[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 833 Introduced in House (IH)]
108th CONGRESS
1st Session
H. R. 833
To combat unfair and deceptive practices in the high-cost mortgage
market, establish a consumer mortgage protection board, and establish
licensing and minimum standards for mortgage brokers, and for other
purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 13, 2003
Mr. Ney (for himself, Mr. Lucas of Kentucky, Mr. Gillmor, and Mr. Gary
G. Miller of California) introduced the following bill; which was
referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To combat unfair and deceptive practices in the high-cost mortgage
market, establish a consumer mortgage protection board, and establish
licensing and minimum standards for mortgage brokers, 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; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Responsible
Lending Act''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--HIGH-COST MORTGAGES
Sec. 101. Definitions relating to high-cost mortgages.
Sec. 102. Amendments to existing requirements for high-cost mortgages.
Sec. 103. Amendments to liability provisions relating to high-cost
mortgages.
Sec. 104. Coordination with State law.
Sec. 105. Continuation of identifications under the Alternative
Mortgage Transaction Parity Act of 1982.
Sec. 106. Effective date.
TITLE II--CONSUMER MORTGAGE PROTECTION BOARD
Sec. 201. Establishment.
Sec. 202. Counseling procedures.
Sec. 203. Grants for housing counseling assistance.
Sec. 204. Requirements to use HUD-certified counselors under HUD
programs.
Sec. 205. Updating and simplification of mortgage information booklet.
TITLE III--REQUIREMENTS FOR MORTGAGE BROKERS
Subtitle A--Licensing and Minimum Standards
Sec. 301. State regulation of mortgage brokers.
Sec. 302. Federal mortgage broker requirements.
Sec. 303. Definitions.
Subtitle B--Database of Licensed Mortgage Brokers
Sec. 311. Establishment.
Sec. 312. Database.
Sec. 313. Fees.
Sec. 314. Confidentiality of information.
Sec. 315. Liability provisions.
TITLE I--HIGH-COST MORTGAGES
SEC. 101. 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)(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 residential mortgage transaction, 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 transaction is secured by a first
mortgage on the consumer's principal dwelling and the
annual percentage rate on the credit, at the
consummation of the transaction, will exceed by more
than 8 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.
``(B) The transaction is secured by a junior or
subordinate mortgage on the consumer's principal
dwelling and the annual percentage rate on the credit,
at the 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.
``(C) The total loan amount exceeds $30,000 and
total points and fees payable on the transaction will
exceed 6 percent of the total loan amount.
``(D) The total loan amount is $30,000 or less and
total points and fees payable on the transaction will
exceed 7 percent of the total loan amount.''.
(b) Points and Fees Defined.--Section 103(aa) of the Truth in
Lending Act (15 U.S.C. 1602(aa)) is amended--
(1) by striking paragraph (3);
(2) by striking paragraph (4) and inserting the following
new paragraph:
``(3) Definition of points and fees.--
``(A) In general.--For purposes of subparagraphs
(C) and (D) of paragraph (1), the term `points and
fees' shall exclude prepayment fees, yield-spread
premiums, and borrower credits and shall include--
``(i) all items included in the finance
charge, except interest and the time-price
differential;
``(ii) all compensation paid directly to
mortgage brokers by or on behalf of the
consumer (other than borrower credits); and
``(iii) each of the charges listed in
section 106(e) (except an escrow for future
payment of taxes or insurance), unless--
``(I) the charge is reasonable and
competitive;
``(II) the creditor receives no
direct compensation; and
``(III) the charge is paid to a
third party; and
``(iv) such other charges as the Board
determines to be appropriate.
``(B) Bona fide discount points excludable.--Not
more than 2 bona fide loan discount points in
connection with the loan transaction may be excluded
from the amount of points and fees taken into account
for purposes of paragraph (1).
``(C) Bona fide discount point defined.--For
purposes of subparagraph (B), the term `bona fide
discount point' means any loan discount point which is
paid for the purpose of reducing, and which in fact
results in a bona fide reduction of, the interest rate
or time-price differential applicable to the loan if
the amount of the interest rate reduction purchased by
the discount points is reasonably consistent with
established industry norms and practices for mortgage
market transactions.''; and
(3) by redesignating paragraph (5) as paragraph (4).
(c) Technical and Conforming Amendment.--Paragraph (2) of section
103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)(2)) is amended
by striking ``specified in paragraph (1)(A)'' and inserting ``specified
in subparagraph (A) or (B) of paragraph (1)''.
SEC. 102. AMENDMENTS TO EXISTING REQUIREMENTS FOR HIGH-COST MORTGAGES.
(a) Prepayment Penalties.--Section 129(c)(2)(C) of the Truth in
Lending Act (15 U.S.C. 1639(c)(2)(C)) is amended by striking ``5-year
period'' and inserting ``4-year period''.
(b) Balloon Payments.--Section 129(e) of the Truth in Lending Act
(15 U.S.C. 1639(e)) is amended--
(1) by striking ``Payments.--A mortgage'' and inserting
``Payments.--
``(1) In general.--A mortgage''; and
(2) by adding at the end the following new paragraph:
``(2) Exception.--Paragraph (1) shall not apply when the
payment schedule is adjusted to account for the seasonal or
irregular income of the obligor or if the purpose of the loan
is a bridge loan made in connection with the acquisition or
construction of a dwelling intended to become the obligor's
principal dwelling.
``(3) Notice required.--A creditor that offers a high-cost
mortgage having a balloon payment term in accordance with
paragraph (2) shall clearly disclose to the consumer that the
loan contains such a term, the balloon payment amount that will
be owed by the consumer, and that balloon payments are
permissible under the circumstances described in paragraph (2)
but are not required for such types of mortgages.''.
(c) Negative Amortization.--Subsection (f) of section 129 of the
Truth in Lending Act (15 U.S.C. 1639(f)) is amended--
(1) by striking ``Amortization.--A mortgage referred to in
section 103 (aa)'' and inserting ``Amortization.--
``(1) In general.--A high-cost mortgage''; and
(2) by adding at the end the following new paragraph:
``(2) Exception for period of forbearance.--Paragraph (1)
shall not apply with respect to negative amortization resulting
from periods of temporary forbearance allowed by the
creditor.''.
(d) Disclosure of Financing of Points or Fees.--Section 129 of the
Truth in Lending Act (15 U.S.C. 1639) is amended by adding at the end
the following new subsection:
``(m) Disclosure of Financing of Points or Fees.--If, in connection
with the formation or consummation of a high-cost mortgage, any portion
of the points, fees, or other charges payable to the creditor or any
third party are included, directly or indirectly, in the principal
amount of the loan or otherwise financed by the creditor, the creditor
shall disclose that fact to the consumer together with a statement that
such treatment of any such point, fee, or charge is not legally
required.''.
