[Congressional Record Volume 153, Number 177 (Thursday, November 15, 2007)]
[House]
[Pages H13978-H14011]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MORTGAGE REFORM AND ANTI-PREDATORY LENDING ACT OF 2007
The SPEAKER pro tempore. Pursuant to House Resolution 825 and rule
XVIII, the Chair declares the House in the Committee of the Whole House
on the State of the Union for the consideration of the bill, H.R. 3915.
{time} 1153
In the Committee of the Whole
Accordingly, the House resolved itself into the Committee of the
Whole House on the State of the Union for the consideration of the bill
(H.R. 3915) 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, with Mr. Cardoza in the chair.
The Clerk read the title of the bill.
The CHAIRMAN. Pursuant to the rule, the bill is considered read the
first time.
The gentleman from Massachusetts (Mr. Frank) and the gentleman from
Alabama (Mr. Bachus) each will control 30 minutes.
The Chair recognizes the gentleman from Massachusetts.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself such time as
I may consume.
We are dealing with legislation today that seeks to prevent a
repetition of events that caused one of the most serious financial
crises in recent times.
We understand today that we are in a worldwide problem economically,
with a terrible shortage of credit, with some institutions threatened.
There is no debate about what is the largest single cause of that.
Innovations in the mortgage industry, in themselves good and useful,
but conducted in such a completely unregulated manner as to have led to
this crisis, I know people have said, well, we may be exaggerating it.
Here's what we recently heard from the head of the Blackstone
operation:
``The mortgage black hole is, I think, worse than anyone saw. Deeper,
darker, scarier. The banks are now looking at new reserves and my sense
. . . is they don't have a clear picture of how this will play out.''
That's from one of the leading private sector entities.
What we have today is a bill that cannot undo what happened but makes
it much less likely that it will happen in the future.
The fundamental principle of the bill, and many people have lost
sight of this, is not to put remedies into place to deal with these
problems when they recur, but to stop them from occurring in the first
place.
We have had two groups of mortgage originators recently. We have had
banks subject to the regulation of the bank regulators, and they've
made mortgage loans. And then we have had mortgage loans made by
brokers who were subject to no regulation, who had access to pools of
money that were not regulated and could sell it to an unregulated
secondary market. It is not the case that the brokers are morally
inferior to the bankers. In both cases we are talking about people
overwhelmingly who are decent and well-intentioned. The difference is
the absence of regulation so that pressures to do things that were
irresponsible were checked by regulation in the banking area and were
left unchecked elsewhere.
Essentially what this bill does in its most important form is to try
to conceptualize the rules that bank regulators used to prevent loans
from being made that should not have been made and apply them to all
loan originators. Again, the goal is not to give more remedies when
people face foreclosure when there have been abuses, but to prevent the
abuses in the first place.
One question has been raised from some in the Attorney General field
and elsewhere who say, what about our current efforts to deal with the
people who were abused? Thanks to a very explicit amendment by the
gentleman from North Carolina (Mr. Watt) who, along with the gentleman
from North Carolina (Mr. Miller), is one of the main authors of this
bill, this bill will be entirely prospective in its effect, and people
should understand no cause of action, no legal complaint, no remedy
sought against anybody who up until now and until this bill is signed
many months in the future, none of those causes of action will be
abrogated. Every remedy being pursued against past abuses and even
abuses that may yet to have occurred, although we hope they won't,
until this bill becomes law will not be stopped.
There is some controversy about preemption. The bill takes a balanced
position which has made a lot of people on all sides a little bit
unhappy. We do not preempt the right of States to decide how to deal
with mortgage originators, with lenders, with any of those. We do say
that with regard to the secondary market, we are going to put some
liability on those who are the active packagers, and that's in some
ways controversial; but we believe the unregulated secondary market was
a large part of this problem.
We do believe that you need to have some uniform rules if you are
going to have a functioning secondary market. And we believe the
secondary market has been on the whole useful but, having been
unregulated, has caused some problems. So there is a limited preemption
to that extent.
[[Page H13979]]
We are continuing to talk with people about ways to, frankly, improve
this bill. There will be some amendments adopted today that will do
this. It is a subject of great complexity with a lot of interlocking
parts and some legitimate competing interests. We have arrived today,
we think, at a reasonable balance. We do not believe that this is the
way the bill absolutely will look in the end, but it is clear progress.
And I want to stress the key point here is not in remedying past
abuses. This bill allows all existing remedies for past abuses to stay
in effect. This bill tries hard to prevent this pattern of loans being
made that should not have been made for a variety of reasons from
recurring and causing that great damage.
Mr. Chairman, I reserve the balance of my time.
