[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 318 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                 S. 318

To amend the Truth in Lending Act to require automatic cancellation and 
    notice of cancellation rights with respect to private mortgage 
 insurance which is required by a creditor as a condition for entering 
    into a residential mortgage transaction, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 12, 1997

  Mr. D'Amato introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
To amend the Truth in Lending Act to require automatic cancellation and 
    notice of cancellation rights with respect to private mortgage 
 insurance which is required by a creditor as a condition for entering 
    into a residential mortgage transaction, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Homeowners Protection Act of 1997''.

SEC. 2. NOTIFICATION OF CANCELLATION RIGHTS FOR PRIVATE MORTGAGE 
              INSURANCE.

    (a) In General.--Chapter 2 of the Truth in Lending Act (15 U.S.C. 
1631 et seq.) is amended by inserting after section 125 the following:

``SEC. 126. CANCELLATION RIGHTS FOR PRIVATE MORTGAGE INSURANCE.

    ``(a) Insurance Ratio Standard.--
            ``(1) In general.--No consumer, in connection with a 
        residential mortgage transaction, shall be required by the 
        creditor to obtain or maintain private mortgage insurance if 
        that consumer has, or will have at the time that the 
        transaction is consummated, equity in the property that is the 
        subject of the transaction in excess of the private mortgage 
        insurance ratio.
            ``(2) Regulatory requirement.--The Board--
                    ``(A) shall issue rules to implement paragraph (1); 
                and
                    ``(B) may issue rules exempting certain classes of 
                transactions from the provisions of paragraph (1) if 
                the Board finds that such exemption is necessary--
                            ``(i) to ensure sound underwriting 
                        standards; or
                            ``(ii) to further the availability of 
                        credit to persons who might otherwise be denied 
                        credit if paragraph (1) was applied to 
                        residential mortgage transactions involving 
                        such persons.
    ``(b) Notice of Right or Lack of Right To Cancel.--If a consumer is 
required to obtain and maintain private mortgage insurance as a 
condition for entering into a residential mortgage transaction, the 
creditor shall disclose to the consumer the current private mortgage 
insurance ratio for the subject property, in writing, at the time that 
the transaction is entered into.
    ``(c) Information Required To Be Disclosed.--With respect to each 
residential mortgage transaction, the creditor shall disclose to the 
consumer, in writing, the following information at the time the 
transaction is entered into:
            ``(1) Identifying information.--Such information as may be 
        necessary to permit the consumer to communicate with the 
        creditor or any subsequent servicer of the mortgage, concerning 
        the private mortgage insurance of that consumer.
            ``(2) Cancellation procedures.--The procedures required to 
        be followed by the consumer in canceling the private mortgage 
        insurance.
    ``(d) Information Required To Be Disclosed With Each Periodic 
Statement.--If a consumer is required to obtain and maintain private 
mortgage insurance as a condition for entering into a residential 
mortgage transaction, the person servicing the mortgage shall include 
in or with each written statement of account provided to the consumer, 
beginning with the first such statement following the date of enactment 
of the Homeowners Protection Act of 1997, while such insurance is in 
effect, but not less than annually--
            ``(1) the information required to be disclosed under 
        subsections (b) and (c); or
            ``(2) a clear and conspicuous written statement 
        containing--
                    ``(A) a statement that the consumer may cancel the 
                private mortgage insurance and a description of the 
                circumstances under which such a cancellation may be 
                made; and
                    ``(B) an address and telephone number that the 
                consumer may use to contact the creditor or the person 
                servicing the mortgage.
    ``(e) Notices Furnished Without Cost to the Consumer.--
            ``(1) In general.--No fee or other cost may be imposed on 
        any consumer with respect to the provision of any notice or 
        information to the consumer pursuant to this section.
            ``(2) Reimbursement.--A creditor or subsequent servicer of 
        the mortgage may seek reimbursement from the issuer of the 
        private mortgage insurance, with respect to any cost incurred 
        by that creditor or subsequent servicer in providing any notice 
        or information to the consumer pursuant to this section.
    ``(f) Existing Mortgages.--If a consumer was required to obtain and 
maintain private mortgage insurance as a condition for entering into a 
residential mortgage transaction occurring before the date of enactment 
of the Homeowners Protection Act of 1997--
            ``(1) not later than 180 days after that date of enactment, 
        the creditor shall disclose, in writing, to each such 
        consumer--
                    ``(A) the information described in paragraphs (1) 
                and (2) of subsection (c); and
                    ``(B) that the private mortgage insurance may, 
                under certain circumstances, be canceled by the 
                consumer at any time while the mortgage is outstanding; 
                and
            ``(2) the person servicing the mortgage shall include in or 
        with each written statement of account provided to the 
        consumer, beginning with the first such statement following the 
        date of enactment of that Act, while such insurance is in 
        effect, but not less than annually--
                    ``(A) the information required to be disclosed 
                under subsection (c); or
                    ``(B) a clear and conspicuous written statement 
                containing--
                            ``(i) a statement that the consumer may be 
                        able to cancel the private mortgage insurance 
                        (if such is the case); and
                            ``(ii) an address and telephone number that 
                        the consumer may use to contact the creditor or 
                        the person servicing the mortgage to determine 
                        whether the consumer has the right to cancel 
                        the private mortgage insurance and, if so, the 
                        conditions and procedures for canceling such 
                        insurance.
    ``(g) Definitions.--In this section, the following definitions 
shall apply:
            ``(1) Mortgage insurance.--The term `mortgage insurance' 
        means insurance, including any mortgage guaranty insurance, 
        against the nonpayment of, or default on, a mortgage or loan 
        involved in a residential mortgage transaction.
            ``(2) Private mortgage insurance.--The term `private 
        mortgage insurance' means mortgage insurance other than 
        mortgage insurance made available under the National Housing 
        Act, title 38 of the United States Code, or title V of the 
        Housing Act of 1949.
            ``(3) Private mortgage insurance ratio.--The term `private 
        mortgage insurance ratio' means a principal balance outstanding 
        on a residential mortgage equal to less than 80 percent of the 
        original value (at the time at which the consumer entered into 
        the original residential mortgage transaction) of the property 
        securing the loan.
    ``(h) Applicability.--This section, other than as provided in 
subsection (d), shall apply with respect to residential mortgage 
transactions entered into beginning 90 days after the date of enactment 
of the Homeowners Protection Act of 1997.''.
    (b) Clerical Amendment.--The table of sections for chapter 2 of the 
Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by striking 
the item relating to section 126 and inserting the following:

``126. Cancellation rights for private mortgage insurance.''.
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