[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3837 Introduced in House (IH)]







110th CONGRESS
  1st Session
                                H. R. 3837

  To require escrows for certain mortgage loans, to improve mortgage 
   servicing, to promote sustainable homeownership opportunities, to 
enhance appraisal quality and standards, to better appraisal oversight, 
        to mitigate appraiser pressure, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 16, 2007

 Mr. Kanjorski (for himself, Mr. Frank of Massachusetts, Mr. Wilson of 
Ohio, and Mr. Hodes) introduced the following bill; which was referred 
                 to the Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
  To require escrows for certain mortgage loans, to improve mortgage 
   servicing, to promote sustainable homeownership opportunities, to 
enhance appraisal quality and standards, to better appraisal oversight, 
        to mitigate appraiser pressure, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Escrow, Appraisal, and Mortgage 
Servicing Improvements Act''.

SEC. 2. TABLE OF CONTENTS.

Sec. 1. Short title.
Sec. 2. Table of contents.
                      TITLE I--MORTGAGE SERVICING

Sec. 101. Escrow and impound accounts relating to certain consumer 
                            credit transactions.
Sec. 102. Disclosure notice required for consumers who opt out of 
                            escrow services.
Sec. 103. Real Estate Settlement Procedures Act of 1974 amendments.
Sec. 104. Mortgage servicing studies required.
Sec. 105. Escrows included in repayment analysis.
                     TITLE II--APPRAISAL ACTIVITIES

Sec. 201. Property appraisal requirements.
Sec. 202. Unfair and deceptive practices and acts relating to certain 
                            consumer credit transactions.
Sec. 203. Amendments relating to appraisal subcommittee of FIEC, 
                            appraiser independence, and approved 
                            appraiser education.
Sec. 204. Study required on improvements in appraisal process and 
                            compliance programs.
Sec. 205. Consumer appraisal disclosure.

                      TITLE I--MORTGAGE SERVICING

SEC. 101. ESCROW AND IMPOUND ACCOUNTS RELATING TO CERTAIN CONSUMER 
              CREDIT TRANSACTIONS.

    (a) In General.--Chapter 2 of the Truth in Lending Act (15 U.S.C. 
1631 et seq.) is amended by inserting after section 129 the following 
new section:

``SEC. 129A. ESCROW OR IMPOUND ACCOUNTS RELATING TO CERTAIN CONSUMER 
              CREDIT TRANSACTIONS.

