[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3901 Introduced in House (IH)]







106th CONGRESS
  2d Session
                                H. R. 3901

 To amend the Truth in Lending Act, the Revised Statutes of the United 
 States, the Home Mortgage Disclosure Act of 1975, the Home Ownership 
 and Equity Protection Act of 1994 to protect consumers from predatory 
               lending practices, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 9, 2000

Ms. Schakowsky introduced the following bill; which was referred to the 
              Committee on Banking and Financial Services

_______________________________________________________________________

                                 A BILL


 
 To amend the Truth in Lending Act, the Revised Statutes of the United 
 States, the Home Mortgage Disclosure Act of 1975, the Home Ownership 
 and Equity Protection Act of 1994 to protect consumers from predatory 
               lending practices, 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 ``Anti-Predatory Lending Act of 
2000''.

SEC. 2. HOME MORTGAGE DISCLOSURE ACT AMENDMENTS.

    (a) Statutory Reporting Requirements.--
            (1) In general.--Section 304(b) of the Home Mortgage 
        Disclosure Act of 1977 (12 U.S.C. 2803(b)) is amended--
                    (A) in paragraph (3), by striking ``and'' after the 
                semicolon;
                    (B) in paragraph (4), by striking the period at the 
                end and inserting ``; and''; and
                    (C) by inserting after paragraph (4) the following 
                new paragraph:
            ``(5) the annual percentage rate of mortgage loans and home 
        improvement loans originated by the institution grouped 
        according to census tract, income level, racial 
        characteristics, and gender.''.
            (2) Conforming amendments.--The Home Mortgage Disclosure 
        Act of 1977 (12 U.S.C. 2801 et seq.) is amended--
                    (A) in section 304(i), by striking ``subsection 
                (b)(4)'' and inserting ``paragraphs (4) and (5) of 
                subsection (b)''.
                    (B) in section 308, by striking ``subsection 
                (b)(4)'' and inserting ``paragraphs (4) and (5) of 
                subsection (b)''.
    (b) Prohibition on Regulatory Exemptions From Reporting 
Requirements.--Section 304 of the Home Mortgage Disclosure Act of 1977 
(12 U.S.C. 2803) is amended by adding at the end the following new 
subsection:
    ``(n) Prohibition on Regulatory Exemptions From Reporting 
Requirements.--Subject to subsection (i)--
            ``(1) no provision of this title may be construed as 
        authorizing the Board, the Secretary, or any other Federal 
        agency to exempt any depository institution from the 
        requirements of this title; and
            ``(2) any exemption from the requirements of this title 
        provided in any regulation, such as the exemption provided in 
        Appendix A to part 203 of the Code of Federal Regulations for 
        lending institutions described in section 303(2)(B) whose total 
        dollar amount of purchase loans originated in any year did not 
        exceed 10 percent of the total dollar amount of all loan 
        originations by such institution in such year, shall cease to 
        be effective as of the date of the enactment of the Anti-
        Predatory Lending Act of 2000.''

SEC. 3. TRUTH IN LENDING ACT AMENDMENTS.

