[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3915 Referred in Senate (RFS)]
1st Session
H. R. 3915
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
December 3, 2007
Received; read twice and referred to the Committee on Banking, Housing,
and Urban Affairs
_______________________________________________________________________
AN ACT
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--RESIDENTIAL MORTGAGE LOAN ORIGINATION
Subtitle A--Licensing System for Residential Mortgage Loan Originators
Sec. 101. Purposes and methods for establishing a mortgage licensing
system and registry.
Sec. 102. Definitions.
Sec. 103. License or registration required.
Sec. 104. State license and registration application and issuance.
Sec. 105. Standards for State license renewal.
Sec. 106. System of registration administration by Federal banking
agencies.
Sec. 107. Secretary of Housing and Urban Development backup authority
to establish a loan originator licensing
system.
Sec. 108. Backup authority to establish a nationwide mortgage licensing
and registry system.
Sec. 109. Fees.
Sec. 110. Background checks of loan originators.
Sec. 111. Confidentiality of information.
Sec. 112. Liability provisions.
Sec. 113. Enforcement under HUD backup licensing system.
Subtitle B--Residential Mortgage Loan Origination Standards
Sec. 121. Definitions.
Sec. 122. Residential mortgage loan origination.
Sec. 123. Prohibition on steering incentives.
Sec. 124. Liability.
Sec. 125. 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. Liability.
Sec. 205. Defense to foreclosure.
Sec. 206. Additional standards and requirements.
Sec. 207. Rule of construction.
Sec. 208. Effect on State laws.
Sec. 209. Regulations.
Sec. 210. Amendments to civil liability provisions.
Sec. 211. Lender rights in the context of borrower deception.
Sec. 212. Six-month notice required before reset of hybrid adjustable
rate mortgages.
Sec. 213. Required disclosures.
Sec. 214. Disclosures required in monthly statements for residential
mortgage loans.
Sec. 215. Authorization of appropriations.
Sec. 216. Effective date.
Sec. 217. Report by the GAO.
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. Amendment to provision governing correction of errors.
Sec. 305. Regulations.
Sec. 306. Effective date.
TITLE IV--OFFICE OF HOUSING COUNSELING
Sec. 401. Short title.
Sec. 402. Establishment of Office of Housing Counseling.
Sec. 403. Counseling procedures.
Sec. 404. Grants for housing counseling assistance.
Sec. 405. Requirements to use HUD-certified counselors under HUD
programs.
Sec. 406. Study of defaults and foreclosures.
Sec. 407. Definitions for counseling-related programs.
Sec. 408. Updating and simplification of mortgage information booklet.
TITLE V--MORTGAGE DISCLOSURES UNDER REAL ESTATE SETTLEMENT PROCEDURES
ACT OF 1974
Sec. 501. Universal mortgage disclosure in good faith estimate of
settlement services costs.
TITLE VI--MORTGAGE SERVICING
Sec. 601. Escrow and impound accounts relating to certain consumer
credit transactions.
Sec. 602. Disclosure notice required for consumers who waive escrow
services.
Sec. 603. Real Estate Settlement Procedures Act of 1974 amendments.
Sec. 604. Mortgage servicing studies required.
Sec. 605. Escrows included in repayment analysis.
TITLE VII--APPRAISAL ACTIVITIES
Sec. 701. Property appraisal requirements.
Sec. 702. Unfair and deceptive practices and acts relating to certain
consumer credit transactions.
Sec. 703. Appraisal subcommittee of FIEC, appraiser independence, and
approved appraiser education.
Sec. 704. Study required on improvements in appraisal process and
compliance programs.
Sec. 705. Consumer appraisal disclosure.
TITLE I--RESIDENTIAL MORTGAGE LOAN ORIGINATION
Subtitle A--Licensing System for Residential Mortgage Loan Originators
SEC. 101. PURPOSES AND METHODS FOR ESTABLISHING A MORTGAGE LICENSING
SYSTEM AND REGISTRY.
In order to increase uniformity, reduce regulatory burden, enhance
consumer protection, and reduce fraud, the States, through the
Conference of State Bank Supervisors and the American Association of
Residential Mortgage Regulators, are hereby encouraged to establish a
Nationwide Mortgage Licensing System and Registry for the residential
mortgage industry that accomplishes all of the following objectives:
(1) Provides uniform license applications and reporting
requirements for State-licensed loan originators.
(2) Provides a comprehensive licensing and supervisory
database.
(3) Aggregates and improves the flow of information to and
between regulators.
(4) Provides increased accountability and tracking of loan
originators.
(5) Streamlines the licensing process and reduces the
regulatory burden.
(6) Enhances consumer protections and supports anti-fraud
measures.
(7) Provides consumers with easily accessible information
regarding the employment history of, and publicly adjudicated
disciplinary and enforcement actions against, loan originators.
SEC. 102. DEFINITIONS.
For purposes of this subtitle, the following definitions shall
apply:
(1) Federal banking agencies.--The term ``Federal banking
agencies'' means the Board of Governors of the Federal Reserve
System, the Comptroller of the Currency, the Director of the
Office of Thrift Supervision, the National Credit Union
Administration, and the Federal Deposit Insurance Corporation.
(2) Depository institution.--The term ``depository
institution'' has the same meaning as in section 3 of the
Federal Deposit Insurance Act and includes any credit union.
(3) Loan originator.--
(A) In general.--The term ``loan originator''--
(i) means an individual who--
(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, for direct
or indirect compensation or gain, or in
the expectation of direct or indirect
compensation or gain;
(ii) includes any individual 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 individual
can or will provide or perform any of the
activities described in clause (i);
(iii) does not include any individual who
is not otherwise described in clause (i) or
(ii) and who performs purely administrative or
clerical tasks on behalf of a person who is
described in any such clause.
(iv) does not include a person or entity
that only performs real estate brokerage
activities and is licensed or registered in
accordance with applicable State law, unless
the person or entity is compensated by a
lender, a mortgage broker, or other loan
originator or by any agent of such lender,
mortgage broker, or other loan originator.
(B) Other definitions relating to loan
originator.--For purposes of this subsection, an
individual ``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.
(C) Administrative or clerical tasks.--The term
``administrative or clerical tasks'' means the receipt,
collection, and distribution of information common for
the processing or underwriting of a loan in the
mortgage industry and communication with a consumer to
obtain information necessary for the processing or
underwriting of a residential mortgage loan.
(D) Real estate brokerage activity defined.--The
term ``real estate brokerage activity'' means any
activity that involves offering or providing real
estate brokerage services to the public, including--
(i) acting as a real estate agent or real
estate broker for a buyer, seller, lessor, or
lessee of real property;
(ii) listing or advertising real property
for sale, purchase, lease, rental, or exchange;
(iii) providing advice in connection with
sale, purchase, lease, rental, or exchange of
real property;
(iv) bringing together parties interested
in the sale, purchase, lease, rental, or
exchange of real property;
(v) negotiating, on behalf of any party,
any portion of a contract relating to the sale,
purchase, lease, rental, or exchange of real
property (other than in connection with
providing financing with respect to any such
transaction);
(vi) engaging in any activity for which a
person engaged in the activity is required to
be registered or licensed as a real estate
agent or real estate broker under any
applicable law; and
(vii) offering to engage in any activity,
or act in any capacity, described in clause
(i), (ii), (iii), (iv), (v), or (vi).
(4) Loan processor or underwriter.--
(A) In general.--The term ``loan processor or
underwriter'' means an individual who performs clerical
or support duties at the direction of and subject to
the supervision and instruction of--
(i) a State-licensed loan originator; or
(ii) a registered loan originator.
(B) Clerical or support duties.--For purposes of
subparagraph (A), the term ``clerical or support
duties'' may include--
(i) the receipt, collection, distribution,
and analysis of information common for the
processing or underwriting of a residential
mortgage loan; and
(ii) communicating with a consumer to
obtain the information necessary for the
processing or underwriting of a loan, to the
extent that such communication does not include
offering or negotiating loan rates or terms, or
counseling consumers about residential mortgage
loan rates or terms.
(5) Nationwide mortgage licensing system and registry.--The
term ``Nationwide Mortgage Licensing System and Registry''
means a mortgage licensing system developed and maintained by
the Conference of State Bank Supervisors and the American
Association of Residential Mortgage Regulators for the State
licensing and registration of State-licensed loan originators
and the registration of registered loan originators or any
system established by the Secretary under section 108.
(6) Registered loan originator.--The term ``registered loan
originator'' means any individual who--
(A) meets the definition of loan originator and is
an employee of a depository institution or a subsidiary
of a depository institution; and
(B) is registered with, and maintains a unique
identifier through, the Nationwide Mortgage Licensing
System and Registry.
(7) Residential mortgage loan.--The term ``residential
mortgage loan'' means any loan primarily for personal, family,
or household use that is secured by a mortgage, deed of trust,
or other equivalent consensual security interest on a dwelling
(as defined in section 103(v) of the Truth in Lending Act) or
residential real estate upon which is constructed or intended
to be constructed a dwelling (as so defined).
(8) Secretary.--The term ``Secretary'' means the Secretary
of Housing and Urban Development.
(9) State-licensed loan originator.--The term ``State-
licensed loan originator'' means any individual who--
(A) is a loan originator;
(B) is not an employee of a depository institution
or any subsidiary of a depository institution; and
(C) is licensed by a State or by the Secretary
under section 107 and registered as a loan originator
with, and maintains a unique identifier through, the
Nationwide Mortgage Licensing System and Registry.
(10) Unique identifier.--The term ``unique identifier''
means a number or other identifier that--
(A) permanently identifies a loan originator; and
(B) is assigned by protocols established by the
Nationwide Mortgage Licensing System and Registry and
the Federal banking agencies to facilitate electronic
tracking of loan originators and uniform identification
of, and public access to, the employment history of and
the publicly adjudicated disciplinary and enforcement
actions against loan originators.
SEC. 103. LICENSE OR REGISTRATION REQUIRED.
(a) In General.--An individual may not engage in the business of a
loan originator without first--
(1) obtaining and maintaining--
(A) a registration as a registered loan originator;
or
(B) a license and registration as a State-licensed
loan originator; and
(2) obtaining a unique identifier.
(b) Loan Processors and Underwriters.--
(1) Supervised loan processors and underwriters.--A loan
processor or underwriter who does not represent 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 individual can or will perform any of the
activities of a loan originator shall not be required to be a
State-licensed loan originator or a registered loan originator.
(2) Independent contractors.--A loan processor or
underwriter may not work as an independent contractor unless
such processor or underwriter is a State-licensed loan
originator or a registered loan originator.
SEC. 104. STATE LICENSE AND REGISTRATION APPLICATION AND ISSUANCE.
(a) Background Checks.--In connection with an application to any
State for licensing and registration as a State-licensed loan
originator, the applicant shall, at a minimum, furnish to the
Nationwide Mortgage Licensing System and Registry information
concerning the applicant's identity, including--
(1) fingerprints for submission to the Federal Bureau of
Investigation, and any governmental agency or entity authorized
to receive such information for a State and national criminal
history background check; and
(2) personal history and experience, including
authorization for the System to obtain--
(A) an independent credit report obtained from a
consumer reporting agency described in section 603(p)
of the Fair Credit Reporting Act; and
(B) information related to any administrative,
civil or criminal findings by any governmental
jurisdiction.
(b) Issuance of License.--The minimum standards for licensing and
registration as a State-licensed loan originator shall include the
following:
(1) The applicant has not had a loan originator or similar
license revoked in any governmental jurisdiction during the 5-
year period immediately preceding the filing of the present
application.
(2) The applicant has not been convicted, pled guilty or
nolo contendere in a domestic, foreign, or military court of a
felony during the 7-year period immediately preceding the
filing of the present application.
(3) The applicant has demonstrated financial
responsibility, character, and general fitness such as to
command the confidence of the community and to warrant a
determination that the loan originator will operate honestly,
fairly, and efficiently within the purposes of this subtitle.
(4) The applicant has completed the pre-licensing education
requirement described in subsection (c).
(5) The applicant has passed a written test that meets the
test requirement described in subsection (d).
(c) Pre-Licensing Education of Loan Originators.--
(1) Minimum educational requirements.--In order to meet the
pre-licensing education requirement referred to in subsection
(b)(4), a person shall complete at least 20 hours of education
approved in accordance with paragraph (2), which shall include
at least 3 hours of Federal law and regulations and 3 hours of
ethics which shall include instruction on fraud, consumer
protection and fair lending issues.
(2) Approved educational courses.--For purposes of
paragraph (1), pre-licensing education courses shall be
reviewed, and published by the Nationwide Mortgage Licensing
System and Registry.
(3) Limitation and standards.--
(A) Limitation.--To maintain the independence of
the approval process, the Nationwide Mortgage Licensing
System and Registry shall not directly or indirectly
offer pre-licensure educational courses for loan
originators.
(B) Standards.--In approving courses under this
section, the Nationwide Mortgage Licensing System and
Registry shall apply reasonable standards in the review
and approval of courses.
(d) Testing of Loan Originators.--
(1) In general.--In order to meet the written test
requirement referred to in subsection (b)(5), an individual
shall pass, in accordance with the standards established under
this subsection, a qualified written test developed by the
Nationwide Mortgage Licensing System and Registry and
administered by an approved test provider.
(2) Qualified test.--A written test shall not be treated as
a qualified written test for purposes of paragraph (1) unless--
(A) the test consists of a minimum of 100
questions; and
(B) the test adequately measures the applicant's
knowledge and comprehension in appropriate subject
areas, including--
(i) ethics;
(ii) Federal law and regulation pertaining
to mortgage origination;
(iii) State law and regulation pertaining
to mortgage origination; and
(iv) Federal and State law and regulation,
including instruction on fraud, consumer
protection, and fair lending issues.
