[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2531 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 2531

 To amend the Truth in Lending Act, the Revised Statutes of the United 
 States, the Home Mortgage Disclosure Act of 1975, and the amendments 
made by 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

                             July 17, 2001

Ms. Schakowsky (for herself, Mr. Sanders, Mr. Gutierrez, Mr. Jackson of 
 Illinois, Mrs. Clayton, Mr. Hinchey, Ms. Norton, Mr. Payne, Mr. Davis 
  of Illinois, Ms. McKinney, Mr. Rush, Ms. Jackson-Lee of Texas, Mr. 
  DeFazio, Ms. Waters, Mr. Jefferson, and Mr. Filner) introduced the 
   following bill; which was referred to the Committee on 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, and the amendments 
made by 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 ``Save Our Homes Act''.

SEC. 2. HOME MORTGAGE DISCLOSURE ACT AMENDMENTS.

    (a) Statutory Reporting Requirements.--
            (1) In general.--Section 304(b) of the Home Mortgage 
        Disclosure Act of 1975 (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 
        other loans secured by residential real property originated by 
        the institution, and the amount of fees and points imposed in 
        connection with the origination of such loans, grouped 
        according to census tract, income level, racial 
        characteristics, age, and gender.''.
            (2) Conforming amendments.--The Home Mortgage Disclosure 
        Act of 1975 (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 1975 
(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 2001.''.