    ``(a) In General.--Except as provided in subsection (b) or (c), a 
creditor, in connection with the formation or consummation of a 
consumer credit transaction secured by the principal dwelling of the 
consumer, shall establish, at the time of the consummation of such 
transaction, an escrow or impound account for the payment of taxes and 
hazard insurance, and, if applicable, flood insurance, mortgage 
insurance, ground rents, and any other required periodic payments or 
premiums with respect to the property or the loan terms, as provided 
in, and in accordance with, this section, unless such account already 
exists.
    ``(b) When Required.--No impound, trust, or other type of account 
for the payment of property taxes, insurance premiums, or other 
purposes relating to the property may be required as a condition of a 
real property sale contract or a loan secured by a deed of trust or 
mortgage on real property containing only a single-family, owner-
occupied dwelling, except when--
            ``(1) any such impound, trust, or other type of escrow or 
        impound account for such purposes is required by Federal or 
        State law;
            ``(2) a loan is made, guaranteed, or insured by a State or 
        Federal governmental lending or insuring agency;
            ``(3) the consumer's debt-to-income ratio at the time the 
        home mortgage is established taking into account income from 
        all sources including the consumer's employment exceeds 40 
        percent;
            ``(4) the transaction is secured by--
                    ``(A) a first mortgage or lien on the consumer's 
                principal dwelling and the annual percentage rate on 
                the credit, at the time of consummation of the 
                transaction, will exceed by more than 2.5 percentage 
                points the yield on Treasury securities having 
                comparable periods of maturity on the 15th day of the 
                month immediately preceding the month in which the 
                application of the extension of credit is received by 
                the creditor; or
                    ``(B) a junior or subordinate mortgage on the 
                consumer's principal dwelling and the annual percentage 
                rate on the credit, at the time of consummation of the 
                transaction, will exceed by more than 5 percentage 
                points the yield on Treasury securities having 
                comparable periods of maturity on the 15th day of the 
                month immediately preceding the month in which the 
                application of the extension of credit is received by 
                the creditor;
            ``(5) a consumer obtains a mortgage referred to in section 
        103(aa);
            ``(6) the original principal amount of such loan at the 
        time of consummation of the transaction is--
                    ``(A) 90 percent or more of the sale price, if the 
                property involved is purchased with the proceeds of the 
                loan; or
                    ``(B) 90 percent or more of the appraised value of 
                the property securing the loan;
            ``(7) the combined principal amount of all loans secured by 
        the real property exceeds 95 percent of the appraised value of 
        the property securing the loans at the time of consummation of 
        the last transaction;
            ``(8) the consumer was the subject of a proceeding under 
        title 11, United States Code, at any time during the 10-year 
        period preceding the date of the transaction (as determined on 
        the basis of the date of entry of the order for relief or the 
        date of adjudication, as the case may be, with respect to such 
        proceeding); or
            ``(9) so required by the Board pursuant to regulation.
    ``(c) Duration of Escrow or Impound Account.--An escrow or impound 
account established pursuant to this section, shall remain in existence 
for a minimum period of 5 years, unless the underlying mortgage 
establishing the account is terminated.
    ``(d) Administration of Escrow or Impound Accounts.--
            ``(1) In general.--Except as may otherwise be provided for 
        in this title or in regulations prescribed by the Board, escrow 
        or impound accounts established pursuant to this section shall 
        be established in an insured depository institution.
            ``(2) Administration.--Except as provided in this section 
        or regulations prescribed under this section, an escrow or 
        impound account subject to this section shall be administered 
        in accordance with--
                    ``(A) the Real Estate Settlement Procedures Act of 
                1974 and regulations prescribed under such Act; and
                    ``(B) the law of the State where the real property 
                securing the consumer credit transaction is located.
            ``(3) Payment of interest.--If prescribed by applicable 
        Federal or State law, each creditor shall pay interest to the 
        consumer on the amount held in any impound, trust, or escrow 
        account that is subject to this section in the manner as 
        prescribed by that applicable Federal or State law.
    ``(e) Disclosures Relating to Escrow or Impound Account.--In the 
case of any impound, trust, or escrow account that is subject to this 
section, the creditor shall disclose by written notice to the consumer 
within 3 business days before the consummation of the consumer credit 
transaction giving rise to such account the following information:
            ``(1) The fact that an escrow or impound account will be 
        established at consummation of the transaction.
            ``(2) The amount required at closing to initially fund the 
        escrow or impound account.
            ``(3) The amount, in the initial year, of the estimated 
        taxes and hazard insurance, including flood insurance, if 
        applicable, and any other required periodic payments or 
        premiums that reflects the taxable assessed value of the real 
        property securing the transaction, including the value of any 
        improvements on the property or to be constructed on the 
        property (whether or not such construction will be financed 
        from the proceeds of the transaction).
            ``(4) The estimated monthly amount payable for taxes, 
        hazard insurance (including flood insurance, if applicable) and 
        any other required periodic payments or premiums.
            ``(5) The fact that if the consumer chooses to terminate 
        the account after 5 years, the consumer will become responsible 
        for the payment of all taxes, hazard insurance, and flood 
        insurance, if applicable, as well as any other required 
        periodic payments or premiums on the property unless a new 
        escrow or impound account is established.
    ``(f) Definitions.--For purposes of this section, the following 
definitions shall apply:
            ``(1) Flood insurance.--The term `flood insurance' means 
        flood insurance coverage provided under the national flood 
        insurance program pursuant to the National Flood Insurance Act 
        of 1968.
            ``(2) Hazard insurance.--The term `hazard insurance' shall 
        have the same meaning as provided under the law of the State 
        where the real property securing the consumer credit 
        transaction is located.''.
    (b) Implementation.--
            (1) Regulations.--The Board shall prescribe, in final form, 
        such regulations as the Board determines to be necessary to 
        implement the amendments made by subsection (a) before the end 
        of the 120-day period beginning on the date of the enactment of 
        this Act.
            (2) Effective date.--The amendments made by subsection (a) 
        shall only apply to covered mortgage loans consummated after 
        the end of the 1-year period beginning on the date of enactment 
        of this Act.
    (c) Clerical Amendment.--The table of sections for chapter 2 of the 
Truth in Lending Act is amended by inserting after the item relating to 
section 129 the following new item:

``129A. Escrow or impound accounts relating to certain consumer credit 
                            transactions.''.

SEC. 102. DISCLOSURE NOTICE REQUIRED FOR CONSUMERS WHO OPT OUT OF 
              ESCROW SERVICES.

    (a) In General.--Section 129A of the Truth in Lending Act (as added 
by section 101 of this title) is amended by adding at the end the 
following new subsection:
    ``(g) Disclosure Notice Required for Consumers Who Opt Out of 
Escrow Services.--
            ``(1) In general.--If--
                    ``(A) an impound, trust, or other type of account 
                for the payment of property taxes, insurance premiums, 
                or other purposes relating to property securing a 
                consumer credit transaction is not established in 
                connection with the transaction; or
                    ``(B) a consumer chooses, at any time after such an 
                account is established in connection with any such 
                transaction, to close such account,
        the creditor shall provide a timely and clearly written 
        disclosure to the consumer that advises the consumer of the 
        responsibilities of the consumer and implications for the 
        consumer in the absence of any such account.
            ``(2) Disclosure requirements.--Any disclosure provided to 
        a consumer under paragraph (1) shall include the following:
                    ``(A) Information concerning any applicable fees 
                associated with either the non-establishment of any 
                such account at the time of the transaction, or any 
                subsequent closure of any such account.
                    ``(B) A clear and prominent notice that the 
                consumer is responsible for personally and directly 
                paying the non-escrowed items, in addition to paying 
                the mortgage loan payment, in the absence of any such 
                account, and the fact that the costs for taxes, 
                insurance, and related fees can be substantial.
                    ``(C) A clear explanation of the consequences of 
                any failure to pay non-escrowed items, including the 
                possible requirement for the forced placement of 
                insurance by the creditor and the potentially higher 
                cost (including any potential commission payments to 
                the servicer) or reduced coverage for the consumer in 
                the event of any such creditor-placed insurance.''.
    (b) Implementation.--
            (1) Regulations.--The Board shall prescribe, in final form, 
        such regulations as the Board determines to be necessary to 
        implement the amendments made by subsection (a) before the end 
        of the 120-day period beginning on the date of the enactment of 
        this Act.
            (2) Effective date.--The amendments made by subsection (a) 
        shall only apply in accordance with the regulations established 
        in paragraph (1) and beginning on the date occurring 180-days 
        after the date of enactment of this Act.

