[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3915 Introduced in House (IH)]







110th CONGRESS
  1st Session
                                H. R. 3915

To amend the Truth in Lending Act to reform consumer mortgage practices 
 and provide accountability for such practices, to establish licensing 
and registration requirements for residential mortgage originators, to 
provide certain minimum standards for consumer mortgage loans, and for 
                            other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 22, 2007

   Mr. Miller of North Carolina (for himself, Mr. Watt, Mr. Frank of 
Massachusetts, Ms. Waters, Mrs. Maloney of New York, Mr. Gutierrez, Ms. 
 Carson, Mr. Meeks of New York, Mr. Capuano, Mr. Clay, Mr. Al Green of 
 Texas, Mr. Cleaver, Ms. Bean, Ms. Moore of Wisconsin, Mr. Hodes, Mr. 
Ellison, and Mr. Murphy of Connecticut) introduced the following bill; 
       which was referred to the Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
To amend the Truth in Lending Act to reform consumer mortgage practices 
 and provide accountability for such practices, to establish licensing 
and registration requirements for residential mortgage originators, to 
provide certain minimum standards for consumer mortgage loans, 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 ``Mortgage Reform 
and Anti-Predatory Lending Act of 2007''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
                     TITLE I--MORTGAGE ORIGINATION

Sec. 101. Definitions.
Sec. 102. Residential mortgage loan origination.
Sec. 103. Anti-steering.
Sec. 104. Licensing and registration of mortgage originators.
Sec. 105. Enforcement.
Sec. 106. Regulations.
               TITLE II--MINIMUM STANDARDS FOR MORTGAGES

Sec. 201. Ability to repay.
Sec. 202. Net tangible benefit for refinancing of residential mortgage 
                            loans.
Sec. 203. Safe harbor and rebuttable presumption.
Sec. 204. Securitizer liability.
Sec. 205. Defense to foreclosure.
Sec. 206. Additional standards and requirements.
Sec. 207. Amendment to provision governing correction of errors.
Sec. 208. Amendment relating to right of rescission.
Sec. 209. Amendments to civil liability provisions.
Sec. 210. Rule of construction.
Sec. 211. Regulations.
                     TITLE III--HIGH-COST MORTGAGES

Sec. 301. Definitions relating to high-cost mortgages.
Sec. 302. Amendments to existing requirements for certain mortgages.
Sec. 303. Additional requirements for certain mortgages.
Sec. 304. Regulations.

                     TITLE I--MORTGAGE ORIGINATION

SEC. 101. DEFINITIONS.

    Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is amended 
by adding at the end the following new subsection:
    ``(cc) Definitions Relating to Mortgage Origination.--
            ``(1) Commission.--The term `Commission' means the Federal 
        Trade Commission.
            ``(2) Mortgage originator.--The term `mortgage 
        originator'--
                    ``(A) means any person who, for direct or indirect 
                compensation or gain, or in the expectation of direct 
                or indirect compensation or gain--
                            ``(i) takes a residential mortgage loan 
                        application;
                            ``(ii) assists a consumer in obtaining or 
                        applying to obtain a residential mortgage loan; 
                        or
                            ``(iii) offers or negotiates terms of a 
                        residential mortgage loan;
                    ``(B) includes any person who represents to the 
                public, through advertising or other means of 
                communicating or providing information (including the 
                use of business cards, stationery, brochures, signs, 
                rate lists, or other promotional items), that such 
                person can or will provide any of the services or 
                perform any of the activities described in subparagraph 
                (A); and
                    ``(C) does not include any person who is not 
                otherwise described in subparagraph (A) or (B) and who 
                performs purely administrative or clerical tasks on 
                behalf of a person who is described in any such 
                subparagraph.
            ``(3) Qualified nationwide registration regime.--The term 
        `qualified nationwide registration regime' means a nationwide 
        registry for the residential mortgage industry, such as the 
        registry established by the Conference of State Bank 
        Supervisors and the American Association of Residential 
        Mortgage Regulators, which is--
                    ``(A) certified by the Secretary as a registry that 
                provides a comprehensive licensing and supervisory 
                database for mortgage originators; or
                    ``(B) established by the Secretary under section 
                129A(c)(3).
            ``(4) Other definitions relating to mortgage originator.--
        For purposes of this subsection, a person `assists a consumer 
        in obtaining or applying to obtain a residential mortgage loan' 
        by, among other things, advising on loan terms (including 
        rates, fees, other costs), preparing loan packages, or 
        collecting information on behalf of the consumer with regard to 
        a residential mortgage loan.
            ``(5) Qualifying state licensing law.--The term `qualifying 
        State licensing law' means the law in effect in a State which 
        the Secretary determines satisfies the following minimum 
        requirements:
                    ``(A) All mortgage originators operating in the 
                State which are not depository institutions or 
                institution-affiliated parties of a depository 
                institution are required--
                            ``(i) to be licensed by the State; and
                            ``(ii) to meet effective minimum 
                        requirements in order to qualify for any such 
                        license.
                    ``(B) All mortgage originators operating in the 
                State which are not depository institutions or 
                institution-affiliated parties of a depository 
                institution are required at all times to maintain--
                            ``(i) a minimum net worth, net of 
                        intangibles, of at least $100,000, as 
                        determined in accordance with generally 
                        accepted accounting principles; or
                            ``(ii) a surety bond in the minimum amount 
                        of $100,000.
                    ``(C) A State mortgage originator supervisory 
                authority is maintained to provide effective 
                supervision and enforcement of such law, including the 
                suspension, termination, or nonrenewal of a license for 
                a violation of State or Federal law.
                    ``(D) The State mortgage originator supervisory 
                authority ensures that all mortgage originators 
                operating in the State which are not depository 
                institutions or institution-affiliated parties of a 
                depository institution are registered under the 
                qualified nationwide registration regime.
                    ``(E) The State mortgage originator supervisory 
                authority is required to regularly report violations of 
                such law, as well as enforcement actions and other 
                relevant information, to the qualified nationwide 
                reporting regime.
                    ``(F) All mortgage originators operating in the 
                State which are not depository institutions or 
                institution-affiliated parties of a depository 
                institution are required to receive minimum training 
                and undergo a background check before receiving a 
                license, and receive ongoing training or continuing 
                education as a condition for maintaining and renewing 
                the licence.
                    ``(G) Any mortgage originator licensed under such 
                law is required to provide accurate and effective 
                disclosures to consumers concerning the costs of the 
                mortgage originator's services and the costs and 
                benefits of residential mortgage loan products, 
                including the disclosures required under section 
                129A(a).
                    ``(H) Individual consumers have an effective 
                mechanism to obtain redress for any violation of such 
                law by a mortgage originator.
            ``(6) Residential mortgage loan.--The term `residential 
        mortgage loan' means any consumer credit transaction that is 
        secured by a mortgage or deed of trust on a dwelling or on 
        residential real property that includes a dwelling, other than 
        a consumer credit transaction under an open end credit plan or 
        a reverse mortgage.
            ``(7) Secretary.--The term `Secretary', when used in 
        connection with any transaction or person involved with a 
        residential mortgage loan, means the Secretary of Housing and 
        Urban Development.
            ``(8) Securitizer.--The term `securitizer' means any 
        assignee who acquires or aggregates residential mortgage loans 
        for the purpose of including such loans in a pool of assets for 
        the purpose of issuing or selling instruments representing 
        interests in such pools.''.

SEC. 102. RESIDENTIAL MORTGAGE LOAN ORIGINATION.

