renting, defaults, foreclosures, credit
issues, and reverse mortgages.
(C) Authorization of appropriations.--There
are authorized to be appropriated to the
Secretary, not to exceed $3,000,000 for fiscal
years 2008, 2009, and 2010, for the develop,
implement, and conduct of national public
service multimedia campaigns under this
paragraph.
(5) Education programs.--The Secretary shall provide
advice and technical assistance to States, units of
general local government, and nonprofit organizations
regarding the establishment and operation of, including
assistance with the development of content and
materials for, educational programs to inform and
educate consumers, particularly those most vulnerable
with respect to residential mortgage loans (such as
elderly persons, persons facing language barriers, low-
income persons, and other potentially vulnerable
consumers), regarding home mortgages, mortgage
refinancing, home equity loans, and home repair loans.
(h) Definitions.--For purposes of this section:
(1) Nonprofit organization.--The term ``nonprofit
organization'' has the meaning given such term in
section 104(5) of the Cranston-Gonzalez National
Affordable Housing Act (42 U.S.C. 12704(5)), except
that subparagraph (D) of such section shall not apply
for purposes of this section.
(2) State.--The term ``State'' means each of the
several States, the Commonwealth of Puerto Rico, the
District of Columbia, the Commonwealth of the Northern
Mariana Islands, Guam, the Virgin Islands, American
Samoa, the Trust Territories of the Pacific, or any
other possession of the United States.
(3) Unit of general local government.--The term
``unit of general local government'' means any city,
county, parish, town, township, borough, village, or
other general purpose political subdivision of a State.
* * * * * * *
----------
REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974
* * * * * * *
[SPECIAL] HOME BUYING INFORMATION BOOKLETS
Sec. 5. [(a) The Secretary shall prepare and distribute
booklets to help persons borrowing money to finance the
purchase of residential real estate better to understand the
nature and costs of real estate settlement services. The
Secretary shall distribute such booklets to all lenders which
make federally related mortgage loans.
[(b) Each booklet shall be in such form and detail as the
Secretary shall prescribe and, in addition to such other
information as the Secretary may provide, shall include in
clear and concise language--
[(1) a description and explanation of the nature and
purpose of each cost incident to a real estate
settlement;
[(2) an explanation and sample of the standard real
estate settlement form developed and prescribed under
section 4;
[(3) a description and explanation of the nature and
purpose of escrow accounts when used in connection with
loans secured by residential real estate;
[(4) an explanation of the choices available to
buyers of residential real estate in selecting persons
to provide necessary services incident to a real estate
settlement; and
[(5) an explanation of the unfair practices and
unreasonable or unnecessary charges to be avoided by
the prospective buyer with respect to a real estate
settlement.
Such booklets shall take into consideration differences in real
estate settlement procedures which may exist among the several
States and territories of the United States and among separate
political subdivisions within the same State and territory.]
(a) Preparation and Distribution.--The Secretary shall
prepare, at least once every 5 years, a booklet to help
consumers applying for federally related mortgage loans to
understand the nature and costs of real estate settlement
services. The Secretary shall prepare the booklet in various
languages and cultural styles, as the Secretary determines to
be appropriate, so that the booklet is understandable and
accessible to homebuyers of different ethnic and cultural
backgrounds. The Secretary shall distribute such booklets to
all lenders that make federally related mortgage loans. The
Secretary shall also distribute to such lenders lists,
organized by location, of homeownership counselors certified
under section 106(e) of the Housing and Urban Development Act
of 1968 (12 U.S.C. 1701x(e)) for use in complying with the
requirement under subsection (c) of this section.
(b) Contents.--Each booklet shall be in such form and detail
as the Secretary shall prescribe and, in addition to such other
information as the Secretary may provide, shall include in
plain and understandable language the following information:
(1) A description and explanation of the nature and
purpose of the costs incident to a real estate
settlement or a federally related mortgage loan. The
description and explanation shall provide general
information about the mortgage process as well as
specific information concerning, at a minimum--
(A) balloon payments;
(B) prepayment penalties; and
(C) the trade-off between closing costs and
the interest rate over the life of the loan.
(2) An explanation and sample of the uniform
settlement statement required by section 4.