SEC. 103. REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 AMENDMENTS.

    (a) Servicer Prohibitions.--Section 6 of the Real Estate Settlement 
Procedures Act of 1974 (12 U.S.C. 2605) is amended by adding at the end 
the following new subsections:
    ``(k) Servicer Prohibitions.--
            ``(1) In general.--A servicer of a federally related 
        mortgage shall not--
                    ``(A) obtain force-placed insurance unless there is 
                a reasonable basis to believe the borrower has failed 
                to comply with the loan contract's requirements to 
                maintain property insurance;
                    ``(B) charge fees for responding to valid qualified 
                written requests under this section;
                    ``(C) fail to take timely action to respond to a 
                borrower's requests to correct errors relating to 
                allocation of payments, final balances for purposes of 
                paying off the loan, or avoiding foreclosure, or other 
                standard servicer's duties;
                    ``(D) fail to respond within 10 business days to a 
                request from a borrower to provide the identity, 
                address, and other relevant information about the owner 
                assignee of the loan; or
                    ``(E) fail to comply with any other obligation 
                found by the Secretary to be appropriate to carry out 
                the consumer protection purposes of this Act.
            ``(2) Force-placed insurance defined.--For purposes of this 
        subsection and subsections (l) and (m), the term `force-placed 
        insurance' means hazard insurance coverage obtained by a 
        servicer of a federally related mortgage to protect the 
        mortgagee's interest in the property secured by the mortgage 
        when the borrower has failed to maintain or renew hazard or 
        flood insurance on such property as required of the borrower 
        under the terms of the mortgage.
    ``(l) Requirements for Force-Placed Insurance.--A servicer of a 
federally related mortgage shall not be construed as having a 
reasonable basis for obtaining force-placed insurance unless the 
requirements of this subsection have been met.
            ``(1) Written notices to borrower.--A servicer may not 
        impose any charge on any borrower for force-placed insurance 
        with respect to any property securing a federally related 
        mortgage unless--
                    ``(A) the servicer has sent, by first-class mail, a 
                written notice to the borrower containing--
                            ``(i) a reminder of the borrower's 
                        obligation to maintain hazard or flood 
                        insurance on the property securing the 
                        federally related mortgage;
                            ``(ii) a statement that the servicer does 
                        not have evidence of insurance coverage of such 
                        property;
                            ``(iii) a clear and conspicuous statement 
                        of the procedures by which the borrower may 
                        demonstrate that the borrower already has 
                        insurance coverage; and
                            ``(iv) a statement that the servicer may 
                        obtain such coverage at the borrower's expense 
                        if the borrower does not provide such 
                        demonstration of the borrower's existing 
                        coverage in a timely manner;
                    ``(B) the servicer has sent, by certified mail, a 
                second written notice, at least 30 days after the 
                mailing of the notice under subparagraph (A) that 
                contains all the information described in each clauses 
                of such subparagraph; and
                    ``(C) the servicer has not received from the 
                borrower any demonstration of hazard insurance coverage 
                or, if applicable, flood insurance coverage for the 
                property securing the mortgage by the end of the 20-day 
                period beginning on the date the notice under 
                subparagraph (B) was sent by the servicer.
            ``(2) Sufficiency of demonstration.--A servicer of a 
        federally related mortgage shall accept any reasonable form of 
        confirmation from a borrower of existing insurance coverage, 
        including verbal confirmation of the existing insurance policy 
        number along with the identity of the insurance company or 
        agent.
            ``(3) Termination of force-placed insurance.--Within 15 
        days of the receipt by a servicer of confirmation of a 
        borrower's existing insurance coverage, the servicer shall--
                    ``(A) terminate the force-placed insurance; and
                    ``(B) refund to the consumer all force-placed 
                insurance premiums paid by the borrower during any 
                period during which the borrower's insurance coverage 
                and the force-placed insurance coverage were each in 
                effect, and any related fees charged to the consumer's 
                account with respect to the force-placed insurance 
                during such period.
            ``(4) Prohibition on default, late fees, or foreclosure.--
                    ``(A) In general.--A servicer of a federally 
                related mortgage may not place the mortgage in default, 
                assess late fees, or initiate any foreclosure or 
                similar proceedings with respect to such mortgage 
                solely due to a borrower's failure to pay force-placed 
                insurance premiums or obtain hazard insurance or flood 
                insurance coverage directly.
                    ``(B) Addition to loan amount.--The amount of 
                force-placed insurance premiums relating to a federally 
                related mortgage that have not been paid by the 
                borrower may be treated by the servicer of such 
                mortgage as additional debt of the borrower secured by 
                the security instrument and interest may be charged on 
                such additional debt as provided in the loan 
                instruments at the note rate.
    ``(m) Limitations on Force-Placed Insurance Charges.--All charges 
for force-placed insurance premiums shall be bona fide and reasonable 
in amount.
    ``(n) Prompt Crediting of Payments Required.--All amounts received 
by a lender or a servicer shall be accepted and credited on the date 
received. The payments shall be credited to interest and principal due 
on the loan, before crediting payment to taxes, insurance, or fees, 
except if taxes and insurance are in arrears.''.
    (b) Increase in Penalty Amounts.--Section 6(f) of the Real Estate 
Settlement Procedures Act of 1974 (12 U.S.C. 2605(f)) is amended--
            (1) in paragraphs (1)(B) and (2)(B), by striking ``$1,000'' 
        each place such term appears and inserting ``$3,000''; and
            (2) in paragraph (2)(B)(i), by striking ``$500,000'' and 
        inserting ``$1,000,000''.
    (c) Decrease in Response Times.--Section 6(e) of the Real Estate 
Settlement Procedures Act of 1974 (12 U.S.C. 2605(e)) is amended--
            (1) in paragraph (1)(A), by striking ``20 days'' and 
        inserting ``10 days'';
            (2) in paragraph (2), by striking ``60 days'' and inserting 
        ``20 days''; and
            (3) by adding at the end the following new paragraph:
            ``(4) Limited extension of response time.--The 20-day 
        period described in paragraph (2) may be extended for not more 
        than 25 days if, before the end of such 20-day period, the 
        servicer notifies the borrower of the extension and the reasons 
        for the delay in responding.''.
    (d) Requests for Pay-Off Amounts.--Section 6(e) of the Real Estate 
Settlement Procedures Act of 1974 (12 U.S.C. 2605(e)) is amended by 
inserting after paragraph (4) (as added by subsection (c) of this 
section) the following new paragraph:
            ``(5) Requests for pay-off amounts.--A creditor or servicer 
        shall send a payoff balance within 5 business days of the 
        receipt of a written request for such balance from or on behalf 
        of the borrower by first-class mail.''.
    (e) Prompt Refund of Escrow Accounts Upon Payoff.--Section 6(g) of 
the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605(g)) 
is amended by adding at the end the following new sentence: ``Any 
balance in any such account at the time the loan is paid off shall be 
promptly returned to the borrower.''.