(e) Prohibition on Unfair Arbitration Requirements.--Section 129 of
the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after
subsection (m) (as added by subsection (d) of this section) the
following new subsection:
``(n) No Unfair Arbitration Clauses.--
``(1) In general.--A high-cost mortgage may not be subject
to a mandatory arbitration clause that is oppressive, unfair,
unconscionable, or substantially in derogation of the rights of
consumers.
``(2) Safe Harbor.--An arbitration clause that--
``(A) establishes the venue for the arbitration in
the Federal judicial district or division in which the
real property that is the security for the high-cost
mortgage is located;
``(B) complies with the standards set forth by a
nationally recognized arbitration organization, such as
the Statement of Principles of the National Consumer
Dispute Advisory Committee of the American Arbitration
Association or any comparable standards of such other
organization as may be approved by the Board of
Governors of the Federal Reserve System, or any
official or employee of the Board duly authorized by
the Board; and
``(C) requires the creditor to bear the reasonable
costs of all parties to the arbitration, including the
production of fact witnesses and documents, during the
first 2 days of such arbitration,
shall be presumed not to violate the proscriptions of paragraph
(1).''.
(f) Prohibition on Evasions Through Structuring Transactions or
Reciprocal Arrangements.--Section 129 of the Truth in Lending Act (15
U.S.C. 1639) is amended by inserting after subsection (n) (as added by
subsection (e) of this section) the following new subsection:
``(o) Prohibition on Evasions Through Structuring Transactions or
Reciprocal Arrangements.--
``(1) In general.--No creditor, or any affiliate of a
creditor, may take any action for the purpose of, or with the
intent to, circumvent or evade any requirement of this title
with respect to high-cost mortgages, including--
``(A) entering into any reciprocal arrangement;
``(B) dividing any loan transaction into separate
parts for the purpose and with the intent of evading
the provisions of this section; or
``(C) structuring or restructuring a credit
transaction as a business loan, as credit extended
under an open end consumer credit plan, or other form
of credit 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 consumer loan or as credit not
extended under an open end consumer credit plan.
``(2) Reciprocal arrangement defined.--For purposes of this
subsection, the term `reciprocal arrangement' means any
agreement, understanding, or other arrangement under which--
``(A) 1 creditor or affiliate of a creditor agrees
to engage in a transaction with, or on behalf of,
another creditor (or affiliate of such other creditor),
in exchange for
``(B) the agreement of the second creditor referred
to in subparagraph (A), or any affiliate of such
company, to engage in a transaction with, or on behalf
of, the first creditor referred to in such
subparagraph, or any affiliate of such company,
for the purpose of evading any requirement or prohibition under
this title, or any other provision of any Federal law or
regulation relating to high-cost mortgages.
``(3) Regulations.--The Board shall prescribe such
regulations as may be necessary to enforce the requirements of
this subsection.''.
(g) No Encouragement of Default or Nonpayment on Prior Existing
Loan.--Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is
amended by inserting after subsection (o) (as added by subsection (f)
of this section) the following new subsection:
``(p) No Encouragement of Default or Skipped Payment.--No creditor
may recommend or encourage default or nonpayment (including nonpayment
of any periodic payment) 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.''.
(h) Ability To Repay.--Subsection (h) of section 129 of the Truth
in Lending Act (15 U.S.C. 1639(h)) is amended to read as follows:
``(h) Prohibition on Extending Credit Without Regard to Payment
Ability of Consumer.--
``(1) In general.--A creditor shall not engage in a pattern
or practice of extending credit to consumers under high-cost
mortgages based on the consumers' collateral without regard to
the consumers' repayment ability, including the consumers'
current and expected income, current obligations, and
employment.
``(2) Presumption of ability.--Unless a creditor knows or
has reason to know otherwise and except as provided in
paragraphs (3) and (4), a creditor may presume that a consumer
is able to make the scheduled payments to repay the high-cost
mortgage, if, at the time the extension of credit is approved,
the consumer's total monthly payments due on outstanding
obligations, including amounts owed under the high-cost
mortgage, do not exceed 53 percent of the consumer's monthly
gross income, as verified by the credit application, the
consumer's financial statement, a credit report, or any other
reasonable means; except that if the consumer's repayment
ability is based substantially on fixed income, then income
verification shall include reasonable documentation of such
fixed income, in addition to any statement by the consumer.
``(3) Presumption not applicable in case of balloon
payments.--Paragraph (2) shall not apply in the case of any
consumer who has an obligation secured by real property (that
would be taken into account for purposes of such paragraph) for
which the aggregate amount of the regular periodic payments
would not fully amortize the obligation.
``(4) Verification of income required in case of consumer
without earned income.--A creditor may not rely on a consumer's
statement of income for purposes of paragraph (2) if the
consumer has no earned income.''.
(i) Prohibition on Single Premium Credit Life Insurance.--Section
129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by
inserting after subsection (p) (as added by subsection (g) of this
section) the following new subsection:
``(q) Prohibition on Single Premium Credit Life Insurance.--No
consumer credit transaction involving a high-cost mortgage may include
the offer or sale of any insurance policy, on a single premium basis,
that insures, guarantees, or indemnifies the repayment of the
outstanding balance of the loan against death, illness, accident,
disability, or unemployment of the consumer.''.
(j) Limitations on Refinancing.--Section 129 of the Truth in
Lending Act (15 U.S.C. 1639) is amended by inserting after subsection
(q) (as added by subsection (i) of this section) the following new
subsection:
``(r) Limitations on Refinancing.--
``(1) Prohibition during 1st year.--
``(A) In general.--No creditor may refinance a
high-cost mortgage loan with another high-cost mortgage
during the 1-year period beginning on the date of
consummation of the prior high-cost mortgage loan.
``(B) Arrangements prohibited.--No mortgage broker
may arrange for the refinancing of a high-cost mortgage
with another high-cost mortgage during the 1-year
period beginning on the date of consummation of the
prior high-cost mortgage.
``(2) Exception for lower interest loan.--Paragraph (1)
shall not apply if the scheduled finance charge for the balance
of the prior existing high-cost mortgage exceeds the scheduled
finance charge for the subsequent high-cost mortgage by an
amount greater than the amount of the fees and charges imposed by the
creditor for such subsequent mortgage.