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Mr. BACHUS. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, I rise in support of this legislation. I believe that
it does, in fact, address abusive practices which, unfortunately, are
in our mortgage lending market today. I believe it brings some needed
oversight to the mortgage industry.
The legislation that we are considering today is the product, and
everyone acknowledges this, industry acknowledges it, consumer groups,
Members on both sides, the membership has engaged for over 2 years in
an attempt to come together to span political differences,
philosophical differences, and to address the very serious problem in
the housing finance market.
I want to commend the gentleman from Massachusetts. He has allowed us
to fully express our opinions. I believe that this long dialogue which
we have had has resulted in consensus legislation which, though not
perfect, I believe will achieve two very important, very necessary
goals. One is to implement reforms that will offer consumers needed
protection against predatory lending practices; and two, I believe, and
I sincerely believe, that this legislation will preserve working
Americans' access to consumer credit.
I believe that the Members most closely involved in the negotiations
which led to the manager's amendment sincerely believe we have achieved
these goals. We need not let the perfect be an enemy to the good.
Members from both sides will address provisions of this bill which they
believe do not satisfy the goal I have described above.
I believe the fact that this legislation fully satisfies neither side
is an indication that we are in about the right place in achieving a
nonpolitical, legislative remedy to address this issue of such great
impact to our economy and our families, both now and moving forward.
In closing, let me say it has always been my view that when faced
with serious issues like this one impacting millions of families across
America, that Congress has both the privilege and the responsibility of
rising above partisanship and acting in the public's interest. With
this legislation today, I believe we have done just that.
Mr. Chairman, I reserve the balance of my time.
Mr. FRANK of Massachusetts. Mr. Chairman, I am very pleased to be
able to yield to a member of the committee, who is not only one of the
authors of this amendment, but has been a real source of strength to us
in dealing with these issues throughout.
I yield the gentleman from North Carolina (Mr. Watt) 4\1/2\ minutes.
Mr. WATT. Mr. Chairman, I thank the chairman of the full committee
for yielding time, and I thank the ranking member of the full committee
who has worked with us and recognized that there is a serious problem
that is going on in the real estate area, in the lending area, that
must be addressed, and I want to applaud the efforts of the chairman
for trying to address this issue in a comprehensive and fair way. And
perhaps the greatest testament to the chair of our committee is that we
have come up with a bill that perhaps not any single person I know is
completely happy with, including me.
This bill started 4 years ago with an initiative by Congressman
Miller from North Carolina and myself, and this was in advance of the
escalating foreclosures, the kind of irrational exuberance that was
taking place in the real estate market. We saw that this was coming
down the road because lending was becoming more available, but it was
also becoming more irresponsible because it was viewed as a no-lose
proposition. So lenders were making riskier and riskier loans to people
who had more and more marginal credit and on terms that were not
beneficial to the borrower but were financially beneficial, at least
until the foreclosures started, to the lenders.
So the predatory lending part of this bill, which is title III,
started out as the base bill to address those concerns that were taking
place that were predatory practices, taking advantage of vulnerable
borrowers so that lenders could make money. Then the onset of the
foreclosures started, and the crisis in the marketplace in general
reflected itself, and that has resulted in the addition of titles I and
II of this bill, which put a framework around brokers, which creates a
framework for responsible secondary market participation around lenders
who dealt in prime loans.
Interestingly enough, over time, it is actually titles I and II that
have become more controversial than title III, which was the predatory
lending part of the bill. We think that the predatory lending part of
the bill certainly has struck the best balance, because it is clear
that with predatory loans there will be a national standard, but we are
not preempting State laws and the States' ability to continue to
innovate.
In titles I and II, where we have created a framework for the
secondary market, we have preempted some State laws, and we have had
trouble finding the right language to do that. We want to do it to
create a national secondary market, but we don't want to do it outside
the specific requirements that are needed to control the secondary
market and make credit available. So there is some angst among a number
of us about the preemption language.
As I said at the beginning, maybe the best tribute to all of us is
that we have a bill that nobody really is completely comfortable with,
and all we can say to all of those people is that we will continue to
work on this bill not only after it passes the House today, but
throughout the process to reach the more delicate balance and a
satisfactory balance that at the end of the day will solve the problems
in the marketplace and be satisfactory to all concerned.
Mr. BACHUS. Mr. Chairman, I recognize the gentleman from California
(Mr. Royce) for 3 minutes to speak in opposition to the bill.
Mr. ROYCE. I thank the gentleman.