SEC. 104. MORTGAGE SERVICING STUDIES REQUIRED.

    (a) Mortgage Servicing Fraud.--
            (1) Study.--The Secretary of Housing and Urban Development, 
        in consultation with the Board of Governors of the Federal 
        Reserve System and the Federal Trade Commission, shall conduct 
        a comprehensive study on mortgage servicing fraud.
            (2) Issues to be included.--In addition to other issues the 
        Secretary, Board, and Commission may determine to be 
        appropriate and possibly pertinent to the study conducted under 
        paragraph (1), the study shall include the following issues:
                    (A) A survey of the industry in order to examine 
                the issue of the timely posting of payments by 
                servicers.
                    (B) The use of force-placed insurance.
                    (C) The employment of daily interest when payments 
                are made after a due date.
                    (D) The charging of late fees on the entire 
                outstanding principal.
                    (E) The charging of interest on servicing fees.
                    (F) The utilization of abusive collection 
                practices.
                    (G) The charging of prepayment penalties when not 
                authorized by either the note or law.
                    (H) The employment of unconscionable forbearance 
                agreements.
                    (I) Foreclosure abuses.
            (3) Report.--Before the end of the 12-month period 
        beginning on the date of the enactment of this Act, the 
        Secretary of Housing and Urban Development shall submit a 
        report on the study conducted under this subsection to the 
        Committee on Financial Services of the House of Representatives 
        and the Committee on Banking, Housing, and Urban Affairs of the 
        Senate.
    (b) Mortgage Servicing Improvements.--
            (1) Study.--The Secretary of Housing and Urban Development, 
        in consultation with the Board of Governors of the Federal 
        Reserve System and the Federal Trade Commission, shall conduct 
        a comprehensive study on means to improve the best practices of 
        the mortgage servicing industry, and Federal and State laws 
        governing such industry.
            (2) Report.--Before the end of the 18-month period 
        beginning on the date of the enactment of this Act, the 
        Secretary of Housing and Urban Development shall submit a 
        report on the study conducted under this subsection to the 
        Committee on Financial Services of the House of Representatives 
        and the Committee on Banking, Housing, and Urban Affairs of the 
        Senate, together with such recommendations for administrative 
        or legislative action as the Secretary, in consultation with 
        the Board and the Commission, may determine to be appropriate.

SEC. 105. ESCROWS INCLUDED IN REPAYMENT ANALYSIS.