    (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. Residential mortgage loan origination
    ``(a) Duty of Care.--
            ``(1) Standard.--Subject to regulations prescribed under 
        this subsection, each mortgage originator shall, in addition to 
        the duties imposed by otherwise applicable provisions of State 
        or Federal law--
                    ``(A) be qualified, licensed, and registered as a 
                mortgage originator in accordance with applicable State 
                or Federal law;
                    ``(B) with respect to each consumer seeking or 
                inquiring about a residential mortgage loan, diligently 
                work to present the consumer with a range of 
                residential mortgage loan products for which the 
                consumer qualifies and which are appropriate to the 
                consumer's existing circumstances, based on information 
                known by, or provided in good faith to, the originator;
                    ``(C) make full, complete, and timely disclosure to 
                each such consumer of--
                            ``(i) the comparative costs and benefits of 
                        each residential mortgage loan product offered, 
                        discussed, or referred to by the originator;
                            ``(ii) the nature of the originator's 
                        relationship to the consumer (including the 
                        cost of the services to be provided by the 
                        originator and a statement that the mortgage 
                        originator is or is not acting as an agent for 
                        the consumer, as the case may be); and
                            ``(iii) any relevant conflicts of interest;
                    ``(D) certify to the creditor, with respect to any 
                transaction involving a residential mortgage loan, that 
                the mortgage originator has fulfilled all requirements 
                applicable to the originator under this section with 
                respect to the transaction; and
                    ``(E) include the unique identifier of the 
                originator provided by a qualified nationwide 
                registration regime on all loan documents.
            ``(2) Rules of construction.--No provision of this 
        subsection shall be construed as--
                    ``(A) creating an agency or fiduciary relationship 
                between a mortgage originator and a consumer if the 
                originator does not hold himself or herself out as such 
                an agent or fiduciary and complies with all 
                requirements of this title that are applicable to 
                mortgage originators; and
                    ``(B) restricting a mortgage originator from 
                holding himself or herself out as an agent or fiduciary 
                of a consumer subject to any additional duty, 
                requirement, or limitation applicable to agents or 
                fiduciaries under any Federal or State law.
            ``(3) Regulations.--
                    ``(A) In general.--The Secretary, the Comptroller 
                of the Currency, the Director of the Office of Thrift 
                Supervision, and the Federal Deposit Insurance 
                Corporation, in consultation with the Commission, shall 
                jointly prescribe regulations to--
                            ``(i) further define the duty established 
                        under paragraph (1);
                            ``(ii) implement the requirements of this 
                        subsection;
                            ``(iii) establish the time period within 
                        which any disclosure required under paragraph 
                        (1) shall be made to the consumer; and
                            ``(iv) establish such other requirements 
                        for any mortgage originator as such regulatory 
                        agencies may determine to be appropriate to 
                        meet the purposes of this subsection.
                    ``(B) Complementary and nonduplicative 
                disclosures.--The agencies referred to in subparagraph 
                (A) shall endeavor to make the required disclosures to 
                consumers under this section complementary and 
                nonduplicative with other disclosures for mortgage 
                consumers to the extent such efforts--
                            ``(i) are practicable; and
                            ``(ii) do not reduce the value of any such 
                        disclosure to recipients of such loans.''.
    (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 129 the following new item:

``129A. Residential mortgage loan origination.''.

SEC. 103. ANTI-STEERING.

    Section 129A of the Truth in Lending Act (as added by section 
102(a)) is amended by inserting after subsection (a) the following new 
subsection:
    ``(b) Prohibition on Steering Incentives.--
            ``(1) In general.--No mortgage originator may receive from 
        any person, and no person may pay to any mortgage originator, 
        directly or indirectly, any incentive compensation (including 
        yield spread premium) that is based on, or varies with, the 
        terms of any residential mortgage loan.
            ``(2) Anti-steering regulations.--
                    ``(A) Required.--The Secretary, the Comptroller of 
                the Currency, the Director of the Office of Thrift 
                Supervision, and the Federal Deposit Insurance 
                Corporation, in consultation with the Commission, shall 
                jointly prescribe regulations to prohibit mortgage 
                originators from steering any consumer to a residential 
                mortgage loan that is not in the consumer's interest 
                (such as loans with predatory characteristics).
                    ``(B) Conditions.--In prescribing any regulations 
                under this subsection, the Secretary, the Comptroller 
                of the Currency, the Director of the Office of Thrift 
                Supervision, and the Federal Deposit Insurance 
                Corporation, in consultation with the Commission, shall 
                seek to ensure that such regulations--
                            ``(i) promote the interest of the consumer 
                        in obtaining--
                                    ``(I) the best terms for a 
                                residential mortgage loan for which the 
                                consumer qualifies; and
                                    ``(II) useful information on the 
                                nature of the residential mortgage loan 
                                and the relationship of the consumer 
                                with the mortgage originator; and
                            ``(ii) prohibit mortgage originators from 
                        steering, counseling, or directing a consumer 
                        into any residential mortgage loan that is not 
                        in the consumer's interest.
            ``(3) Rules of construction.--No provision of this 
        subsection shall be construed as--
                    ``(A) limiting or affecting the ability of a 
                mortgage originator to sell residential mortgage loans 
                to subsequent purchasers; or
                    ``(B) restricting a consumer's ability to finance 
                origination fees to the extent that such fees were 
                fully disclosed to the consumer earlier in the 
                application process and do not vary based on the 
                consumer's decision about whether to finance such 
                fees.''.

SEC. 104. LICENSING AND REGISTRATION OF MORTGAGE ORIGINATORS.

    Section 129A of the Truth in Lending Act is amended by inserting 
after subsection (b) (as added by section 103) the following new 
subsections:
    ``(c) Federal Licensing and Regulation Backstop.--
            ``(1) In general.--A mortgage originator which is not a 
        depository institution or an institution-affiliated party of a 
        depository institution may not originate any residential 
        mortgage loan after the end of the 24-month period beginning on 
        the date of the enactment of the Mortgage Reform and Anti-
        Predatory Lending Act of 2007, unless such mortgage 
        originator--
                    ``(A) is licensed--
                            ``(i) under a qualifying State licensing 
                        law or by the Secretary in accordance with 
                        paragraph (2); and
                    ``(B) is registered with and participating in a 
                qualified nationwide registration regime.
            ``(2) HUD licensing and registration.--
                    ``(A) Establishment.--If, on or after the end of 
                the 24-month period beginning on the date of the 
                enactment of the Mortgage Reform and Anti-Predatory 
                Lending Act of 2007, any State does not have in effect 
                a qualifying State licensing law, the Secretary shall 
                establish and maintain a system for licensing and 
                registering mortgage originators operating in such 
                State which are not depository institutions or 
                institution-affiliated parties of a depository 
                institution.
                    ``(B) Requirements.--The Secretary shall prescribe, 
                by regulation, such requirements for mortgage 
                originators licensed under the system established under 
                subparagraph (A) as the Secretary determines to be 
                appropriate and are equivalent to the requirements for 
                qualifying State licensing laws.
                    ``(C) Best interests of consumer requirement.--
                Regulations prescribed under subparagraph (B) shall 
                require a mortgage originator to act solely in the best 
                interest of the consumer, including finding the 
                residential mortgage loan that best meets the needs of 
                the borrower, and to meet any other duties incumbent on 
                the mortgage originator under Federal or State law when 
                acting in such a capacity.
            ``(3) Participation in qualified nationwide registration 
        regime.--If the Secretary has not certified any registry as a 
        qualified nationwide registration regime by the end of the 18-
        month period beginning on the date of the enactment of the 
        Mortgage Reform and Anti-Predatory Lending Act of 2007, or if a 
        certified nationwide registration regime fails to meet the 
        requirements under this title for such a regime, the Secretary 
        shall establish a qualified nationwide registration regime that 
        provides a comprehensive licensing and supervisory database for 
        mortgage originators to carry out the purposes of this section 
        and the effective regulation of mortgage originators licensed 
        under a qualifying State licensing law or by the Secretary 
        under paragraph (2).
            ``(4) Advance preparation.--The Secretary shall take such 
        actions as the Secretary determines to be appropriate in 
        advance of the end of the 24-month period beginning on the date 
        of the enactment of the Mortgage Reform and Anti-Predatory 
        Lending Act of 2007, to ensure the timely establishment, if 
        necessary, on or after the end of such period of--
                    ``(A) a system for licensing and registering 
                mortgage originators under paragraph (2); or
                    ``(B) a qualified nationwide registration regime 
                under paragraph (3).
            ``(5) Temporary extension of period.--The Secretary may 
        extend, by not more than 6 months, the 24-month period referred 
        to in paragraphs (1) and (2) for the licensing of mortgage 
        originators in any State under a qualifying State licensing law 
        if the Secretary determines that such State is making a good 
        faith effort to establish a qualifying State licensing law and 
        to license mortgage originators under such law.
            ``(6) Minimum standards for certification of a nationwide 
        registration regime.--In determining whether to certify a 
        nationwide registration regime, the Secretary shall determine 
        that the regime at a minimum--
                    ``(A) provides and maintains a unique identifier 
                for each mortgage originator participating in the 
                regime; and
                    ``(B) provides relevant and timely information to 
                consumers, industry participants, and Federal and State 
                regulatory agencies (including any enforcement actions 
                relating to any mortgage originator).
    ``(d) Regulation of Depository Institutions.--
            ``(1) In general.--Any depository institution, and any 
        institution-affiliated party of a depository institution, that 
        is a mortgage originator shall comply with regulations 
        prescribed under paragraph (2) and applicable requirements for 
        registrants of a qualified nationwide registration regime.
            ``(2) Regulations.--The Comptroller of the Currency, the 
        Director of the Office of Thrift Supervision, and the Federal 
        Deposit Insurance Corporation, in consultation with the 
        Secretary, shall jointly prescribe equivalent regulations 
        applicable to depository institutions, and institution-
        affiliated parties of depository institutions that act as 
        mortgage originators, taking into account all the requirements 
        for a qualifying State licensing law, and shall specifically 
        require--
                    ``(A) licensing of any institution-affiliated party 
                of a depository institution who acts as a mortgage 
                originator;
                    ``(B) registration with, and participation in, a 
                qualified nationwide registration regime; and
                    ``(C) minimum qualification requirements and pre-
                licensing training and continuing education 
                requirements.
            ``(3) Definitions.--For purposes of this subsection, the 
        term `depository institution' includes a credit union and the 
        term `institution-affiliated party' has the same meaning as in 
        section 3(u) of the Federal Deposit Insurance Act.''.