(3) Minimum competence.--
(A) Passing score.--An individual shall not be
considered to have passed a qualified written test
unless the individual achieves a test score of not less
than 75 percent correct answers to questions.
(B) Initial retests.--An individual may retake a
test 3 consecutive times with each consecutive taking
occurring in less than 14 days after the preceding
test.
(C) Subsequent retests.--After 3 consecutive tests,
an individual shall wait at least 14 days before taking
the test again.
(D) Retest after lapse of license.--A State-
licensed loan originator who fails to maintain a valid
license for a period of 5 years or longer shall retake
the test, not taking into account any time during which
such individual is a registered loan originator.
SEC. 105. STANDARDS FOR STATE LICENSE RENEWAL.
(a) In General.--The minimum standards for license renewal for
State-licensed loan originators shall include the following:
(1) The loan originator continues to meet the minimum
standards for license issuance.
(2) The loan originator has satisfied the annual continuing
education requirements described in subsection (b).
(b) Continuing Education for State-Licensed Loan Originators.--
(1) In general.--In order to meet the annual continuing
education requirements referred to in subsection (a)(2), a
State-licensed loan originator shall complete at least 8 hours
of education approved in accordance with paragraph (2), which
shall include at least 3 hours of Federal law and regulations
and 2 hours of ethics, including education on fraud, consumer
protection, and fair lending issues.
(2) Approved educational courses.--For purposes of
paragraph (1), continuing education courses shall be reviewed,
and published by the Nationwide Mortgage Licensing System and
Registry.
(3) Calculation of continuing education credits.--A State-
licensed loan originator--
(A) may only receive credit for a continuing
education course in the year in which the course is
taken; and
(B) may not take the same approved course in the
same or successive years to meet the annual
requirements for continuing education.
(4) Instructor credit.--A State-licensed loan originator
who is approved as an instructor of an approved continuing
education course may receive credit for the originator's own
annual continuing education requirement at the rate of 2 hours
credit for every 1 hour taught.
(5) Limitation and standards.--
(A) Limitation.--To maintain the independence of
the approval process, the Nationwide Mortgage Licensing
System and Registry shall not directly or indirectly
offer any continuing education courses for loan
originators.
(B) Standards.--In approving courses under this
section, the Nationwide Mortgage Licensing System and
Registry shall apply reasonable standards in the review
and approval of courses.
SEC. 106. SYSTEM OF REGISTRATION ADMINISTRATION BY FEDERAL BANKING
AGENCIES.
(a) Development.--
(1) In general.--The Federal banking agencies shall jointly
develop and maintain a system for registering employees of
depository institutions or subsidiaries of depository
institutions as registered loan originators with the Nationwide
Mortgage Licensing System and Registry. The system shall be
implemented before the end of the 1-year period beginning on
the date of the enactment of this Act.
(2) Registration requirements.--In connection with the
registration of any loan originator who is an employee of a
depository institution or a subsidiary of a depository
institution with the Nationwide Mortgage Licensing System and
Registry, the appropriate Federal banking agency shall, at a
minimum, furnish or cause to be furnished to the Nationwide
Mortgage Licensing System and Registry information concerning
the employees's identity, including--
(A) fingerprints for submission to the Federal
Bureau of Investigation, and any governmental agency or
entity authorized to receive such information for a
State and national criminal history background check;
and
(B) personal history and experience, including
authorization for the Nationwide Mortgage Licensing
System and Registry to obtain information related to
any administrative, civil or criminal findings by any
governmental jurisdiction.
(b) Coordination.--
(1) Unique identifier.--The Federal banking agencies,
through the Financial Institutions Examination Council, shall
coordinate with the Nationwide Mortgage Licensing System and
Registry to establish protocols for assigning a unique
identifier to each registered loan originator that will
facilitate electronic tracking and uniform identification of,
and public access to, the employment history of and publicly
adjudicated disciplinary and enforcement actions against loan
originators.
(2) Nationwide mortgage licensing system and registry
development.--To facilitate the transfer of information
required by subsection (a)(2), the Nationwide Mortgage
Licensing System and Registry shall coordinate with the Federal
banking agencies, through the Financial Institutions
Examination Council, concerning the development and operation,
by such System and Registry, of the registration functionality
and data requirements for loan originators.
(c) Consideration of Factors and Procedures.--In establishing the
registration procedures under subsection (a) and the protocols for
assigning a unique identifier to a registered loan originator, the
Federal banking agencies shall make such de minimis exceptions as may
be appropriate to paragraphs (1)(A) and (2) of section 103(a), shall
make reasonable efforts to utilize existing information to minimize the
burden of registering loan originators, and shall consider methods for
automating the process to the greatest extent practicable consistent
with the purposes of this subtitle.
SEC. 107. SECRETARY OF HOUSING AND URBAN DEVELOPMENT BACKUP AUTHORITY
TO ESTABLISH A LOAN ORIGINATOR LICENSING SYSTEM.
(a) Back up Licensing System.--If, by the end of the 1-year period,
or the 2-year period in the case of a State whose legislature meets
only biennially, beginning on the date of the enactment of this Act or
at any time thereafter, the Secretary determines that a State does not
have in place by law or regulation a system for licensing and
registering loan originators that meets the requirements of sections
104 and 105 and subsection (d) or does not participate in the
Nationwide Mortgage Licensing System and Registry, the Secretary shall
provide for the establishment and maintenance of a system for the
licensing and registration by the Secretary of loan originators
operating in such State as State-licensed loan originators.
(b) Licensing and Registration Requirements.--The system
established by the Secretary under subsection (a) for any State shall
meet the requirements of sections 104 and 105 for State-licensed loan
originators.
(c) Unique Identifier.--The Secretary shall coordinate with the
Nationwide Mortgage Licensing System and Registry to establish
protocols for assigning a unique identifier to each loan originator
licensed by the Secretary as a State-licensed loan originator that will
facilitate electronic tracking and uniform identification of, and
public access to, the employment history of and the publicly
adjudicated disciplinary and enforcement actions against loan
originators.
(d) State Licensing Law Requirements.--For purposes of this
section, the law in effect in a State meets the requirements of this
subsection if the Secretary determines the law satisfies the following
minimum requirements:
(1) A State loan 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.
(2) The State loan originator supervisory authority ensures
that all State-licensed loan originators operating in the State
are registered with Nationwide Mortgage Licensing System and
Registry.
(3) The State loan originator supervisory authority is
required to regularly report violations of such law, as well as
enforcement actions and other relevant information, to the
Nationwide Mortgage Licensing System and Registry.
(e) Temporary Extension of Period.--The Secretary may extend, by
not more than 6 months, the 1-year or 2-year period, as the case may
be, referred to in subsection (a) for the licensing of loan originators
in any State under a State licensing law that meets the requirements of
sections 104 and 105 and subsection (d) if the Secretary determines
that such State is making a good faith effort to establish a State
licensing law that meets such requirements, license mortgage
originators under such law, and register such originators with the
Nationwide Mortgage Licensing System and Registry.
(f) Limitation on HUD-Licensed Loan Originators.--Any loan
originator who is licensed by the Secretary under a system established
under this section for any State may not use such license to originate
loans in any other State.
SEC. 108. BACKUP AUTHORITY TO ESTABLISH A NATIONWIDE MORTGAGE LICENSING
AND REGISTRY SYSTEM.
If at any time the Secretary determines that the Nationwide
Mortgage Licensing System and Registry is failing to meet the
requirements and purposes of this subtitle for a comprehensive
licensing, supervisory, and tracking system for loan originators, the
Secretary shall establish and maintain such a system to carry out the
purposes of this subtitle and the effective registration and regulation
of loan originators.
SEC. 109. FEES.
The Federal banking agencies, the Secretary, and the Nationwide
Mortgage Licensing System and Registry may charge reasonable fees to
cover the costs of maintaining and providing access to information from
the Nationwide Mortgage Licensing System and Registry to the extent
such fees are not charged to consumers for access such system and
registry.
SEC. 110. BACKGROUND CHECKS OF LOAN ORIGINATORS.
(a) Access to Records.--Notwithstanding any other provision of law,
in providing identification and processing functions, the Attorney
General shall provide access to all criminal history information to the
appropriate State officials responsible for regulating State-licensed
loan originators to the extent criminal history background checks are
required under the laws of the State for the licensing of such loan
originators.
(b) Agent.--For the purposes of this section and in order to reduce
the points of contact which the Federal Bureau of Investigation may
have to maintain for purposes of subsection (a), the Conference of
State Bank Supervisors or a wholly owned subsidiary may be used as a
channeling agent of the States for requesting and distributing
information between the Department of Justice and the appropriate State
agencies.
SEC. 111. CONFIDENTIALITY OF INFORMATION.
(a) System Confidentiality.--Except as otherwise provided in this
section, any requirement under Federal or State law regarding the
privacy or confidentiality of any information or material provided to
the Nationwide Mortgage Licensing System and Registry or a system
established by the Secretary under section 108, and any privilege
arising under Federal or State law (including the rules of any Federal
or State court) with respect to such information or material, shall
continue to apply to such information or material after the information
or material has been disclosed to the system. Such information and
material may be shared with all State and Federal regulatory officials
with mortgage industry oversight authority without the loss of
privilege or the loss of confidentiality protections provided by
Federal and State laws.
(b) Nonapplicability of Certain Requirements.--Information or
material that is subject to a privilege or confidentiality under
subsection (a) shall not be subject to--
(1) disclosure under any Federal or State law governing the
disclosure to the public of information held by an officer or
an agency of the Federal Government or the respective State; or
(2) subpoena or discovery, or admission into evidence, in
any private civil action or administrative process, unless with
respect to any privilege held by the Nationwide Mortgage
Licensing System and Registry or the Secretary with respect to
such information or material, the person to whom such
information or material pertains waives, in whole or in part,
in the discretion of such person, that privilege.
(c) Coordination With Other Law.--Any State law, including any
State open record law, relating to the disclosure of confidential
supervisory information or any information or material described in
subsection (a) that is inconsistent with subsection (a) shall be
superseded by the requirements of such provision to the extent State
law provides less confidentiality or a weaker privilege.
(d) Public Access to Information.--This section shall not apply
with respect to the information or material relating to the employment
history of, and publicly adjudicated disciplinary and enforcement
actions against, loan originators that is included in Nationwide
Mortgage Licensing System and Registry for access by the public.
SEC. 112. LIABILITY PROVISIONS.
The Secretary, any State official or agency, any Federal banking
agency, or any organization serving as the administrator of the
Nationwide Mortgage Licensing System and Registry or a system
established by the Secretary under section 108, or any officer or
employee of any such entity, shall not be subject to any civil action
or proceeding for monetary damages by reason of the good-faith action
or omission of any officer or employee of any such entity, while acting
within the scope of office or employment, relating to the collection,
furnishing, or dissemination of information concerning persons who are
loan originators or are applying for licensing or registration as loan
originators.
SEC. 113. ENFORCEMENT UNDER HUD BACKUP LICENSING SYSTEM.
(a) Summons Authority.--The Secretary may--
(1) examine any books, papers, records, or other data of
any loan originator operating in any State which is subject to
a licensing system established by the Secretary under section
107; and
(2) summon any loan originator referred to in paragraph (1)
or any person having possession, custody, or care of the
reports and records relating to such loan originator, to appear
before the Secretary or any delegate of the Secretary at a time
and place named in the summons and to produce such books,
papers, records, or other data, and to give testimony, under
oath, as may be relevant or material to an investigation of
such loan originator for compliance with the requirements of
this subtitle.
(b) Examination Authority.--
(1) In general.--If the Secretary establishes a licensing
system under section 107 for any State, the Secretary shall
appoint examiners for the purposes of administering such
section.
(2) Power to examine.--Any examiner appointed under
paragraph (1) shall have power, on behalf of the Secretary, to
make any examination of any loan originator operating in any
State which is subject to a licensing system established by the
Secretary under section 107 whenever the Secretary determines
an examination of any loan originator is necessary to determine
the compliance by the originator with this subtitle.
(3) Report of examination.--Each examiner appointed under
paragraph (1) shall make a full and detailed report of
examination of any loan originator examined to the Secretary.
(4) Administration of oaths and affirmations; evidence.--In
connection with examinations of loan originators operating in
any State which is subject to a licensing system established by
the Secretary under section 107, or with other types of
investigations to determine compliance with applicable law and
regulations, the Secretary and examiners appointed by the
Secretary may administer oaths and affirmations and examine and
take and preserve testimony under oath as to any matter in
respect to the affairs of any such loan originator.
(5) Assessments.--The cost of conducting any examination of
any loan originator operating in any State which is subject to
a licensing system established by the Secretary under section
107 shall be assessed by the Secretary against the loan
originator to meet the Secretary's expenses in carrying out
such examination.
(c) Cease and Desist Proceeding.--
(1) Authority of secretary.--If the Secretary finds, after
notice and opportunity for hearing, that any person is
violating, has violated, or is about to violate any provision
of this subtitle, or any regulation thereunder, with respect to
a State which is subject to a licensing system established by
the Secretary under section 107, the Secretary may publish such
findings and enter an order requiring such person, and any
other person that is, was, or would be a cause of the
violation, due to an act or omission the person knew or should
have known would contribute to such violation, to cease and
desist from committing or causing such violation and any future
violation of the same provision, rule, or regulation. Such
order may, in addition to requiring a person to cease and
desist from committing or causing a violation, require such
person to comply, or to take steps to effect compliance, with
such provision or regulation, upon such terms and conditions
and within such time as the Secretary may specify in such
order. Any such order may, as the Secretary deems appropriate,
require future compliance or steps to effect future compliance,
either permanently or for such period of time as the Secretary
may specify, with such provision or regulation with respect to
any loan originator.