    (a) In General.--Section 128(b) of the Truth in Lending Act (15 
U.S.C. 1638(b)) is amended by adding at the end the following new 
paragraph:
            ``(4) Repayment analysis required to include escrow 
        payments.--
                    ``(A) In general.--In the case of any consumer 
                credit transaction secured by a first mortgage or lien 
                on the consumer's principal residence for which an 
                impound, trust, or other type of account has been or 
                will be established in connection with the transaction 
                for the payment of property taxes, hazard and flood (if 
                any) insurance premiums, or other purposes relating to 
                the property, the information required to be provided 
                under subsection (a) with respect to the amount of the 
                repayments shall take into account the amount of any 
                payment to such account for each such repayment in 
                accordance with section 10(a)(2) of the Real Estate 
                Settlement Procedures Act of 1974.
                    ``(B) Assessment value.--The amount taken into 
                account under subparagraph (A) for the payment of 
                property taxes, hazard and flood (if any) insurance 
                premiums, or other purposes shall reflect the taxable 
                assessed value of the real property securing the 
                transaction, including the value of any improvements on 
                the property or to be constructed on the property 
                (whether or not such construction will be financed from 
                the proceeds of the transaction).''.

                     TITLE II--APPRAISAL ACTIVITIES

SEC. 201. PROPERTY APPRAISAL REQUIREMENTS.

    Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended 
by inserting after subsection (l) the following new subsection:
    ``(m) Property Appraisal Requirements.--
            ``(1) In general.--A creditor may not extend credit in the 
        form of a mortgage referred to in section 103(aa) to any 
        consumer without first obtaining a written appraisal of the 
        property to be mortgaged prepared in accordance with the 
        requirements of this subsection.
            ``(2) Appraisal requirements.--
                    ``(A) Physical property visit.--An appraisal of 
                property to be secured by a mortgage referred to in 
                section 103(aa) does not meet the requirement of this 
                subsection unless it is performed by a qualified 
                appraiser who conducts a physical property visit of the 
                interior of the mortgaged property.
                    ``(B) Second appraisal under certain 
                circumstances.--
                            ``(i) In general.--If the purpose of a 
                        mortgage referred to in section 103(aa) is to 
                        finance the purchase or acquisition of the 
                        mortgaged property from a person within 180 
                        days of the purchase or acquisition of such 
                        property by that person at a price that was 
                        lower than the current sale price of the 
                        property, the creditor shall obtain a second 
                        appraisal from a different qualified appraiser. 
                        The second appraisal shall include an analysis 
                        of the difference in sale prices, changes in 
                        market conditions, and any improvements made to 
                        the property between the date of the previous 
                        sale and the current sale.
                            ``(ii) No cost to consumer.--The cost of 
                        any second appraisal required under clause (i) 
                        may not be charged to the consumer.
                    ``(C) Qualified appraiser defined.--For purposes of 
                this subsection, the term `qualified appraiser' means a 
                person who--
                            ``(i) is certified or licensed by the State 
                        in which the property to be appraised is 
                        located; and
                            ``(ii) performs each appraisal in 
                        conformity with the Uniform Standards of 
                        Professional Appraisal Practice and title XI of 
                        the Financial Institutions Reform, Recovery, 
                        and Enforcement Act of 1989, and the 
                        regulations prescribed under such title, as in 
                        effect on the date of the appraisal.
            ``(3) Free copy of appraisal.--A creditor shall provide 1 
        copy of each appraisal conducted in accordance with this 
        subsection in connection with a mortgage referred to in section 
        103(aa) to the consumer without charge, and at least 3 days 
        prior to the transaction closing date.
            ``(4) Consumer notification.--At the time of the initial 
        mortgage application, the consumer shall be provided with a 
        statement by the creditor that any appraisal prepared for the 
        mortgage is for the sole use of the creditor, and that the 
        consumer may choose to have a separate appraisal conducted at 
        their own expense.
            ``(5) Violations.--In addition to any other liability to 
        any person under this title, a creditor found to have willfully 
        failed to obtain an appraisal as required in this subsection 
        shall be liable to the consumer for the sum of $2,000.''.

SEC. 202. UNFAIR AND DECEPTIVE PRACTICES AND ACTS RELATING TO CERTAIN 
              CONSUMER CREDIT TRANSACTIONS.

    (a) In General.--Chapter 2 of the Truth in Lending Act (15 U.S.C. 
1631 et seq.) is amended by inserting after section 129A (as added by 
section 101 of this Act) the following new section:

``SEC. 129B. UNFAIR AND DECEPTIVE PRACTICES AND ACTS RELATING TO 
              CERTAIN CONSUMER CREDIT TRANSACTIONS.