(3) A list and explanation of lending practices,
including those prohibited by the Truth in Lending Act
or other applicable Federal law, and of other unfair
practices and unreasonable or unnecessary charges to be
avoided by the prospective buyer with respect to a real
estate settlement.
(4) A list and explanation of questions a consumer
obtaining a federally related mortgage loan should ask
regarding the loan, including whether the consumer will
have the ability to repay the loan, whether the
consumer sufficiently shopped for the loan, whether the
loan terms include prepayment penalties or balloon
payments, and whether the loan will benefit the
borrower.
(5) An explanation of the right of rescission as to
certain transactions provided by sections 125 and 129
of the Truth in Lending Act.
(6) A brief explanation of the nature of a variable
rate mortgage and a reference to the booklet entitled
``Consumer Handbook on Adjustable Rate Mortgages'',
published by the Board of Governors of the Federal
Reserve System pursuant to section 226.19(b)(1) of
title 12, Code of Federal Regulations, or to any
suitable substitute of such booklet that such Board of
Governors may subsequently adopt pursuant to such
section.
(7) A brief explanation of the nature of a home
equity line of credit and a reference to the pamphlet
required to be provided under section 127A of the Truth
in Lending Act.
(8) Information about homeownership counseling
services made available pursuant to section 106(a)(4)
of the Housing and Urban Development Act of 1968 (12
U.S.C. 1701x(a)(4)), a recommendation that the consumer
use such services, and notification that a list of
certified providers of homeownership counseling in the
area, and their contact information, is available.
(9) An explanation of the nature and purpose of
escrow accounts when used in connection with loans
secured by residential real estate and the requirements
under section 10 of this Act regarding such accounts.
(10) An explanation of the choices available to
buyers of residential real estate in selecting persons
to provide necessary services incidental to a real
estate settlement.
(11) An explanation of a consumer's responsibilities,
liabilities, and obligations in a mortgage transaction.
(12) An explanation of the nature and purpose of real
estate appraisals, including the difference between an
appraisal and a home inspection.
(13) Notice that the Office of Housing of the
Department of Housing and Urban Development has made
publicly available a brochure regarding loan fraud and
a World Wide Web address and toll-free telephone number
for obtaining the brochure.
The booklet prepared pursuant to this section shall take into
consideration differences in real estate settlement procedures
that may exist among the several States and territories of the
United States and among separate political subdivisions within
the same State and territory.
(c) Each lender shall include with the booklet a good faith
estimate of the amount or range of charges for specific
settlement services the borrower is likely to incur in
connection with the settlement as prescribed by the Secretary.
Each lender shall also include with the booklet a reasonably
complete or updated list of homeownership counselors who are
certified pursuant to section 106(e) of the Housing and Urban
Development Act of 1968 (12 U.S.C. 1701x(e)) and located in the
area of the lender. Each such good faith estimate shall include
the disclosure required under subsection (f) in the form
prescribed by the Secretary pursuant to such subsection, except
that if the Secretary at any time issues any regulations
requiring the use of a standard or uniform form or statement in
providing the good faith estimate required under this
subsection and prescribing such standard or uniform form or
statement, such disclosure shall not be required after the
effective date of such regulations.
(d) Each lender referred to in subsection (a) shall provide
the booklet described in such subsection to each person from
whom it receives or for whom it prepares a written application
to borrow money to finance the purchase of residential real
estate. The lender shall provide the HUD-issued booklet in the
version that is most appropriate for the person receiving it.
Such booklet shall be provided by delivering it or placing it
in the mail not later than 3 business days after the lender
receives the application, but no booklet need be provided if
the lender denies the application for credit before the end of
the 3-day period.
* * * * * * *
(f) Universal Mortgage Disclosure Requirement for Good Faith
Estimates.--
(1) Disclosure.--The disclosure required under this
subsection is a written statement regarding the
federally related mortgage loan for which the good
faith estimate under subsection (c) is made, that
consists of the following statements, appropriately and
in good faith completed by the lender in accordance
with the terms of the federally related mortgage loan
involved in the settlement:
(A) ``Your Loan Amount will be'' and
``$____'', each statement appearing in a
separate column of the disclosure.
