Greater transparency of settlement fees

(a)

In general

Section 4 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2603) is amended— (1)in subsection (a), in the first sentence, by striking The Secretary, and inserting Provision of Settlement Statement.—The Secretary,; (2)in subsection (b)— (A)in the first sentence— (i)by striking The form and inserting Advance Inspection of Settlement Statement.—The form; and (ii)by striking , except and all that follows through available at such time; and (B)in the second sentence— (i)by striking Upon the request of the borrower to inspect the form prescribed under this section during the and inserting At least 1; (ii)by striking shall permit the and inserting shall provide a completed, written copy of the settlement statement to the; and (iii)by striking to inspect those and all that follows through preceding day; and (3)by adding at the end the following:

(c)

Agreement for originator fees

(1)

Notice of fees

Not later than 3 days after a person applies for a federally related mortgage loan, the mortgage originator of such loan shall provide to that person a written agreement itemizing all of the fees that person may be charged by the mortgage originator, including any origination fees, underwriting fees, broker fees, and any other fees to be charged at or before the settlement of such loan to be paid to the mortgage originator. Bona fide discount points payable by such person to reduce the interest rate of such loan need not be included on any originator fees agreement under this paragraph. (2)

Method of payment

(A)

In general

Each originator fee agreement under paragraph (1) shall set out the following 3 methods for the payment of the fees described in any such agreement: (i)Payment in cash before or at settlement. (ii)Adding such fees into the total loan amount to be borrowed. (iii)Increasing the interest rate of the loan. (B)

Borrower's choice of payment method

Each applicant for a federally related mortgage loan, in determining how to pay any of the fees described in an originator fees agreement under paragraph (1), shall choose one of the payment methods described under subparagraph (A), except that the applicant may choose to combine the payment methods described under clauses (i) and (ii) of subparagraph (A). (C)

Required explanation

(i)

Written

Each originator fee agreement under paragraph (1) shall include a written explanation of each of the payment options listed in subparagraph (A), along with a clear and concise illustration of the effect of each option on the amount borrowed, the interest rate, the payments required on the loan, and any other loan terms which might be affected by such option. (ii)

Oral

Each mortgage originator of a federally related mortgage loan shall explain to each applicant for such a loan each of the payment options listed in subparagraph (A) before accepting any payment from that person. (D)

Required signature

Before any applicant for a federally related mortgage loan is obligated to pay any of the fees described in the originator fees agreement under paragraph (1), the person shall have— (i)agreed to and signed the originator fees agreement described under paragraph (1); and (ii)exercised the option for determining the method of payment for such fees. (d)

Early settlement statement

(1)

In general

Not later than 3 days after a person applies for a federally related mortgage loan, the mortgage originator of such loan shall provide to that person a written early settlement statement of all of the settlement costs to be charged to that person at or before settlement. The early settlement statement shall be in the same or a similar form as the statement of settlement costs provided to the person pursuant to subsection (a). (2)

Required inclusions

Each early settlement statement under this subsection shall include an itemization of the following: (A)All fees agreed to by the applicant of a federally related mortgage loan pursuant to the originator fees agreement described under subsection (c)(1). (B)All fees to be charged to that applicant by independent third parties, including government agencies at or before settlement of the loan, plus all escrows reserves which may be required of that person. (e)

Borrower liability for fees

No borrower shall be liable for any fees which are not disclosed on an early settlement statement, except that the borrower is liable for such fees if— (1)the total amount charged for fees imposed by independent third parties is— (A)not more than 10 percent greater than that stated in the early settlement statement; or (B)greater than that allowed under subparagraph (A) because bona fide and reasonable expenses were incurred by such third parties for unanticipated inspection, appraisal, survey, or flood certification of the home which was the subject of such loan; (2)the mortgage originator provides a reasonable explanation of the circumstances surrounding the settlement of the loan of the borrower which were different than anticipated by the mortgage originator when the statement was provided; and (3)the mortgage originator does not engage in a pattern or practice of providing early settlement statements which disclose individual fees of independent third parties in different amounts than actually charged at settlement. (f)

Liability for failure To comply

(1)

In general

Whoever fails to comply with any provision of this section shall be liable to the borrower for an amount equal to the sum of— (A)any actual damages to the borrower as a result of the failure; and (B)$5,000 for each such instance of noncompliance. (2)

Court costs

In addition to any amount under paragraph (1), in the case of any successful action brought by a borrower under this subsection, such borrower shall be reimbursed for the costs of the action, together with any attorneys fees incurred in connection with such action as the court may determine to be reasonable under the circumstances. (g)

Definition

As used in this section, the term mortgage originator— (1)means any person who, for direct or indirect compensation or gain, or in the expectation of direct or indirect compensation or gain— (A)takes a residential mortgage loan application; or (B)assists a consumer in obtaining or applying to obtain a residential mortgage loan; and (2)includes any person who makes loans directly or brokers loans for others.

(b)

Conforming amendment

Section 5(c) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2604(c)) is hereby repealed.