SEC. 105. ENFORCEMENT.

    Section 129A of the Truth in Lending Act is amended by inserting 
after subsection (d) (as added by section 104) the following new 
subsection:
    ``(e) Liability for Violations.--
            ``(1) In general.--For purposes of providing a cause of 
        action for any failure by a mortgage originator to comply with 
        any requirement imposed under this section and any regulation 
        prescribed under this section, subsections (a) and (b) of 
        section 130 shall be applied with respect to any such failure 
        by substituting `mortgage originator' for `creditor' each place 
        such term appears in each such subsection
            ``(2) Maximum.--The maximum amount of any liability of a 
        mortgage originator under paragraph (1) to a consumer for any 
        violation of this section shall not exceed an amount equal to 3 
        times the total amount of direct and indirect compensation or 
        gain accruing to the mortgage originator in connection with the 
        residential mortgage loan involved in the violation, plus the 
        costs to the consumer of the action, including a reasonable 
        attorney's fee.''.

SEC. 106. REGULATIONS.

    Except as otherwise provided in the amendment made by section 104, 
regulations required or authorized to be prescribed under this title or 
the amendments made by this title--
            (1) shall be prescribed in final form before the end of the 
        12-month period beginning on the date of the enactment of this 
        Act; and
            (2) shall take effect not later than 18 months after the 
        date of the enactment of this Act.

               TITLE II--MINIMUM STANDARDS FOR MORTGAGES

SEC. 201. ABILITY TO REPAY.

    (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 102(a)) the following new section:
``Sec. 129B. Minimum standards for residential mortgage loans
    ``(a) Ability To Repay.--
            ``(1) In general.--In accordance with regulations 
        prescribed jointly by the Comptroller of the Currency, the 
        Director of the Office of Thrift Supervision and the Federal 
        Deposit Insurance Corporation, in consultation with the 
        Commission, no creditor may make a residential mortgage loan 
        unless the creditor makes a reasonable and good faith 
        determination based on verified and documented information 
        that, at the time the loan is consummated, the consumer has a 
        reasonable ability to repay the loan, according to its terms, 
        and all applicable taxes, insurance, and assessments.
            ``(2) Multiple loans.--If the creditor knows, or has reason 
        to know, that 1 or more residential mortgage loans secured by 
        the same dwelling will be made to the same consumer, the 
        creditor shall make a reasonable and good faith determination, 
        based on verified and documented information, that the consumer 
        has a reasonable ability to repay the combined payments of all 
        loans on the same dwelling according to the terms of those 
        loans and all applicable taxes, insurance, and assessments.
            ``(3) Basis for determination.--A determination under this 
        subsection of a consumer's ability to repay a residential 
        mortgage loan shall be based on consideration of the consumer's 
        credit history, current income, expected income the consumer is 
        reasonably assured of receiving, current obligations, debt-to-
        income ratio, employment status, and other financial resources 
        other than the consumer's equity in the real property that 
        secures repayment of the loan.
            ``(4) Nonstandard loans.--
                    ``(A) Adjustable rate loans that defer repayment of 
                any principal or interest.--For purposes of 
                determining, under this subsection, a consumer's 
                ability to repay an adjustable rate residential 
                mortgage loan that defers the repayment of any 
                principal or interest, the creditor shall take into 
                consideration a fully amortizing repayment schedule.
                    ``(B) Interest-only loans.--For purposes of 
                determining, under this subsection, a consumer's 
                ability to repay a residential mortgage loan that 
                requires the payment of interest only, the creditor 
                shall take into consideration the payment amount 
                required to amortize the loan by its final maturity.
                    ``(C) Calculation for negative amortization.--In 
                making any determination under this subsection, a 
                creditor shall also take into consideration any balance 
                increase that may accrue from any negative amortization 
                provision.
                    ``(D) Calculation process.--For purposes of making 
                any determination under this subsection, a creditor 
                shall calculate the monthly payment amount for 
                principal and interest on any residential mortgage loan 
                by assuming--
                            ``(i) the loan proceeds are fully disbursed 
                        on the date of the consummation of the loan;
                            ``(ii) the loan is to be repaid in 
                        substantially equal monthly amortizing payments 
                        for principal and interest over the entire term 
                        of the loan with no balloon payment, unless the 
                        loan contract requires more rapid repayment 
                        (including balloon payment), in which case the 
                        contract's repayment schedule shall be used in 
                        this calculation; and
                            ``(iii) the interest rate over the entire 
                        term of the loan is a fixed rate equal to the 
                        fully indexed rate at the time of the loan 
                        closing, without considering the introductory 
                        rate.
            ``(5) Fully-indexed rate defined.--For purposes of this 
        subsection, the term `fully indexed rate' means the index rate 
        prevailing on a residential mortgage loan at the time the loan 
        is made plus the margin that will apply after the expiration of 
        an introductory interest rate.''.
    (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 102(b)) the following new item:

``129B. Minimum standards for all mortgages.''.

SEC. 202. NET TANGIBLE BENEFIT FOR REFINANCING OF RESIDENTIAL MORTGAGE 
              LOANS.