(2) Hearing.--The notice instituting proceedings pursuant
to paragraph (1) shall fix a hearing date not earlier than 30
days nor later than 60 days after service of the notice unless
an earlier or a later date is set by the Secretary with the
consent of any respondent so served.
(3) Temporary order.--Whenever the Secretary determines
that the alleged violation or threatened violation specified in
the notice instituting proceedings pursuant to paragraph (1),
or the continuation thereof, is likely to result in significant
dissipation or conversion of assets, significant harm to
consumers, or substantial harm to the public interest prior to
the completion of the proceedings, the Secretary may enter a
temporary order requiring the respondent to cease and desist
from the violation or threatened violation and to take such
action to prevent the violation or threatened violation and to
prevent dissipation or conversion of assets, significant harm
to consumers, or substantial harm to the public interest as the
Secretary deems appropriate pending completion of such
proceedings. Such an order shall be entered only after notice
and opportunity for a hearing, unless the Secretary determines
that notice and hearing prior to entry would be impracticable
or contrary to the public interest. A temporary order shall
become effective upon service upon the respondent and, unless
set aside, limited, or suspended by the Secretary or a court of
competent jurisdiction, shall remain effective and enforceable
pending the completion of the proceedings.
(4) Review of temporary orders.--
(A) Review by secretary.--At any time after the
respondent has been served with a temporary cease-and-
desist order pursuant to paragraph (3), the respondent
may apply to the Secretary to have the order set aside,
limited, or suspended. If the respondent has been
served with a temporary cease-and-desist order entered
without a prior hearing before the Secretary, the
respondent may, within 10 days after the date on which
the order was served, request a hearing on such
application and the Secretary shall hold a hearing and
render a decision on such application at the earliest
possible time.
(B) Judicial review.--Within--
(i) 10 days after the date the respondent
was served with a temporary cease-and-desist
order entered with a prior hearing before the
Secretary; or
(ii) 10 days after the Secretary renders a
decision on an application and hearing under
paragraph (1), with respect to any temporary
cease-and-desist order entered without a prior
hearing before the Secretary,
the respondent may apply to the United States district
court for the district in which the respondent resides
or has its principal place of business, or for the
District of Columbia, for an order setting aside,
limiting, or suspending the effectiveness or
enforcement of the order, and the court shall have
jurisdiction to enter such an order. A respondent
served with a temporary cease-and-desist order entered
without a prior hearing before the Secretary may not
apply to the court except after hearing and decision by
the Secretary on the respondent's application under
subparagraph (A).
(C) No automatic stay of temporary order.--The
commencement of proceedings under subparagraph (B)
shall not, unless specifically ordered by the court,
operate as a stay of the Secretary's order.
(5) Authority of the secretary to prohibit persons from
serving as loan originators.--In any cease-and-desist
proceeding under paragraph (1), the Secretary may issue an
order to prohibit, conditionally or unconditionally, and
permanently or for such period of time as the Secretary shall
determine, any person who has violated this subtitle or
regulations thereunder, from acting as a loan originator if the
conduct of that person demonstrates unfitness to serve as a
loan originator.
(d) Authority of the Secretary To Assess Money Penalties.--
(1) In general.--The Secretary may impose a civil penalty
on a loan originator operating in any State which is subject to
licensing system established by the Secretary under section 107
if the Secretary finds, on the record after notice and
opportunity for hearing, that such loan originator has violated
or failed to comply with any requirement of this subtitle or
any regulation prescribed by the Secretary under this subtitle
or order issued under subsection (c).
(2) Maximum amount of penalty.--The maximum amount of
penalty for each act or omission described in paragraph (1)
shall be $5,000 for each day the violation continues.
Subtitle B--Residential Mortgage Loan Origination Standards
SEC. 121. 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 and Residential
Mortgage Loans.--
``(1) Commission.--Unless otherwise specified, the term
`Commission' means the Federal Trade Commission.
``(2) Federal banking agencies.--The term `Federal banking
agencies' means the Board of Governors of the Federal Reserve
System, the Comptroller of the Currency, the Director of the
Office of Thrift Supervision, the Federal Deposit Insurance
Corporation, and the National Credit Union Administration
Board.
``(3) Mortgage originator.--The term `mortgage
originator'--
``(A) means any person who--
``(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, for direct or
indirect compensation or gain, or in the
expectation of direct or indirect compensation
or gain;
``(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.
``(4) Nationwide mortgage licensing system and registry.--
The term `Nationwide Mortgage Licensing System and Registry'
has the same meaning as in section 102(5) of the Mortgage
Reform and Anti-Predatory Lending Act of 2007.
``(5) 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 residential mortgage loan
terms (including rates, fees, and other costs), preparing
residential mortgage loan packages, or collecting information
on behalf of the consumer with regard to a residential mortgage
loan.
``(6) Residential mortgage loan.--The term `residential
mortgage loan' means any consumer credit transaction that is
secured by a mortgage, deed of trust, or other equivalent
consensual security interest 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) Securitization vehicle.--The term `securitization
vehicle' means a trust, corporation, partnership, limited
liability entity, or special purpose entity that--
``(A) is the issuer, or is created by the issuer,
of mortgage pass-through certificates, participation
certificates, mortgage-backed securities, or other
similar securities backed by a pool of assets that
includes residential mortgage loans; and
``(B) holds such loans.
``(9) Securitizer.--The term `securitizer' means the person
that transfers, conveys, or assigns, or causes the transfer,
conveyance, or assignment of, residential mortgage loans,
including through a special purpose vehicle, to any
securitization vehicle, excluding any trustee that holds such
loans solely for the benefit of the securitization vehicle.
``(10) Servicer.--The term `servicer' has the same meaning
as in section 6(i)(2) of the Real Estate Settlement Procedures
Act of 1974.''.
SEC. 122. 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 and, when required, registered
and licensed as a mortgage originator in accordance
with applicable State or Federal law including subtitle
A of title I of the Mortgage Reform and Anti-Predatory
Lending Act of 2007;
``(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 likely qualifies and which are appropriate to
the consumer's existing circumstances, based on
information known by, or obtained in good faith by, 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 the Nationwide Mortgage
Licensing System and Registry on all loan documents.
``(2) Clarification of extent of duty to present range of
products and appropriate products.--
``(A) No duty to offer products for which
originator is not authorized to take an application.--
Paragraph (1)(B) shall not be construed as requiring--
``(i) a mortgage originator to present to
any consumer any specific residential mortgage
loan product that is offered by a creditor
which does not accept consumer referrals from,
or consumer applications submitted by or
through, such originator; or
``(ii) a creditor to offer products that
the creditor does not offer to the general
public.
``(B) Appropriate loan product.--For purposes of
paragraph (1)(B), a residential mortgage loan shall be
presumed to be appropriate for a consumer if--
``(i) the mortgage originator determines in
good faith, based on then existing information
and without undergoing a full underwriting
process, that the consumer has a reasonable
ability to repay and, in the case of a
refinancing of an existing residential mortgage
loan, receives a net tangible benefit, as
determined in accordance with regulations
prescribed under subsections (a) and (b) of
section 129B.
``(ii) the loan does not have predatory
characteristics or effects (such as equity
stripping and excessive fees and abusive terms)
as determined in accordance with regulations
prescribed under paragraph (4).
``(3) 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; or
``(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.
``(4) Regulations.--
``(A) In general.--The Federal banking agencies, in
consultation with the Secretary, the Chairman of the
State Liaison Committee to the Financial Institutions
Examination Council, and 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 subsection 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 disclosures.
``(5) Compliance procedures required.--The Federal banking
agencies shall prescribe regulations requiring depository
institutions to establish and maintain procedures reasonably
designed to assure and monitor the compliance of such
depository institutions, the subsidiaries of such institutions,
and the employees of such institutions or subsidiaries with the
requirements of this section and the registration procedures
established under section 106 of the Mortgage Reform and Anti-
Predatory Lending Act of 2007.''.
(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. 123. PROHIBITION ON STEERING INCENTIVES.
Section 129A of the Truth in Lending Act (as added by section
122(a)) is amended by inserting after subsection (a) the following new
subsection:
``(b) Prohibition on Steering Incentives.--
``(1) Amount of originator compensation cannot vary based
on terms.--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 or any equivalent compensation or gain, that is based
on, or varies with, the terms (other than the amount of
principal) of any loan that is not a qualified mortgage (as
defined in section 129B(c)(3)).
``(2) Regulations.--The Federal banking agencies, in
consultation with the Secretary and the Commission, shall
jointly prescribe regulations to prohibit--
``(A) mortgage originators from steering any
consumer to a residential mortgage loan that--
``(i) the consumer lacks a reasonable
ability to repay (in accordance with
regulations prescribed under section 129B(a));
``(ii) in the case of a refinancing of a
residential mortgage loan, does not provide the
consumer with a net tangible benefit (in
accordance with regulations prescribed under
section 129B(b)); or
``(iii) has predatory characteristics or
effects (such as equity stripping, excessive
fees, or abusive terms);
``(B) mortgage originators from steering any
consumer from a residential mortgage loan for which the
consumer is qualified that is a qualified mortgage (as
defined in section 129B(c)(3)) to a residential
mortgage loan that is not a qualified mortgage; and
``(C) abusive or unfair lending practices that
promote disparities among consumers of equal credit
worthiness but of different race, ethnicity, gender, or
age.
``(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;
``(B) restricting a consumer's ability to finance,
including through rate or principal, any origination
fees or costs permitted under this subsection, or the
originator's ability to receive such fees or costs
(including compensation) from any person, so long as
such fees or costs were fully and clearly disclosed to
the consumer earlier in the application process as
required by 129A(a)(1)(C)(ii) and do not vary based on
the terms of the loan or the consumer's decision about
whether to finance such fees or costs; or
``(C) prohibiting incentive payments to a mortgage
originator based on the number of residential mortgage
loans originated within a specified period of time.''.
SEC. 124. LIABILITY.
Section 129A of the Truth in Lending Act is amended by inserting
after subsection (b) (as added by section 123) the following new
subsection:
``(c) 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. 125. REGULATIONS.
The 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 122(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 Federal banking agencies, 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 dwelling or real
property that secures repayment of the loan.
``(4) Nonstandard loans.--
``(A) Variable rate loans that defer repayment of
any principal or interest.--For purposes of
determining, under this subsection, a consumer's
ability to repay a variable rate residential mortgage
loan that allows or requires the consumer to defer 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
permits or 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
any introductory interest rates.''.
(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 122(b)) the following new item:
``129B. Minimum standards for residential mortgage loans.''.
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.--In accordance with regulations
prescribed under paragraph (3), 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 obtained in good faith by 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 without any corresponding changes in the terms of the
refinanced loan that are advantageous to the consumer.
``(3) Net tangible benefit.--The Federal banking agencies
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 or securitizer 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 (or any successor publication), in the week
preceding a date of determination for purposes of
applying this subsection.
``(B) Qualified mortgage.--The term `qualified
mortgage' means--
``(i) any residential mortgage loan that
constitutes a first lien on the dwelling or
real property securing the loan and either--
``(I) 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; or
``(II) 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;
``(ii) any residential mortgage loan that
is not the first lien on the dwelling or real
property securing the loan and either--
``(I) 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; or
``(II) 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;
``(iii) a loan made or guaranteed by the
Secretary of Veterans Affairs; and
``(iv) a mortgage insured under title II of
the National Housing Act (12 U.S.C. 1707 et
seq.).
``(C) Qualified safe harbor mortgage.--The term
`qualified safe harbor mortgage' means any 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 all
applicable taxes, insurance, and assessments;
``(iii) which does not provide for a
repayment schedule that results in negative
amortization at any time;
``(iv) meets such other requirements as may
be established by regulation; and
``(v) for which any of the following
factors apply with respect to such loan:
``(I) The periodic payment amount
for principal and interest are fixed
for a minimum of 5 years under the
terms of the loan.
``(II) In the case of a variable
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.
``(III) The loan does not cause the
consumer's total monthly debts,
including amounts under the loan, to
exceed a percentage established by
regulation of his or her monthly gross
income or such other maximum percentage
of such income as may be prescribed by
regulation under paragraph (6).
``(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 a variable rate is a
qualified mortgage, the determination of the annual percentage
rate, as determined in accordance with regulations prescribed
by the Board under section 107, shall be based on the greater
of the introductory rate and the fully indexed rate of
interest.
``(6) Regulations.--
``(A) In general.--The Federal banking agencies
shall jointly prescribe regulations to carry out the
purposes of this subsection.
``(B) Revision of safe harbor criteria.--The
Federal banking agencies may jointly prescribe
regulations that revise, add to, or subtract from the
criteria that define a qualified mortgage and a
qualified safe harbor mortgage to the extent necessary
and appropriate to effectuate the purposes of this
subsection, to prevent circumvention or evasion of this
subsection, or to facilitate compliance with this
subsection.
``(7) Rule of construction.--No provision of this
subsection may be construed as implying that a residential
mortgage loan may be presumed to violate subsection (a) or (b)
if such loan is not a qualified mortgage or a qualified safe
harbor mortgage.''.
SEC. 204. 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) In general.--
``(A) Rescission.--In addition to any other
liability under this title for a violation by a
creditor of subsection (a) or (b) (for example under
section 130) and subject to the statute of limitations
in paragraph (7), a civil action may be maintained
against a creditor for a violation of subsection (a) or
(b) with respect to a residential mortgage loan for the
rescission of the loan, and 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.