(B) ``Your Loan is'', ``A Fixed Rate Loan'',
and ``An Adjustable Rate Loan '', each
statement appearing in a separate column and
each of the last two such statements preceded
by a checkbox.
(C) ``Your Loan Term is'', ``___ years'', and
``___ years'', each statement appearing in a
separate column, and the second such statement
shall appear in the same column as the
statement required by subparagraph (B)
regarding fixed rate loans and the third such
statement shall appear in the same column as
the statement required by subparagraph (B)
regarding adjustable rate loans;
(D) ``Your Estimated Interest Rate (APR)
is'', ``___%'', and ``___% initially, then it
will adjust. In ___ months, Your rate may
adjust to a maximum of ___%'', each statement
appearing in a separate column, the second such
statement shall appear in the same column as
the statement required by subparagraph (B)
regarding fixed rate loans and the third such
statement shall appear in the same column as
the statement required by subparagraph (B)
regarding adjustable rate loans, and the blanks
relating to estimated interest rate shall be
completed by the lender using an annual
percentage rate determined in accordance with
the Truth in Lending Act.
(E) ``Your Total Estimated Monthly Payment
(Including loan Principal and Interest, and
property Taxes (based on current rates) and
Insurance (PITI)) is'', ``$___ which represents
___% of Your estimated monthly income'', and
``$___ which represents ___% of Your estimated
monthly income. When Your interest rate
initially adjusts, Your maximum monthly payment
may be as high as $___ which represents ___% of
Your estimated monthly income'', each statement
appearing in a separate column, and the second
such statement shall appear in the same column
as the statement required by subparagraph (B)
regarding fixed rate loans and the third such
statement shall appear in the same column as
the statement required by subparagraph (B)
regarding adjustable rate loans.
(F) ``Your Rate Lock Period is'' and ``___
days. After You lock into Your interest rate,
You must go to settlement within this number of
days to be guaranteed this interest rate.'',
each statement appearing in a separate column.
(G) ``Does Your loan have a prepayment
penalty?'', ``YES, Your maximum prepayment
penalty is $___'', and ``NO'', the first such
statement and the last two such statements
appearing in a separate column, and each of the
last two such statements preceded by a
checkbox.
(H) ``Does Your loan have a balloon
payment?'', ``YES, Your balloon payment of $___
is due in ___ months'', and ``NO'', the first
such statement and the last two such statements
appearing in a separate column, and each of the
last two such statements preceded by a
checkbox.
(I) ``Your Total Estimated Settlement Charges
Will be $___ (a)'' and ``Your Total Estimated
Down Payment will be $___ (b)'', each statement
appearing in a separate column.
(J) ``Your Total Estimated Cash Needed at
Closing Will Be'' and ``$___ (a+b)'', each
statement appearing in a separate column.
(K) ``This represents a simple summary of
Your Good Faith Estimate (GFE). To understand
the terms of Your loan, You must see disclosure
forms and the Truth in Lending Act.'', such
statement appearing directly below the entirety
of the remainder of the disclosure.
(2) Standard form.--
(A) Development and use.--The Secretary, in
consultation with the Secretary of Veterans
Affairs, the Federal Deposit Insurance
Corporation, and the Director of the Office of
Thrift Supervision, shall develop and prescribe
a standard form for the disclosure required
under this subsection, which shall be used
without variation in all transactions in the
United States that involve federally related
mortgage loans.
(B) Appearance.--The standard form developed
pursuant to this paragraph shall--
(i) set forth each statement required
under a separate subparagraph under
paragraph (1) on a separate row of the
disclosure;
(ii) be set forth in 8-point type;
(iii) be not more than 6 inches in
width or 3.5 inches in height;
(iv) include such boldface type and
shading as the Secretary considers
appropriate;
(v) include such parenthetical
statements directing the borrower to
the terms of the loan (such as ``see
terms'') as the Secretary considers
appropriate, in such places as the
Secretary considers appropriate; and
(vi) be located in the upper one-
third of the first page of the good
faith estimate required under
subsection (c) in a manner that allows
the identity, address, phone number,
and other relevant information of the
lender, the identity, address, phone
number, and other relevant information
of the borrower, and the address of the
property for which the federally
related mortgage loan is to be made, to
be located above the standard form.