    Section 129B of the Truth in Lending Act (as added by section 
201(a)) is amended by inserting after subsection (a) the following new 
subsection:
    ``(b) Net Tangible Benefit for Refinancing of Residential Mortgage 
Loans.--
            ``(1) In general.--No creditor may extend credit in 
        connection with any residential mortgage loan that involves a 
        refinancing of a prior existing residential mortgage loan 
        unless the creditor reasonably and in good faith determines, at 
        the time the loan is consummated and on the basis of 
        information known by or provided in good faith to the creditor, 
        that the refinanced loan will provide a net tangible benefit to 
        the consumer.
            ``(2) Certain loans providing no net tangible benefit.--A 
        residential mortgage loan that involves a refinancing of a 
        prior existing residential mortgage loan shall not be 
        considered to provide a net tangible benefit to the consumer if 
        the costs of the refinanced loan, including points, fees and 
        other charges, exceed the amount of any newly advanced 
        principal.
            ``(3) Net tangible benefit.--The Comptroller of the 
        Currency, the Director of the Office of Thrift Supervision and 
        the Federal Deposit Insurance Corporation shall jointly 
        prescribe regulations defining the term `net tangible benefit' 
        for purposes of this subsection.''.

SEC. 203. SAFE HARBOR AND REBUTTABLE PRESUMPTION.

    Section 129B of the Truth in Lending Act is amended by inserting 
after subsection (b) (as added by section 202) the following new 
subsection:
    ``(c) Presumption of Ability To Repay and Net Tangible Benefit.--
            ``(1) In general.--Any creditor with respect to any 
        residential mortgage loan, and any assignee of such loan, may 
        presume that the loan has met the requirements of subsections 
        (a) and (b), if the loan is a qualified mortgage or a qualified 
        safe harbor mortgage.
            ``(2) Rebuttable presumption.--Any presumption established 
        under paragraph (1) with respect to any residential mortgage 
        loan shall be rebuttable only--
                    ``(A) against the creditor of such loan; and
                    ``(B) if such loan is a qualified safe harbor 
                mortgage.
            ``(3) Definitions.--For purposes of this section the 
        following definitions shall apply:
                    ``(A) Most recent conventional mortgage rate.--The 
                term `most recent conventional mortgage rate' means the 
                contract interest rate on commitments for fixed-rate 
                first mortgages most recently published in the Federal 
                Reserve Statistical Release on selected interest rates 
                (daily or weekly), and commonly referred to as the H.15 
                release, in the week preceding a date of determination 
                for purposes of applying this subsection.
                    ``(B) Qualified mortgage.--The term `qualified 
                mortgage' means--
                            ``(i) a residential mortgage loan that--
                                    ``(I) constitutes a first lien on 
                                the real property securing the loan;
                                    ``(II) has an annual percentage 
                                rate that does not equal or exceed the 
                                yield on securities issued by the 
                                Secretary of the Treasury under chapter 
                                31 of title 31, United States Code, 
                                that bear comparable periods of 
                                maturity by more than 3 percentage 
                                points; and
                                    ``(III) has an annual percentage 
                                rate that does not equal or exceed the 
                                most recent conventional mortgage rate, 
                                or such other annual percentage rate as 
                                may be established by regulation under 
                                paragraph (6), by more than 175 basis 
                                points; or
                            ``(ii) a residential mortgage loan that--
                                    ``(I) is not the first lien on the 
                                real property securing the loan;
                                    ``(II) has an annual percentage 
                                rate that does not equal or exceed the 
                                yield on securities issued by the 
                                Secretary of the Treasury under chapter 
                                31 of title 31, United States Code, 
                                that bear comparable periods of 
                                maturity by more than 5 percentage 
                                points; and
                                    ``(III) has an annual percentage 
                                rate that does not equal or exceed the 
                                most recent conventional mortgage rate, 
                                or such other annual percentage rate as 
                                may be established by regulation under 
                                paragraph (6), by more than 375 basis 
                                points.
                    ``(C) Qualified safe harbor mortgage.--The term 
                `qualified safe harbor mortgage' means a residential 
                mortgage loan--
                            ``(i) for which the income and financial 
                        resources of the consumer are verified and 
                        documented;
                            ``(ii) for which the residential mortgage 
                        loan underwriting process is based on the 
                        fully-indexed rate, and takes into account real 
                        estate taxes and homeowner's and mortgage 
                        insurance premiums;
                            ``(iii) which does not cause the consumer's 
                        total monthly debts, including amounts under 
                        the loan, to exceed 50 percent of his or her 
                        monthly gross income or such other maximum 
                        percentage of such income as may be prescribed 
                        by regulation under paragraph (4);
                            ``(iv) which does not provide for a 
                        repayment schedule that results in negative 
                        amortization at any time;
                            ``(v) meets such other requirements as may 
                        be established by regulation; and
                            ``(vi) for which any of the following 
                        factors apply with respect to such loan:
                                    ``(I) The periodic payment amount 
                                for principal or interest are fixed for 
                                a minimum of 7 years under the terms of 
                                the loan.
                                    ``(II) In the case of an adjustable 
                                rate loan, the annual percentage rate 
                                varies based on a margin that is less 
                                than 3 percent over a single generally 
                                accepted interest rate index that is 
                                the basis for determining the rate of 
                                interest for the mortgage.
            ``(4) Determination of comparison to treasury securities.--
                    ``(A) In general.--Without regard to whether a 
                residential mortgage loan is subject to or reportable 
                under the Home Mortgage Disclosure Act of 1975 and 
                subject to subparagraph (B), the difference between the 
                annual percentage rate of such loan and the yield on 
                securities issued by the Secretary of the Treasury 
                under chapter 31 of title 31, United States Code, 
                having comparable periods of maturity shall be 
                determined using the same procedures and methods of 
                calculation applicable to loans that are subject to the 
                reporting requirements under the Home Mortgage 
                Disclosure Act of 1975.
                    ``(B) Date of determination of yield.--The yield on 
                the securities referred to in subparagraph (A) shall be 
                determined, for purposes of such subparagraph and 
                paragraph (3) with respect to any residential mortgage 
                loan, as of the 15th day of the month preceding the 
                month in which a completed application is submitted for 
                such loan.
            ``(5) APR in case of introductory offer.--For purposes of 
        making a determination of whether a residential mortgage loan 
        that provides for a fixed interest rate for an introductory 
        period and then resets or adjusts to an adjustable rate is a 
        qualified mortgage, the determination of the annual percentage 
        rate shall be based on the greater of the introductory rate and 
        the fully indexed rate of interest.
            ``(6) Regulations.--
                    ``(A) In general.--The Comptroller of the Currency, 
                the Director of the Office of Thrift Supervision, and 
                the Federal Deposit Insurance Corporation shall jointly 
                prescribe regulations to carry out the purposes of this 
                subsection.
                    ``(B) Classifications, differentiations, 
                modifications, and exemptions.--The regulations 
                prescribed under subparagraph (A) may contain such 
                classifications, differentiations, modifications of 
                terms defined in this subsection, or other provisions, 
                and may provide for such adjustments and exceptions, as 
                in the judgement of the Federal banking agencies 
                referred to in subparagraph (A) are necessary and 
                appropriate to effectuate the purposes of this 
                subsection to prevent circumvention or evasion thereof, 
                or to facilitate compliance therewith.''.

SEC. 204. SECURITIZER LIABILITY.

