[Congressional Record Volume 144, Number 94 (Wednesday, July 15, 1998)]
[Senate]
[Pages S8267-S8268]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   HOMEOWNERS PROTECTION ACT OF 1998

  Mr. DeWINE. Mr. President, I ask the Chair lay before the Senate a 
message from the House of Representatives on the bill (S. 318) to 
require automatic cancellation and notice of cancellation rights with 
respect to private mortgage insurance which is required as a condition 
for entering into a residential mortgage transaction, to abolish the 
Thrift Depositor Protection Oversight Board, and for other purposes.
  The PRESIDING OFFICER laid before the Senate the following message 
from the House of Representatives:

       Resolved, That the bill from the Senate (S. 318) entitled 
     ``An Act to require automatic cancellation and notice of 
     cancellation rights with respect to private mortgage 
     insurance which is required as a condition for entering into 
     a residential mortgage transaction, to abolish the Thrift 
     Depositor Protection Oversight Board, and for other 
     purposes'', do pass with the following amendments:

     (1)Page 1, line 5, strike [1997] and insert: 1998
     (2)Page 12, after line 16 insert the following:

       (4) Gao report.--Not later than 2 years after the date of 
     the enactment of this Act, the Comptroller General of the 
     United States shall submit to the Congress a report 
     describing the volume and characteristics of residential 
     mortgages and residential mortgage transactions that, 
     pursuant to paragraph (1) of this subsection, are exempt from 
     the application of subsections (a) and (b). The report 
     shall--
       (A) determine the number or volume of such mortgages and 
     transactions compared to residential mortgages and 
     residential mortgage transactions that are not classified as 
     high-risk for purposes of paragraph (1); and
       (B) identify the characteristics of such mortgages and 
     transactions that result in their classification (for 
     purposes of paragraph (1)) as having high risks associated 
     with the extension of the loan and describe such 
     characteristics, including--
       (i) the income levels and races of the mortgagors involved;
       (ii) the amount of the downpayments involved and the 
     downpayments expressed as percentages of the acquisition 
     costs of the properties involved;
       (iii) the types and locations of the properties involved;
       (iv) the mortgage principal amounts; and
       (v) any other characteristics of such mortgages and 
     transactions that may contribute to their classification as 
     high risk for purposes of paragraph (1), including whether 
     such mortgages are purchase-money mortgages or refinancings 
     and whether and to what extent such loans are low-
     documentation loans.

     (3)Page 24, strike lines 15 through 23 and insert:

       (2) Protection of existing state laws.--
       (A) In general.--The provisions of this Act do not 
     supersede protected State laws, except to the extent that the 
     protected State laws are inconsistent with any provision of 
     this Act, and then only to the extent of the inconsistency.
       (B) Inconsistencies.--A protected State law shall not be 
     considered to be inconsistent with a provision of this Act if 
     the protected State law--
       (i) requires termination of private mortgage insurance or 
     other mortgage guaranty insurance--

       (I) at a date earlier than as provided in this Act; or
       (II) when a mortgage principal balance is achieved that is 
     higher than as provided in this Act; or

       (ii) requires disclosure of information--

       (I) that provides more information than the information 
     required by this Act; or
       (II) more often or at a date earlier than is required by 
     this Act.

       (C) Protected state laws.--For purposes of this paragraph, 
     the term ``protected State law'' means a State law--
       (i) regarding any requirements relating to private mortgage 
     insurance in connection with residential mortgage 
     transactions;
       (ii) that was enacted not later than 2 years after the date 
     of the enactment of this Act; and
       (iii) that is the law of a State that had in effect, on or 
     before January 2, 1998, any State law described in clause 
     (i).

     (4)Page 27, line 21 before ``Nothing'' insert:

       (a) PMI Not Required.--

     (5)Page 27, after line 23 insert the following:

       (b) No Preclusion of Cancellation or Termination 
     Agreements.--Nothing in this Act shall be construed to 
     preclude cancellation or termination, by agreement between a 
     mortgagor and the holder of the mortgage, of a requirement 
     for private mortgage insurance in connection with a 
     residential mortgage transaction before the cancellation or 
     termination date established by this Act for the mortgage.