``(3) Refinancing of certain low-interest loans prohibited
for 10 years.--A high-cost mortgage may not be made to
refinance, and the proceeds of a high-cost mortgage may not be
used to pay off, any below-market interest rate or subsidized
loan made by any government agency, government-sponsored
enterprise, or nonprofit corporation (other than a mutual bank,
mutual savings association, or credit union) during the 10-year
period beginning when such low-interest loan was consummated,
without either the express written consent of the holder of the
loan or certification from a person or organization certified
under section 106(e) of the Housing and Urban Development Act
of 1968 that the consumer has obtained credit counseling.''.
(k) Requirements Relating to Home Improvement Contracts.--Section
129(i) of the Truth in Lending Act (15 U.S.C. 1639(i)) is amended--
(1) by striking ``Improvement Contracts.--A creditor'' and
inserting ``Improvement Contracts.--
``(1) In general.--A creditor''; and
(2) by adding at the end the following new paragraph:
``(2) No payment in full without proof of completion of the
work.--
``(A) In general.--No creditor may use the proceeds
of a high-cost mortgage to make a final payment or
payment in full to a home improvement contractor under
a home improvement contract without proof that the
contractor has fully performed the obligations of the
contract.
``(B) Signed statement of consumer.--A signed
statement by the consumer who entered into the high-
cost mortgage and home improvement contract referred to
in subparagraph (A) that the contractor has fully
performed the contract shall constitute proof for
purposes of such subparagraph.''.
(l) Additional Specific Disclosures.--Section 129(a)(1) of the
Truth in Lending Act (15 U.S.C. 1639(a)) is amended by adding at the
end the following new subparagraphs:
``(C) `The rate of interest and the amount of fees
you pay on a loan may vary depending on which lender or
broker you select.'
``(D) `The timing and amount of payments on debts
you already are carrying contribute to the credit
rating that is used to determine whether you may get a
new loan and how much you will pay for that new loan.
You should NOT accept any advice to ignore or delay
making any payments on loans you already have, even if
those loans will be paid off with the new loan.'
``(E) `You may get into serious financial
difficulties if you use this loan to pay off old debts
and then run up other new debts.'''.
(m) Credit Reporting Requirements.--Section 129 of the Truth in
Lending Act (15 U.S.C. 1639) is amended by inserting after subsection
(r) (as added by subsection (j) of this section) the following new
subsection:
``(s) Credit Reporting Requirements.--
``(1) Periodic full file reporting required.--A creditor
with respect to a high-cost mortgage (or the assignee or
servicer of such mortgage) shall furnish, at least once in each
calendar quarter, a full file credit report with respect to all
high-cost mortgages held or serviced by such creditor,
assignee, or servicer to a consumer reporting agency that
compiles and maintains files on consumers on a nationwide basis
(as defined in section 603(p) of the Fair Credit Reporting
Act), except for information deleted in connection with the
settlement of a dispute or consumer complaint.
``(2) Right to free credit reports in connection with high-
cost mortgages.--Any acceptance by a creditor of an application
for a consumer credit transaction the terms of which would
cause the transaction to be defined as a high-cost mortgage
shall be treated as an adverse action with respect to the
consumer for purposes of sections 612(b) and 615(a) of the Fair
Credit Reporting Act, except that, the creditor need not refer
to such action as adverse in any communication with the
consumer.
``(3) Full file credit report defined.--For purposes of
this subsection, the term `full file credit report' means a
report given to a consumer reporting agency on a regular basis
reflecting the status of every loan in the server's portfolio
as of the report date.''.
(n) No Call Provision.--Section 129 of the Truth in Lending Act (15
U.S.C. 1639) is amended by inserting after subsection (s) (as added by
subsection (m) of this section) the following new subsection:
``(t) 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--
``(A) by default or pursuant to a due-on-sale
provision or some other provision of the loan documents
unrelated to the payment schedule; or
``(B) due to any action or omission by the consumer
that adversely affects the creditor's security interest
in the residence or any rights of the creditor in such
security.''.
(o) Modification and Deferral Fees 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 (n) of this section) the
following new subsection:
``(u) Modification and Deferral Fees Prohibited.--
``(1) In general.--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.
``(2) Exception for certain workouts.--Paragraph (1) shall
not apply in the case of an existing high-cost mortgage that is
in default or more than 60 days delinquent, if the
modification, renewal, extension, or amendment is part of the
resolution or workout of the default or delinquency.''.
(p) Profiting on Foreclosures Prohibited.--Section 129 of the Truth
in Lending Act (15 U.S.C. 1639) is amended by inserting after
subsection (u) (as added by subsection (o) of this section) the
following new subsection:
``(v) Lender Profits on Foreclosures Prohibited.--
``(1) In general.--
``(A) Creditor, assignee, or affiliate reacquires
property interest at foreclosure sale.--If the
creditor, any assignee of the creditor, or any
affiliate of such creditor or assignee is the
successful bidder at a judicial or nonjudicial
foreclosure sale of a residence of a consumer that was
the security for a high-cost mortgage, any profit
realized by a creditor, any assignee of the creditor,
or any affiliate of such creditor or assignee realized
upon the subsequent resale or other disposition of the
property that was the security for a high-cost mortgage
shall be paid to the consumer.
``(B) Creditor, assignee, or affiliate does not
reacquire property interest at foreclosure sale.--If
the creditor, any assignee of the creditor, or any
affiliate of such creditor or assignee is not the
successful bidder at a judicial or nonjudicial
foreclosure sale of a residence of a consumer that was
the security for a high cost mortgage, any surplus
realized in excess of the sum of--
``(i) the amount to which the creditor or
assignee or affiliate or others have a right
under the law of the State where the real
property that was the security for a high-cost
mortgage is located; and
``(ii) the amounts referred to in
subparagraphs (A), (B), and (C) of paragraph
(4),
shall be paid to the consumer.
``(2) Profit defined.--For purposes of this subsection, the
term `profit' means the amount which is equal to--
``(A) the amount paid to the creditor, any assignee
of the creditor, or any affiliate of such creditor or
assignee by a third party for the sale of the property
to the third party, minus
``(B) the amount to which the creditor or assignee
has a right under the terms of the mortgage.
``(3) Surplus defined.--
``(A) In general.--For the purposes of paragraph
(1)(B), the term `surplus' means the amount which is
equal to--
``(i) the amount derived from the sale as
determined by the law of the State where the
real property that was the security for a high-
cost mortgage is located; minus
``(ii) the amounts disbursed to others
under the processes, priorities and procedures
for disbursement of surplus funds, and for
determining the rights and priorities between
consumers and others who may have an interest
in or claim to the surplus funds, as determined
by the law of the State where the real property
that was the security for a high-cost mortgage
is located.