``(B) Cure.--A creditor shall not be liable for
rescission under subparagraph (A) with respect to a
residential mortgage loan if, no later than 90 days
after the receipt of notification from the consumer
that the loan violates subsection (a) or (b), the
creditor provides a cure.
``(2) Limited assignee and securitizer liability.--
Notwithstanding sections 125(e) and 131 and except as provided
in paragraph (3), 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 any assignee or securitizer of such residential
mortgage loan, who has acted in good faith, for the following
liabilities only:
``(A) Rescission of the loan.
``(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.
``(3) Assignee and securitizer exemption.--No assignee or
securitizer of a residential mortgage loan shall be liable
under paragraph (2) 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 or securitizer
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 or securitizer--
``(I) has a policy against buying
residential mortgage loans other than
qualified mortgages or qualified safe
harbor mortgages (as defined in
subsection (c));
``(II) the policy is intended to
verify seller or assignor compliance
with the representations and warranties
required under clause (ii); and
``(III) in accordance with
regulations which the Federal banking
agencies and the Securities and
Exchange Commission shall jointly
prescribe, exercises reasonable due
diligence to adhere to such policy in
purchasing residential mortgage loans,
including through adequate, thorough,
and consistently applied sampling
procedures.
``(ii) The contract under which such
assignee or securitizer acquired the
residential mortgage loan from a seller or
assignor of the loan contains representations
and warranties that the seller or assignor--
``(I) is not selling or assigning
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 or securitizer in good faith
takes reasonable steps to obtain the benefit of
such representation or warranty.
``(4) Absent parties.--
``(A) Absent creditor.--Notwithstanding the
exemption provided in paragraph (3), if the creditor
with respect to a residential mortgage loan made in
violation of subsection (a) or (b) has ceased to exist
as a matter of law or has filed for bankruptcy
protection under title 11, United States Code, or has
had a receiver or liquidating agent appointed, a
consumer may maintain a civil action against an
assignee to cure, but not rescind, the residential
mortgage loan, plus the costs and reasonable attorney's
fees incurred in obtaining such remedy.
``(B) Absent creditor and assignee.--
Notwithstanding the exemption provided in paragraph
(3), if the creditor with respect to a residential
mortgage loan made in violation of subsection (a) or
(b) and each assignee of such loan have ceased to exist
as a matter of law or have filed for bankruptcy
protection under title 11, United States Code, or have
had receivers or liquidating agents appointed, the
consumer may maintain the civil action referred to in
subparagraph (A) against the securitizer.
``(5) Cure defined.--For purposes of this subsection, 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 subsections
(a) and (b) if the loan had contained such terms as of the
origination of the loan and the payment of such additional
costs as the obligor may have incurred as a result of the
violation and in connection with obtaining a cure of the loan,
including a reasonable attorney's fee.
``(6) Disagreement over cure.--If any creditor, assignee,
or securitizer and a consumer fail to reach agreement on a cure
with respect to a residential mortgage loan that violates
subsection (a) or (b), or the consumer fails to accept a cure
proffered by a creditor, assignee, or securitizer--
``(A) the creditor, assignee, or securitizer may
provide the cure; and
``(B) the consumer may challenge the adequacy of
the cure during the 6-month period beginning when the
cure is provided.
If the consumer's challenge, under this paragraph, of a cure is
successful, the creditor, assignee, or securitizer shall be
liable to the consumer for rescission of the loan and such
additional costs under paragraph (2).
``(7) Inability to provide or obtain rescission.--If a
creditor, assignee, or securitizer cannot provide, or a
consumer cannot obtain, rescission under paragraph (1) or (2),
the liability of such creditor, assignee, or securitizer shall
be met by providing the financial equivalent of a rescission,
together with 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.
``(8) No class actions against assignee or securitizer
under paragraph (2).--Only individual actions may be brought
against an assignee or securitizer of a residential mortgage
loan for a violation of subsection (a) or (b).
``(9) Statute of limitations.--The liability of a creditor,
assignee, or securitizer under this subsection shall apply in
any original action against a creditor under paragraph (1) or
an assignee or securitizer under paragraph (2) which is brought
before--
``(A) in the case of any residential mortgage loan
other than a loan to which subparagraph (B) applies,
the end of the 3-year period beginning on the date the
loan is consummated; or
``(B) in the case of a residential mortgage loan
that provides for a fixed interest rate for an
introductory period and then resets or adjusts to a
variable rate or that provides for a nonamortizing
payment schedule and then converts to an amortizing
payment schedule, the earlier of--
``(i) the end of the 1-year period
beginning on the date of such reset,
adjustment, or conversion; or
``(ii) the end of the 6-year period
beginning on the date the loan is consummated.
``(10) 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 held for
the purpose of issuing or selling instruments representing
interests in such pools including through a securitization
vehicle, the terms `assignee' and `securitizer', as used in
this section, do not include the securitization vehicle, the
pools of such loans or any original or subsequent purchaser of
any interest in the securitization vehicle or any instrument
representing a direct or indirect 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
nonjudicial foreclosure--
``(A) a consumer who has the right to rescind under
this section with respect to such loan against the
creditor or any assignee or securitizer may assert such
right as a defense to foreclosure or counterclaim to
such foreclosure against the holder, or
``(B) if the foreclosure proceeding begins after
the end of the period during which a consumer may bring
an action for rescission under subsection (d) and the
consumer would have had a valid basis for such an
action if it had been brought before the end of such
period, the consumer may seek actual damages incurred
by reason of the violation which gave rise to the right
of rescission, together with costs of the action,
including a reasonable attorney's fee against the
creditor or any assignee or securitizer; and
``(2) such holder or anyone acting for such holder or any
other applicable third party may sell, transfer, convey, or
assign a residential mortgage loan to a creditor, any assignee,
or any securitizer, or their designees, to effect a rescission
or 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) Phased-out penalties on qualified mortgages.--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 in excess of the following limitations:
``(A) During the 1-year period beginning on the
date the loan is consummated, the prepayment penalty
shall not exceed an amount equal to 3 percent of the
outstanding balance on the loan.
``(B) During the 1-year period beginning after the
period described in subparagraph (A), the prepayment
penalty shall not exceed an amount equal to 2 percent
of the outstanding balance on the loan.
``(C) During the 1-year period beginning after the
1-year period described in subparagraph (B), the
prepayment penalty shall not exceed an amount equal to
1 percent of the outstanding balance on the loan.
``(D) After the end of the 3-year period beginning
on the date the loan is consummated, no prepayment
penalty may be imposed on a qualified mortgage.
``(3) Prohibited after initial period on loans with a
reset.--A qualified mortgage with a fixed interest rate for an
introductory period that adjusts or resets 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.
``(4) Option for no prepayment penalty required.--A
creditor may not offer a consumer a residential mortgage loan
product that has a prepayment penalty for paying all or part of
the principal after the loan is consummated as a term of the
loan without offering the consumer a residential mortgage loan
product that does not have a prepayment penalty as a term of
the loan.
``(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--
``(1) 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; and
``(2) this subsection shall not apply to credit
unemployment insurance for which the unemployment insurance
premiums are reasonable and at no additional cost to the
consumer, the creditor receives no direct or indirect
compensation in connection with the unemployment insurance
premiums, and the unemployment insurance premiums are paid
pursuant to another insurance contract and not paid to an
affiliate of 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, any assignee, or any
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
relating to the residential mortgage loan or extension of
credit referred to in paragraph (1), 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.--
``(1) In general.--In the case of any foreclosure on any
dwelling or 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--
``(A) the provision, by the successor in interest,
of a notice to vacate to any bona fide tenant at least
90 days before the effective date of the notice to
vacate; and
``(B) the rights of any bona fide tenant, as of the
date of such notice of foreclosure--
``(i) under any bona fide lease entered
into before the notice of foreclosure to occupy
the premises until the end of the remaining
term of the lease or the end of the 6-month
period beginning on the date of the notice of
foreclosure, whichever occurs first, subject to
the receipt by the tenant of the 90-day notice
under subparagraph (A); or
``(ii) without a lease or with a lease
terminable at will under State law, subject to
the receipt by the tenant of the 90-day notice
under subparagraph (A).
``(2) Bona fide lease or tenancy.--For purposes of this
section, a lease or tenancy shall be considered bona fide only
if--
``(A) the mortgagor under the contract is not the
tenant;
``(B) the lease or tenancy was the result of an
arms-length transaction; or
``(C) the lease or tenancy requires the receipt of
rent that is not substantially less than fair market
rent for the property.
``(k) Mortgages With Negative Amortization.--No creditor may extend
credit to a 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 dwelling or real property; and
``(2) in the case of a first-time borrower with respect to
a residential mortgage loan that is not a qualified mortgage,
the first-time borrower 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.
``(l) Annual Contact Information.--At least once annually and
whenever there is a change in ownership of a residential mortgage loan,
the servicer with respect to a residential mortgage loan shall provide
a written notice to the consumer identifying the name of the creditor
or any assignee or securitizer who should be contacted by the consumer
for any reason concerning the consumer's rights with respect to the
loan.''.
(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 a broker or dealer, other than a
depository institution, by the Securities and Exchange
Commission.''.
SEC. 207. 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 or any
other provision of Federal or State law.
SEC. 208. EFFECT ON STATE LAWS.
(a) In General.--Section 129B(d) of the Truth in Lending Act (as
added by section 204) shall supersede any State law or application
thereof that provides additional remedies against any assignee,
securitizer, or securitization vehicle, and the remedies described in
such section shall constitute the sole remedies against any assignee,
securitizer, or securitization vehicle, for a violation of subsection
(a) or (b) of section 129B of such Act or any other State law the terms
of which address the specific subject matter of subsection (a)
(determination of ability to repay) or (b) (requirement of a net
tangible benefit) of such section 129B.
(b) Rules of Construction.--No provision of this section shall be
construed as limiting--
(1) the application of any State law against a creditor;
(2) the availability of remedies based upon fraud,
misrepresentation, deception, false advertising, or civil
rights laws--
(A) against any assignee, securitizer, or
securitization vehicle for its own conduct relating to
the making of a residential mortgage loan to a
consumer; or
(B) against any assignee, securitizer, or
securitization vehicle in the sale or purchase of
residential mortgage loans or securities; or
(3) the application of any other State law against any
assignee, securitizer, or securitization vehicle except as
specifically provided in subsection (a) of this section.
SEC. 209. 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.
SEC. 210. AMENDMENTS TO CIVIL LIABILITY PROVISIONS.
(a) Increase in Amount of Civil Money Penalties for Certain
Violations.--Section 130(a)(2) of the Truth in Lending Act (15 U.S.C.
1640(a)(2)) is amended--
(1) by striking ``$100'' and inserting ``$200'';
(2) by striking ``$1,000'' and inserting ``$2,000'';
(3) by striking ``$200'' and inserting ``$400'';
(4) by striking ``$2,000'' and inserting ``$4,000''; and
(5) by striking ``$500,000'' and inserting ``$1,000,000''.
(b) Statute of Limitations Extended for Section 129 Violations.--
Section 130(e) of the Truth in Lending Act (15 U.S.C. 1640(e)) 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. 211. LENDER RIGHTS IN THE CONTEXT OF BORROWER DECEPTION.
Section 130 of the Truth in Lending Act is amended by adding at the
end the following new subsection:
``(j) Exemption From Liability and Rescission in Case of Borrower
Fraud or Deception.--In addition to any other remedy available by law
or contract, no creditor, assignee, or securitizer shall be liable to
an obligor under this section, nor shall it be subject to the right of
rescission of any obligor under 129B, if such obligor, or co-obligor,
knowingly, or willfully and with actual knowledge furnished material
information known to be false for the purpose of obtaining such
residential mortgage loan.''.
SEC. 212. SIX-MONTH NOTICE REQUIRED BEFORE RESET OF HYBRID ADJUSTABLE
RATE MORTGAGES.
(a) In General.--Chapter 2 of the Truth in Lending Act (15 U.S.C.
1631 et seq.) is amended by inserting after section 128 the following
new section:
``Sec. 128A. Reset of hybrid adjustable rate mortgages
``(a) Hybrid Adjustable Rate Mortgages Defined.--For purposes of
this section, the term `hybrid adjustable rate mortgage' means a
consumer credit transaction secured by the consumer's principal
residence with a fixed interest rate for an introductory period that
adjusts or resets to a variable interest rate after such period.
``(b) Notice of Reset and Alternatives.--During the 1-month period
that ends 6 months before the date on which the interest rate in effect
during the introductory period of a hybrid adjustable rate mortgage
adjusts or resets to a variable interest rate, the creditor or servicer
of such loan shall provide a written notice, separate and distinct from
all other correspondence to the consumer, that includes the following:
``(1) Any index or formula used in making adjustments to or
resetting the interest rate and a source of information about
the index or formula.
``(2) An explanation of how the new interest rate and
payment would be determined, including an explanation of how
the index was adjusted, such as by the addition of a margin.
``(3) A good faith estimate, based on accepted industry
standards, of the creditor or servicer of the amount of the
monthly payment that will apply after the date of the
adjustment or reset, and the assumptions on which this estimate
is based.
``(4) A list of alternatives consumers may pursue before
the date of adjustment or reset, and descriptions of the
actions consumers must take to pursue these alternatives,
including--
``(A) refinancing;
``(B) renegotiation of loan terms;
``(C) payment forbearances; and
``(D) pre-foreclosure sales.