    Section 129B of the Truth in Lending Act is amended by inserting 
after subsection (c) (as added by section 203) the following new 
subsection:
    ``(d) Liability for Violations.--
            ``(1) Limited assignee liability.--Notwithstanding sections 
        125(e) and 131 and except as provided in paragraph (2), a civil 
        action which may be maintained against a creditor with respect 
        to a residential mortgage loan for a violation of subsection 
        (a) or (b) may be maintained against an assignee, including a 
        securitizer, of such residential mortgage loan, acting in good 
        faith, for the following liabilities only:
                    ``(A) Rescission of the loan in accordance with 
                this title.
                    ``(B) Such additional costs as the obligor may have 
                incurred as a result of the violation and in connection 
                with obtaining a rescission of the loan, including a 
                reasonable attorney's fee.
            ``(2) Exemption.--No assignee, including a securitizer, of 
        a residential mortgage loan shall be liable under paragraph (1) 
        with respect to such loan if--
                    ``(A) no later than 90 days after the receipt of 
                notification from the consumer that the loan violates 
                subsection (a) or (b), the assignee provides a cure so 
                that the loan satisfies the requirements of subsections 
                (a) and (b); or
                    ``(B) each of the following conditions are met:
                            ``(i) The assignee--
                                    ``(I) has a policy against buying 
                                residential mortgage loans other than 
                                qualified mortgages or qualified safe 
                                harbor mortgages (as defined in 
                                subsection (c)); and
                                    ``(II) exercises reasonable due 
                                diligence to adhere to such policy in 
                                purchasing residential mortgage loans 
                                through adequate, thorough, and 
                                consistently applied sampling 
                                procedures established in accordance 
                                which regulations which the Comptroller 
                                of the Currency, the Director of the 
                                Office of Thrift Supervision, and the 
                                Federal Deposit Insurance Corporation 
                                shall jointly prescribe.
                            ``(ii) The contract under which such 
                        assignee acquired the residential mortgage loan 
                        from a seller or assignor of the loan contains 
                        representations and warranties that the seller 
                        or assignor--
                                    ``(I) will not sell or assign any 
                                residential mortgage loan which is not 
                                a qualified mortgage or a qualified 
                                safe harbor mortgage; or
                                    ``(II) is a beneficiary of a 
                                representation and warranty from a 
                                previous seller or assignor to that 
                                effect,
                        and the assignee in good faith takes reasonable 
                        steps to obtain the benefit of such 
                        representation or warranty.
            ``(3) Cure defined.--For purposes of paragraph (2)(A), the 
        term `cure' means, with respect to a residential mortgage loan 
        that violates subsection (a) or (b), the modification or 
        refinancing, at no cost to the consumer, of the loan to provide 
        terms that would have satisfied the requirements of subsection 
        (a) and (b) if the loan had contained such terms as of the 
        origination of the loan.
            ``(4) No class actions under this subsection.--Only 
        individual actions may be brought against an assignee, 
        including a securitizer, of a residential mortgage loan for a 
        violation of subsection (a) or (b).
            ``(5) Scope of application.--Liability of an assignee, 
        including a securitizer, under this subsection shall apply--
                    ``(A) in any original action brought by a consumer 
                for a violation of subsection (a) or (b) with respect 
                to a residential mortgage loan during the 6-year period 
                beginning when the loan is entered into; and
                    ``(B) without regard to the 6-year limitation in 
                subparagraph (A) if raised by the consumer at any time 
                during the term of the loan--
                            ``(i) as a defense, claim, or counterclaim, 
                        including a claim for a violation of subsection 
                        (a) or (b), with respect to a residential 
                        mortgage loan after foreclosure has commenced 
                        on the loan, the obligation to pay the balance 
                        due on the loan is accelerated, or the obligor 
                        has been in default on any payment for 60 days 
                        or more; or
                            ``(ii) in any action to enjoin foreclosure 
                        or to preserve or obtain possession of the 
                        residence securing a residential mortgage loan.
            ``(6) Pools and investors in pools excluded.--In the case 
        of residential mortgage loans acquired or aggregated for the 
        purpose of including such loans in a pool of assets for the 
        purpose of issuing or selling instruments representing 
        interests in such pools, the terms `assignee' and 
        `securitizer', as used in this section, do not include the 
        pools of such loans or any original or subsequent purchaser of 
        any instrument representing an interest in such pool.''.

SEC. 205. DEFENSE TO FORECLOSURE.

    Section 129B of the Truth in Lending Act is amended by inserting 
after subsection (d) (as added by section 204) the following new 
subsection:
    ``(e) Defense to Foreclosure.--Notwithstanding any other provision 
of law--
            ``(1) when the holder of a residential mortgage loan or 
        anyone acting for such holder initiates a judicial or non-
        judicial foreclosure, a consumer who has the right to rescind 
        under this section with respect to such loan may exercise such 
        right; and
            ``(2) a third party may sell, transfer, convey, or assign a 
        residential mortgage loan to an assignee, including a 
        securitizer, to effect a rescission or a cure.''.

SEC. 206. ADDITIONAL STANDARDS AND REQUIREMENTS.

    (a) In General.--Section 129B of the Truth in Lending Act is 
amended by inserting after subsection (e) (as added by section 205) the 
following new subsections:
    ``(f) Prohibition on Certain Prepayment Penalties.--
            ``(1) Prohibited on certain loans.--A residential mortgage 
        loan that is not a qualified mortgage (as defined in subsection 
        (c)) may not contain terms under which a consumer must pay a 
        prepayment penalty for paying all or part of the principal 
        after the loan is consummated.
            ``(2) Prohibited after initial period on loans with a 
        reset.--A residential mortgage loan with a fixed interest rate 
        for an introductory period that adjusts or resets to a variable 
        interest rate after such period may not contain terms under 
        which a consumer must pay a prepayment penalty for paying all 
        or part of the principal after the beginning of the 3-month 
        period ending on the date of the adjustment or reset.
    ``(g) Single Premium Credit Insurance Prohibited.--No creditor may 
finance, directly or indirectly, in connection with any residential 
mortgage loan or with any extension of credit under an open end 
consumer credit plan secured by the principal dwelling of the consumer 
(other than a reverse mortgage), any credit life, credit disability, 
credit unemployment or credit property insurance, or any other 
accident, loss-of-income, life or health insurance, or any payments 
directly or indirectly for any debt cancellation or suspension 
agreement or contract, except that insurance premiums or debt 
cancellation or suspension fees calculated and paid in full on a 
monthly basis shall not be considered financed by the creditor.
    ``(h) Arbitration.--
            ``(1) In general.--No residential mortgage loan and no 
        extension of credit under an open end consumer credit plan 
        secured by the principal dwelling of the consumer (other than a 
        reverse mortgage) may include terms which require arbitration 
        or any other nonjudicial procedure as the method for resolving 
        any controversy or settling any claims arising out of the 
        transaction.
            ``(2) Post-controversy agreements.--Subject to paragraph 
        (3), paragraph (1) shall not be construed as limiting the right 
        of the consumer and the creditor or an assignee, including a 
        securitizer, to agree to arbitration or any other nonjudicial 
        procedure as the method for resolving any controversy at any 
        time after a dispute or claim under the transaction arises.
            ``(3) No waiver of statutory cause of action.--No provision 
        of any residential mortgage loan or of any extension of credit 
        under an open end consumer credit plan secured by the principal 
        dwelling of the consumer (other than a reverse mortgage), and 
        no other agreement between the consumer and the creditor, shall 
        be applied or interpreted so as to bar a consumer from bringing 
        an action in an appropriate district court of the United 
        States, or any other court of competent jurisdiction, pursuant 
        to section 130 or any other provision of law, for damages or 
        other relief in connection with any alleged violation of this 
        section, any other provision of this title, or any other 
        Federal law.
    ``(i) Duty of Securitizer To Retain Access to Loans.--Any 
securitizer shall reserve the right and preserve an ability, in any 
document or contract establishing any pool of assets that includes any 
residential mortgage loan--
            ``(1) to identify and obtain access to any such loan in the 
        pool; and
            ``(2) to provide for and obtain a remedy under this title 
        for the obligor under any such loan.
    ``(j) Effect of Foreclosure on Preexisting Lease.--In the case of 
any foreclosure on any residential real property securing an extension 
of credit made under a contract entered into after the date of the 
enactment of the Mortgage Reform and Anti-Predatory Lending Act of 
2007, any successor in interest in such property pursuant to the 
foreclosure shall assume such interest subject to--
            ``(1) any bona fide lease made to a bona fide tenant 
        entered into before the notice of foreclosure; and
            ``(2) the rights of any bona fide tenant without a lease or 
        with a lease terminable at will under State law and the 
        provision, by the successor in interest, of a notice to vacate 
        to the tenant at least 90 days before the effective date of the 
        notice.
    ``(k) Mortgages With Negative Amortization.--No creditor may extend 
credit to a first-time borrower in connection with a consumer credit 
transaction under an open or closed end consumer credit plan secured by 
a dwelling or residential real property that includes a dwelling, other 
than a reverse mortgage, that provides or permits a payment plan that 
may, at any time over the term of the extension of credit, result in 
negative amortization unless, before such transaction is consummated--
            ``(1) the creditor provides the consumer with a statement 
        that--
                    ``(A) the pending transaction will or may, as the 
                case may be, result in negative amortization;
                    ``(B) describes negative amortization in such 
                manner as the Federal banking agencies shall prescribe;
                    ``(C) negative amortization increases the 
                outstanding principal balance of the account; and
                    ``(D) negative amortization reduces the consumer's 
                equity in the real property; and
            ``(2) the consumer provides the creditor with sufficient 
        documentation to demonstrate that the consumer received 
        homeownership counseling from organizations or counselors 
        certified by the Secretary of Housing and Urban Development as 
        competent to provide such counseling.''.
    (b) Conforming Amendment Relating to Enforcement .--Section 108(a) 
of the Truth in Lending Act (15 U.S.C. 1607(a)) is amended by inserting 
after paragraph (6) the following new paragraph:
            ``(7) sections 21B and 21C of the Securities Exchange Act 
        of 1934, in the case of an entity that is subject to 
        consolidated supervision by the Securities and Exchange 
        Commission, other than a depository institution, by the 
        Securities and Exchange Commission.''.