    ``(a) In General.--It shall be unlawful, in providing any mortgage 
lending services for a consumer credit transaction secured by the 
principal dwelling of the consumer or any mortgage brokerage services 
for such a transaction, to engage in any unfair or deceptive act or 
practice.
    ``(b) Appraisal Independence.--For purposes of subsection (a), 
unfair and deceptive practices shall include--
            ``(1) any appraisal of a property offered as security for 
        repayment of the consumer credit transaction that is conducted 
        in connection with such transaction in which a person with an 
        interest in the underlying transaction compensates, coerces, 
        extorts, colludes, instructs, induces, bribes, or intimidates a 
        person conducting or involved in an appraisal, or attempts, to 
        compensate, coerce, extort, collude, instruct, induce, bribe, 
        or intimidate such a person, for the purpose of causing the 
        appraised value assigned, under the appraisal, to the property 
        to be based on any factor other than the independent judgment 
        of the appraiser;
            ``(2) mischaracterizing, or suborning any 
        mischaracterization of, the appraised value of the property 
        securing the extension of the credit;
            ``(3) seeking to influence an appraiser or otherwise to 
        encourage a targeted value in order to facilitate the making or 
        pricing of the transaction; and
            ``(4) failing to timely compensate an appraiser for a 
        completed appraisal regardless of whether the transaction 
        closes.
    ``(c) Exceptions.--The requirements of subsection (b) shall not be 
construed as prohibiting a mortgage lender, mortgage broker, mortgage 
banker, real estate broker, or any other person with an interest in a 
real estate transaction from asking an appraiser to provide 1 or more 
of the following services:
            ``(1) Consider additional, appropriate property 
        information, including the consideration of additional 
        comparable properties to make or support an appraisal.
            ``(2) Provide further detail, substantiation, or 
        explanation for the appraiser's value conclusion.
            ``(3) Correct errors in the appraisal report.
    ``(d) Rulemaking Proceedings.--The Board and the Federal Trade 
Commission--
            ``(1) shall jointly prescribe regulations defining with 
        specificity acts or practices which are unfair or deceptive in 
        the provision of mortgage lending services for a consumer 
        credit transaction secured by the principal dwelling of the 
        consumer or mortgage brokerage services for such a transaction, 
        within the meaning of subsections (a), (b), and (c); and
            ``(2) may jointly issue interpretive guidelines and general 
        statements of policy with respect to unfair or deceptive acts 
        or practices in the provision of mortgage lending services for 
        a consumer credit transaction secured by the principal dwelling 
        of the consumer and mortgage brokerage services for such a 
        transaction, within the meaning of subsections (a), (b), and 
        (c).
    ``(e) Definitions.--For purposes of this section, the terms 
`mortgage brokerage services' and `mortgage lending services', 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)).
    ``(f) Penalties.--
            ``(1) First violation.--In addition to the enforcement 
        provisions referred to in section 130, 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 with respect to any person described in 
        paragraph (1) shall assess any penalty under this subsection to 
        which such person is subject.''.
    (b) Clerical Amendment.--The table of sections for chapter 2 of the 
Truth in Lending Act is amended by inserting after the item relating to 
section 129A (as added by section 101 of this Act) the following new 
item:

``129B. Unfair and deceptive practices and acts relating to certain 
                            consumer credit transactions.''.

SEC. 203. AMENDMENTS RELATING TO APPRAISAL SUBCOMMITTEE OF FIEC, 
              APPRAISER INDEPENDENCE, AND APPROVED APPRAISER EDUCATION.