``(5) The names, addresses, telephone numbers, and Internet
addresses of counseling agencies or programs reasonably
available to the consumer that have been certified or approved
and made publicly available by the Secretary of Housing and
Urban Development or a State housing finance authority (as
defined in section 1301 of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989).
``(6) The address, telephone number, and Internet address
for the State housing finance authority (as so defined) for the
State in which the consumer resides.''.
(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 128 the following new item:
``128A. Reset of hybrid adjustable rate mortgages.''.
SEC. 213. REQUIRED DISCLOSURES.
(a) Additional Information.--Section 128(a) of Truth in Lending Act
(15 U.S.C. 1638(a)) is amended by adding at the end the following new
paragraphs:
``(16) In the case of an extension of credit that is
secured by the dwelling of a consumer, under which the annual
rate of interest is variable, or with respect to which the
regular payments may otherwise be variable, in addition to the
other disclosures required under this subsection, the
disclosures provided under this subsection shall state the
maximum amount of the regular required payments on the loan,
based on the maximum interest rate allowed, introduced with the
following language in conspicuous type size and format: `Your
payment can go as high as $__', the blank to be filled in with
the maximum possible payment amount.
``(17) In the case of a residential mortgage loan for which
an escrow or impound account will be established for the
payment of all applicable taxes, insurance, and assessments,
the following statement: `Your payments will be increased to
cover taxes and insurance. In the first year, you will pay an
additional $__ [insert the amount of the monthly payment to the
account] every month to cover the costs of taxes and
insurance.'.
``(18) In the case of a variable rate residential mortgage
loan for which an escrow or impound account will be established
for the payment of all applicable taxes, insurance, and
assessments--
``(A) the amount of initial monthly payment due
under the loan for the payment of principal and
interest, and the amount of such initial monthly
payment including the monthly payment deposited in the
account for the payment of all applicable taxes,
insurance, and assessments; and
``(B) the amount of the fully indexed monthly
payment due under the loan for the payment of principal
and interest, and the amount of such fully indexed
monthly payment including the monthly payment deposited
in the account for the payment of all applicable taxes,
insurance, and assessments.
``(19) In the case of a residential mortgage loan, the
aggregate amount of settlement charges for all settlement
services provided in connection with the loan, the amount of
charges that are included in the loan and the amount of such
charges the borrower must pay at closing, the approximate
amount of the wholesale rate of funds in connection with the
loan, and the aggregate amount of other fees or required
payments in connection with the loan.
``(20) In the case of a residential mortgage loan, the
aggregate amount of fees paid to the mortgage originator in
connection with the loan, the amount of such fees paid directly
by the consumer, and any additional amount received by the
originator from the creditor based on the interest rate of the
loan.''.
(b) Timing.--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) Residential mortgage loan disclosures.--In the case
of a residential mortgage loan, the information required to be
disclosed under subsection (a) with respect to such loan shall
be disclosed before the earlier of--
``(A) the time required under the first sentence of
paragraph (1); or
``(B) the end of the 3-day period beginning on the
date the application for the loan from a consumer is
received by the creditor.''.
(c) Enhanced Mortgage Loan Disclosures.--Section 128(b)(2) of the
Truth in Lending Act (15 U.S.C. 1638(b)(2)) is amended--
(1) by striking ``(2) In the'' and inserting the following:
``(2) Mortgage disclosures.--
``(A) In general.--In the'';
(2) by striking ``a residential mortgage transaction, as
defined in section 103(w)'' and inserting ``any extension of
credit that is secured by the dwelling of a consumer'';
(3) by striking ``shall be made in accordance'' and all
that follows through ``extended, or'';
(4) by striking ``If the'' and all that follows through the
end of the paragraph and inserting the following new
subparagraphs:
``(B) Statement and timing of disclosures.--In the
case of an extension of credit that is secured by the
dwelling of a consumer, in addition to the other
disclosures required by subsection (a), the disclosures
provided under this paragraph shall state in
conspicuous type size and format, the following: `You
are not required to complete this agreement merely
because you have received these disclosures or signed a
loan application.'.
``(i) state in conspicuous type size and
format, the following: `You are not required to
complete this agreement merely because you have
received these disclosures or signed a loan
application.'; and
``(ii) be furnished to the borrower not
later than 7 business days before the date of
consummation of the transaction, subject to
subparagraph (D).
``(C) Variable rates or payment schedules.--In the
case of an extension of credit that is secured by the
dwelling of a consumer, under which the annual rate of
interest is variable, or with respect to which the
regular payments may otherwise be variable, in addition
to the other disclosures required by subsection (a),
the disclosures provided under this paragraph shall
label the payment schedule as follows: `Payment
Schedule: Payments Will Vary Based on Interest Rate
Changes.'.
``(D) Updating apr.--In any case in which the
disclosure statement provided 7 business days before
the date of consummation of the transaction contains an
annual percentage rate of interest that is no longer
accurate, as determined under section 107(c), the
creditor shall furnish an additional, corrected
statement to the borrower, not later than 3 business
days before the date of consummation of the
transaction.''.
SEC. 214. DISCLOSURES REQUIRED IN MONTHLY STATEMENTS FOR RESIDENTIAL
MORTGAGE LOANS.
Section 128 of the Truth in Lending Act (15 U.S.C. 1638) is amended
by adding at the end the following new subsection:
``(e) Periodic Statements for Residential Mortgage Loans.--
``(1) In general.--The creditor, assignee, or servicer with
respect to any residential mortgage loan shall transmit to the
obligor, for each billing cycle, a statement setting forth each
of the following items, to the extent applicable, in a
conspicuous and prominent manner:
``(A) The amount of the principal obligation under
the mortgage.
``(B) The current interest rate in effect for the
loan.
``(C) The date on which the interest rate may next
reset or adjust.
``(D) The amount of any prepayment fee to be
charged, if any.
``(E) A description of any late payment fees.
``(F) A telephone number and electronic mail
address that may be used by the obligor to obtain
information regarding the mortgage.
``(G) Such other information as the Board may
prescribe in regulations.
``(2) Development and use of standard form.--The Federal
banking agencies shall jointly develop and prescribe a standard
form for the disclosure required under this subsection, taking
into account that the statements required may be transmitted in
writing or electronically.''.
SEC. 215. AUTHORIZATION OF APPROPRIATIONS.
For fiscal years 2008, 2009, 2010, 2011, and 2012, there are
authorized to be appropriated to the Attorney General a total of--
(1) $31,250,000 to support the employment of 30 additional
agents of the Federal Bureau of Investigation and 2 additional
dedicated prosecutors at the Department of Justice to
coordinate prosecution of mortgage fraud efforts with the
offices of the United States Attorneys; and
(2) $750,000 to support the operations of interagency task
forces of the Federal Bureau of Investigation in the areas with
the 15 highest concentrations of mortgage fraud.
SEC. 216. EFFECTIVE DATE.
The amendments made by this title shall apply to transactions
consummated on or after the effective date of the regulations specified
in section 209.
SEC. 217. REPORT BY THE GAO.
(a) Report Required.--The Comptroller General shall conduct a study
to determine the effects the enactment of this Act will have on the
availability and affordability of credit for homebuyers and mortgage
lending, including the effect--
(1) on the mortgage market for mortgages that are not
within the safe harbor provided in the amendments made by this
title;
(2) on the ability of prospective homebuyers to obtain
financing;
(3) on the ability of homeowners facing resets or
adjustments to refinance--for example, do they have fewer
refinancing options due to the unavailability of certain loan
products that were available before the enactment of this Act;
(4) on minorities' ability to access affordable credit
compared with other prospective borrowers;
(5) on home sales and construction;
(6) of extending the rescission right, if any, on
adjustable rate loans and its impact on litigation;
(7) of State foreclosure laws and, if any, an investor's
ability to transfer a property after foreclosure;
(8) of expanding the existing provisions of the Home
Ownership and Equity Protection Act of 1994;
(9) of prohibiting prepayment penalties on high-cost
mortgages; and
(10) of establishing counseling services under the
Department of Housing and Urban Development and offered through
the Office of Housing Counseling.
(b) Report.--Before the end of the 1-year period beginning on the
date of the enactment of this Act, the Comptroller General shall submit
a report to the Congress containing the findings and conclusions of the
Comptroller General with respect to the study conducted pursuant to
subsection (a).
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 credit transaction
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 (10 percentage
points, if the dwelling is personal
property and the transaction is for
less than $50,000) 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 transaction exceed--
``(I) in the case of a transaction
for $20,000 or more, 5 percent of the
total transaction amount; or
``(II) in the case of a transaction
for less than $20,000, the lesser of 8
percent of the total transaction amount
or $1,000; or
``(iii) the credit transaction documents
permit the creditor to charge or collect
prepayment fees or penalties more than 36
months after the transaction 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
transaction 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 transaction 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 transaction agreement.
``(iii) In the case of any other
transaction in which the rate may vary at any
time during the term of the loan for any
reason, the interest charged on the transaction
at the maximum rate that may be charged during
the term of the transaction.''.
(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 originator that originates
a loan in the name of the originator in a table-funded
transaction;'';
(B) in subparagraph (C)(ii), by inserting ``except
where applied to the charges set forth in section
106(e)(1) where a creditor may receive indirect
compensation solely as a result of obtaining
distributions of profits from an affiliated entity
based on its ownership interest in compliance with
section 8(c)(4) of the Real Estate Settlement
Procedures Act of 1974'' before the semicolon at the
end;
(C) in subparagraph (C)(iii), by striking ``; and''
and inserting ``, except as provided for in clause
(ii);'';
(D) by redesignating subparagraph (D) as
subparagraph (G); and
(E) 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 credit
transaction;
``(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 consumer
credit plans.--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 consumer
credit plans.--In the case of open-end consumer credit plans,
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 credit transaction, 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, 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 inserting after subsection (cc) (as added by section 121)
the following new subsection:
``(dd) 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 paragraph (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 point 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 mortgages.''; 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
mortgage 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 mortgage, 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 high-cost
mortgage is consummated, the consumer's total monthly
debts, including amounts under the mortgage, 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 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 mortgage. 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 high-cost mortgage unless the
counselor can verify that the consumer has received each
statement required (in connection with such loan) by this
section or 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).''.
(f) Flipping Prohibited.--Section 129 of the Truth in Lending Act
(15 U.S.C. 1639) is amended by inserting after subsection (t) (as added
by subsection (e)) the following new subsection:
``(u) Flipping.--
``(1) In general.--No creditor may knowingly or
intentionally engage in the unfair act or practice of flipping
in connection with a high-cost mortgage.
``(2) Flipping defined.--For purposes of this subsection,
the term `flipping' means the making of a loan or extension of
credit in the form a high-cost mortgage to a consumer which
refinances an existing mortgage when the new loan or extension
of credit does not have reasonable, net tangible benefit (as
determined in accordance with regulations prescribed under
section 129B(b)) to the consumer considering all of the
circumstances, including the terms of both the new and the
refinanced loans or credit, the cost of the new loan or credit,
and the consumer's circumstances.''.
SEC. 304. 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) in the case of a high-cost mortgage, 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) in the case of a high-cost mortgage, change
the terms of the loan in a manner beneficial so that
the loan will no longer be a high-cost mortgage.''.
SEC. 305. 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.
SEC. 306. EFFECTIVE DATE.
The amendments made by this title shall take effect at the end of
the 6-month period beginning on the date of the enactment of this Act
and shall apply to mortgages referred to in section 103(aa) of the
Truth in Lending Act (15 U.S.C. 1602(aa)) consummated after the end of
such period.
TITLE IV--OFFICE OF HOUSING COUNSELING
SEC. 401. SHORT TITLE.
This title may be cited as the ``Expand and Preserve Home Ownership
Through Counseling Act''.
SEC. 402. ESTABLISHMENT OF OFFICE OF HOUSING COUNSELING.
Section 4 of the Department of Housing and Urban Development Act
(42 U.S.C. 3533) is amended by adding at the end the following new
subsection:
``(g) Office of Housing Counseling.--
``(1) Establishment.--There is established, in the Office
of the Secretary, the Office of Housing Counseling.
``(2) Director.--There is established the position of
Director of Housing Counseling. The Director shall be the head
of the Office of Housing Counseling and shall be appointed by
the Secretary. Such position shall be a career-reserved
position in the Senior Executive Service.
``(3) Functions.--
``(A) In general.--The Director shall have ultimate
responsibility within the Department, except for the
Secretary, for all activities and matters relating to
homeownership counseling and rental housing counseling,
including--
``(i) research, grant administration,
public outreach, and policy development
relating to such counseling; and
``(ii) establishment, coordination, and
administration of all regulations,
requirements, standards, and performance
measures under programs and laws administered
by the Department that relate to housing
counseling, homeownership counseling (including
maintenance of homes), mortgage-related
counseling (including home equity conversion
mortgages and credit protection options to
avoid foreclosure), and rental housing
counseling, including the requirements,
standards, and performance measures relating to
housing counseling.
``(B) Specific functions.--The Director shall carry
out the functions assigned to the Director and the
Office under this section and any other provisions of
law. Such functions shall include establishing rules
necessary for--
``(i) the counseling procedures under
section 106(g)(1) of the Housing and Urban
Development Act of 1968 (12 U.S.C.
1701x(h)(1));
``(ii) carrying out all other functions of
the Secretary under section 106(g) of the
Housing and Urban Development Act of 1968,
including the establishment, operation, and
publication of the availability of the toll-
free telephone number under paragraph (2) of
such section;
``(iii) carrying out section 5 of the Real
Estate Settlement Procedures Act of 1974 (12
U.S.C. 2604) for home buying information
booklets prepared pursuant to such section;
``(iv) carrying out the certification
program under section 106(e) of the Housing and
Urban Development Act of 1968 (12 U.S.C.