SEC. 207. AMENDMENT TO PROVISION GOVERNING CORRECTION OF ERRORS.

    Section 130(b) of the Truth in Lending Act (15 U.S.C. 1640(b)) is 
amended to read as follows:
    ``(b) Correction of Errors.--A creditor has no liability under this 
section or section 108 or 112 for any failure to comply with any 
requirement imposed under this chapter or chapter 5, if--
            ``(1) within 30 days of the loan closing and prior to the 
        institution of any action, the consumer is notified of or 
        discovers the violation, appropriate restitution is made, and 
        whatever adjustments are necessary are made to the loan to 
        either, at the choice of the consumer--
                    ``(A) make the loan satisfy the requirements of 
                this chapter; or
                    ``(B) change the terms of the loan in a manner 
                beneficial to the consumer so that the loan will no 
                longer be a high-cost mortgage; or
            ``(2) within 60 days of the creditor's discovery or receipt 
        of notification of an unintentional violation or bona fide 
        error as described in subsection (c) and prior to the 
        institution of any action, the consumer is notified of the 
        compliance failure, appropriate restitution is made, and 
        whatever adjustments are necessary are made to the loan to 
        either, at the choice of the consumer--
                    ``(A) make the loan satisfy the requirements of 
                this chapter; or
                    ``(B) change the terms of the loan in a manner 
                beneficial so that the loan will no longer be a high-
                cost mortgage.''.

SEC. 208. AMENDMENT RELATING TO RIGHT OF RESCISSION.

    Section 130(e) of the Truth in Lending Act (15 U.S.C. 1640(e)) is 
amended by inserting after the second sentence the following new 
sentence: ``This subsection also shall not bar a person from asserting 
a right to rescission under section 125, in an action to collect the 
debt or as a defense to a judicial or nonjudicial foreclosure after the 
expiration of the time periods for affirmative actions set forth in 
this section and section 125.''.

SEC. 209. AMENDMENTS TO CIVIL LIABILITY PROVISIONS.

    (a) Increase in Amount of Civil Money Penalties for Certain 
Violations.--Section 130(a) of the Truth in Lending Act (15 U.S.C. 
1640(a)) is amended, in the matter preceding paragraph (1), by striking 
``an amount equal to the sum'' and inserting ``an amount equal to twice 
the sum''.
    (b) Statute of Limitations Extended for Section 129 Violations.--
Section 130(e) of the Truth in Lending Act (15 U.S.C. 1640(e)) (as 
amended by section 207 of this title) is amended--
            (1) in the first sentence, by striking ``Any action'' and 
        inserting ``Except as provided in the subsequent sentence, any 
        action''; and
            (2) by inserting after the first sentence the following new 
        sentence: ``Any action under this section with respect to any 
        violation of section 129 may be brought in any United States 
        district court, or in any other court of competent 
        jurisdiction, before the end of the 3-year period beginning on 
        the date of the occurrence of the violation.''.

SEC. 210. RULE OF CONSTRUCTION.

    Except as otherwise expressly provided in section 129A or 129B of 
the Truth in Lending Act (as added by this Act), no provision of such 
section 129A or 129B shall be construed as superseding, repealing, or 
affecting any duty, right, obligation, privilege, or remedy of any 
person under any other provision of the Truth in Lending Act.

SEC. 211. REGULATIONS.

    Regulations required or authorized to be prescribed under this 
title or the amendments made by this title--
            (1) shall be prescribed in final form before the end of the 
        12-month period beginning on the date of the enactment of this 
        Act; and
            (2) shall take effect not later than 18 months after the 
        date of the enactment of this Act.