``(B) Applicable definition if state law does not
provide for the determinations of amounts described in
subparagraph (A).--If the law of the State where the
real property that was the security for a high-cost
mortgage is located does not provide for the
determination of the amounts described in clauses (i)
and (ii) of subparagraph (A), the term `surplus' means
that portion of the amount derived from the sale that
exceeds the sum of the amounts described in
subparagraphs (A), (B), and (C) of paragraph (4).
``(4) Creditor's amount.--The amount to which the creditor
or assignee has a right under the terms of the mortgage, for
purposes of this subsection, includes--
``(A) all foreclosure expenses, including
reasonable attorneys' fees and expenses reasonably
incurred to secure, market, and preserve the property
through the date of the foreclosure sale, incurred by
the creditor or assignee;
``(B) all amounts due the creditor or assignee
under the terms of the agreement through the date of
the judicial or nonjudicial foreclosure sale referred
to in paragraph (1);
``(C) all amounts paid by the creditor or assignee
to other lien holders of record on the property; and
``(D) all postforeclosure expenses, including
reasonable attorneys' fees, commissions, advances, and
expenses reasonably incurred to secure, market,
preserve, improve and sell the property to a third
party referred to in paragraph (1), incurred by the
creditor or assignee.''.
(q) Increased Interest Rate Upon Default Prohibited.--Section 129
of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting
after subsection (v) (as added by subsection (p) of this section) the
following new subsection:
``(w) Applicability of Limitations on Variable Rate Changes.--In
the case of a high-cost mortgage that is subject to a variable rate of
interest based on an index or rate of interest which is publicly
available and is not under the control of the creditor, subsection (d)
shall not apply to changes in the rate of interest due to any change in
such index, to the extent the change of interest is not due in any part
to a default by the consumer or a permissible acceleration by the
creditor.''.
(r) Prepayment of Periodic Payments From Proceeds Prohibited.--
Section 129(g) of the Truth in Lending Act (15 U.S.C. 1639) is amended
to read as follows:
``(g) Prepayment of Periodic Payments From Proceeds Prohibited.--No
high-cost mortgage may include terms under which any periodic payments
of interest or principal due under such mortgage may be paid in advance
or otherwise deducted from the proceeds of the loan.''.
(s) Payoff Statements.--Section 129 of the Truth in Lending Act (15
U.S.C. 1639) is amended by inserting after subsection (w) (as added by
subsection (q) of this section) the following new subsection:
``(x) 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 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 residential mortgage
transactions or high-cost mortgages.
``(C) 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 a reasonable time but in any event no more than 5
business days after receiving a request by a consumer or a
person authorized by the consumer to obtain such
information.''.
SEC. 103. AMENDMENTS TO LIABILITY PROVISIONS RELATING TO HIGH-COST
MORTGAGES.
(a) Right to Cure.--Section 130(b) of the Truth in Lending Act (15
U.S.C. 1640(b)) is amended--
(1) by striking ``(b) A creditor or assignee'' and
inserting ``(b) Right to Cure.--
``(1) In general.--Subject to paragraph (2), a creditor or
assignee''; and
(2) by adding at the end the following new paragraph:
``(2) High-cost mortgages.--In addition to the provisions
of paragraph (1), a creditor or assignee shall have no
liability under this section for any failure to comply with any
requirement imposed under section 129 with respect to a high-
cost mortgage, if within 60 days after discovering an error,
and prior to the institution of an action under this section,
the creditor or assignee notifies the consumer of the error and
makes appropriate restitution to the consumer or modifies the
terms of the credit transaction in such a way that the
transaction is no longer a high-cost mortgage within the
meaning of this title.''.
(b) Coordination of Class Action Damages With Actual Damages.--
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) Class Actions Relating to High-Cost Mortgages.--
``(1) Coordination of class action damages with actual
damages.--The maximum amount of general damages which may
otherwise be imposed on any person under subsection (a)(2)(B)
for violations of section 129 in a class action shall be
reduced by the aggregate amount of actual damages for which
such person is liable to members of the class under subsection
(a)(1).
``(2) Pattern and practice.--In determining the amount of
any liability of any person under subsection (a)(2)(B) for
violations of section 129 in a class action, the court shall
consider the pattern and practices of the person giving rise to
the violations.''.
(c) Amendment Relating to Liability of Assignees.--
(1) In general.--Paragraph (4) of section 131(d) of the
Truth in Lending Act (15 U.S.C. 1641(d)) is amended by striking
``mortgage referred to in section 103(aa)'' and inserting
``high-cost mortgage''.
(2) Rights Upon Assignment of High-Cost Mortgages.--Section
131(d) of the Truth in Lending Act (15 U.S.C. 1641(d)) is
amended--
(A) by redesignating paragraphs (2), (3), and (4)
as paragraphs (5), (6), and (7), respectively; and
(B) striking paragraph (1) and inserting the
following new paragraphs:
``(1) In general.--Any person who purchases or is otherwise
assigned a high-cost mortgage shall be subject to an action
under this title only if the violation for which such action or
proceeding is brought is apparent on the face of the disclosure
statement or the underlying promissory note.
``(2) Affirmative claims and defenses.--Any person who
purchases or is otherwise assigned a high-cost mortgage that
was made, arranged, or assigned by a person financing home
improvements to the dwelling of a consumer shall be subject to
all affirmative claims and defenses which the consumer may have against
the seller, home improvement contractor, broker, or creditor with
respect to such mortgage or home improvements.
``(3) Safe harbor.--A person who maintains and exercises
procedures that are reasonably adapted to prevent the
acquisition of high-cost mortgages containing violations of
this title, which procedures are consistent with established
industry norms and practices for secondary mortgage market
transactions, shall not be liable for any such violations in
connection with any loan acquired pursuant to such procedures.
``(4) Clarification of terms.--For purposes of this title,
the terms `purchaser', `assignee', and `person who purchases or
is otherwise assigned' includes--
``(A) any person acting on behalf of the purchaser
or assignee; and
``(B) with regard to credit obligations secured by
consumers' dwellings included in a pool for the purpose
of issuing asset-backed securities, the issuer of the
asset-backed security, the depositor entity holding
such pool, and any affiliate of such issuer or
depository entity.''.
SEC. 104. COORDINATION WITH STATE LAW.
(a) In General.--Section 111 of the Truth in Lending Act (15 U.S.C.
1610) is amended--
(1) by adding at the end the following new subsection:
``(f) High-Cost Mortgages.--
``(1) In general.--To the extent that any law of any
State--
``(A) imposes any requirement, limitation, or
prohibition on any mortgage lending activities in
connection with an extension of consumer credit secured
by a lien against a consumer's dwelling in whole or in
part because the actual or contingent costs and finance
charges to the consumer associated with such extension
of credit exceed any particular threshold for such
costs, however such threshold may be defined; or
``(B) attempts to regulate such mortgage lending
activities--
``(i) through limitations or prohibitions
in connection with contracts for other business
with any such State or political subdivision
thereof;
``(ii) by making any conduct in connection
with any such activities subject to criminal
penalties; or
``(iii) by making activities regulated
under real estate, foreclosure, or other laws
of such State or political subdivision
contingent upon the manner in which mortgage
lending activities are conducted,
this title shall preempt such law, irrespective of whether such
law affords greater protection, substantive or otherwise, to
consumers.
