[Congressional Record Volume 144, Number 111 (Friday, August 7, 1998)]
[Extensions of Remarks]
[Page E1607]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   PRIVATE MORTGAGE INSURANCE CANCELLATION SIMPLIFICATION ACT OF 1998

                                 ______
                                 

                          HON. JOHN J. LaFALCE

                              of new york

                    in the house of representatives

                        Thursday, August 6, 1998

  Mr. LaFALCE. Mr. Speaker, on Wednesday, July 29, 1998, the President 
signed into law S. 318, the ``Homeowners Protection Act of 1998.'' 
While the law provides important new rights to consumers who are 
required to purchase private mortgage insurance in order to qualify for 
a home loan, I wish the law had gone further. I am particularly 
concerned that the Federal law pre-empts State law, unless the State 
had enacted a law prior to January 2, 1998. Even the eight States that 
have private mortgage insurance (PMI) cancellation and termination laws 
on the books, are prohibited from passing stronger laws two years after 
the date of enactment. It is my belief that the law should protect the 
rights of all states to pass stronger consumer protection laws.
  I am also troubled that the law provides Fannie Mae and Freddie Mac, 
the Government Sponsored Enterprises (GSEs) that secure mortgages, 
broad discretion to distinguish certain borrowers as ``high risk.'' 
Those borrowers, under the law, are prohibited from even initiating 
cancellation of their mortgage insurance after 20 percent of their 
mortgage is satisfied, and instead are required to carry mortgage 
insurance for half the life of the loan. While certain types of 
borrowers at loan origination may be riskier than others, by the time 
the borrower has satisfied 20 percent of their mortgage, the lender's 
risks are negligible. At that point, consumers should not be required 
to make costly payments to the private mortgage industry.
  For the above-mentioned reasons, today I am introducing the ``Private 
Mortgage Insurance Cancellation Simplification Act of 1998.'' The bill 
protects the rights of all states to enact stronger PMI cancellation 
and disclosure laws and provides the same cancellation rights to all 
consumers with conforming loans.
  The text of the legislation follows:

                               H.R. 4435

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Private Mortgage Insurance 
     Cancellation Simplification Act of 1998''.

     SEC. 2. APPLICABILITY TO HIGH-RISK LOANS.

       (a) In General.--Section 3 of the Homeowners Protection Act 
     of 1998 (Public Law 105-216) is amended by striking 
     subsection (f).
       (b) Conforming Amendments.--Section 4(a) of the Homeowners 
     Protection Act of 1998 (Public Law 105-216) is amended----
       (1) in paragraph (1)----
       (A) in the matter preceding subparagraph (A), by striking 
     ``(other than a mortgage or mortgage transaction described in 
     section 3(f)(1))'';
       (B) in subparagraph (A)(ii)----
       (i) in subclause (II), by inserting ``and'' after the 
     semicolon at the end; and
       (ii) by striking subclause (IV); and
       (C) in subparagraph (B)----
       (i) in clause (i), by inserting ``and'' after the semicolon 
     at the end;
       (ii) in clause (ii), by striking ``; and'' and inserting a 
     period; and
       (iii) by striking clause (iii);
       (2) by striking paragraph (2);
       (3) in paragraph (4), by striking ``through (3)'' and 
     inserting ``and (2)''; and
       (4) by redesignating paragraphs (3) and (4), as so amended, 
     as paragraphs (2) and (3), respectively.

     SEC. 3. PROTECTION OF STATE LAWS.

       Section 9 of the Homeowners Protection Act of 1998 (Public 
     Law 105-216) is amended by striking subsection (a) and 
     inserting the following new subsection:
       ``(a) Effect on State Law.----
       ``(1) In general.--This Act does not annul, alter, or 
     affect, or exempt any person subject to the provisions of 
     this Act from complying with, the laws of any State regarding 
     any requirements relating to private mortgage insurance in 
     connection with residential mortgage transactions, except to 
     the extent that such State laws are inconsistent with any 
     provision of this Act, and then only to the extent of the 
     inconsistency.
       ``(2) Inconsistencies.--A State law shall not be considered 
     to be inconsistent with a provision of this Act if the State 
     law----
       ``(A) 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;
       ``(B) 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; or
       ``(C) otherwise provides greater protection for the private 
     mortgage insurance consumer.''.

     

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