                     TITLE III--HIGH-COST MORTGAGES

SEC. 301. 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)) is amended by striking all that 
precedes paragraph (2) and inserting the following:
    ``(aa) High-Cost Mortgage.--
            ``(1) Definition.--
                    ``(A) In general.--The term `high-cost mortgage', 
                and a mortgage referred to in this subsection, means a 
                consumer credit transaction that is secured by the 
                consumer's principal dwelling, other than a reverse 
                mortgage transaction, if--
                            ``(i) in the case of a loan secured--
                                    ``(I) by a first mortgage on the 
                                consumer's principal dwelling, the 
                                annual percentage rate at consummation 
                                of the transaction will exceed by more 
                                than 8 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 for the 
                                extension of credit is received by the 
                                creditor; or
                                    ``(II) by a subordinate or junior 
                                mortgage on the consumer's principal 
                                dwelling, the annual percentage rate at 
                                consummation of the transaction will 
                                exceed by more than 10 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 for the extension 
                                of credit is received by the creditor;
                            ``(ii) the total points and fees payable in 
                        connection with the loan exceed--
                                    ``(I) in the case of a loan for 
                                $20,000 or more, 5 percent of the total 
                                loan amount; or
                                    ``(II) in the case of a loan for 
                                less than $20,000, the lesser of 8 
                                percent of the total loan amount or 
                                $1,000; or
                            ``(iii) the loan documents permit the 
                        creditor to charge or collect prepayment fees 
                        or penalties more than 30 months after the loan 
                        closing or such fees or penalties exceed, in 
                        the aggregate, more than 2 percent of the 
                        amount prepaid.
                    ``(B) Introductory rates taken into account.--For 
                purposes of subparagraph (A)(i), the annual percentage 
                rate of interest shall be determined based on the 
                following interest rate:
                            ``(i) In the case of a fixed-rate loan in 
                        which the annual percentage rate will not vary 
                        during the term of the loan, the interest rate 
                        in effect on the date of consummation of the 
                        transaction.
                            ``(ii) In the case of a loan in which the 
                        rate of interest varies solely in accordance 
                        with an index, the interest rate determined by 
                        adding the index rate in effect on the date of 
                        consummation of the transaction to the maximum 
                        margin permitted at any time during the loan 
                        agreement.
                            ``(iii) In the case of any other loan in 
                        which the rate may vary at any time during the 
                        term of the loan for any reason, the interest 
                        charged on the loan at the maximum rate that 
                        may be charged during the term of the loan.''.
    (b) Adjustment of Percentage Points.--Section 103(aa)(2) of the 
Truth in Lending Act (15 U.S.C. 1602(aa)(2)) is amended by striking 
subparagraph (B) and inserting the following new subparagraph:
                    ``(B) An increase or decrease under subparagraph 
                (A)--
                            ``(i) may not result in the number of 
                        percentage points referred to in paragraph 
                        (1)(A)(i)(I) being less than 6 percentage 
                        points or greater than 10 percentage points; 
                        and
                            ``(ii) may not result in the number of 
                        percentage points referred to in paragraph 
                        (1)(A)(i)(II) being less than 8 percentage 
                        points or greater than 12 percentage points.''.
    (c) Points and Fees Defined.--
            (1) In general.--Section 103(aa)(4) of the Truth in Lending 
        Act (15 U.S.C. 1602(aa)(4)) is amended--
                    (A) by striking subparagraph (B) and inserting the 
                following:
                    ``(B) all compensation paid directly or indirectly 
                by a consumer or creditor to a mortgage broker from any 
                source, including a mortgage broker that originates a 
                loan in the name of the broker in a table-funded 
                transaction;'';
                    (B) in subparagraph (C)(ii), by striking ``and'' 
                after the semicolon at the end;
                    (C) by redesignating subparagraph (D) as 
                subparagraph (G); and
                    (D) by inserting after subparagraph (C) the 
                following new subparagraphs:
                    ``(D) premiums or other charges payable at or 
                before closing for any credit life, credit disability, 
                credit unemployment, or credit property insurance, or 
                any other accident, loss-of-income, life or health 
                insurance, or any payments directly or indirectly for 
                any debt cancellation or suspension agreement or 
                contract, except that insurance premiums or debt 
                cancellation or suspension fees calculated and paid in 
                full on a monthly basis shall not be considered 
                financed by the creditor;
                    ``(E) except as provided in subsection (cc), the 
                maximum prepayment fees and penalties which may be 
                charged or collected under the terms of the loan 
                documents;
                    ``(F) all prepayment fees or penalties that are 
                incurred by the consumer if the loan refinances a 
                previous loan made or currently held by the same 
                creditor or an affiliate of the creditor; and''.
            (2) Calculation of points and fees for open-end loans.--
        Section 103(aa) of the Truth in Lending Act (15 U.S.C. 
        1602(aa)) is amended--
                    (A) by redesignating paragraph (5) as paragraph 
                (6); and
                    (B) by inserting after paragraph (4) the following 
                new paragraph:
            ``(5) Calculation of points and fees for open-end loans.--
        In the case of open-end loans, points and fees shall be 
        calculated, for purposes of this section and section 129, by 
        adding the total points and fees known at or before closing, 
        including the maximum prepayment penalties which may be charged 
        or collected under the terms of the loan documents, plus the 
        minimum additional fees the consumer would be required to pay 
        to draw down an amount equal to the total credit line.''.
    (d) High Cost Mortgage Lender.--Section 103(f) of the Truth in 
Lending Act (15 U.S.C. 1602(f)) is amended by striking the last 
sentence and inserting the following new sentence: ``Any person who 
originates or brokers 2 or more mortgages referred to in subsection 
(aa) in any 12-month period, any person who originates 1 or more such 
mortgages through a mortgage broker in any 12-month period, or, in 
connection with a table funding transaction of such a mortgage, and any 
person to whom the obligation is initially assigned at or after 
settlement shall be considered to be a creditor for purposes of this 
title.''.
    (e) Bona Fide Discount Loan Discount Points and Prepayment 
Penalties.--Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is 
amended by adding at the end the following new subsection:
    ``(cc) Bona Fide Discount Points and Prepayment Penalties.--For the 
purposes of determining the amount of points and fees for purposes of 
subsection (aa), either the amounts described in paragraphs (1) or (4) 
of the following paragraphs, but not both, may be excluded:
            ``(1) Exclusion of bona fide discount points.--The discount 
        points described in 1 of the following subparagraphs shall be 
        excluded from determining the amounts of points and fees with 
        respect to a high-cost mortgage for purposes of subsection 
        (aa):
                    ``(A) Up to and including 2 bona fide discount 
                points payable by the consumer in connection with the 
                mortgage, but only if the interest rate from which the 
                mortgage's interest rate will be discounted does not 
                exceed by more than 1 percentage point the required net 
                yield for a 90-day standard mandatory delivery 
                commitment for a reasonably comparable loan from either 
                the Federal National Mortgage Association or the 
                Federal Home Loan Mortgage Corporation, whichever is 
                greater.
                    ``(B) Unless 2 bona fide discount points have been 
                excluded under subparagraph (A), up to and including 1 
                bona fide discount points payable by the consumer in 
                connection with the mortgage, but only if the interest 
                rate from which the mortgage's interest rate will be 
                discounted does not exceed by more than 2 percentage 
                points the required net yield for a 90-day standard 
                mandatory delivery commitment for a reasonably 
                comparable loan from either the Federal National 
                Mortgage Association or the Federal Home Loan Mortgage 
                Corporation, whichever is greater.
            ``(2) Definition.--For purposes of paragraph (1), the term 
        `bona fide discount points' means loan discount points which 
        are knowingly paid by the consumer for the purpose of reducing, 
        and which in fact result in a bona fide reduction of, the 
        interest rate or time-price differential applicable to the 
        mortgage.
            ``(3) Exception for interest rate reductions inconsistent 
        with industry norms.--Paragraph (1) shall not apply to discount 
        points used to purchase an interest rate reduction unless the 
        amount of the interest rate reduction purchased is reasonably 
        consistent with established industry norms and practices for 
        secondary mortgage market transactions.
            ``(4) Allowance of conventional prepayment penalty.--
        Subsection (aa)(1)(4)(E) shall not apply so as to include a 
        prepayment penalty or fee that is authorized by law other than 
        this title and may be imposed pursuant to the terms of a high-
        cost mortgage (or other consumer credit transaction secured by 
        the consumer's principal dwelling) if--
                    ``(A) the annual percentage rate applicable with 
                respect to such mortgage or transaction (as determined 
                for purposes of subsection (aa)(1)(A)(i))--
                            ``(i) in the case of a first mortgage on 
                        the consumer's principal dwelling, does not 
                        exceed by more than 2 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 for the extension of credit is 
                        received by the creditor; or
                            ``(ii) in the case of a subordinate or 
                        junior mortgage on the consumer's principal 
                        dwelling, does not exceed by more than 4 
                        percentage points the yield on such Treasury 
                        securities; and
                    ``(B) the total amount of any prepayment fees or 
                penalties permitted under the terms of the high-cost 
                mortgage or transaction does not exceed 2 percent of 
                the amount prepaid.''.

SEC. 302. AMENDMENTS TO EXISTING REQUIREMENTS FOR CERTAIN MORTGAGES.