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.--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, if any of 
        the following apply with respect to such consumer credit 
        transaction:
                    ``(A) The annual percentage rate at consummation of 
                the transaction exceeds by 5 or more percentage points 
                the yield on United States Treasury securities having 
                comparable periods of maturity (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) The total points and fees payable on the 
                transaction will exceed the greater of 3 percent of the 
                total loan amount or $1,000.''.
    (b) 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) 
                and section 129(q), the term `points and fees' shall 
                include--
                            ``(i) all items included in the finance 
                        charge, except interest or the time-price 
                        differential;
                            ``(ii) 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;
                            ``(iii) each of the charges listed in 
                        section 106(e) (except an escrow for future 
                        payment of taxes and insurance);
                            ``(iv) the cost of all premiums financed by 
                        the lender, directly or indirectly, for any 
                        credit life, credit disability, credit 
                        unemployment or credit property insurance, or 
                        any other life or health insurance, or any 
                        payments financed by the lender, directly or 
                        indirectly, for any debt cancellation or 
                        suspension agreement or contract, except that, 
                        for purposes of this subparagraph, insurance 
                        premiums or debt cancellation or suspension 
                        fees calculated and paid on a monthly basis 
                        shall not be considered financed by the lender;
                            ``(v) any prepayment penalty (as defined in 
                        section 129(c)(5)) or other fee paid by the 
                        consumer in connection with an existing loan 
                        which is being refinanced with the proceeds of 
                        the consumer credit transaction; and
                            ``(vi) such other charges as the Board 
                        determines to be appropriate.
                    ``(B) Items excluded.--For purposes of paragraph 
                (1)(D) and section 129(q), 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 2001, are met.''.
    (c) Coverage of Mortgage Brokers.--
            (1) In general.--The last sentence of section 103(f) of the 
        Truth in Lending Act (15 U.S.C. 1602(f)) is amended--
                    (A) by striking ``or any person who'' and inserting 
                a comma;
                    (B) 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,''.
            (2) Liability of creditor for violations by mortgage 
        broker.--Section 130 of the Truth in Lending Act (15 U.S.C. 
        1640) is amended by adding at the end the following new 
        subsection:
    ``(j) Liability of Creditor for Violations by Mortgage Broker.--In 
the case of any credit extended to a consumer by a creditor through a 
mortgage broker, the creditor shall be liable under this section to the 
consumer for any violation of any requirement of this title, or 
regulations prescribed under this title, by the mortgage broker in 
connection with such extension of credit.''.
    (d) Prohibited Practices for High-Cost Home Loans.--Section 129 of 
the Truth in Lending Act (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 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) No Prepayment Penalty.--
            ``(1) Limitation on terms.--A high-cost mortgage 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).
    ``(l) No Negative Amortization.--A high-cost mortgage 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.
    ``(m) Prohibition on Extending Credit Without Regard to Payment 
Ability of Customer.--
            ``(1) In general.--No creditor may make a high-cost 
        mortgage, 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.
    ``(n) Prohibition on Flipping of Home Loans.--
            ``(1) In general.--No creditor may knowingly or 
        intentionally engage in the practice of flipping a high-cost 
        mortgage.
            ``(2) Flipping defined.--For purposes of paragraph (1), the 
        term `flipping' means the act of making of a new high-cost 
        mortgage 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.
    ``(o) 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 high-cost mortgage 
that refinances all or any portion of such existing loan or debt.
    ``(p) 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 high-cost mortgage.
            ``(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 high-cost mortgage to 
        the extent the calculation and servicing of such insurance 
        premiums are conducted and reported independently of the high-
        cost mortgage.
    ``(q) Restriction on Financing Points and Fees.--
            ``(1) Limit on amount of points and fees that may be 
        financed.--No creditor may, in connection with the formation or 
        consummation of a high-cost mortgage, finance, directly or 
        indirectly, any portion of the points, fees, or other charges 
        payable to the creditor or any third party in an amount in 
        excess of the greater of 3 percent of the total loan amount or 
        $600.
            ``(2) Prohibition on financing certain points, fees, or 
        charges.--No creditor may, in connection with the formation or 
        consummation of a high-cost mortgage, finance, directly or 
        indirectly, any of the following fees or other charges payable 
        to the creditor or any third party:
                    ``(A) Any prepayment fee or penalty required to be 
                paid by the consumer in connection with a loan or other 
                extension of credit which is being refinanced by such 
                mortgage if the creditor, with respect to such 
                mortgage, or any affiliate of the creditor, is the 
                creditor with respect to the loan or other extension of 
                credit being refinanced.
                    ``(B) Any points, fees, or other charges required 
                to be paid by the consumer in connection with such 
                mortgage if--
                            ``(i) the mortgage is being entered into in 
                        order to refinance an existing high-cost 
                        mortgage of the consumer; and
                            ``(ii) if the creditor, with respect to 
                        such new mortgage, or any affiliate of the 
                        creditor, is the creditor with respect to the 
                        existing high-cost mortgage which is being 
                        refinanced.
    ``(r) No Blank Items.--A high-cost mortgage 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.
    ``(s) Same Language Requirement.--If the discussions between a 
creditor and a borrower or potential borrower with respect to a high-
cost mortgage 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.
    ``(t) 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) engaging in any other such subterfuge for the purpose 
        of evading the provisions of this section.
    ``(u) 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 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 
                        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 Loan.--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 Payments to Appraisers.--No creditor or mortgage broker 
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.
    ``(c) 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) Technical and Conforming Amendments.--
            (1) The first sentence of section 130(a) of the Truth in 
        Lending Act (15 U.S.C. 1640(a)) is amended, in the portion of 
        such section that precedes paragraph (1), by inserting ``, and 
        to the extent subject to any requirement of this title, any 
        mortgage broker (including any person acting as a mortgage 
        broker),'' after ``any creditor''.
            (2) Section 130(b) of the Truth in Lending Act (15 U.S.C. 
        1640(b)) is amended--
                    (A) by striking ``creditor or assignee'' the first 
                place such term appears and inserting ``creditor, 
                assignee, or, to the extent subject to any requirement 
                of this title, any mortgage broker (including any 
                person acting as a mortgage broker),'';
                    (B) by striking ``creditor's or assignee's own 
                procedures'' and inserting ``creditor's, assignee's, or 
                mortgage broker's own procedure''; and
                    (C) by striking ``the creditor or assignee 
                notifies'' and inserting ``creditor, assignee, or 
                mortgage broker notifies''.
            (3) Section 130(c) of the Truth in Lending Act (15 U.S.C. 
        1640(c)) is amended--
                    (A) by striking ``creditor or assignee'' the first 
                place such term appears and inserting ``creditor, 
                assignee, or, to the extent subject to any requirement 
                of this title, any mortgage broker (including any 
                person acting as a mortgage broker),''; and
                    (B) by striking ``if the creditor or assignee 
                shows'' and inserting ``if the creditor, assignee, or 
                mortgage broker shows''.
            (4) The third sentence of section 130(e) of the Truth in 
        Lending Act (15 U.S.C. 1640(e)) is amended by inserting ``or 
        129A'' after ``section 129''.
    (c) 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. ALTERNATIVE MAXIMUM AMOUNT OF CIVIL LIABILITY FOR VIOLATIONS 
              INVOLVING HIGH-COST MORTGAGES AND CONFORMING LOANS.

    (e) Alternative Maximum Amount of Civil Liability.--Section 129 of 
the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after 
subsection (u) (as added by section 3(d) of this Act) the following new 
subsection:
    ``(v) Alternative Maximum Amount of Civil Liability.--
Notwithstanding any maximum amount limitation contained in section 130, 
any creditor, and to the extent subject to any requirement of this 
title, any mortgage broker (including any person acting as a mortgage 
broker), who fails to comply with section 129, in connection with any 
high-cost mortgage, or with section 129A, in connection with any 
conforming loan, shall be liable for--
            ``(1) in the case of an individual action, the greater of--
                    ``(A) the amount determined under section 130; or
                    ``(B) the sum of the amount of the principal and 
                the total amount of all finance charges and fees paid 
                by the consumer with respect to such mortgage or loan; 
                and
            ``(2) in the case of a class action, the greater of--
                    ``(A) the amount determined under section 130; or
                    ``(B) as to each member of the class in any class 
                action or series of class actions arising out of the 
                same failure to comply by the same creditor, the sum of 
                the amount of the principal and the total amount of all 
                finance charges and fees paid by the consumer with 
                respect to such mortgage or loan.''.

SEC. 6. 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 
first calendar year beginning after the date of the enactment of this 
Act.
                                 <all>