    (a) Consumer Protection Mission.--
            (1) Purposes.--Section 1101 of the Financial Institutions 
        Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3331) 
        is amended by inserting ``and to provide the Appraisal 
        Subcommittee with a consumer protection mandate'' before the 
        period at the end.
            (2) Functions of appraisal subcommittee.--Section 1103(a) 
        of the Financial Institutions Reform, Recovery, and Enforcement 
        Act of 1989 (12 U.S.C. 3332(a) is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (3);
                    (B) by striking the period at the end of paragraph 
                (4) and inserting ``; and''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(5) protect the consumer from improper appraisal 
        practices and the predations of unlicensed appraisers.''.
            (3) Threshold levels.--Section 1112(b) of the Financial 
        Institutions Reform, Recovery, and Enforcement Act of 1989 (12 
        U.S.C. 3341(b)) is amended by inserting before the period the 
        following: ``, and that such threshold level provides 
        reasonable protection for consumers who purchase 1-4 unit 
        single-family residences''.
    (b) Annual Report of Appraisal Subcommittee.--Section 1103(a)(4) of 
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 
(12 U.S.C. 3332(a)(4)) is amended at the end by inserting: ``The report 
shall also detail the activities of the Appraisal Subcommittee, 
including the results of all audits of State appraiser regulatory 
agencies, and provide an accounting of disapproved actions and warnings 
taken in the previous year, including a description of the conditions 
causing the disapproval.''.
    (c) Open Meetings.--Section 1104(b) of the Financial Institutions 
Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3333(b)) is 
amended by inserting ``in public session after notice in the Federal 
Register'' after ``shall meet''.
    (d) Regulations.--Section 1106 of the Financial Institutions 
Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3335) is 
amended--
            (1) by inserting ``prescribe regulations after notice and 
        opportunity for comment,'' after ``hold hearings''; and
            (2) at the end by inserting ``Any regulations prescribed by 
        the Appraisal Subcommittee shall (unless otherwise provided in 
        this title) be limited to the following functions: temporary 
        practice, national registry, information sharing, and 
        enforcement. For purposes of prescribing regulations, the 
        Appraisal Subcommittee shall establish an advisory committee of 
        industry participants, including appraisers and government 
        agencies, and hold regular meetings.''.
    (e) State Agency Reporting Requirement.--Section 1109(a) of the 
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 
(12 U.S.C. 3338(a)) is amended--
            (1) by striking ``and'' after the semicolon in paragraph 
        (1);
            (2) by redesignating paragraph (2) as paragraph (3); and
            (3) by inserting after paragraph (1) the following new 
        paragraph:
            ``(2) transmit reports on claims, disciplinary actions, 
        license and certification revocations, and license and 
        certification suspensions on a timely basis to the national 
        registry of the Appraisal Subcommittee; and''.
    (f) Registry Fees Modified.--Section 1109(a)(3) of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 
3338(a)(3)) (as modified by section 203(e) of this Act) is amended by--
            (1) striking ``$25'' and inserting ``$40'';
            (2) striking ``$50'' and inserting ``$80''; and
            (3) inserting after the period at the end the following new 
        sentences: ``The Appraisal Subcommittee must consider at least 
        once every 5 years whether to adjust the dollar amount of the 
        registry fees to account for inflation. In implementing any 
        change in registry fees, the Appraisal Subcommittee shall 
        provide flexibility to the States for multi-year certifications 
        and licenses already in place, as well as a transition period 
        to implement the changes in registry fees.''
    (g) Grants and Reports.--Section 1109(b) of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 
3348(b)) is amended--
            (1) by striking ``and'' after the semicolon in paragraph 
        (3);
            (2) by striking the period at the end of paragraph (4) and 
        inserting a semicolon; and
            (3) by adding at the end the following new paragraphs:
            ``(5) make grants to State appraiser regulatory agencies to 
        help defray those costs relating to enforcement activities; and
            ``(6) to report to all State appraiser certifying and 
        licensing agencies when a license or certification is revoked 
        or suspended.''.
    (h) Criteria.--Section 1116 of the Financial Institutions Reform, 
Recovery, and Enforcement Act of 1989 (12 U.S.C. 3345) is amended--
            (1) in subsection (c), by inserting ``whose criteria for 
        the licensing of a real estate appraiser currently meet or 
        exceed the minimum criteria issued by the Appraisal 
        Qualifications Board of The Appraisal Foundation for the 
        licensing of real estate appraisers'' before the period at the 
        end; and
            (2) by striking subsection (e) and inserting the following 
        new subsection:
    ``(e) Minimum Qualification Requirements.--Any requirements 
established for individuals in the position of `Trainee Appraiser' and 
`Supervisory Appraiser' shall meet or exceed the minimum qualification 
requirements of the Appraiser Qualifications Board of the Appraisal 
Foundation. The Appraisal Subcommittee shall have the authority to 
enforce these requirements.''.
    (i) Monitoring of State Appraiser Certifying and Licensing 
Agencies.--Section 1118(a) of the Financial Institutions Reform, 
Recovery, and Enforcement Act of 1989 (12 U.S.C. 3347(a)) is amended--
            (1) by inserting ``funding, staffing,'' after 
        ``practices,'' each place such term appears;
            (2) by inserting before the period at the end of the first 
        sentence the following: ``, whether a State agency processes 
        complaints and completes exams in a reasonable time period, and 
        whether a State agency reports claims and disciplinary actions 
        on a timely basis to the national registry maintained by the 
        Appraisal Subcommittee''; and
            (3) by inserting at the end the following new sentence: 
        ``The Appraisal Subcommittee shall have the authority to impose 
        interim sanctions and suspensions.''.
    (j) Reciprocity.--Subsection (b) of section 1122 of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 
3351(b)) is amended to read as follows:
    ``(b) Reciprocity.--A State appraiser certifying or licensing 
agency shall issue a reciprocal certification or license for an 
individual from another State when--
            ``(1) the appraiser licensing and certification program of 
        such other State is in compliance with the provisions of this 
        title; and
            ``(2) the appraiser holds a valid certification from a 
        State whose requirements for certification or licensing meet or 
        exceed the licensure standards established by the State where 
        an individual seeks appraisal licensure.''.
    (k) Consideration of Professional Appraisal Designations.--Section 
1122(d) of the Financial Institutions Reform, Recovery, and Enforcement 
Act of 1989 (12 U.S.C. 3351(d)) is amended by adding at the end the 
following new sentence: ``No provision of this subsection shall be 
construed as prohibiting consideration of designations conferred by 
recognized national professional appraisal organizations, such as 
sponsoring organizations of The Appraisal Foundation.''.
    (l) Appraiser Independence.--Section 1122 of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 
3351) is amended by adding at the end the following new subsection:
    ``(g) Appraiser Independence.--
            ``(1) Prohibitions on interested parties in a real estate 
        transaction.--No mortgage lender, mortgage broker, mortgage 
        banker, real estate broker, nor any other person with an 
        interest in a real estate transaction involving an appraisal 
        shall improperly influence, or attempt to improperly influence, 
        through coercion, extortion, collusion, compensation, 
        instruction, inducement, intimidation, non-payment for services 
        rendered, or bribery, the development, reporting, result, or 
        review of a real estate appraisal sought in connection with a 
        mortgage loan.
            ``(2) Exceptions.--The requirements of paragraph (1) shall 
        not be construed as prohibiting a mortgage lender, mortgage 
        broker, mortgage banker, real estate broker, or any other 
        person with an interest in a real estate transaction from 
        asking an appraiser to provide 1 or more of the following 
        services:
                    ``(A) Consider additional, appropriate property 
                information, including the consideration of additional 
                comparable properties to make or support an appraisal.
                    ``(B) Provide further detail, substantiation, or 
                explanation for the appraiser's value conclusion.
                    ``(C) Correct errors in the appraisal report.
            ``(3) Prohibitions on conflicts of interest.--No certified 
        or licensed appraiser conducting an appraisal may have a direct 
        or indirect interest, financial or otherwise, in the property 
        or transaction involving the appraisal.
            ``(4) Mandatory reporting.--Any mortgage lender, mortgage 
        broker, mortgage banker, real estate broker, or any other 
        person with an interest in a real estate transaction involving 
        an appraisal who has a reasonable basis to believe an appraiser 
        is violating applicable laws, or is otherwise engaging in 
        unethical or unprofessional conduct, shall refer the matter to 
        the applicable State appraiser certifying and licensing agency.
            ``(5) Regulations.--The Federal financial institutions 
        regulatory agencies (as defined in section 1003(1) of the 
        Federal Financial Institutions Examination Council Act of 1978) 
        shall prescribe such regulations as may be necessary to carry 
        out the provisions of this subsection.
            ``(6) Penalties.--Any person who violates any provision of 
        this section shall be subject to civil penalties under section 
        8(i)(2) of the Federal Deposit Insurance Act or section 
        206(k)(2) of the Federal Credit Union Act, as appropriate.
            ``(7) Proceeding.--A proceeding with respect to a violation 
        of this section shall be an administrative proceeding which may 
        be conducted by a Federal financial institutions regulatory 
        agency in accordance with the procedures set forth in 
        subchapter II of chapter 5 of title 5, United States Code.''.
    (m) Appraiser Education.--Section 1122 of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 
3351) is amended by inserting after subsection (g) (as added by 
subsection (l) of this section) the following new subsection:
    ``(h) Approved Education.--The Appraisal Subcommittee shall 
encourage the States to accept courses approved by the Appraiser 
Qualification Board's Course Approval Program.''.
    (n) Technical Corrections.--
            (1) Section 1119(a)(2) of the Financial Institutions 
        Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 
        3348(a)(2)) is amended by striking ``council,'' and inserting 
        ``Council,''.
            (2) Section 1121(6) of the Financial Institutions Reform, 
        Recovery, and Enforcement Act of 1989 (12 U.S.C. 3350(6)) is 
        amended by striking ``Corporations,'' and inserting 
        ``Corporation,''.
            (3) Section 1121(8) of the Financial Institutions Reform, 
        Recovery, and Enforcement Act of 1989 (12 U.S.C. 3350(8)) is 
        amended by striking ``council'' and inserting ``Council''.
            (4) Section 1122 of the Financial Institutions Reform, 
        Recovery, and Enforcement Act of 1989 (12 U.S.C. 3351) is 
        amended--
                    (A) in subsection (a)(1) by moving the left margin 
                of subparagraphs (A), (B), and (C) 2 ems to the right; 
                and
                    (B) in subsection (c)--
                            (i) by striking ``Federal Financial 
                        Institutions Examination Council'' and 
                        inserting ``Financial Institutions Examination 
                        Council''; and
                            (ii) by striking ``the council's 
                        functions'' and inserting ``the Council's 
                        functions''.