``(2) Definitions.--For purposes of this subsection, the
following definitions shall apply:
``(A) Mortgage lending activities.--The term
`mortgage lending activities' includes any
advertisement, solicitation, offer, negotiation,
application, processing, underwriting, originating,
closing, funding, recording, assignment,
securitization, servicing, collection, modification,
satisfaction, or foreclosure (including the disposition
of foreclosed property) for or of any extension of
consumer credit secured by a lien against a consumer's
dwelling.
``(B) Law of any state.--The term `law of any
State' includes any statute, rule, regulation, or
ordinance of any State or any political subdivision of
any State.
``(3) Clarification of preemption.--Laws preempted under
paragraph (1) of this subsection shall, without in any way
limiting the effect of paragraph (1) of this subsection,
include--
``(A) any law of any State that directly or
indirectly limits a creditor's ability to extend new
credit to a consumer for the purpose of refinancing an
existing extension of consumer credit in whole or in
part because the actual or contingent costs and finance
charges to the consumer associated with either the
existing or the new extension of consumer credit are
lower than or in excess of any particular threshold; or
``(B) any law of any State that directly or
indirectly limits the claims, defenses, or other
remedies at law or equity available to a creditor, its
agent, or its direct or indirect assignee in connection
with an extension of consumer credit secured by a lien
against a consumer's dwelling in whole or in part
because the actual or contingent costs and finance
charges to the consumer associated with such extension
of consumer credit are in excess of any particular threshold.
``(4) Exclusions.--Notwithstanding paragraphs (1) and (2),
the following laws are expressly excluded from the preemption
set forth in paragraph (1):
``(A) Any law of any State, not otherwise preempted
under Federal law, limiting the rate of interest
reflected in the note or other instrument evidencing an
extension of consumer credit secured by a lien against
a consumer's dwelling, to the extent that such law does
not require compliance with any law that is otherwise
preempted under paragraphs (1) and (2) as a condition
of contracting for, charging, or collecting any rate of
interest otherwise permitted by such law.
``(B) Any law of any State requiring the licensing,
registration, or authorization of any person engaged in
mortgage lending activities, to the extent that such
law does not condition the issuance of such a license,
registration or other authorization, or the authority
granted thereby, on compliance with any law that is
otherwise preempted under paragraphs (1) and (2).
``(5) Prompt determination by board of governors.--
``(A) In general.--In response to a request from
any person, the Board of Governors of the Federal
Reserve System, or any official or employee of the
Board of Governors of the Federal Reserve System duly
authorized by the Board, shall--
``(i) promptly determine whether the
specific law of any State identified in such
request is preempted by operation of this
subsection; and
``(ii) cause such determination to be
published in the Federal Register.
``(B) Effect of publication.--Any determination
under subparagraph (A) that is published in the Federal
Register shall have the force and effect of law as of
the date of such publication.'';
(2) in subsection (a)(1), by striking the 1st sentence and
inserting ``Except as provided in subsections (e) and (f), no
provision of chapter 1, 2 or 3 shall be construed as annulling,
altering, or affecting the laws of any State relating to the
disclosure of information in connection with credit
transactions, except to the extent that those laws are
inconsistent with the provisions of this title, and then only
to the extent of the inconsistency.''; and
(3) in subsection (b) by striking ``section 129'' the 1st
place such term appears and inserting ``subsection (f) and
section 129''; and
(4) in subsection (d), by striking ``sections 125, 130, and
166'' and inserting ``subsection (f) and sections 125, 130, and
166''.
(b) Clarification of Primary Enforcement Authority With Respect to
State-Chartered Entities.--Section 108 of the Truth in Lending Act (15
U.S.C. 1607) is amended by adding at the end the following new
subsection:
``(f) Clarification of Primary Enforcement Authority With Respect
to State-Chartered Entities.--In addition to the authority provided
under section 130(e), no provision of this title shall be construed as
affecting the authority of any State to enforce the laws of such State,
as the primary enforcement authority, with regard to any person
domiciled in such State or chartered by such State.''.
SEC. 105. CONTINUATION OF IDENTIFICATIONS UNDER THE ALTERNATIVE
MORTGAGE TRANSACTION PARITY ACT OF 1982.
The Director of the Office of Thrift Supervision shall take no
action under the Alternative Mortgage Transaction Parity Act of 1982
that would have the effect of discontinuing the identification of
regulations of the Director relating to late fees and prepayment
penalties as applicable to State housing creditors and no regulation of
the Director that was prescribed in final form before the enactment of
this Act and that would discontinue such identification shall be
effective on or after such date of enactment, unless permitted by a
subsequent Act of the Congress.
SEC. 106. EFFECTIVE DATE.
(a) In General.--This Act, and the amendments made by this Act,
shall take effect at the end of the 1-year period beginning on the date
of the enactment of this Act.
(b) Scope of Application.--This Act, and the amendments made by
this Act, shall apply with respect to applications for high-cost
mortgages received on or after the effective date of this Act.
(c) Voluntary Compliance.--No creditor or assignee shall be subject
to civil liability in any action brought under the Truth in Lending Act
with respect to provisions of such Act that are amended by this Act, if
the creditor or assignee voluntarily complies with the requirements of
such amendments during the 1-year period referred to in subsection (a).
TITLE II--CONSUMER MORTGAGE PROTECTION BOARD
SEC. 201. ESTABLISHMENT.
(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) Consumer Mortgage Protection Board.--
``(1) Establishment.--There is established in the
Department of Housing and Urban Development the Consumer
Mortgage Protection Board (in this section referred to as the
`Board').
``(2) Functions.--The Board shall carry out the functions
assigned to the Board under this section and any other
provisions of law. Such functions shall include establishing
rules necessary--
``(A) for the counseling procedures under
subsection (h)(1);
``(B) under section 5 of the Real Estate Settlement
Procedures Act of 1974 (12 U.S.C. 2604) for mortgage
information booklets prepared pursuant to such section;
``(C) for the operation and administration of the
Board; and
``(D) for the establishment and maintenance of the
national database of mortgage brokers under subtitle B
of title II of the Responsible Lending Act.
``(3) Members.--The Board shall be composed of 15 members,
who shall be appointed by the Secretary, as follows:
``(A) 4 members shall be individuals who represent
consumers of settlement services.