* * * * * * *
ADDITIONAL VIEWS
The undersigned Members of Committee on Financial Services
Committee acknowledge the significant work that the Chairman,
the Ranking Member, and other Members and staff have done to
address some of H.R. 3951's most problematic provisions.
However, we continue to have very serious concerns about
the bill, even as revised, and believe that it will hurt rather
than help the consumers for which it is intended to provide
relief. Never before have we adopted such far-reaching
government restrictions and limitations on loan terms and
products and underwriting decisions in the private market, that
affect the ability of thousands of this country's borrowers to
obtain a mortgage loan to finance or refinance their home.
While the bill's breadth will affect the mortgage markets
serving all segments of our society, its negative impact on the
availability and affordability of credit to those borrowers,
including minority borrowers, with blemished credit histories,
will be most dire.
American consumers must be treated fairly when obtaining
mortgage loans and the mortgage crisis clearly revealed
organizational weaknesses in the mortgage finance system. These
should be addressed by fostering greater understanding by
borrowers of loan choices, by improving the regulation of and
public knowledge of loan originators, and by ensuring that
those persons involved in offering and making loans have a
stake in the performance of the loans. But consumers are better
off if lenders retain the freedom to offer and consumers have
the freedom to choose from the widest range of financial
products and options. We are committed to improving the
mortgage process to empower consumers to make sound choices
among these competing options. H.R. 3915, however, will
drastically limit options for consumers, precisely at a time
when the markets are already tightening, by imposing stringent
restrictions, many of which are subjective, on loans that may
be made, and creating severe liability for any lender that
makes a loan that might be viewed as outside of those
restrictions.
Among our major specific concerns with H.R. 3915 are the
following:
Highly Subjective Duties and Standards. The bill creates
federal duties for loan originators that are highly subjective,
and thus difficult to define for purposes of compliance and
potential liability. We remain concerned that any federal duty
requiring a loan originator to identify loan products that are
``appropriate'' for the consumer, including those having a
``net tangible benefit,'' necessitate a determination whether
the loan is suitable for the borrower. This type of standard
can always be second-guessed, and should be determined by the
borrower, after disclosure of the loan terms, not by the
originator who is not the agent of the borrower. Even with
regulations providing further clarity on terms such as loans
with ``predatory characteristics (such as equity stripping,
excessive fees, and abusive terms),'' the bill will
understandably make lenders and assignees highly skittish about
making or buying loans other than traditional loans to the most
qualified customers. The accommodation of subprime borrowers
through flexible underwriting will be sharply curtailed, to the
detriment of many borrowers who, experience has shown, can and
do repay their loans.
It has been noted that some states, such as North Carolina,
have a ``net tangible benefit'' test in their high cost loan
law and it has been suggested that this has not resulted in a
reduction in loans. While there are conflicting studies
regarding the impact on credit availability of the North
Carolina law, the reason there have been few challenges under
that law's net tangible benefit test is because of the
unavailability of attorney's fees in actions brought by
borrowers who choose not to accept the lender's previous offer
to cure. H.R. 3915 does not have such a provision which would
disallow attorney's fees in a borrower action. The full impact
of other states' laws has yet to be felt. In any event,
creating a federal ``net tangible benefit'' that applies across
the country will undoubtedly cause a much higher focus on this
subjective test, resulting in significant claims. Lenders
consequently, will be more restrictive in their offerings.
Rebuttable Presumption. The bill creates a presumption that
qualified safe harbor loans (those that meet a number of
restrictions) will have a ``reasonable ability to repay'' and a
``net tangible benefit,'' but that presumption is rebuttable.
As a result, there are no safe harbors to ensure lenders in
advance of making a loan that the loan is compliant and thus
insulated from challenge. Because of the subjective standards
mentioned above, lenders will be very hesitant to make loans
subject to this presumption because they will be unable to
dispose of even unmeritorious litigation through a motion to
dismiss, and thus will incur significant additional costs and
exposure.
Excessive Potential Liability. The bill creates excessive
potential liability for creditors for compliance with the
bill's numerous requirements. In addition to a potential
liability of three times the total amount ``of direct and
indirect compensation or gain accruing'' in connection with the
violation, which arguably includes all interest and fees, the
bill creates an extended rescission right for up to 6 years for
certain adjustable rate loans, and potentially allows class
action rescission claims against creditors for vague and
subjective standards.