1701x(e));
``(v) carrying out the assistance program
under section 106(a)(4) of the Housing and
Urban Development Act of 1968, including
criteria for selection of applications to
receive assistance;
``(vi) carrying out any functions regarding
abusive, deceptive, or unscrupulous lending
practices relating to residential mortgage
loans that the Secretary considers appropriate,
which shall include conducting the study under
section 6 of the Expand and Preserve Home
Ownership Through Counseling Act;
``(vii) providing for operation of the
advisory committee established under paragraph
(4) of this subsection;
``(viii) collaborating with community-based
organizations with expertise in the field of
housing counseling; and
``(ix) providing for the building of
capacity to provide housing counseling services
in areas that lack sufficient services.
``(4) Advisory committee.--
``(A) In general.--The Secretary shall appoint an
advisory committee to provide advice regarding the
carrying out of the functions of the Director.
``(B) Members.--Such advisory committee shall
consist of not more than 12 individuals, and the
membership of the committee shall equally represent all
aspects of the mortgage and real estate industry,
including consumers.
``(C) Terms.--Except as provided in subparagraph
(D), each member of the advisory committee shall be
appointed for a term of 3 years. Members may be
reappointed at the discretion of the Secretary.
``(D) Terms of initial appointees.--As designated
by the Secretary at the time of appointment, of the
members first appointed to the advisory committee, 4
shall be appointed for a term of 1 year and 4 shall be
appointed for a term of 2 years.
``(E) Prohibition of pay; travel expenses.--Members
of the advisory committee shall serve without pay, but
shall receive travel expenses, including per diem in
lieu of subsistence, in accordance with applicable
provisions under subchapter I of chapter 57 of title 5,
United States Code.
``(F) Advisory role only.--The advisory committee
shall have no role in reviewing or awarding housing
counseling grants.
``(5) Scope of homeownership counseling.--In carrying out
the responsibilities of the Director, the Director shall ensure
that homeownership counseling provided by, in connection with,
or pursuant to any function, activity, or program of the
Department addresses the entire process of homeownership,
including the decision to purchase a home, the selection and
purchase of a home, issues arising during or affecting the
period of ownership of a home (including refinancing, default
and foreclosure, and other financial decisions), and the sale
or other disposition of a home.''.
SEC. 403. COUNSELING PROCEDURES.
(a) In General.--Section 106 of the Housing and Urban Development
Act of 1968 (12 U.S.C. 1701x) is amended by adding at the end the
following new subsection:
``(g) Procedures and Activities.--
``(1) Counseling procedures.--
``(A) In general.--The Secretary shall establish,
coordinate, and monitor the administration by the
Department of Housing and Urban Development of the
counseling procedures for homeownership counseling and
rental housing counseling provided in connection with
any program of the Department, including all
requirements, standards, and performance measures that
relate to homeownership and rental housing counseling.
``(B) Homeownership counseling.--For purposes of
this subsection and as used in the provisions referred
to in this subparagraph, the term `homeownership
counseling' means counseling related to homeownership
and residential mortgage loans. Such term includes
counseling related to homeownership and residential
mortgage loans that is provided pursuant to--
``(i) section 105(a)(20) of the Housing and
Community Development Act of 1974 (42 U.S.C.
5305(a)(20));
``(ii) in the United States Housing Act of
1937--
``(I) section 9(e) (42 U.S.C.
1437g(e));
``(II) section 8(y)(1)(D) (42
U.S.C. 1437f(y)(1)(D));
``(III) section 18(a)(4)(D) (42
U.S.C. 1437p(a)(4)(D));
``(IV) section 23(c)(4) (42 U.S.C.
1437u(c)(4));
``(V) section 32(e)(4) (42 U.S.C.
1437z-4(e)(4));
``(VI) section 33(d)(2)(B) (42
U.S.C. 1437z-5(d)(2)(B));
``(VII) sections 302(b)(6) and
303(b)(7) (42 U.S.C. 1437aaa-1(b)(6),
1437aaa-2(b)(7)); and
``(VIII) section 304(c)(4) (42
U.S.C. 1437aaa-3(c)(4));
``(iii) section 302(a)(4) of the American
Homeownership and Economic Opportunity Act of
2000 (42 U.S.C. 1437f note);
``(iv) sections 233(b)(2) and 258(b) of the
Cranston-Gonzalez National Affordable Housing
Act (42 U.S.C. 12773(b)(2), 12808(b));
``(v) this section and section 101(e) of
the Housing and Urban Development Act of 1968
(12 U.S.C. 1701x, 1701w(e));
``(vi) section 220(d)(2)(G) of the Low-
Income Housing Preservation and Resident
Homeownership Act of 1990 (12 U.S.C.
4110(d)(2)(G));
``(vii) sections 422(b)(6), 423(b)(7),
424(c)(4), 442(b)(6), and 443(b)(6) of the
Cranston-Gonzalez National Affordable Housing
Act (42 U.S.C. 12872(b)(6), 12873(b)(7),
12874(c)(4), 12892(b)(6), and 12893(b)(6));
``(viii) section 491(b)(1)(F)(iii) of the
McKinney-Vento Homeless Assistance Act (42
U.S.C. 11408(b)(1)(F)(iii));
``(ix) sections 202(3) and 810(b)(2)(A) of
the Native American Housing and Self-
Determination Act of 1996 (25 U.S.C. 4132(3),
4229(b)(2)(A));
``(x) in the National Housing Act--
``(I) in section 203 (12 U.S.C.
1709), the penultimate undesignated
paragraph of paragraph (2) of
subsection (b), subsection (c)(2)(A),
and subsection (r)(4);
``(II) subsections (a) and (c)(3)
of section 237 (12 U.S.C. 1715z-2); and
``(III) subsections (d)(2)(B) and
(m)(1) of section 255 (12 U.S.C. 1715z-
20);
``(xi) section 502(h)(4)(B) of the Housing
Act of 1949 (42 U.S.C. 1472(h)(4)(B)); and
``(xii) section 508 of the Housing and
Urban Development Act of 1970 (12 U.S.C. 1701z-
7).
``(C) Rental housing counseling.--For purposes of
this subsection, the term `rental housing counseling'
means counseling related to rental of residential
property, which may include counseling regarding future
homeownership opportunities and providing referrals for
renters and prospective renters to entities providing
counseling and shall include counseling related to such
topics that is provided pursuant to--
``(i) section 105(a)(20) of the Housing and
Community Development Act of 1974 (42 U.S.C.
5305(a)(20));
``(ii) in the United States Housing Act of
1937--
``(I) section 9(e) (42 U.S.C.
1437g(e));
``(II) section 18(a)(4)(D) (42
U.S.C. 1437p(a)(4)(D));
``(III) section 23(c)(4) (42 U.S.C.
1437u(c)(4));
``(IV) section 32(e)(4) (42 U.S.C.
1437z-4(e)(4));
``(V) section 33(d)(2)(B) (42
U.S.C. 1437z-5(d)(2)(B)); and
``(VI) section 302(b)(6) (42 U.S.C.
1437aaa-1(b)(6));
``(iii) section 233(b)(2) of the Cranston-
Gonzalez National Affordable Housing Act (42
U.S.C. 12773(b)(2));
``(iv) section 106 of the Housing and Urban
Development Act of 1968 (12 U.S.C. 1701x);
``(v) section 422(b)(6) of the Cranston-
Gonzalez National Affordable Housing Act (42
U.S.C. 12872(b)(6));
``(vi) section 491(b)(1)(F)(iii) of the
McKinney-Vento Homeless Assistance Act (42
U.S.C. 11408(b)(1)(F)(iii));
``(vii) sections 202(3) and 810(b)(2)(A) of
the Native American Housing and Self-
Determination Act of 1996 (25 U.S.C. 4132(3),
4229(b)(2)(A)); and
``(viii) the rental assistance program
under section 8 of the United States Housing
Act of 1937 (42 U.S.C. 1437f).
``(2) Standards for materials.--The Secretary, in
conjunction with the advisory committee established under
subsection (g)(4) of the Department of Housing and Urban
Development Act, shall establish standards for materials and
forms to be used, as appropriate, by organizations providing
homeownership counseling services, including any recipients of
assistance pursuant to subsection (a)(4).
``(3) Mortgage software systems.--
``(A) Certification.--The Secretary shall provide
for the certification of various computer software
programs for consumers to use in evaluating different
residential mortgage loan proposals. The Secretary
shall require, for such certification, that the
mortgage software systems take into account--
``(i) the consumer's financial situation
and the cost of maintaining a home, including
insurance, taxes, and utilities;
``(ii) the amount of time the consumer
expects to remain in the home or expected time
to maturity of the loan;
``(iii) such other factors as the Secretary
considers appropriate to assist the consumer in
evaluating whether to pay points, to lock in an
interest rate, to select an adjustable or fixed
rate loan, to select a conventional or
government-insured or guaranteed loan and to
make other choices during the loan application
process.
If the Secretary determines that available existing
software is inadequate to assist consumers during the
residential mortgage loan application process, the
Secretary shall arrange for the development by private
sector software companies of new mortgage software
systems that meet the Secretary's specifications.
``(B) Use and initial availability.--Such certified
computer software programs shall be used to supplement,
not replace, housing counseling. The Secretary shall
provide that such programs are initially used only in
connection with the assistance of housing counselors
certified pursuant to subsection (e).
``(C) Availability.--After a period of initial
availability under subparagraph (B) as the Secretary
considers appropriate, the Secretary shall take
reasonable steps to make mortgage software systems
certified pursuant to this paragraph widely available
through the Internet and at public locations, including
public libraries, senior-citizen centers, public
housing sites, offices of public housing agencies that
administer rental housing assistance vouchers, and
housing counseling centers.
``(4) National public service multimedia campaigns to
promote housing counseling.--
``(A) In general.--The Director of Housing
Counseling shall develop, implement, and conduct
national public service multimedia campaigns designed
to make persons facing mortgage foreclosure, persons
considering a subprime mortgage loan to purchase a
home, elderly persons, persons who face language
barriers, low-income persons, and other potentially
vulnerable consumers aware that it is advisable, before
seeking or maintaining a residential mortgage loan, to
obtain homeownership counseling from an unbiased and
reliable sources and that such homeownership counseling
is available, including through programs sponsored by
the Secretary of Housing and Urban Development.
``(B) Contact information.--Each segment of the
multimedia campaign under subparagraph (A) shall
publicize the toll-free telephone number and web site
of the Department of Housing and Urban Development
through which persons seeking housing counseling can
locate a housing counseling agency in their State that
is certified by the Secretary of Housing and Urban
Development and can provide advice on buying a home,
renting, defaults, foreclosures, credit issues, and
reverse mortgages.
``(C) Authorization of appropriations.--There are
authorized to be appropriated to the Secretary, not to
exceed $3,000,000 for fiscal years 2008, 2009, and
2010, for the develop, implement, and conduct of
national public service multimedia campaigns under this
paragraph.
``(5) Education programs.--The Secretary shall provide
advice and technical assistance to States, units of general
local government, and nonprofit organizations regarding the
establishment and operation of, including assistance with the
development of content and materials for, educational programs
to inform and educate consumers, particularly those most
vulnerable with respect to residential mortgage loans (such as
elderly persons, persons facing language barriers, low-income
persons, and other potentially vulnerable consumers), regarding
home mortgages, mortgage refinancing, home equity loans, and
home repair loans.''.
(b) Conforming Amendments to Grant Program for Homeownership
Counseling Organizations.--Section 106(c)(5)(A)(ii) of the Housing and
Urban Development Act of 1968 (12 U.S.C. 1701x(c)(5)(A)(ii)) is
amended--
(1) in subclause (III), by striking ``and'' at the end;
(2) in subclause (IV) by striking the period at the end and
inserting ``; and''; and
(3) by inserting after subclause (IV) the following new
subclause:
``(V) notify the housing or
mortgage applicant of the availability
of mortgage software systems provided
pursuant to subsection (g)(3).''.
SEC. 404. GRANTS FOR HOUSING COUNSELING ASSISTANCE.
Section 106(a) of the Housing and Urban Development Act of 1968 (12
U.S.C. 1701x(a)(3)) is amended by adding at the end the following new
paragraph:
``(4) Homeownership and Rental Counseling Assistance.--
``(A) In general.--The Secretary shall make financial
assistance available under this paragraph to States, units of
general local governments, and nonprofit organizations
providing homeownership or rental counseling (as such terms are
defined in subsection (g)(1)).
``(B) Qualified entities.--The Secretary shall establish
standards and guidelines for eligibility of organizations
(including governmental and nonprofit organizations) to receive
assistance under this paragraph.
``(C) Distribution.--Assistance made available under this
paragraph shall be distributed in a manner that encourages
efficient and successful counseling programs.
``(D) Authorization of appropriations.--There are
authorized to be appropriated $45,000,000 for each of fiscal
years 2008 through 2011 for--
``(i) the operations of the Office of Housing
Counseling of the Department of Housing and Urban
Development;
``(ii) the responsibilities of the Secretary under
paragraphs (2) through (5) of subsection (g); and
``(iii) assistance pursuant to this paragraph for
entities providing homeownership and rental
counseling.''.
SEC. 405. REQUIREMENTS TO USE HUD-CERTIFIED COUNSELORS UNDER HUD
PROGRAMS.
