[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1994 Introduced in House (IH)]






109th CONGRESS
  1st Session
                                H. R. 1994

        To protect home buyers from predatory lending practices.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 28, 2005

    Mrs. Jones of Ohio (for herself, Ms. DeLauro, Mr. Cummings, Ms. 
    Millender-McDonald, Mr. Grijalva, Mr. Owens, Ms. Kilpatrick of 
 Michigan, Mr. Jefferson, and Mr. Jackson of Illinois) introduced the 
   following bill; which was referred to the Committee on Financial 
                                Services

_______________________________________________________________________

                                 A BILL


 
        To protect home buyers from predatory lending practices.

    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 ``Predatory Mortgage Lending Practices 
Reduction Act''.

SEC. 2. CERTIFICATION REQUIREMENTS FOR MORTGAGE LENDERS AND BROKERS.

    (a) In General.--The Real Estate Settlement Procedures Act of 1974 
is amended by inserting after section 12 (12 U.S.C. 2610) the following 
new section:

``SEC. 13. CERTIFICATION REQUIREMENTS FOR MORTGAGE LENDERS AND BROKERS.

    ``(a) Requirement.--No person may, in connection with a subprime 
federally mortgage related loan, provide mortgage lending services or 
mortgage brokerage services unless such person is, at the time of the 
provision of such services, certified by the Secretary pursuant to this 
section as having been adequately trained with regard to subprime 
lending.
    ``(b) Standards and Examination.--
            ``(1) In general.--The Secretary shall, by regulation, 
        establish requirements, standards, and procedures for testing 
        and certifying persons providing mortgage lending services or 
        mortgage brokerage services in connection with a subprime, 
        federally related mortgage loans.
            ``(2) Examination.--Such standards and procedures shall 
        require, for certification under this section, that the 
        individual shall demonstrate, by written examination, knowledge 
        regarding the following areas:
                    ``(A) Federal law.--The requirements and 
                limitations under Federal laws regarding mortgage 
                lending, including the Truth in Lending Act, the Fair 
                Credit Reporting Act, the Equal Credit Opportunity Act, 
                the Real Estate Settlement Procedures Act of 1974, the 
                Home Ownership and Equity Protection Act of 1994, the 
                Home Mortgage Disclosure Act of 1975, and the Fair 
                Housing Act.
                    ``(B) Subprime lending.--Legal and appropriate 
                practices, methods, conventions, and terms of subprime 
                lending in all lending functions, including advertising 
                and marketing, consumer education and counseling, 
                origination, underwriting, closing, servicing, 
                information technology, and internal control policies 
                and procedures.
                    ``(C) Predatory lending.--Illegal and inappropriate 
                practices, methods, practices, and terms of predatory 
                lending. The Secretary shall, by regulation, define the 
                term `predatory lending' for purposes of this 
                subsection.
                    ``(D) Law regarding competency to contract.--Basic 
                contract law regarding competency and incapacity to 
                contract.
    ``(c) Decertification.--The Secretary shall establish standards and 
procedures for suspension and revocation of the certification under 
this section, which shall--
            ``(1) provide the individual subject to suspension or 
        revocation an opportunity to be heard; and
            ``(2) provide for suspension or revocation in such 
        instances as the Secretary determines appropriate, which shall 
        include an agency determination or a judgment by a court of 
        competent jurisdiction that a certified individual has engaged 
        in an act or practice that is unfair or deceptive under section 
        5 of the Predatory Mortgage Lending Practices Reduction Act.