``(B) 3 members shall be individuals who represent
originators of federally related mortgage loans (as
such term is defined in section 3 of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C. 2602),
including at least 2 individuals who are associated
with lenders that fund and close loans with their own
funds and are capable of servicing such loans.
``(C) 1 member shall be an individual who
represents real estate sales professionals.
``(D) 1 member shall be an individual who
represents real estate appraisers.
``(E) 1 member shall be an individual who
represents private mortgage insurers.
``(F) 1 member shall be an individual who
represents title insurance providers.
``(G) 1 member shall be an individual who
represents settlement service management companies.
``(H) 1 member shall be an individual who
represents providers of electronic delivery mechanisms
that facilitate home purchases and home financings.
``(I) 1 member shall be an individual who is a
practicing attorney specializing in residential
mortgage finance or settlement services.
``(J) 1 member shall be an individual who
represents mortgage brokers (as such term is defined in
section 303 of the Responsible Lending Act).
``(4) Terms and vacancies.--Each member of the Board shall
be appointed for a term of three years. Any member appointed to
fill a vacancy occurring before the expiration of the term for
which the member's predecessor was appointed shall be appointed
only for the remainder of that term. A member may serve after
the expiration of that member's term until a successor has
taken office. A vacancy in the Board shall be filled in the
manner in which the original appointment was made.
``(5) Service without pay; travel expenses.--Members of the
Board shall serve without pay, but each member of the Board
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.
``(6) Staff.--Subject to the rules prescribed by the Board,
the Board may appoint and fix the pay of personnel as the Board
considers appropriate to carry out the Board's functions. Such
personnel may be appointed without regard to the provisions of
title 5, United States Code, governing appointments in the
competitive service, and may be paid without regard to the
provisions of chapter 51 and subchapter III of chapter 53 of
that title relating to classification and General Schedule pay
rates. The Board may provide reasonable additional compensation
and benefits to employees of the Board if the same type of
compensation or benefits are then being provided by any Federal
bank regulatory agency or, if not then being provided, could be
provided by such an agency under applicable provisions of law,
rule, or regulation.
``(7) Exemption from federal advisory committee act
provisions.--The provisions of the Federal Advisory Committee
Act (5 U.S.C. App.) shall not apply to the Board.''.
(b) Initial Appointments.--The Secretary of Housing and Urban
Development shall appoint the initial members of the Consumer Mortgage
Protection Board, pursuant to section 106(g) of the Housing and Urban
Development Act of 1968 (12 U.S.C. 1701x(g)), not later than 20 days
after the date of the enactment of this Act.
SEC. 202. COUNSELING PROCEDURES.
(a) In General.--Section 106 of the Housing and Urban Development
Act of 1968 (12 U.S.C. 1701x), as amended by the preceding provisions
of this Act, is further amended by adding at the end the following new
subsection:
``(h) Board Responsibilities.--
``(1) Counseling procedures.--
``(A) In general.--Subject to the approval of the
Secretary, the Board 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
counseling.
``(B) Homeownership counseling.--For purposes of
this subsection, the term `homeownership counseling'
means counseling related to homeownership and
residential mortgage loans, and includes 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. 42
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 23(c)(4) (42 U.S.C.
1437u(c)(4));
``(IV) sections 302(b)(6) and
303(b)(7) (42 U.S.C. 1437aaa-1(b)(6),
1437aaa-2(b)(7)); and
``(V) 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) sections 101(e) and 106 of the
Housing and Urban Development Act of 1968 (12
U.S.C. 1701w(e), 1701x);
``(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, and includes 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. 42
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);
``(vii) section 422(b)(6) of the Cranston-
Gonzalez National Affordable Housing Act (42
U.S.C. 12872(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)); and
``(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)).
``(2) Toll-free telephone number and web site.--The Board
shall establish and operate a toll-free telephone number and a
World Wide Web site through which persons interested in
homeownership counseling services may locate and obtain names
and contact information of persons and organizations certified
under section 106(e) of the Housing and Urban Development Act
of 1968 to provide such services.
``(3) Uniform materials.--The Board shall ensure the
uniformity of materials and forms to be used, as appropriate,
by organizations providing homeownership counseling services,
including any recipients of assistance pursuant to subsection (a)(4).
``(4) Mortgage software systems.--
``(A) Certification.--The Board shall provide for
the certification of various computer software programs
for consumers to use in evaluating different
residential mortgage loan proposals. The Board shall
require, for such certification, that the mortgage
software systems that take into account--
``(i) the consumer's financial situation;
``(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 Board
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 Board determines that available existing
software is inadequate to assist consumers during the
residential mortgage loan application process, the
Board shall arrange for the development by private
sector software companies of new mortgage software
systems that meet the Board's specifications.
``(B) Availability.--The Board 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, and
homeownership counseling centers.
``(5) Outreach to vulnerable populations.--The Board shall
develop a media program designed to make elderly persons,
illiterate persons, low-income persons, and other potentially
vulnerable consumers aware that it is advisable, before seeking
a residential mortgage loan, to obtain homeownership counseling
from an unbiased and reliable source and that such
homeownership counseling is available, including through
programs of the Department of Housing and Urban Development.''.
(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 (II), by striking ``and'' at the end;
(2) in subclause (III) by striking the period at the end
and inserting ``; and''; and
(3) by inserting after subclause (III) the following new
subclause:
``(IV) notify the homeowner or
mortgage applicant of the availability
of mortgage software systems provided
pursuant to subsection (h)(4).''.
SEC. 203. GRANTS FOR HOUSING COUNSELING ASSISTANCE.
(a) Authorization of Appropriations.--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 Counseling Assistance.--
``(A) In general.--The Secretary shall, through the
Consumer Mortgage Protection Board established under subsection
(g), make financial assistance available under this paragraph
to entities providing homeownership counseling (as such term is
defined in subsection (h)(1)(B)).
``(B) Qualified entities.--The Consumer Mortgage Protection
Board 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, to the Consumer Mortgage
Protection Board established under subsection (g), $50,000,000
for each of fiscal years 2003 through 2007 for--
``(i) the operations of the Board; and
``(ii) assistance under this paragraph (1)(iii) for
entities providing homeownership counseling.''.
SEC. 204. REQUIREMENTS TO USE HUD-CERTIFIED COUNSELORS UNDER HUD
PROGRAMS.
(a) Board Responsibility.--Section 106(e) of the Housing and Urban
Development Act of 1968 (12 U.S.C. 1701x(e)) is amended--
(1) in paragraph (1), by striking ``Secretary'' and
inserting ``Consumer Mortgage Protection Board established
under subsection (g)''; and
(2) in paragraphs (2) and (3), by striking ``Secretary''
each place such term appears and inserting ``Board''.