Section 106(e) of the Housing and Urban Development Act of 1968 (12
U.S.C. 1701x(e)) is amended--
(1) by striking paragraph (1) and inserting the following
new paragraph:
``(1) Requirement for assistance.--An organization may not
receive assistance for counseling activities under subsection
(a)(1)(iii), (a)(2), (a)(4), (c), or (d) of this section, or
under section 101(e), unless the organization, or the
individuals through which the organization provides such
counseling, has been certified by the Secretary under this
subsection as competent to provide such counseling.'';
(2) in paragraph (2)--
(A) by inserting ``and for certifying
organizations'' before the period at the end of the
first sentence; and
(B) in the second sentence by striking ``for
certification'' and inserting ``, for certification of
an organization, that each individual through which the
organization provides counseling shall demonstrate,
and, for certification of an individual,'';
(3) in paragraph (3), by inserting ``organizations and''
before ``individuals'';
(4) by redesignating paragraph (3) as paragraph (5); and
(5) by inserting after paragraph (2) the following new
paragraphs:
``(3) Requirement under hud programs.--Any homeownership
counseling or rental housing counseling (as such terms are
defined in subsection (g)(1)) required under, or provided in
connection with, any program administered by the Department of
Housing and Urban Development shall be provided only by
organizations or counselors certified by the Secretary under
this subsection as competent to provide such counseling.
``(4) Outreach.--The Secretary shall take such actions as
the Secretary considers appropriate to ensure that individuals
and organizations providing homeownership or rental housing
counseling are aware of the certification requirements and
standards of this subsection and of the training and
certification programs under subsection (f).''.
SEC. 406. STUDY OF DEFAULTS AND FORECLOSURES.
The Secretary of Housing and Urban Development shall conduct an
extensive study of the root causes of default and foreclosure of home
loans, using as much empirical data as are available. The study shall
also examine the role of escrow accounts in helping prime and nonprime
borrowers to avoid defaults and foreclosures. Not later than 12 months
after the date of the enactment of this Act, the Secretary shall submit
to the Congress a preliminary report regarding the study. Not later
than 24 months after such date of enactment, the Secretary shall submit
a final report regarding the results of the study, which shall include
any recommended legislation relating to the study, and recommendations
for best practices and for a process to identify populations that need
counseling the most.
SEC. 407. DEFINITIONS FOR COUNSELING-RELATED PROGRAMS.
Section 106 of the Housing and Urban Development Act of 1968 (12
U.S.C. 1701x), as amended by the preceding provisions of this title, is
further amended by adding at the end the following new subsection:
``(h) Definitions.--For purposes of this section:
``(1) Nonprofit organization.--The term `nonprofit
organization' has the meaning given such term in section 104(5)
of the Cranston-Gonzalez National Affordable Housing Act (42
U.S.C. 12704(5)), except that subparagraph (D) of such section
shall not apply for purposes of this section.
``(2) State.--The term `State' means each of the several
States, the Commonwealth of Puerto Rico, the District of
Columbia, the Commonwealth of the Northern Mariana Islands,
Guam, the Virgin Islands, American Samoa, the Trust Territories
of the Pacific, or any other possession of the United States.
``(3) Unit of general local government.--The term `unit of
general local government' means any city, county, parish, town,
township, borough, village, or other general purpose political
subdivision of a State.''.
SEC. 408. UPDATING AND SIMPLIFICATION OF MORTGAGE INFORMATION BOOKLET.
Section 5 of the Real Estate Settlement Procedures Act of 1974 (12
U.S.C. 2604) is amended--
(1) in the section heading, by striking ``special'' and
inserting ``home buying'';
(2) by striking subsections (a) and (b) and inserting the
following new subsections:
``(a) Preparation and Distribution.--The Secretary shall prepare,
at least once every 5 years, a booklet to help consumers applying for
federally related mortgage loans to understand the nature and costs of
real estate settlement services. The Secretary shall prepare the
booklet in various languages and cultural styles, as the Secretary
determines to be appropriate, so that the booklet is understandable and
accessible to homebuyers of different ethnic and cultural backgrounds.
The Secretary shall distribute such booklets to all lenders that make
federally related mortgage loans. The Secretary shall also distribute
to such lenders lists, organized by location, of homeownership
counselors certified under section 106(e) of the Housing and Urban
Development Act of 1968 (12 U.S.C. 1701x(e)) for use in complying with
the requirement under subsection (c) of this section.
``(b) Contents.--Each booklet shall be in such form and detail as
the Secretary shall prescribe and, in addition to such other
information as the Secretary may provide, shall include in plain and
understandable language the following information:
``(1) A description and explanation of the nature and
purpose of the costs incident to a real estate settlement or a
federally related mortgage loan. The description and
explanation shall provide general information about the
mortgage process as well as specific information concerning, at
a minimum--
``(A) balloon payments;
``(B) prepayment penalties; and
``(C) the trade-off between closing costs and the
interest rate over the life of the loan.
``(2) An explanation and sample of the uniform settlement
statement required by section 4.
``(3) A list and explanation of lending practices,
including those prohibited by the Truth in Lending Act or other
applicable Federal law, and of other unfair practices and
unreasonable or unnecessary charges to be avoided by the
prospective buyer with respect to a real estate settlement.
``(4) A list and explanation of questions a consumer
obtaining a federally related mortgage loan should ask
regarding the loan, including whether the consumer will have
the ability to repay the loan, whether the consumer
sufficiently shopped for the loan, whether the loan terms
include prepayment penalties or balloon payments, and whether
the loan will benefit the borrower.
``(5) An explanation of the right of rescission as to
certain transactions provided by sections 125 and 129 of the
Truth in Lending Act.
``(6) A brief explanation of the nature of a variable rate
mortgage and a reference to the booklet entitled `Consumer
Handbook on Adjustable Rate Mortgages', published by the Board
of Governors of the Federal Reserve System pursuant to section
226.19(b)(1) of title 12, Code of Federal Regulations, or to
any suitable substitute of such booklet that such Board of
Governors may subsequently adopt pursuant to such section.
``(7) A brief explanation of the nature of a home equity
line of credit and a reference to the pamphlet required to be
provided under section 127A of the Truth in Lending Act.
``(8) Information about homeownership counseling services
made available pursuant to section 106(a)(4) of the Housing and
Urban Development Act of 1968 (12 U.S.C. 1701x(a)(4)), a
recommendation that the consumer use such services, and
notification that a list of certified providers of
homeownership counseling in the area, and their contact
information, is available.
``(9) An explanation of the nature and purpose of escrow
accounts when used in connection with loans secured by
residential real estate and the requirements under section 10
of this Act regarding such accounts.
``(10) An explanation of the choices available to buyers of
residential real estate in selecting persons to provide
necessary services incidental to a real estate settlement.
``(11) An explanation of a consumer's responsibilities,
liabilities, and obligations in a mortgage transaction.
``(12) An explanation of the nature and purpose of real
estate appraisals, including the difference between an
appraisal and a home inspection.
``(13) Notice that the Office of Housing of the Department
of Housing and Urban Development has made publicly available a
brochure regarding loan fraud and a World Wide Web address and
toll-free telephone number for obtaining the brochure.
The booklet prepared pursuant to this section shall take into
consideration differences in real estate settlement procedures that may
exist among the several States and territories of the United States and
among separate political subdivisions within the same State and
territory.'';
(3) in subsection (c), by inserting at the end the
following new sentence: ``Each lender shall also include with
the booklet a reasonably complete or updated list of
homeownership counselors who are certified pursuant to section
106(e) of the Housing and Urban Development Act of 1968 (12
U.S.C. 1701x(e)) and located in the area of the lender.''; and
(4) in subsection (d), by inserting after the period at the
end of the first sentence the following: ``The lender shall
provide the HUD-issued booklet in the version that is most
appropriate for the person receiving it.''.
TITLE V--MORTGAGE DISCLOSURES UNDER REAL ESTATE SETTLEMENT PROCEDURES
ACT OF 1974
SEC. 501. UNIVERSAL MORTGAGE DISCLOSURE IN GOOD FAITH ESTIMATE OF
SETTLEMENT SERVICES COSTS.
(a) In General.--Section 5 of the Real Estate Settlement Procedures
Act of 1974 (12 U.S.C. 2604) is amended--
(1) in subsection (c), by adding after the period at the
end the following: ``Each such good faith estimate shall
include the disclosure required under subsection (f) in the
form prescribed by the Secretary pursuant to such subsection,
except that if the Secretary at any time issues any regulations
requiring the use of a standard or uniform form or statement in
providing the good faith estimate required under this
subsection and prescribing such standard or uniform form or
statement, such disclosure shall not be required after the
effective date of such regulations.''; and
(2) by adding at the end the following new subsection:
``(f) Universal Mortgage Disclosure Requirement for Good Faith
Estimates.--
``(1) Disclosure.--The disclosure required under this
subsection is a written statement regarding the federally
related mortgage loan for which the good faith estimate under
subsection (c) is made, that consists of the following
statements, appropriately and in good faith completed by the
lender in accordance with the terms of the federally related
mortgage loan involved in the settlement:
``(A) `Your Loan Amount will be' and `$____', each
statement appearing in a separate column of the
disclosure.
``(B) `Your Loan is', `A Fixed Rate Loan', and `An
Adjustable Rate Loan ', each statement appearing in a
separate column and each of the last two such
statements preceded by a checkbox.
``(C) `Your Loan Term is', `___ years', and `___
years', each statement appearing in a separate column,
and the second such statement shall appear in the same
column as the statement required by subparagraph (B)
regarding fixed rate loans and the third such statement
shall appear in the same column as the statement
required by subparagraph (B) regarding adjustable rate
loans;
``(D) `Your Estimated Interest Rate (APR) is',
`___%', and `___% initially, then it will adjust. In
___ months, Your rate may adjust to a maximum of ___%',
each statement appearing in a separate column, the
second such statement shall appear in the same column
as the statement required by subparagraph (B) regarding
fixed rate loans and the third such statement shall
appear in the same column as the statement required by
subparagraph (B) regarding adjustable rate loans, and
the blanks relating to estimated interest rate shall be
completed by the lender using an annual percentage rate
determined in accordance with the Truth in Lending Act.
``(E) `Your Total Estimated Monthly Payment
(Including loan Principal and Interest, and property
Taxes (based on current rates) and Insurance (PITI))
is', `$____ which represents ___% of Your estimated
monthly income', and `$____ which represents ___% of
Your estimated monthly income. When Your interest rate
initially adjusts, Your maximum monthly payment may be
as high as $____ which represents ___% of Your
estimated monthly income', each statement appearing in
a separate column, and the second such statement shall
appear in the same column as the statement required by
subparagraph (B) regarding fixed rate loans and the
third such statement shall appear in the same column as
the statement required by subparagraph (B) regarding
adjustable rate loans.
``(F) `Your Rate Lock Period is' and `___ days.
After You lock into Your interest rate, You must go to
settlement within this number of days to be guaranteed
this interest rate.', each statement appearing in a
separate column.
``(G) `Does Your loan have a prepayment penalty?',
`YES, Your maximum prepayment penalty is $____', and
`NO', the first such statement and the last two such
statements appearing in a separate column, and each of
the last two such statements preceded by a checkbox.
``(H) `Does Your loan have a balloon payment?',
`YES, Your balloon payment of $____ is due in ___
months', and `NO', the first such statement and the
last two such statements appearing in a separate
column, and each of the last two such statements
preceded by a checkbox.
``(I) `Your Total Estimated Settlement Charges Will
be $____ (a)' and `Your Total Estimated Down Payment
will be $____ (b)', each statement appearing in a
separate column.
``(J) `Your Total Estimated Cash Needed at Closing
Will Be' and `$____ (a+b)', each statement appearing in
a separate column.
``(K) `This represents a simple summary of Your
Good Faith Estimate (GFE). To understand the terms of
Your loan, You must see disclosure forms and the Truth
in Lending Act.', such statement appearing directly
below the entirety of the remainder of the disclosure.
``(2) Standard form.--
``(A) Development and use.--The Secretary, in
consultation with the Secretary of Veterans Affairs,
the Federal Deposit Insurance Corporation, and the
Director of the Office of Thrift Supervision, shall
develop and prescribe a standard form for the
disclosure required under this subsection, which shall
be used without variation in all transactions in the
United States that involve federally related mortgage
loans.
``(B) Appearance.--The standard form developed
pursuant to this paragraph shall--
``(i) set forth each statement required
under a separate subparagraph under paragraph
(1) on a separate row of the disclosure;
``(ii) be set forth in 8-point type;
``(iii) be not more than 6 inches in width
or 3.5 inches in height;
``(iv) include such boldface type and
shading as the Secretary considers appropriate;
``(v) include such parenthetical statements
directing the borrower to the terms of the loan
(such as `see terms') as the Secretary
considers appropriate, in such places as the
Secretary considers appropriate; and
``(vi) be located in the upper one-third of
the first page of the good faith estimate
required under subsection (c) in a manner that
allows the identity, address, phone number, and
other relevant information of the lender, the
identity, address, phone number, and other
relevant information of the borrower, and the
address of the property for which the federally
related mortgage loan is to be made, to be
located above the standard form.''.
(b) Regulations.--The Secretary of Housing and Urban Development
shall issue regulations prescribing the standard form and the use of
such form, as required by the amendment made by subsection (a), not
later than the expiration of the 180-day period beginning upon the date
of the enactment of this Act, and such regulations shall take effect
upon issuance.
TITLE VI--MORTGAGE SERVICING
SEC. 601. 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 129B (as added by
section 201) the following new section:
``SEC. 129C. 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 a first lien on the principal
dwelling of the consumer, other than a consumer credit transaction
under an open end credit plan or a reverse mortgage, 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.