    (a) Applying High-Cost Loan Protections to Home Purchase Loans and 
Lowering the Threshold for High-Cost Loans.--
            (1) In general.--Section 103(aa) of the Truth in Lending 
        Act (15 U.S.C. 1602(aa)(1)) is amended by striking all that 
        precedes paragraph (2) and inserting the following:
    ``(aa) High-Cost Mortgage Defined.--
            ``(1) 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 or a 
        transaction under an open end credit plan, if any of the 
        following apply with respect to such consumer credit 
        transaction:
                    ``(A) The annual percentage rate at consummation 
                exceeds by 5 or more percentage points the weekly 
                average yield on United States Treasury securities 
                adjusted to a constant maturity of 1 year (as made 
                available by the Board) as of the week immediately 
                preceding the week in which the interest rate for the 
                loan is established.
                    ``(B) The mortgage is a variable-rate loan in which 
                the annual percentage rate can reasonably be expected 
                to increase beyond the threshold established in 
                subparagraph (A).
                    ``(C) Potential or scheduled increases in the 
                annual percentage rate of the home loan are controlled 
                by the creditor and not directly tied to changes in a 
                publicly available rate not controlled by the creditor.
                    ``(D) Subject to paragraph (5), the points and fees 
                on the loan cannot be financed.''.
            (2) Technical amendment relating to points and fees.--
        Section 103(aa) of the Truth in Lending Act (15 U.S.C. 
        1602(aa)) is amended--
                            (i) by redesignating paragraph (5) as 
                        paragraph (6); and
                            (ii) by inserting after paragraph (4), the 
                        following new paragraph:
            ``(5) Rule relating to discount points.--For the purposes 
        of paragraph (1)(D), the following discount points shall be 
        excluded from the calculation of the total points and fees:
                    ``(A) Up to and including 2 bona fide loan discount 
                points payable by the borrower in connection with the 
                loan transaction, but only if the interest rate from 
                which the loan'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) Up to and including 1 bona fide loan discount 
                point payable by the borrower in connection with the 
                loan transaction, but only if the interest rate from 
                which the loan'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.''.
    (b) Modification of Definition of ``Points and Fees''.--Paragraph 
(4) of section 103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)) 
is amended to read as follows:
            ``(4) Definition of points and fees.--
                    ``(A) In general.--For purposes of paragraph 
                (1)(D), the term `points and fees' shall include--
                            ``(i) all compensation paid directly or 
                        indirectly to a mortgage broker, including a 
                        broker that originates a loan in its own name 
                        in a table-funded transaction; and
                            ``(ii) such other charges as the Board 
                        determines to be appropriate.
                    ``(B) Items excluded.--For purposes of paragraph 
                (1)(D), the term `points and fees' shall not include 
                the following:
                            ``(i) Taxes, filing fees, recording and 
                        other charges and fees paid or to be paid to 
                        public officials for determining the existence 
                        of or for perfecting, releasing, or satisfying 
                        a security interest.
                            ``(ii) Fees paid to a person other than a 
                        creditor or an affiliate of the creditor or to 
                        the mortgage broker or an affiliate of the 
                        mortgage broker for any of the following:
                                    ``(I) Fees for flood certification.
                                    ``(II) Fees for pest infestation 
                                and flood determinations.
                                    ``(III) Appraisal fees.
                                    ``(IV) Fees for inspections 
                                performed prior to closing.
                                    ``(V) Credit reports.
                                    ``(VI) Surveys.
                                    ``(VII) Attorneys' fees (if the 
                                borrower has the right to select the 
                                attorney from an approved list or 
                                otherwise).
                                    ``(VIII) Notary fees.
                                    ``(IX) Escrow charges, so long as 
                                not otherwise included under 
                                subparagraph (A).
                                    ``(X) Title insurance premiums.
                                    ``(XI) Fire insurance and flood 
                                insurance premiums, to the extent that 
                                the conditions in section 226.4(d)(2) 
                                of title 12 of the Code of Federal 