    ``(d) Renewal of Certification.--The Secretary shall provide that 
certification under this section shall be effective for a specified 
period of time, as determined by the Secretary. The Secretary shall 
establish standards and procedures for recertification of individuals 
whose certifications are expiring. The Secretary shall establish a 
procedure for notifying certified individuals of the expiration of 
their certifications.
    ``(e) Information and Training.--
            ``(1) In general.--The Secretary shall make available, for 
        persons engaged in providing mortgage lending services and 
        mortgage brokerage services, information and training in the 
        areas described in subsection (b)(2). Such information and 
        training shall be made available through classes, written 
        materials, and the World Wide Web.
            ``(2) Contracts.--The Secretary may enter into such 
        agreements and contracts as the Secretary considers necessary 
        to make information and training under this subsection 
        available.
            ``(3) Authorization of appropriations.--For providing 
        information and training under this subsection, there are 
        authorized to be appropriated to the Secretary $2,000,000 for 
        each of fiscal years 2006 and 2007.
    ``(f) Definitions.--For purposes of this section, the following 
definitions shall apply:
            ``(1) Mortgage brokerage services.--The term `mortgage 
        brokerage services' means the bringing together of a borrower 
        and lender to obtain a federally related mortgage loan and the 
        rendering of settlement services, by a person who is not an 
        employee or exclusive agent of a lender.
            ``(2) Mortgage lending services.--The term `mortgage 
        lending services' means services relating to the origination of 
        a federally related mortgage loan, including the taking of loan 
        applications, loan processing, and the underwriting and funding 
        of a loan.
            ``(3) Prime lending rate.--The term `prime lending rate' 
        means, with respect to a lender, the lowest interest rate 
        charged by such lender to its most creditworthy customers.
            ``(4) Subprime.--
                    ``(A) In general.--The term `subprime' means, with 
                respect to a federally related mortgage loan, that the 
                borrower under the loan, or the loan terms, exhibit 
                characteristics that indicate that the loan is subject 
                to a significantly higher risk of default than 
                federally related mortgage loans made to borrowers at 
                prime lending rates.
                    ``(B) Regulations.--The Secretary shall prescribe 
                regulations to carry out this paragraph, which shall 
                specify characteristics referred to in subparagraph (A) 
                that indicate a higher risk of default and shall 
                establish criteria based on such characteristics for 
                determining whether a federally related mortgage loan 
                is a subprime loan. Such characteristics shall 
                include--
                            ``(i) higher loan fees or penalties;
                            ``(ii) higher interest rates;
                            ``(iii) higher debt-to-income ratios;
                            ``(iv) a history of loan delinquency;
                            ``(v) higher loan-to-value ratios;
                            ``(vi) lower credit scores or other credit 
                        ratings;
                            ``(vii) more recent declaration of 
                        bankruptcy;
                            ``(viii) lack of a credit history; and
                            ``(ix) any other factors that the Secretary 
                        considers appropriate.''.
    (b) Regulations.--Not later than 6 months after the date of the 
enactment of this Act, the Secretary of Housing and Urban Development 
shall issue regulations pursuant to section 19(a) of the Real Estate 
Settlement Procedures Act of 1974 (12 U.S.C. 2617(a)) as may be 
necessary to carry out the amendment made by subsection (a) of this 
section.