``(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 first deed of trust
or mortgage on the principal dwelling of the consumer, other than a
consumer credit transaction under an open end credit plan or a reverse
mortgage, 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 50
percent;
``(4) the transaction is secured by 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 3.0 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 mortgage transaction;
``(8) the consumer was the subject of a proceeding under
title 11, United States Code, at any time during the 7-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 and included in a consumer report on the consumer
under the Fair Credit Reporting Act) ; or
``(9) so required by the Board pursuant to regulation.
``(c) Duration of Mandatory Escrow or Impound Account.--An escrow
or impound account established pursuant to subsection (b), shall remain
in existence for a minimum period of 5 years and until such borrower
has sufficient equity in the dwelling securing the consumer credit
transaction so as to no longer be required to maintain private mortgage
insurance, or such other period as may be provided in regulations to
address situations such as borrower delinquency, unless the underlying
mortgage establishing the account is terminated.
``(d) Clarification on Escrow Accounts for Loans Not Meeting
Statutory Test.--For mortgages not covered by the requirements of
subsection (b), no provision of this section shall be construed as
precluding the establishment of an impound, trust, or other type of
account for the payment of property taxes, insurance premiums, or other
purposes relating to the property--
``(1) on terms mutually agreeable to the parties to the
loan;
``(2) at the discretion of the lender or servicer, as
provided by the contract between the lender or servicer and the
borrower; or
``(3) pursuant to the requirements for the escrowing of
flood insurance payments for regulated lending institutions in
section 102(d) of the Flood Disaster Protection Act of 1973.
``(e) Administration of Mandatory 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 subsection (b)
shall be established in a federally 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;
``(B) the Flood Disaster Protection Act of 1973 and
regulations prescribed under such Act; and
``(C) the law of the State, if applicable, where
the real property securing the consumer credit
transaction is located.
``(3) Applicability of payment of interest.--If prescribed
by applicable State or Federal 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 State or Federal law.
``(4) Penalty coordination with respa.--Any action or
omission on the part of any person which constitutes a
violation of the Real Estate Settlement Procedures Act of 1974
or any regulation prescribed under such Act for which the
person has paid any fine, civil money penalty, or other damages
shall not give rise to any additional fine, civil money
penalty, or other damages under this section, unless the action
or omission also constitutes a direct violation of this
section.
``(f) Disclosures Relating to Mandatory 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 at least 3 business days before the consummation of the
consumer credit transaction giving rise to such account or in
accordance with timeframes established in prescribed regulations 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 after the
consummation of the transaction, of the estimated taxes and
hazard insurance, including flood insurance, if applicable, and
any other required periodic payments or premiums that reflects,
as appropriate, either 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) or the replacement costs
of the property.
``(4) The estimated monthly amount payable to be escrowed
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 at the appropriate time in the future, 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.
``(g) 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 for `hazard insurance',
`casualty insurance', `homeowner's insurance', or other similar
term under the law of the State where the real property
securing the consumer credit transaction is located.''.
(b) Implementation.--
(1) Regulations.--The Board of Governors of the Federal
Reserve System, the Comptroller of the Currency, the Director
of the Office of Thrift Supervision, the Federal Deposit
Insurance Corporation, the National Credit Union Administration
Board, (hereafter in this Act referred to as the ``Federal
banking agencies'') and the Federal Trade Commission shall
prescribe, in final form, such regulations as determined to be
necessary to implement the amendments made by subsection (a)
before the end of the 180-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 the
publication of final regulations in the Federal Register.
(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 129B (as added by section 201) the following new item:
``129C. Escrow or impound accounts relating to certain consumer credit
transactions.''.
SEC. 602. DISCLOSURE NOTICE REQUIRED FOR CONSUMERS WHO WAIVE ESCROW
SERVICES.
(a) In General.--Section 129C of the Truth in Lending Act (as added
by section 601) is amended by adding at the end the following new
subsection:
``(h) Disclosure Notice Required for Consumers Who Waive 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 real 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 and in accordance with any statute,
regulation, or contractual agreement, to close such
account,
the creditor or servicer 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 or
costs 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 or servicer 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 Federal banking agencies and the
Federal Trade Commission shall prescribe, in final form, such
regulations as such agencies determine to be necessary to
implement the amendments made by subsection (a) before the end
of the 180-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 the publication of final regulations in the
Federal Register.
SEC. 603. 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 hazard 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 (as defined in regulations which the
Secretary shall prescribe) 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 contact information about
the owner assignee of the loan; or
``(E) fail to comply with any other obligation
found by the Secretary, by regulation, 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 when the borrower has
failed to maintain or renew hazard 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 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 first-class 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
for the property securing the mortgage by the end of
the 15-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
written confirmation from a borrower of existing insurance
coverage, which shall include the existing insurance policy
number along with the identity of, and contact information for,
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) Clarification with respect to flood disaster
protection act.--No provision of this section shall be
construed as prohibiting a servicer from providing simultaneous
or concurrent notice of a lack of flood insurance pursuant to
section 102(e) of the Flood Disaster Protection Act of 1973.
``(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.--
``(1) In general.--All amounts received by a lender or a
servicer on a home loan at the address where the borrower has
been instructed to make payments shall be accepted and
credited, or treated as credited, on the business day received,
to the extent that the borrower has made the full contractual
payment and has provided sufficient information to credit the
account.
``(2) Scheduled method.--If a servicer uses the scheduled
method of accounting, any regularly scheduled payment made
prior to the scheduled due date shall be credited no later than
the due date.
``(3) Notice of noncredit.--If any payment is received by a
lender or a servicer on a home loan and not credited, or
treated as credited, the borrower shall be notified within 10
business days by mail at the borrower's last known address of
the disposition of the payment, the reason the payment was not
credited, or treated as credited to the account, and any
actions necessary by the borrower to make the loan current.''.
(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 ``$2,000''; 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
``30 days''; and
(3) by adding at the end the following new paragraph:
``(4) Limited extension of response time.--The 30-day
period described in paragraph (2) may be extended for not more
than 30 days if, before the end of such 30-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 7 business days of the
receipt of a written request for such balance from or on behalf
of the borrower.''.
(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 that is within the servicer's control at
the time the loan is paid off shall be promptly returned to the
borrower within 20 business days or credited to a similar account for a
new mortgage loan to the borrower with the same lender.''.
SEC. 604. MORTGAGE SERVICING STUDIES REQUIRED.
(a) Mortgage Servicing Practices.--
(1) Study.--The Secretary of Housing and Urban Development,
in consultation with the Federal banking agencies, and the
Federal Trade Commission, shall conduct a comprehensive study
on mortgage servicing practices and their potential for fraud
and abuse.
(2) Issues to be included.--In addition to other issues the
Secretary of Housing and Urban Development, the Federal banking
agencies, and the Federal Trade 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 or effective posting of
payments by servicers.
(B) The employment of daily interest when payments
are made after a due date.
(C) The charging of late fees on the entire
outstanding principal.
(D) The charging of interest on servicing fees.
(E) The utilization of collection practices that
failed to comply with the Fair Debt Collection
Practices Act.
(F) The charging of prepayment penalties when not
authorized by either the note or law.
(G) The employment of unconscionable forbearance
agreements.
(H) 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 Federal banking agencies, 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. 605. 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 principal dwelling of the consumer, other than a
consumer credit transaction under an open end credit
plan or a reverse mortgage, 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 periodic payments or
premiums with respect to the property, the information
required to be provided under subsection (a) with
respect to the number, amount, and due dates or period
of payments scheduled to repay the total of payments
shall take into account the amount of any monthly
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 periodic payments or premiums with
respect to the property shall reflect the taxable
assessed value of the real property securing the
transaction after the consummation of 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), if known, and the replacement costs
of the property for hazard insurance, in the initial
year after the transaction.''.
TITLE VII--APPRAISAL ACTIVITIES
SEC. 701. PROPERTY APPRAISAL REQUIREMENTS.
Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended
by inserting after subsection (u) (as added by section 303(f)) the
following new subsection:
``(v) 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. 702. 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 129C (as added by
section 601) the following new section:
``SEC. 129D. UNFAIR AND DECEPTIVE PRACTICES AND ACTS RELATING TO
CERTAIN CONSUMER CREDIT TRANSACTIONS.
``(a) In General.--It shall be unlawful, in providing any services
for a consumer credit transaction secured by the principal dwelling of
the consumer, to engage in any unfair or deceptive act or practice as
described in or pursuant to regulations prescribed under this section.
``(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, appraisal management company, employee of
an appraisal management company, 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, the Comptroller of the
Currency, the Director of the Office of Thrift Supervision, the Federal
Deposit Insurance Corporation, the National Credit Union Administration
Board, and the Federal Trade Commission--
``(1) shall, for purposes of this section, 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 and defining any
terms in this section or such regulations; 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) 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 129C (as added by section 601) the following new item:
``129D. Unfair and deceptive practices and acts relating to certain
consumer credit transactions.''.
SEC. 703. APPRAISAL SUBCOMMITTEE OF FIEC, APPRAISER INDEPENDENCE, AND
APPROVED APPRAISER EDUCATION.
(a) Consumer Protection Mission.--
(1) Purpose.--A purpose for the establishment and operation
of the Appraisal Subcommittee of the Financial Institutions
Examination Council (hereafter in this section referred to as
the ``Appraisal Subcommittee'') shall be to establish a
consumer protection mandate.
(2) Functions of appraisal subcommittee.--It shall be a
function of the Appraisal Subcommittee to protect the consumer
from improper appraisal practices and the predations of
unlicensed appraisers.
(3) Threshold levels.--In establishing a threshold level
under section 1112(b) of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (12 U.S.C. 3341(b)), each
agency shall determine in writing that the threshold level
provides reasonable protection for consumers who purchase 1-4
unit single-family residences.
(b) Annual Report of Appraisal Subcommittee.--The annual report of
the Appraisal Subcommittee under section 1103(a)(4) of Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 shall 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.--All meetings of the Appraisal Subcommittee
shall be held in public session after notice in the Federal Register.
(d) Regulations.--The Appraisal Subcommittee may prescribe
regulations after notice and opportunity for comment. Any regulations
prescribed by the Appraisal Subcommittee shall (unless otherwise
provided in this section or title XI of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989) 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, lenders, consumer
advocates, and government agencies, and hold regular meetings.
(e) Field Appraisals and Appraisal Reviews.--All field appraisals
performed at a property within a State shall be prepared by appraisers
licensed in the State where the property is located. All Uniform
Standards of Professional Appraisal Practice-compliant appraisal
reviews shall be performed by an appraiser who is duly licensed by a
State appraisal board.
(f) State Agency Reporting Requirement.--Each State with an
appraiser certifying and licensing agency whose certifications and
licenses comply with title XI of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 shall transmit reports on
sanctions, disciplinary actions, license and certification revocations,
and license and certification suspensions on a timely basis to the
national registry of the Appraisal Subcommittee.
(g) Registry Fees Modified.--
(1) In general.--The annual registry fees for persons
performing appraisals in federally related transactions shall
be increased from $25 to $40. The maximum amount up to which
the Appraisal Subcommittee may adjust any registry fees shall
be increased from $50 to $80 per annum. The Appraisal
Subcommittee shall 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.
(2) Incremental revenues.--Incremental revenues collected
pursuant to the increases required by this section shall be
placed in a separate account at the United States Treasury,
entitled the Appraisal Subcommittee Account.
(h) Grants and Reports.--
(1) In general.--Amounts appropriated for or collected by
the Appraisal Subcommittee after the date of the enactment of
this Act shall, in addition to other uses authorized, be used--
(A) to make grants to State appraiser regulatory
agencies to help defray those costs relating to
enforcement activities; and
(B) to report to all State appraiser certifying and
licensing agencies when a license or certification is
surrendered, revoked, or suspended.
(2) Limitation on obligations.--Obligations authorized
under this section may not exceed 75 percent of the fiscal year
total of incremental increase in fees collected and deposited
in the Appraisal Subcommittee Account pursuant to section
703(g) of this Act.
(i) Criteria.--
(1) Definition.--For purposes of this section and title XI
of the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 (notwithstanding section 1116(c) of such title),
the term ``State licensed appraiser'' means an individual who
has satisfied the requirements for State licensing in a State
or territory 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.
(2) 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.
(j) Monitoring of State Appraiser Certifying and Licensing
Agencies.--The Appraisal Subcommittee shall monitor State appraiser
certifying and licencing agencies for the purpose of determining
whether a State agency's funding and staffing are consistent with the
requirements of title XI of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989, 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. The Appraisal Subcommittee shall have the authority to
impose interim sanctions and suspensions.
(k) 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.
(l) Consideration of Professional Appraisal Designations.--No
provision of section 1122(d) of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 shall be construed as prohibiting
consideration of designations conferred by recognized national
professional appraisal organizations, such as sponsoring organizations
of The Appraisal Foundation.
(m) Appraiser Independence.--
(1) Prohibitions on interested parties in a real estate
transaction.--No mortgage lender, mortgage broker, mortgage
banker, real estate broker, appraisal management company,
employee of an appraisal management company, 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, appraisal
management company, employee of an appraisal management
company, 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, appraisal
management company, employee of an appraisal management
company, 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 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 subsection 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 subsection 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.
(n) Approved Education.--The Appraisal Subcommittee shall encourage
the States to accept courses approved by the Appraiser Qualification
Board's Course Approval Program.
SEC. 704. 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 minimis 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. 705. 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 129D (as added by
section 702) the following new section:
``SEC. 129E. 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 business 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 129D (as added by section 702) the following new item:
``129E. Consumer appraisal disclosure.''.
Passed the House of Representatives November 15, 2007.
Attest:
LORRAINE C. MILLER,
Clerk.