Other Restrictions on Loan Terms. The bill contains various
provisions that prohibit or severely restrict loan terms that
consumers today use to their benefit, including:
<bullet> arbitration, which is often fast, fair and
affordable relief to consumers, who choose not to go to
court; and
<bullet> yield spread premiums, on higher cost loans,
which has been a valuable mechanism for borrowers to
finance upfront broker compensation rather than pay it
at closing.
While these mechanisms clearly must be fully disclosed and
chosen by a consumer, outlawing them simply restricts the
potential pricing package that consumers may choose.
Intrusion into Internal Company Compensation Structures.
The bill's prohibition on all types of ``incentive
compensation'' is overbroad, pushing government regulation into
companies' internal operations and incentives. We are not aware
that the federal government has attempted previously to
regulate that intrusively in American business,whether in the
financial industry or in any other industry. This unprecedented
incursion into the internal operations and incentives of companies is a
major departure from U.S. law, both as traditionally applied to lenders
and as currently applied to every other industry. Lenders use incentive
compensation for numerous legitimate purposes, including aligning
employees' incentives with their company's incentives, ensuring that
the company can obtain specific products when necessary to meet the
terms of required loan sale commitments, when the company wants to
readjust its portfolio to meet new strategic or risk objectives, and
other purposes.
Interference with State Foreclosure Laws. The bill preempts
state foreclosure laws that permit a foreclosing creditor to
evict a renter in possession. This will greatly disrupt an
investor's ability to transfer a property after foreclosure.
Investors will demand higher rates, especially on higher risk
loans, to compensate for their increased losses in the case of
a foreclosure.
Expansion of HOEPA. Title III's lowering of the HOEPA
thresholds, and including many additional items in the ``points
and fees'' calculation, would result in far too many loans
falling under HOEPA restrictions. Very few lenders have any
appetite for making HOEPA loans, so in effect this would result
in the establishment of a low usury ceiling--and one that would
unintentionally cause many loans to be unsaleable. (For
example, by adding prepayment penalties on pre-existing loans
in refinancings to the ``points and fees'' calculation, lenders
may be unable to refinance a loan subject to a prepayment
penalty without the loan becoming an unsaleable HOEPA loan).
The combination of the bill's expansion of HOEPA, the
subjective standards applicable to the loan origination and
underwriting process, and the vastly increased liability will
greatly reduce mortgage lending, other than to those borrowers
with pristine credit records and substantial downpayments. That
appears to be the general expectation of every industry
participant with whom we have spoken. The Federal Reserve Board
issued a credit scoring study in August that indicated that
members of certain minority groups have, on average,
substantially below-average credit scores. If that study is an
accurate reflection of the credit scores of the overall
population, we are very concerned that the reduction of lending
that we foresee as a result of the bill will have particularly
negative effects on minority applicants and communities. It
would be a true shame if this bill, meant to protect American
consumers, were to have the effect of making mortgage credit
unavailable to many deserving borrowers who want a piece of the
American dream.
We are confident that consumers can receive appropriate
protections without unduly restricting credit or creating
enormous liability for the mortgage lending industry. For the
foregoing reasons, however, we believe H.R. 3915 must be
significantly changed to achieve that objective.
Tom Feeney.
Peter J. Roskam.
Adam H. Putnam.
Geoff Davis.
Stevan Pearce.
Michele Bachmann.
Thomas Price.
Patrick T. McHenry.
Scott Garrett.
John Campbell.
Kenny Marchant.
Randy Neugebauer.
DISSENTING VIEWS
H.R. 3915 is a bill that, in an attempt to improve
conditions in the housing market, will end up making it more
difficult and more expensive for hard-working Americans to
obtain a mortgage. I am afraid that if this bill is adopted
into law, its effects would be as severe in the housing market
as Sarbanes-Oxley was in the financial industry. Like Sarbanes-
Oxley, this is a rushed response to a financial crisis.