(b) Requirement to Use Certified Counselors.--Section 106(e) of the
Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(e)) is
amended--
(1) in paragraph (1)--
(A) by inserting ``(a)(4),'' after ``(a)(2),'';
(B) by inserting ``of this section, or under
section 101(e)'' after ``or (d)''; and
(C) by striking ``, to the extent practicable,''
and inserting ``only'';
(2) by redesignating paragraph (3) as paragraph (4); and
(3) by inserting after paragraph (2) the following new
paragraph:
``(3) Requirement under hud programs.--Any homeownership
counseling or rental housing counseling (as such terms are
defined in subsection (h)(1)) required under, or provided in
connection with, any program administered by the Department of
Housing and Urban Development shall be provided only by counselors
certified by the Board under this subsection as competent to provide
such counseling.''.
SEC. 205. 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 ``mortgage'';
(2) by striking subsections (a) and (b) and inserting the
following new subsections:
``(a) Preparation and Distribution.--Subject to the approval of the
Secretary, the Consumer Mortgage Protection Board established under
section 106(g) of the Housing and Urban Development Act of 1968 (12
U.S.C. 1701x(g)) (in this section referred to as the `Board') shall
prepare 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 distribute such booklets to
all lenders that make federally related mortgage loans.
``(b) Contents.--Each booklet shall be in such form and detail as
the Board shall prescribe and, in addition to such other information as
the Board 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 tradeoff 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 common unfair, deceptive,
or fraudulent 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 (15 U.S.C. 1635, 1639).
``(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 (15
U.S.C. 1637a(e)).
``(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)) and a
recommendation that the consumer use such services.
``(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 incident 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.
The booklet prepared pursuant to this section 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.'';
(3) in subsection (c), by striking the last sentence; and
(4) in subsection (e), by striking ``Secretary'' and
inserting ``Board''.
TITLE III--REQUIREMENTS FOR MORTGAGE BROKERS
Subtitle A--Licensing and Minimum Standards
SEC. 301. STATE REGULATION OF MORTGAGE BROKERS.
(a) In General.--The Federal mortgage broker requirements
established pursuant to this title shall apply only with respect to
States that, upon the expiration of the 3-year period beginning on the
date of the enactment of this Act, have not enacted and do not have in
effect uniform laws and regulations described in subsection (b).
(b) Uniform State Laws.--
(1) In general.--Laws and regulations described in this
subsection are laws and regulations that--
(A) require licensing for mortgage brokers;
(B) require, as a condition of issuance of a
license, that an applicant comply with pre-licensing
education requirements and submit a written application
for a license, and that a criminal background check be
performed on the applicant;
(C) establish minimum testing standards for
mortgage brokers;
(D) establish continuing education requirements for
mortgage brokers;
(E) require the public agency or official in the
State that is responsible for licensing of mortgage
brokers to provide, directly or otherwise to the
national mortgage database established under subtitle
B, such information as may be necessary to ensure that
such database is effective for the purposes for which
it is established; and
(F) comply with such standards regarding uniformity
of information submitted to the national database of
mortgage brokers established under subtitle B as the
Secretary of Housing and Urban Development considers
necessary to facilitate the operation of the database.
(2) Exemptions.--For purposes of this subsection, the term
``mortgage broker'' has the meaning provided in section 303(3),
except that the laws and regulations of a State may exempt from
treatment as mortgage brokers the following persons:
(A) Any bank, savings bank, savings and loan
association, or credit union organized under the laws
of a State or the United States, or a subsidiary or
affiliate of a bank, savings bank, savings and loan
association, or credit union.
(B) Any budget or debt counseling service, as
defined by the Secretary, that is a nonprofit
organization exempt from taxation under section
501(c)(3) of the Internal Revenue Code of 1986 (26
U.S.C. 501(c)(3));
(C) Any consumer reporting agency that is in
substantial compliance with the Fair Credit Reporting
Act (15 U.S.C. 1681 et seq.).
(D) Any political subdivision, or any governmental
or other public entity, corporation, or agency, in or
of the United States or any State.
(E) Any college or university, or entity that is
controlled by a college or university, as determined by
the Secretary.
(F) Any person who--
(i) makes, service, buys, or sells mortgage
loans;
(ii) underwrites the loans; and
(iii)(I) has been approved by the Secretary
of Housing and Urban Development as a
nonsupervised mortgagee with participation in
the direct endorsement program, but not
including a mortgagee approved as a loan
correspondent;
(II) has been approved by the Federal
National Mortgage Association as a seller/
servicer;
(III) has been approved by the Federal Home
Loan Mortgage Corporation as a seller/servicer;
(IV) has been approved by the Secretary of
Veterans Affairs as a nonsupervised automatic
lender, but not including a person approved by
the Secretary as a nonsupervised lender, an
agent of a nonsupervised automatic lender, or
an agent of a nonsupervised lender; or
(V) is a creditor (as defined in section
103(f) of the Truth in Lending Act) who makes
or invests in residential real estate loans
aggregating more than $1,000,000 per year, and
irrespective of whether such creditor is
licensed or supervised by an agency of a State.
(G) Any person created solely for the purpose of
packaging and selling, as a unit of sale as investment
securities, mortgage loans that are secured by an
interest in real estate, if the person does not service
the loans.
(c) Determination.--
(1) HUD determination.--At the end of the 3-year period
beginning on the date of the enactment of this Act, the
Secretary of Housing and Urban Development shall determine, in
consultation with the Board of Governors of the Federal Reserve
System, whether the uniformity necessary to comply with
subsection (a) has been achieved.
(2) Judicial review.--The appropriate United States
district court shall have exclusive jurisdiction over any
challenge to the determination pursuant to paragraph (1) and
such court shall apply the standards set forth in section 706
of title 5, United States Code, when reviewing any such
challenge.
(d) Continued Application.--If, at any time, the Secretary
determines that a State no longer has in effect laws and regulations
described in subsection (a) or the uniformity necessary to comply with
subsection (a) no longer exists with respect to a State, the Federal
mortgage broker requirements shall take effect with respect to such
State 2 years after the date on which such determination was made,
unless the State has in effect such laws or regulations, or the
uniformity necessary to comply with subsection (a) is satisfied, before
the expiration of such 2-year period.
(e) Monitoring.--The Secretary shall monitor the laws and
regulations of the States governing the matters referred to in
subsection (a) for purposes of making determinations under subsection
(d).
SEC. 302. FEDERAL MORTGAGE BROKER REQUIREMENTS.