SEC. 3. LENDER REQUIREMENTS FOR HIGH COST MORTGAGES.

    Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended 
by adding at the end the following new subsections:
    ``(m) Best Practices Plan.--
            ``(1) In general.--Any creditor who extends credit in 
        connection with a mortgage referred to in section 103(aa) shall 
        establish and maintain a best practices plan, in accordance 
        with regulations which the Board shall prescribe, to ensure 
        compliance with the requirements of this title.
            ``(2) Requirements.--The best practices plan established 
        under paragraph (1) by any creditor shall require the creditor, 
        and any subcontractor or agent of the creditor to--
                    ``(A) provide all employees of the creditor, 
                subcontractor, or agent who are involved in any aspect 
                of an extension of credit in connection with a mortgage 
                referred to in section 103(aa), and any subcontractor 
                or agent of such creditor so involved, with such 
                training in the best practices plan of the creditor as 
                the Board determines by regulation to be appropriate; 
                and
                    ``(B) periodically review and evaluate the 
                performance of such employees, contractors, and agents 
                under the best practices plan.
    ``(n) Good Faith Resolution of Complaints.--A creditor, and any 
agent or assignee of the creditor----
            ``(1) shall make a good faith effort to resolve any 
        consumer complaint concerning improper or questionable lending 
        practices with respect to a mortgage referred to in section 
        103(aa) before the end of the 60-day period beginning on the 
        date the complaint is received by the creditor, agent or 
        assignee; and
            ``(2) may take no action, directly or indirectly, including 
        seeking any remedy in law or equity, to collect the amount of 
        any mortgage referred to in paragraph (1), or any part of such 
        amount, or otherwise enforce the mortgage against the consumer 
        or the property securing the mortgage, during such 60-day 
        period (and any time limit for bringing an action to collect 
        any such amount shall toll during such period and any civil 
        action filed before the beginning of such period in any court 
        shall be suspended during such period).
    ``(o) Prohibition on Charges not Previously Disclosed.--A creditor, 
or an agent or assignee of a creditor, may not impose any charge or 
fee, or attempt to collect any charge or fee, in connection with a 
mortgage referred to in section 103(aa) that was not disclosed before 
the mortgage was executed, or impose or attempt to collect any charge 
or fee that was so disclosed in an amount in excess of the amount 
disclosed, unless the creditor or assignee establishes, in accordance 
with regulations which the Board shall prescribe, that the charge or 
fee is reasonable and could not have reasonably been foreseen at the 
time the mortgage was executed.
    ``(p) Plain Description and Disclosure Requirement.--
            ``(1) Charges and fees.--Notwithstanding any other 
        provision of this title, all disclosures of charges and fees 
        required under this title with regard to a mortgage referred to 
        in section 103(aa), shall be separately enumerated and clearly 
        labeled, stated, and described, including charges described in 
        clause (ii) or (iii) of section 128(a)(2)(A).
            ``(2) Rescission and other rights.--The disclosure required 
        under the penultimate sentence of section 125(a) in connection 
        with a mortgage referred to in section 103(aa), together with a 
        summary of the consumer's rights, shall be provided to the 
        consumer in clear and plain language not less than 24 hours 
        before the mortgage is executed.''.

SEC. 4. UNFAIR AND DECEPTIVE ACTS AND PRACTICES.

    (a) Prohibition.--It shall be unlawful, in providing any mortgage 
lending services for a subprime federally related mortgage loan or any 
mortgage brokerage services for such a loan, to engage in any unfair or 
deceptive act or practice.
    (b) Rulemaking Proceedings.--The Secretary of Housing and Urban 
Development, the Board of Governors of the Federal Reserve System, and 
the Federal Trade Commission may jointly issue--
            (1) interpretive rules and general statements of policy 
        with respect to unfair or deceptive acts or practices in the 
        provision of mortgage lending services for a subprime federally 
        related mortgage loan and mortgage brokerage services for such 
        a loan, within the meaning of subsection (a); and
            (2) regulations defining with specificity acts or practices 
        which are unfair or deceptive in the provision of mortgage 
        lending services for a subprime federally related mortgage loan 
        or mortgage brokerage services for such a loan, within the 
        meaning of subsection (a).
    (c) Compliance Enforcement.--Any violation of a regulation issued 
under subsection (b)(2) shall be treated as a violation of a 
requirement imposed under the Truth in Lending Act and compliance with 
such regulation shall be enforceable under sections 108 and 130 of such 
Act.
    (d) Definitions.--For purposes of this section, the terms 
``mortgage brokerage services'', ``mortgage lending services'', and 
``subprime'' have the meanings given such terms in section 13(f) of the 
Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2611(f)).
    (e) Penalties.--
            (1) First violation.--In addition to the enforcement 
        provisions referred to in subsection (c), each person who 
        violates this section shall forfeit and pay a civil penalty of 
        not more than $10,000 for each day any such violation 
        continues.
            (2) Subsequent violations.--In the case of any person on 
        whom a civil penalty has been imposed under paragraph (1), 
        paragraph (1) shall be applied by substituting ``$20,000'' for 
        ``$10,000'' with respect to all subsequent violations.
            (3) Assessment.--The agency referred to in subsection (a) 
        or (c) of section 108 of the Truth in Lending Act with respect 
        to any person described in paragraph (1) shall assess any 
        penalty under this subsection to which such person is subject.