I object to the scapegoating of mortgage brokers and
lenders that typifies the current legislative response to the
subprime housing crisis. The root of this crisis, as with other
financial and economic crises, results from the federal
government intervention into monetary policy and the housing
market, not the actions of market participants. Yet, Congress
has failed to identify the causes of the crisis, and instead
aims to solve the crisis with more intervention.
The introduction of mandatory fingerprinting and background
checks for loan originators is a grave misstep and sets a
dangerous precedent. Mandatory background checks and
fingerprinting are not a panacea, will not eliminate mortgage
fraud, and are an affront to a free and open labor market.
Furthermore, by introducing a national mortgage licensing
system and registry, Congress would restrict the number of
people able to work in the mortgage industry. According to the
laws of economics, when the supply of mortgage providers
decreases, the cost of retaining those services will increase.
H.R. 3915 also makes restrictions on the types of mortgages
which can be offered, utilizing language which is vague enough
that its definition will likely be finally determined in time-
consuming federal court cases. By restricting the number of
people licensed to work in the mortgage industry and the types
of mortgages that can be offered, the availability of mortgages
would decrease and the cost would increase. H.R. 3915, which
has as its purported aim the protection of American homebuyers,
would have the perverse effect of keeping more Americans from
being able to purchase homes.
The collapse of the housing market has served as a catalyst
for much of the recent turbulence in the financial markets, and
it appears as though the worst is yet to come. For years the
federal government has made it one of its prime aims to
encourage homeownership among people who otherwise would not be
able to afford homes. Various federal mortgage programs through
the FHA, Fannie Mae, and Freddie Mac have distorted the normal
workings of the housing market.
The implicit government backing of Fannie Mae and Freddie
Mac provides investors an incentive to provide funds to Fannie
and Freddie that otherwise would have been put to use in other,
more productive sectors of the economy. This flood of investor
capital helped to fuel the housing bubble, which as it implodes
is causing concern among both homeowners and investors.
Previous legislation passed by this committee made it
possible for people who could not afford down payments on
houses to receive assistance from the federal government, or
even to pay no down payment at all, courtesy of the taxpayers.
The requirement of a down payment has always helped to
ascertain the ability of a buyer to pay off a mortgage. It
requires the buyer to show hard work and thrift, the ability to
delay present consumption in order to make a larger acquisition
in the future.
When this requirement is minimized or eliminated, you
introduce a new class of homebuyers, people who are unable to
budget and save for the purchase of a home, or who should wait
for a few years until they have saved enough to purchase a
home. Federal policies have encouraged investors, lenders, and
brokers to cater to these people, so it is no surprise that
market actors came up with ever more sophisticated means of
bringing these people into the real estate market. The implicit
backing of Fannie Mae and Freddie Mac attracted unsavory
characters, much as any other federal gravy train. This does
not reflect badly on the market, but rather on the government
policies which incentivize such behavior. Ironically, today
Congress is attacking brokers for providing mortgages to people
who arguably could not afford them, when these brokers were
merely following the lead of Congress.
Finally, legislative solutions to the housing crisis fail
to take into account that fact that the Federal Reserve's loose
monetary policy and lowering of interest rates were a major
spur to the housing boom. Low interest rates influence marginal
buyers, those who are sitting on the fence, and encourage them
to take on a mortgage that they otherwise would not. Even when
interest rates are raised, no one expects them to stay high for
long, as there is always pressure from politicians and
investors to keep rates low, as no one wants the cheap credit
to end.
Thinking that interest rates will cycle from low to higher,
back to low, lenders begin to offer adjustable rate mortgages
and other sophisticated mechanisms that may trap many unsavvy
buyers. Buyers hope for low interest rates, lenders hope for
higher rates, and many homebuyers, lenders, and investors have
been harmed as a result of their attempts to foresee the Fed's
cyclical policy. Some people might frown on these types of
mortgages as excessively risky or even predatory. Risk,
however, is endemic to every action in the marketplace, and no
amount of legislation will change that fact.
In conclusion, it is time for the federal government to get
out of legislating and regulating the housing and mortgage
industry. Through interventionist federal legislation we laid
the groundwork for the housing bubble, and any attempts at
reform that fail to address the causes of our current problem
will only exacerbate the problem. H.R. 3915 is no exception,
and will only serve to add additional unnecessary complexity to
an already over-regulated industry.
Ron Paul.
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