    (a) Prepayment Penalty Provisions.--Section 129(c)(2) of the Truth 
in Lending Act (15 U.S.C. 1639(c)(2)) is amended--
            (1) by striking ``and'' after the semicolon at the end of 
        subparagraph (C);
            (2) by redesignating subparagraph (D) as subparagraph (E); 
        and
            (3) by inserting after subparagraph (C) the following new 
        subparagraph:
                    ``(D) the amount of the principal obligation of the 
                mortgage exceeds the maximum principal obligation 
                limitation (for the applicable size residence) under 
                section 203(b)(2) of the National Housing Act for the 
                area in which the residence subject to the mortgage is 
                located; and''.
    (b) No Balloon Payments.--Section 129(e) of the Truth in Lending 
Act (15 U.S.C. 1639(e)) is amended to read as follows:
    ``(e) No Balloon Payments.--No high-cost mortgage may contain a 
scheduled payment that is more than twice as large as the average of 
earlier scheduled payments. This subsection shall not apply when the 
payment schedule is adjusted to the seasonal or irregular income of the 
consumer.''.
    (c) No Lending Without Due Regard to Ability To Repay.--Section 
129(h) of the Truth in Lending Act (15 U.S.C. 1639(h)) is amended--
            (1) by striking ``Payment Ability of Consumer.--A creditor 
        shall not'' and inserting ``Payment Ability of Consumer.--
            ``(1) Pattern or practice.--
                    ``(A) In general.--A creditor shall not'';
            (2) by inserting after subparagraph (A) (as so designated 
        by paragraph (1) of this subsection) the following new 
        subparagraph:
                    ``(B) Presumption of violation.--There shall be a 
                presumption that a creditor has violated this 
                subsection if the creditor engages in a pattern or 
                practice of making high-cost mortgages without 
                verifying or documenting the repayment ability of 
                consumers with respect to such loans.''; and
            (3) by adding at the end the following new paragraph:
            ``(2) Prohibition on extending credit without regard to 
        payment ability of consumer.--
                    ``(A) In general.--A creditor may not extend credit 
                to a consumer under a high-cost mortgage unless a 
                reasonable creditor would believe at the time the loan 
                is closed that the consumer or consumers that are 
                residing or will reside in the residence subject to the 
                mortgage will be able to make the scheduled payments 
                associated with the loan, based upon a consideration of 
                current and expected income, current obligations, 
                employment status, and other financial resources, other 
                than equity in the residence.
                    ``(B) Presumption of ability.--For purposes of this 
                subsection, there shall be a rebuttable presumption 
                that a consumer is able to make the scheduled payments 
                to repay the obligation if, at the time the loan is 
                consummated, the consumer's total monthly debts, 
                including amounts under the loan, do not exceed 50 
                percent of his or her monthly gross income as verified 
                by tax returns, payroll receipts, or other third-party 
                income verification.''.

SEC. 303. ADDITIONAL REQUIREMENTS FOR CERTAIN MORTGAGES.

    (a) Additional Requirements for Certain Mortgages.--Section 129 of 
the Truth in Lending Act (15 U.S.C. 1639) is amended--
            (1) by redesignating subsections (j), (k) and (l) as 
        subsections (n), (o) and (p) respectively; and
            (2) by inserting after subsection (i) the following new 
        subsections:
    ``(j) Recommended Default.--No creditor shall recommend or 
encourage default on an existing loan or other debt prior to and in 
connection with the closing or planned closing of a high-cost mortgage 
that refinances all or any portion of such existing loan or debt.
    ``(k) Late Fees.--
            ``(1) In general.--No creditor may impose a late payment 
        charge or fee in connection with a high-cost mortgage--
                    ``(A) in an amount in excess of 4 percent of the 
                amount of the payment past due;
                    ``(B) unless the loan documents specifically 
                authorize the charge or fee;
                    ``(C) before the end of the 15-day period beginning 
                on the date the payment is due, or in the case of a 
                loan on which interest on each installment is paid in 
                advance, before the end of the 30-day period beginning 
                on the date the payment is due; or
                    ``(D) more than once with respect to a single late 
                payment.
            ``(2) Coordination with subsequent late fees.--If a payment 
        is otherwise a full payment for the applicable period and is 
        paid on its due date or within an applicable grace period, and 
        the only delinquency or insufficiency of payment is 
        attributable to any late fee or delinquency charge assessed on 
        any earlier payment, no late fee or delinquency charge may be 
        imposed on such payment.
            ``(3) Failure to make installment payment.--If, in the case 
        of a loan agreement the terms of which provide that any payment 
        shall first be applied to any past due principal balance, the 
        consumer fails to make an installment payment and the consumer 
        subsequently resumes making installment payments but has not 
        paid all past due installments, the creditor may impose a 
        separate late payment charge or fee for any principal due 
        (without deduction due to late fees or related fees) until the 
        default is cured.
    ``(l) Acceleration of Debt.--No high-cost mortgage may contain a 
provision which permits the creditor, in its sole discretion, to 
accelerate the indebtedness. This provision shall not apply when 
repayment of the loan has been accelerated by default, pursuant to a 
due-on-sale provision, or pursuant to a material violation of some 
other provision of the loan documents unrelated to the payment 
schedule.
    ``(m) Restriction on Financing Points and Fees.--No creditor may 
directly or indirectly finance, in connection with any high-cost 
mortgage, any of the following:
            ``(1) Any prepayment fee or penalty payable by the consumer 
        in a refinancing transaction if the creditor or an affiliate of 
        the creditor is the noteholder of the note being refinanced.
            ``(2) Any points or fees.''.
    (b) Prohibitions on Evasions.--Section 129 of the Truth in Lending 
Act (15 U.S.C. 1639) is amended by inserting after subsection (p) (as 
so redesignated by subsection (a)(1)) the following new subsection:
    ``(q) Prohibitions on Evasions, Structuring of Transactions, and 
Reciprocal Arrangements.--A creditor may not take any action in 
connection with a high-cost mortgage--
            ``(1) to structure a loan transaction as an open-end credit 
        plan or another form of loan for the purpose and with the 
        intent of evading the provisions of this title; or
            ``(2) to divide any loan transaction into separate parts 
        for the purpose and with the intent of evading provisions of 
        this title.''.
    (c) Modification or Deferral Fees.--Section 129 of the Truth in 
Lending Act (15 U.S.C. 1639) is amended by inserting after subsection 
(q) (as added by subsection (b) of this section) the following new 
subsection:
    ``(r) Modification and Deferral Fees Prohibited.--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.''.
    (d) Payoff Statement.--Section 129 of the Truth in Lending Act (15 
U.S.C. 1639) is amended by inserting after subsection (r) (as added by 
subsection (c) of this section) the following new subsection:
    ``(s) 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 to 
                cover the cost of such transmission or service in an 
                amount 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 high-cost mortgages.
                    ``(C) Fee disclosure.--Prior to charging a 
                transaction fee as provided in subparagraph (B), a 
                creditor or servicer shall disclose that payoff 
                balances are available for free pursuant to 
                subparagraph (A).
                    ``(D) 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.''.
    (e) Pre-Loan Counseling Required.--Section 129 of the Truth in 
Lending Act (15 U.S.C. 1639) is amended by inserting after subsection 
(s) (as added by subsection (d) of this section) the following new 
subsection:
    ``(t) Pre-Loan Counseling.--
            ``(1) In general.--A creditor may not extend credit to a 
        consumer under a high-cost mortgage without first receiving 
        certification from a counselor that is approved by the 
        Secretary of Housing and Urban Development, or at the 
        discretion of the Secretary, a state housing finance authority, 
        that the consumer has received counseling on the advisability 
        of the loan transaction. Such counselor shall not be employed 
        by the creditor or an affiliate of the creditor or be 
        affiliated with the creditor.
            ``(2) Disclosures required prior to counseling.--No 
        counselor may certify that a consumer has received counseling 
        on the advisability of the loan transaction unless the 
        counselor can verify that the consumer has received each 
        statement required (in connection with such loan) by section 
        129 of this title or by the Real Estate Settlement Procedures 
        Act of 1974 with respect to the transaction.
            ``(3) Regulations.--The Secretary of Housing and Urban 
        Development may prescribe such regulations as the Secretary 
        determines to be appropriate to carry out the requirements of 
        paragraph (1).''.

SEC. 304. REGULATIONS.

    (a) In General.--The Board of Governors of the Federal Reserve 
System shall publish regulations implementing this title and the 
amendments made by this title in final form before the end of the 6-
month period beginning on the date of the enactment of this Act.
    (b) Consumer Mortgage Education.--
            (1) Regulations.--The Board of Governors of the Federal 
        Reserve System may prescribe regulations requiring or 
        encouraging creditors to provide consumer mortgage education to 
        prospective customers or direct such customers to qualified 
        consumer mortgage education or counseling programs in the 
        vicinity of the residence of the consumer.
            (2) Coordination with state law.--No requirement 
        established by the Board of Governors of the Federal Reserve 
        System pursuant to paragraph (1) shall be construed as 
        affecting or superseding any requirement under the law of any 
        State with respect to consumer mortgage counseling or 
        education.
                                 <all>