(a) In General.--Not later than 3 years after the date of the
enactment of this Act, the Secretary of Housing and Urban Development
shall, by regulation and in consultation with the Board of Governors of
the Federal Reserve System, establish Federal mortgage broker
requirements under this section that meet the requirements set forth in
subparagraphs (A) through (F) of section 301(b)(1).
(b) Rulemaking.--The regulations required under subsection (a)
shall be issued after notice and opportunity for public comment
pursuant to the provisions of section 553 of title 5, United States
Code (notwithstanding subsections (a)(2), (b)(B), and (d)(3) of such
section).
SEC. 303. DEFINITIONS.
For purposes of this title, the following definitions shall apply:
(1) Buyer.--the term ``buyer'' means an individual who is
solicited to purchase, or who purchases, the services of a
mortgage broker for purposes other than obtaining a business
loan.
(2) Mortgage.--The term ``mortgage'' means any indebtedness
secured by a deed of trust, security deed, or other lien on
real property.
(3) Mortgage broker.--
(A) In general.--The term ``mortgage broker'' means
a person that--
(i) holds such person out as being able to
assist a buyer in obtaining a mortgage and
charges or receives, from the buyer or lender
for the mortgage, money or other valuable
consideration readily convertible into money
for providing such assistance; or
(ii) is engaged in table-funding mortgage
loans that are first lien mortgage loans.
(B) Solicitation of information.--Such term
includes any person that solicits financial and
mortgage information from the public, provides such
information to a mortgage broker, as defined in
subparagraph (A), and charges or receives from the
mortgage broker money or other valuable consideration
readily convertible into money for providing the
information;
(C) Exceptions.--Such term does not include the
persons referred to in subparagraphs (A) through (H) of
section 301(b)(2).
(4) Secretary.--The term ``Secretary'' means the Secretary
of Housing and Urban Development.
(5) Table-funding mortgage loan.--The term ``table-funding
mortgage loan'' means a mortgage loan transaction in which the
mortgage is initially payable to the mortgage broker, the
mortgage broker does not use the mortgage broker's own funds to
fund the transaction, and, by the terms of the mortgage or
other agreement, the mortgage is simultaneously assigned to
another person.
Subtitle B--Database of Licensed Mortgage Brokers
SEC. 311. ESTABLISHMENT.
(a) In General.--The Consumer Mortgage Protection Board established
under section 106(g) of the Housing and Urban Development Act of 1968
(12 U.S.C. 1701x(g)) (in this subtitle referred to as the ``Board'')
shall provide for the establishment and maintenance of a national
database of mortgage brokers.
(b) Administration.--The Board may maintain and administrate the
database established under this subtitle or may enter into a contract
with a private regulatory organization to maintain and administrate the
database. The Board shall consult with the American Association of
Residential Mortgage Regulators, the Conference of State Bank
Supervisors, and other appropriate organizations in determining the
information to be maintained in the database and, if the Board provides
for any other organization to maintain and administrate the database,
in selecting such organization.
(c) Competitively Procured Contract.--The Secretary shall enter
into any contract for administration of the database using competitive
procedures (as such term is defined in section 4 of the Office of
Federal Procurement Policy Act).
(d) Performance Review.--The Secretary--
(1) shall periodically review the performance of the Board,
or such other organization, in serving as administrator of the
database; and
(2) may replace any such other organization with another
qualified organization, pursuant to competitive procedures if
the Secretary determines in writing that the organization
serving as administrator is not fulfilling the terms of the contract or
upon the expiration of the contract.
SEC. 312. DATABASE.
The national database of mortgage brokers maintained pursuant to
this title shall--
(1) include a listing of each person licensed under State
law or regulation or under Federal mortgage broker requirements
under section 302 to act as a mortgage broker;
(2) make available to the public information regarding
complaints made, and final disciplinary and enforcement actions
taken, against each licensed mortgage broker;
(3) make available to the Secretary of Housing and Urban
Development and to each public agency or official in a State
responsible for licensing or testing under the laws or
regulations referred to in section 301(b) such information
regarding mortgage brokers as the Board, by regulation,
considers appropriate for the Secretary and such agencies and
officials to carry out their functions regarding regulation,
licensing, or testing of mortgage brokers, including
information regarding employment history and criminal
background of mortgage brokers;
(4) make available to persons employing or using the
services of mortgage brokers such information regarding
mortgage brokers as the Board, by regulation, considers
appropriate; and
(5) provide for the maintenance of such other information
as the Board considers appropriate.
SEC. 313. FEES.
The Board may provide for the national database of mortgage brokers
to charge reasonable fees to cover costs of maintaining and providing
access to information from the database.
SEC. 314. CONFIDENTIALITY OF INFORMATION.
(a) In General.--
(1) Database.--Except as otherwise provided in this
section, any requirement under Federal or State law regarding
the privacy or confidentiality of any information or material
in the possession of the Board or any other organization
serving as the administrator of the database, 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 database.
(2) Nonapplicability of certain requirements.--Information
or material that is subject to a privilege or confidentiality
under any other paragraph of this subsection shall not be
subject to--
(A) 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
(B) subpoena or discovery, or admission into
evidence, in any private civil action or administrative
process,
unless with respect to any privilege held by the Board with
respect to such information or material, the participant
waives, in whole or in part, in the discretion of the
participant, such privilege.
(b) Preemption of State 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.
SEC. 315. LIABILITY PROVISIONS.
(a) No Liability for Good Faith Disclosures.--Any State official or
agency, or employee thereof, 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, while acting within the scope
of office or employment, relating to collecting, furnishing, or
disseminating of information concerning persons who are mortgage
brokers or are applying for licensing as mortgage brokers, whether
directly or through the national database established under this
subtitle.
(b) Criminal Liability for Intentional Unlawful Disclosures.--
(1) In general.--It shall be unlawful to willfully disclose
to any person any information concerning any person who is a
mortgage broker or is applying for licensing as a mortgage
broker knowing the disclosure to be in violation of any
provision of this title--
(A) requiring the confidentiality of such
information; or
(B) establishing a privilege from disclosure for
such information that has not been waived by the Board
and the person who is a mortgage broker or is applying
for licensing as a mortgage broker.
(2) Penalty.--Notwithstanding section 3571 of title 18,
United States Code, any person who violates paragraph (1) shall
be fined an amount not to exceed the greater of $100,000 or the
amount of the actual damages sustained by any person as a
result of such violation, or imprisoned not more than 5 years,
or both.
(c) Full, Continued Protection Under the So-Called ``Federal Tort
Claims Act''.--No provision of this Act shall be construed as reducing
or limiting any protection provided for any Federal agency, or any
officer or employee of any Federal agency, under section 2679 of title
28, United States Code.
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