                                Regulations, as in effect on the date 
                                of the enactment of the Anti-Predatory 
                                Lending Act of 2000, are met.''.
    (c) Coverage of Mortgage Brokers.--The last sentence of section 
103(f) of the Truth in Lending Act (15 U.S.C. 1602(f)) is amended--
            (1) by striking ``or any person who'' and inserting a 
        comma;
            (2) by inserting after ``through a mortgage broker'' the 
        following: ``, or acted as a mortgage broker between 
        originators and borrowers on more than 5 home loans within the 
        past 12-month period''.
    (d) Prohibited Practices for High-Cost Home Loans.--Section 129 of 
the Home Ownership and Equity Protection Act of 1994 (15 U.S.C. 1639) 
is amended--
            (1) in subsection (e), by striking ``of less than five 
        years'';
            (2) by striking subsections (c), (f), and (h);
            (3) by redesignating subsections (d), (e), (g), and (i) as 
        subsections (c), (d), (e), and (f), respectively; and
            (4) by inserting after subsection (f) (as so redesignated 
        by paragraph (3) of this subsection) the following new 
        subsections:
    ``(g) No Call Provision.--
            ``(1) In general.--A high-cost mortgage may not include 
        terms under which the indebtedness may be accelerated by the 
        creditor, in the creditor's sole discretion.
            ``(2) Exception.--Paragraph (1) shall not apply when 
        repayment of the loan has been accelerated by default or made 
        pursuant to a due-on-sale provision or some other provision of 
        the loan documents unrelated to the payment schedule.
    ``(h) No Modification or Deferral Fees.--A creditor shall not 
charge a borrower any fees or other charges to modify, renew, extend, 
or amend a high-cost home mortgage or to defer any payment due under 
any such mortgage.
    ``(i) No Lending Without Home-Ownership Counseling.--A creditor 
shall not enter into a high-cost mortgage without having received 
certification from a housing counseling agency (which is certified by 
the Department of Housing and Urban Development) that the borrower has 
received counseling on the advisability of the loan transaction and the 
appropriateness of the loan for the borrower.
    ``(j) No Mandatory Arbitration Clause.--A high-cost mortgage may 
not include terms under which a mandatory arbitration clause limits in 
any way the right of the borrower to seek relief through the judicial 
process.
    ``(k) Attempted Evasion of Coverage.--The provisions of this 
section shall apply to any person who in bad faith attempts to avoid 
its application by--
            ``(1) structuring a loan transaction as an open-end credit 
        plan for the purpose and with the intent of evading the 
        provisions of this section when the loan would have been a 
        high-cost mortgage if the loan had been structured as a closed-
        end loan;
            ``(2) dividing any loan transaction into separate parts for 
        the purpose and with the intent of evading the provisions of 
        this section; or
            ``(3) by engaging in any other such subterfuge for the 
        purpose of evading the provisions of this section.
    ``(l) Corrections and Unintentional Violations.--
            ``(1) In general.--A creditor with respect to a high-cost 
        mortgage who, when acting in good faith, fails to comply with 
        this section, shall not be deemed to have violated this section 
        if the creditor establishes that either--
                    ``(A) within 30 days of the loan closing and prior 
                to the institution of any action under this section, 
                the borrower 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 borrower--
                            ``(i) make the high-cost home loan satisfy 
                        the requirements of this section; or
                            ``(ii) change the terms of the loan in a 
                        manner beneficial to the borrower so that the 
                        loan will no longer be considered a high-cost 
                        mortgage subject to the provisions of this 
                        section; or
                    ``(B) the compliance failure was not intentional 
                and resulted from a bona fide error notwithstanding the 
                maintenance of procedures reasonably adapted to avoid 
                such errors, and within 60 days after the discovery of 
                the compliance failure and prior to the institution of 
                any action under this section or the receipt of written 
                notice of the compliance failure, the borrower 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 borrower--
                            ``(i) make the high-cost home loan satisfy 
                        the requirements of section 129; or
                            ``(ii) change the terms of the loan in a 
                        manner beneficial to the borrower so that the 
                        loan will no longer be considered a high-cost 
                        home loan subject to the provisions of this 
                        section.
            ``(2) Bona fide error.--For purposes of paragraph (1), 
        examples of a bona fide error include clerical, calculation, 
        computer malfunction and programming, and printing errors. An 
        error of legal judgment with respect to a person's obligations 
        under this section is not a bona fide error.''.