SEC. 5. PROHIBITION ON CERTAIN ARBITRATION CLAUSES.

    (a) In General.--The Consumer Credit Protection Act (15 U.S.C. 1601 
et seq.) is amended by adding at the end the following new title:

                     ``TITLE X--DISPUTE RESOLUTION

``SEC. 1001. SHORT TITLE.

    ``This title may be cited as the `Consumer Fairness Act'.

``SEC. 1002. DEFINITIONS.

    ``For purposes of this title, the following definitions shall 
apply:
            ``(1) Consumer.--The term `consumer' means any individual.
            ``(2) Consumer transaction.--The term `consumer 
        transaction' means the sale or rental of goods or services, the 
        extension of credit, or the provision of any other financial 
        product or service, to an individual in a transaction entered 
        into primarily for personal, family, or household purposes, 
        including any consumer credit transaction that is secured by 
        the consumer's principal dwelling.
            ``(3) Consumer contract.--The term `consumer contract' 
        means any written, standardized form contract between the 
        parties to a consumer transaction.

``SEC. 1003. PROHIBITION ON ARBITRATION CLAUSES IMPOSED ON CONSUMERS 
              WITHOUT THEIR CONSENT.

    ``(a) In General.--A written provision in any consumer transaction 
or consumer contract which requires binding arbitration to resolve any 
controversy arising out of such transaction or contract, or the refusal 
to perform the whole or any part of the transaction shall not be 
enforceable.
    ``(b) Post-Controversy Agreements.--Subsection (a) shall not apply 
with respect to a written agreement to determine by binding arbitration 
an existing controversy arising out of a consumer transaction or 
consumer contract if the written agreement has been entered into by the 
parties to the consumer transaction or consumer contract after the 
controversy has arisen.
    ``(c) Coordination With Other Law.--No provision of this section 
shall be construed as annulling, altering, affecting, or superseding 
any Federal law, or the laws of any State, relating to arbitration in 
connection with consumer transactions or consumer contracts, except to 
the extent that those laws are inconsistent with the provisions of this 
section, and then only to the extent of the inconsistency.''.
    (b) Applicability.--The amendments made by this section shall apply 
to all consumer transactions and consumer contracts entered into on, or 
after the date of the enactment of this Act and to all controversies 
pending or filed on, or arising after, the date of the enactment of 
this Act.

SEC. 6. GRANTS TO COMMUNITY DEVELOPMENT CORPORATIONS FOR PREDATORY 
              LENDING EDUCATION.

    (a) In General.--The Community Development Banking and Financial 
Institutions Act of 1994 (12 U.S.C. 4701 et seq.) is amended by adding 
at the end the following new section:

``SEC. 122. GRANTS TO COMMUNITY DEVELOPMENT CORPORATIONS FOR PREDATORY 
              LENDING EDUCATION.

    ``(a) In General.--To the extent amounts are made available under 
subsection (d), the Fund may make grants to nonprofit community 
development corporations to provide education and training to 
borrowers, potential borrowers, and community groups regarding illegal 
and inappropriate practices, methods, practices, and terms of predatory 
lending.
    ``(b) Selection.--The selection of community development 
corporations to receive grants under this section shall be at the 
discretion of the Fund and in accordance with criteria established by 
the Fund.
    ``(c) Grant Amounts.--The Fund may establish a limitation on the 
amount received by any single community development corporation from 
grants under this section for any single fiscal year.
    ``(d) Authorization of Appropriations.--There is authorized to be 
appropriated to the Fund for grants under this section $2,000,000 for 
each of fiscal years 2006 and 2007.''.
    (b) Amendment to Table of Contents.--The table of contents in 
section 1(b) of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (12 U.S.C. 4701 note) is amended by inserting 
after the item relating to section 121 the following new item:

``122. Grants to community development corporations for predatory 
                            lending education.''.
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