SEC. 204. STUDY REQUIRED ON IMPROVEMENTS IN APPRAISAL PROCESS AND 
              COMPLIANCE PROGRAMS.

    (a) Study.--The Comptroller General shall conduct a comprehensive 
study on possible improvements in the appraisal process generally, and 
specifically on the consistency in and the effectiveness of, and 
possible improvements in, State compliance efforts and programs in 
accordance with title XI of the Financial Institutions Reform, 
Recovery, and Enforcement Act of 1989. In addition, this study shall 
examine the existing de minimus loan levels established by Federal 
regulators for compliance under title XI and whether there is a need to 
revise them to reflect the addition of consumer protection to the 
purposes and functions of the Appraisal Subcommittee.
    (b) Report.--Before the end of the 18-month period beginning on the 
date of the enactment of this Act, the Comptroller General shall submit 
a report on the study under subsection (a) to the Committee on 
Financial Services of the House of Representatives and the Committee on 
Banking, Housing, and Urban Affairs of the Senate, together with such 
recommendations for administrative or legislative action, at the 
Federal or State level, as the Comptroller General may determine to be 
appropriate.

SEC. 205. CONSUMER APPRAISAL DISCLOSURE.

    (a) In General.--Chapter 2 of the Truth in Lending Act (15 U.S.C. 
1631 et seq.) is amended by inserting after section 129B (as added by 
section 202 of this Act) the following new section:

``SEC. 129C. CONSUMER APPRAISAL DISCLOSURE.

    ``In any case in which an appraisal is performed in connection with 
an extension of credit secured by an interest in real property, the 
creditor or other mortgage originator shall make available to the 
applicant for the extension of credit a copy of all appraisal valuation 
reports upon completion but no later than 3 days prior to the 
transaction closing date.''.
    (b) Clerical Amendment.--The table of sections for chapter 2 of the 
Truth in Lending Act is amended by inserting after the item relating to 
section 129B (as added by section 202 of this Act) the following new 
item:

``129C. Consumer appraisal disclosure.''.
                                 <all>