  Ms. MOSELEY-BRAUN. Mr. President, I am glad that the Senate is 
considering S. 318, the Homeowners Protection Act. I thank my 
colleagues on the Banking Committee for working so hard to come to a 
final agreement on this legislation. I am pleased with the result, and 
I believe that our final product is a good balance which will both 
benefit consumers and protect the industry. The Senate passed S. 318 
last November and this version, which has been passed by the House, 
contains all of the key provisions of the bill as it first passed the 
Senate.
  Private Mortgage Insurance or PMI is a property insurance line that 
protects lenders from mortgage default risk. Homeowners pay the 
premiums, but the lender is the beneficary. PMI is generally used to 
facilitate loans in which the borrower makes a down payment of less 
than 20 percent, and the lender usually seeks coverage of the initial 
20 percent of the loan value.
  However, a number of homeowners currently continue to pay premiums 
well pass the point of reaching 20 percent equity in their home, and 
sometimes for the entire life of the loan. This excessive PMI coverage 
is not only expensive for the consumer, but provides little added 
protection to the lender. In many cases, homeowners are never informed 
of their right to cancel PMI, or are faced with significant obstacles 
when they do attempt to cancel the coverage. This legislation will end 
that predatory practice. It gives homeowners the right to cancel PMI 
when they have accummulated sufficient equity in their home to protect 
the lender from default. It will also provide for automatic 
cancellation of the mortgage insurance when the mortgagor's

[[Page S8268]]

payments meet the defined loan to value ratio of 78 percent or less. 
Finally, the bill generally prohibits lenders from requiring that 
consumers obtain PMI when they have a 20 percent or more down payment, 
with certain exceptions.
  S. 318 also ensures that lenders can continue to offer a product 
called lender paid mortgage insurance or LPMI, where the mortgage 
insurance is paid by the lender. LPMI folds the insurance payment into 
a slightly higher interest rate. The product provides an economic 
benefit for consumers for the early part of the loan, and becomes less 
beneficial over time if the loan is not refinanced for the life of the 
loan. When the legislation was considered in the Banking Committee I 
authored an amendment, along with my colleague, Senator Grams, which 
preserves LPMI. Our amendment, which is a part of this legislation, 
provides for strong disclosures that ensure the consumer is aware of 
the way that LPMI works, and can assess the benefits and drawbacks of 
this product. I would like to thank my colleagues for accepting my 
amendment, which ensures that this product will continue to provide 
benefit to consumers.
  Again, Mr. President, I would like to express my strong support for 
S. 318, the Homeowners' Protection Act, and I urge my colleagues to 
support its quick enactment.


                           Amendment No. 3171

  Mr. DeWINE. I ask unanimous consent the Senate concur in the 
amendments of the House with an amendment, which is at the desk.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Ohio [Mr. DeWine] for Mr. Santorum, for 
     himself and Mr. Specter, proposes an amendment numbered 3171 
     to the amendments of the House to the bill S. 318.

  The amendment is as follows:

       At the end of the House amendments, add the following:
       Sec.  . Section 481(a)(4) of the Higher Education Act of 
     1965 (20 U.S.C. 1088(a)(4)) is amended by--
       (1) inserting the subparagraph designation ``(A)'' 
     immediately after the paragraph designation ``(4)'';
       (2) redesignating subparagraphs (A) and (B) as clauses (i) 
     and (ii), respectively;
       (3) adding at the end thereof the following new 
     subparagraph:
       ``(B) Subparagraph (A)(i) shall not apply to a nonprofit 
     institution whose primary function is to provide health care 
     educational services (or an affiliate of such an institution 
     that has the power, by contract or ownership interest, to 
     direct or cause the direction of the institution's management 
     or policies) that files for bankrupcy under Chapter 11 of 
     Title 11 of the United States Code between July 1 and 
     December 31, 1998.''

  Mr. DeWINE. Mr. President, I move that the Senate concur in the 
amendments of the House with the amendment I have sent to the desk.
  The motion was agreed to.

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