[Congressional Record Volume 153, Number 175 (Tuesday, November 13, 2007)]
[Senate]
[Pages S14298-S14300]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. REED:
  S. 2343. A bill to amend the Real Estate Settlement Procedures Act to 
require mortgage originators to make their fees more transparent; to 
the Committee on Banking, Housing, and Urban Affairs.
  Mr. REED. Mr. President, today I introduce the Real Estate 
Transparency Act of 2007. This bill would amend the

[[Page S14299]]

Real Estate Settlement Practices Act of 1974 to improve the early loan 
disclosures given to those applying for a mortgage, ensure binding and 
transparent payment agreements between mortgage originators and 
borrowers, and require that a borrower be given a copy of their final 
settlement statement at least one business day before settlement so 
that it can be thoroughly examined before closing.
  As we are all too aware, current Good Faith Estimates do not provide 
enough useful information to help borrowers truly make informed lending 
decisions. We have heard too many stories of borrowers not 
understanding the terms of their loan or not being told about 
unexpectedly high settlement fees until they are at the closing table. 
This lack of early and appropriate disclosures regarding the terms of a 
mortgage loan and the costs of closing on that loan hinders a family's 
ability to shop for the best loan product for the purchase of a home, 
and also has allowed families to be taken advantage of by unscrupulous 
brokers and lenders.
  First and foremost, the Real Estate Transparency Act would replace 
the current Good Faith Estimate with an early written settlement 
statement of all of the costs to be charged to that person at or before 
settlement of the loan. It would require that this early settlement 
statement be in the same form as the final settlement statement, 
currently known as the HUD 1. The borrower would not be liable for any 
fees which are not disclosed on this early settlement statement, except 
for third party fees within 10 percent of the cost listed on the early 
settlement statement, or fees for bona fide and reasonable expenses not 
anticipated by the mortgage originator for an inspection, appraisal, 
survey, or flood certification. This early written settlement statement 
should allow consumers to compare the costs associated with different 
loan products from different mortgage originators and shop around for 
the best product for them early in the process.
  Second, this legislation would require for the first time that the 
HUD 1 or final settlement statement be provided to the borrower at 
least one business day before settlement. If this final settlement 
statement is not provided to the borrower, then lenders will be subject 
to statutory damages.
  Third, this bill would require mortgage originators to provide 
borrowers with a written agreement itemizing all of the fees they may 
charge the borrower, including any origination fees, underwriting fees, 
broker fees, or other fees to be charged at or before settlement of 
such loan to be paid to the lender, the broker, or affiliates of the 
lender or broker. In addition, this written agreement would have to set 
out and explain three possible methods of payment for such fees: 
payment in cash before or at settlement; adding such fees into the loan 
amount to be borrowed; and increasing the interest rate of the loan. 
The borrower also could choose to both pay in cash and incorporate some 
of the fees into the loan amount. This written agreement regarding 
mortgage origination fees would have to be provided to the borrower 
within three days of application and be signed before the borrower is 
obligated to pay any of these fees. Not only should this provide 
greater transparency regarding what fees are going to be charged by the 
mortgage originator, consumers also can decide not to sign on the 
dotted line if they do not like the costs associated with the loan.
  Finally, the bill subjects mortgage originators to statutory damages 
for violations of these disclosure provisions equal to the sum of the 
borrower's actual damages plus $5,000 for each instance such instance 
of noncompliance.
  Congress needs to take many steps to address the subprime mortgage 
crisis and to reinstate confidence among our nation's homeowners and 
those we hope will become homeowners. I believe that giving consumers 
the information they need regarding their loan costs is a vital part of 
improving this complicated and often overwhelming process. Borrowers 
need to better understand the financial ramifications of choosing a 
certain loan product from a certain mortgage originator early in this 
process, and before they actually consummate the loan. I hope my 
colleagues will join with me in supporting this legislation that I 
believe will greatly improve mortgage loan disclosures.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2343

       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 ``Real Estate Transparency Act 
     of 2007''.

     SEC. 2. 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.

[[Page S14300]]

       ``(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.

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