SEC. 4. REQUIREMENTS FOR ALL CONFORMING HOME LOANS.

    (a) In General.--Chapter 2 of the Truth in Lending Act (15 U.S.C. 
1601 et seq.) is amended by inserting after section 129 the following 
new section:

``SEC. 129A. REQUIREMENTS FOR ALL CONFORMING HOME LOANS.

    ``(a) Definition of Conforming Home Loans.--For the purpose of this 
section, the term `conforming home loan' means a loan, other than an 
extension of credit under an open-end credit plan or a reverse mortgage 
transaction, where--
            ``(1) the principal amount of the loan does not exceed the 
        conforming loan size limit for a single-family dwelling as 
        established from time to time by the Federal National Mortgage 
        Association;
            ``(2) the borrower is an individual or are individuals;
            ``(3) the debt is incurred by the borrower primarily for 
        personal, family, or household purposes; and
            ``(4) the loan is secured by a mortgage or deed of trust on 
        real estate upon which there is located or there is to be 
        located a structure or structures designed principally for 
        occupancy of from 1 to 4 families which is or will be occupied 
        by the borrower as the borrower's principal dwelling.
    ``(b) No Prepayment Penalty.--
            ``(1) Limitation on terms.--A conforming home loan may not 
        contain terms under which a consumer must pay a prepayment 
        penalty for paying all or part of the principal before the date 
        on which the principal is due.
            ``(2) Construction.--For purposes of this subsection, any 
        method of computing a refund of unearned scheduled interest is 
        a prepayment penalty if it is less favorable to the consumer 
        than the actuarial method (as that term is defined in section 
        933(d)(1) of the Housing and Community Development Act of 
        1992).
    ``(c) No Negative Amortization.--A conforming home loan may not 
include terms under which the outstanding principal balance will 
increase at any time over the course of the loan because the regular 
periodic payments do not cover the full amount of interest due.
    ``(d) Prohibition on Extending Credit Without Regard to Payment 
Ability of Customer.--
            ``(1) In general.--No creditor may make a conforming home 
        loan, unless the creditor reasonably believes at the time the 
        loan is consummated that 1 or more of the obligors, when 
        considered individually or collectively, will be able to make 
        the scheduled payments to repay the obligation based upon a 
        consideration of their current and expected income, current 
        obligations, employment status, and other financial resources 
        (other than the borrower's equity in the dwelling which secures 
        repayment of the loan).
            ``(2) Obligor defined.--For purposes of paragraph (1), the 
        term `obligor' means each borrower, coborrower, cosigner, or 
        guarantor obligated to repay a loan.
    ``(e) Prohibition on Flipping of Home Loans.--
            ``(1) In general.--No creditor may knowingly or 
        intentionally engage in the practice of flipping a conforming 
        home loan.
            ``(2) Flipping defined.--For purposes of paragraph (1), the 
        term `flipping' means the act of making of a new conforming 
        home loan to a borrower to refinance an existing home loan when 
        the new loan does not have a reasonable, tangible net benefit 
        to the borrower considering all of the circumstances, including 
        the terms of both the new and refinanced loans, the cost of the 
        new loan, and the borrower's circumstances.
    ``(f) No Encouragement of Default.--No creditor may recommend or 
encourage default on an existing loan or other debt prior to and in 
connection with the closing or planned closing of a conforming home 
loan that refinances all or any portion of such existing loan or debt.
    ``(g) No Payments to Appraisers.--No creditor may compensate, 
directly or indirectly, coerce, or intimidate an appraiser for the 
purpose of influencing the independent judgment of the appraiser with 
respect to the value of real estate that is to be covered by a 
conforming home loan or is being offered as security according to an 
application for a conforming home loan.
    ``(h) No Financing of Credit Insurance.--
            ``(1) In general.--No creditor may finance, directly or 
        indirectly, any credit life, credit disability, or credit 
        unemployment insurance, or any other life or health insurance 
        premiums through a conforming home loan.
            ``(2) Rule of construction.--Paragraph (1) shall not be 
        construed as affecting the right of a creditor to require the 
        collection of insurance premium payments into an escrow account 
        in conjunction with the servicing of a conforming home loan to 
        the extent the calculation and servicing of such insurance 
        premiums are conducted and reported independently of the 
        conforming home loan.
    ``(i) No Blank Items.--A conforming home loan document in which 
blanks are left to be filled in after the contract is signed shall not 
be enforceable under Federal law or the law of any State.
    ``(j) Same Language Requirement.--If the discussions between a 
creditor and a borrower or potential borrower with respect to a 
conforming home loan are conducted primarily in a language other than 
English, the creditor shall, before closing, provide an additional copy 
of all information required to be disclosed to the borrower under this 
title translated into the language in which the discussions were 
conducted.
    ``(k) Alternative Maximum Penalty.--Notwithstanding any maximum 
amount limitation contained in section 130, in the case of any creditor 
who fails to comply with section 129, in connection with any high-cost 
mortgage, or this section, in connection with any conforming home loan, 
the liability of the creditor under section 130 to the consumer for 
such violation shall not exceed the greater of--
            ``(1) the amount determined under section 130; or
            ``(2) the amount of the principal and the total amount of 
        the finance charge on such mortgage or loan.
    ``(l) Noncompliant Loans Prohibited From Mortgage-Backed Security 
Pools.--
            ``(1) Issuance of securities from tainted pools 
        prohibited.--No person may issue a security representing an 
        interest in or an obligation backed by a pool of mortgages, 
        deeds of trust, or other security interests created in 
        connection with consumer credit transactions secured by 
        principal dwellings of consumers if such person knows or has 
        reason to believe that any high-cost mortgage or conforming 
        home loan included in such pool violates any provision of this 
        section or section 129.
            ``(2) Inclusion in pools.--No creditor or other person may 
        knowingly include any high-cost mortgage or conforming home 
        loan that violates any provision of this section or section 129 
        in any pool described in paragraph (1).''.
    (b) Clerical Amendment.--The table of sections for chapter 2 of the 
Truth in Lending Act (15 U.S.C. 1601 et seq.) is amended by inserting 
after the item relating to section 129 the following new item:

``129A. Requirements for all conforming home loans.

SEC. 5. EFFECTIVE DATE.

    (a) In General.--Except as provided in subsection (b), this Act and 
the amendments made by this Act shall take effect at the end of the 90-
day period beginning on the date of the enactment of this Act.
    (b) HMDA Requirements.--Notwithstanding subsection (a), the 
amendments made by section 2 shall take effect on January 1 of the 1st 
calendar year beginning after the date of the enactment of this Act.
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