Mortgage broker requirements

The Truth in Lending Act (15 U.S.C. 1601 et seq.) is amended by inserting after section 129 the following new section:

129A.

Duties of mortgage brokers

(a)

Definitions

For purposes of this section, the following definitions shall apply: (1)

Home mortgage loan

The term home mortgage loan means any consumer credit transaction in which a security interest, including any such interest arising by operation of law, is or will be retained or acquired in any real property located within the United States which is or, upon the completion of the transaction, will be used as the principal residence of the consumer. (2)

Mortgage broker

The term mortgage broker means any person who, for compensation or in anticipation of compensation, provides mortgage brokerage services with respect to home mortgage loans for which the person is not the creditor and includes any loan correspondents that provide such services. (3)

Mortgage brokerage services

The term mortgage brokerage services means any of the following services: (A)Arranging or negotiating, or attempting to arrange or negotiate, home mortgage loans or commitments for such loans. (B)Referring consumer applicants or prospective applicants for home mortgage loans to creditors. (C)Selecting or offering to select, on behalf of consumers, creditors to whom requests for an extension of a home mortgage loan may be made. (b)

Mortgage broker responsibilities and duties

(1)

Agency by operation of law

A mortgage broker who provides mortgage brokerage services to any consumer shall be deemed to have an agency relationship with the consumer for such purposes and the broker shall be subject to all requirements for agents of consumers that are applicable under State or Federal law in connection with providing such services. (2)

Broker duties

In providing any mortgage brokerage services to any consumer, the mortgage broker shall— (A)act with reasonable skill, care, and diligence in providing any such services to the consumer and provide the consumer with a reasonable choice among available home mortgage loan products that meet the consumer’s stated needs for mortgage financing; (B)disclose to a consumer the risks and benefits of each home mortgage loan product offered to the borrower, including any possibility of, and the possible extent of, a payment increase at the time of any resetting of rate, the extent of any prepayment penalties, balloon payments, and the consumer's responsibilities to pay taxes and insurance with respect to such product; (C)disclose to the consumer— (i)all fees or other payments the mortgage broker may or will receive, if any, from a creditor in connection with each home mortgage loan product that is offered or disclosed to the consumer, directly or indirectly, in the course of providing such services; (ii)the amount of each such fee or payment; (iii)the rate used to determine the amount of any such fee; (iv)how the consumer may use the amount of such fees or payments to reduce settlement costs otherwise applicable to the consumer upon entering into consumer credit transaction involving such home mortgage loan product; and (v)all fees or other payments the mortgage broker may or will receive, if any, from the consumer in connection with each home mortgage loan product that is offered or disclosed to the consumer, directly or indirectly, in the course of providing such services; (D)meet all applicable licensing requirements under State or local law; and (E)obtain and permanently maintain a bond— (i)for an amount equal to not less than 1 percent of the aggregate value of all direct and indirect fees received by the mortgage broker in connection with providing mortgage brokerage services in the calendar year preceding the date of the transaction; (ii)that inures, first, to the benefit of any consumer who has any claim against the mortgage broker under this title or any other applicable provision of law; and, second, to the benefit of creditors that deal with mortgage brokers in accordance with this title; and (iii)under which any assignee or subsequent transferee or trustee of a consumer or creditor remains a beneficiary of the bond. (3)

Steering prohibited

In connection with a home mortgage loan, a mortgage broker may not steer, counsel, or direct a consumer to a higher-cost mortgage as evidenced by higher rates, charges, principal amounts, or the inclusion of prepayment penalties or other terms than a lower-cost mortgage for which the consumer would otherwise qualify, considering the loan features requested by the consumer. (c)

Statutory obligation

No requirement imposed on any mortgage broker under this section may be waived by any consumer or by the terms of any agreement executed between the mortgage broker and any consumer. (d)

Enforcement

For purposes of providing a cause of action for any failure to comply with any requirement imposed this section, section 130(a) shall be applied with respect to any such failure— (1)by substituting mortgage broker for creditor each place such term appears in such section; and (2)by treating all points, fees, and costs incurred in the origination of any home mortgage loan as actual damages sustained by the consumer as a result of the failure.