I do rise in opposition to this bill and to explain a line of
reasoning that the Wall Street Journal and other critics have pointed
out on their editorial pages. This proposal, in fact, is a trial
lawyer's dream. What this bill does is it, with very murky language,
forbids banks for signing up borrowers for what is termed ``overly
expensive loans.'' It requires banks to make sure that the consumer has
a ``reasonable ability to repay the loan'' and insist that loans must
be ``solely in the best interest of the consumer.'' This kind of murky
language would invite litigation from every borrower who misses a
payment. The Wall Street Journal says that if this bill becomes law, we
can expect to read billboards reading, ``Behind on your mortgage? For
relief, call 1-800 Sue-Your-Banker.''
For the first time, under this act, banks that securitize mortgages
would be made explicitly liable for violations of lending laws. This is
a version of secondary liability that holds the bundlers and resellers
of mortgages responsible for any mistakes of the original lenders. Now,
the reselling of mortgages has been both a boon to the housing
liquidity and risk diversification and, therefore, to lower interest
rates for all of us that have taken out a loan. So to the extent that
the bill adds a new risk element to securitizing subprime loans, and it
surely will, the main loser will be the subprime borrower who will pay
higher rates if he or she can get a loan at all.
Now, this debate is occurring during a challenging period for our
mortgage market. What has transpired over the last few months has
spread throughout our capital markets. It has the potential to slow the
economy even further if we do this wrong. This bill is the wrong
approach.
Now, we have had some signs of self-correction in the mortgage
market. Lenders are underwriting mortgages
[[Page H13980]]
much more carefully as a result of market discipline. Products which
have proven to be unfit for certain borrowers such low-doc loans,
short-term hybrid ARMS, interest-only products, those are becoming
increasingly hard to find. Those have been pushed out of the market.
But the legislation before us today ignores such advances. Not only
does this bill fail to account for the progress made in the market, it
has the potential to seriously restrict access to credit for millions
of Americans looking to purchase a home or refinance their mortgage.
In its present form, a borrower will have the ability to recover all
of the principal and interest paid over the entire history of the loan
as long as he can convince a court that he didn't have a reasonable
ability to pay, as I said. At the time the loan was originated, again,
it is not hard to imagine how language such as this is going to be
abused and run up the costs of home mortgages for everyone.
Mr. FRANK of Massachusetts. I yield 3 minutes to another Member who
had a great input into this, the Chair of the Housing Subcommittee of
our committee, the gentlewoman from California (Ms. Waters).
Ms. WATERS. Thank you, Mr. Chairman. I would like to thank you and
Mel Watt, Mr. Bachus and Mr. Miller and others who have worked so hard
on this bill. It is a very complicated issue. You have done a
spectacular job.
I rise in support of the Mortgage Reform and Anti-Predatory Act of
2007. Each month brings figures, new figures, that reinforce the
importance of putting in place a Federal legislative and regulatory
framework that prevents us from reliving this crisis in the mortgage
markets. I have a keen interest in this legislation because of the
disproportionate impact of the foreclosure wave on my home State.
California's third quarter foreclosure rate of one foreclosure filing
for every 88 households ranked second highest in all States and
reflects a near quadrupling of the number reported for the same period
last year. Five of the top 10 metropolitan areas in foreclosure filings
are in California.
Clearly, we need to prevent the now widespread practice of getting
people into loans they simply can't afford. H.R. 3915 takes critical
steps in this respect, including, for the first time, imposing a
Federal duty of care on all mortgage originators and setting minimum
Federal standards on all mortgages. Anchoring the bill's approach are
newly established minimum standards regarding the borrower's ability to
repay and net tangible benefit to the consumer. This is a sound
strategy given that federally regulated mortgage originators have long
had to meet similar benchmarks, and not coincidentally, we have seen
few problems in that sector of the market.
H.R. 3915 also seeks to reduce the incentives to market inappropriate
credit products to borrowers. I am particularly pleased that H.R. 3915,
again for the first time, removes the most destructive of such
incentives, severing the link between the compensation of the
originator and the terms of the loan. Minority borrowers have been
disproportionately steered to costly loans, in part because the fees
such loans generate for originators are higher than more appropriate
products. H.R. 3915 correctly prohibits this practice outright.
I am proud to have been an operational cosponsor of this very
ambitious legislation, and I urge my colleagues to support this passage
today. However, I would not be telling the truth if I said I lacked any
concerns about the potential impact of our ambition over time. Mr.
Chairman, I certainly want to thank you, Ranking Member Bachus, Mr.
Watt and others for your diligent work in the manager's amendment to
address one such concern that I raised during the Financial Services
Committee markup of the bill, namely, the extent to which the assignee
liability and remedies this bill creates should preempt State law.
{time} 1215
We want to make sure that consumers are protected to the greatest
extent possible. Historically, many of these protections have been
initiated by States, especially in the subprime market.
With that, I would like to conclude. I would like to be clear that
this groundbreaking bill should be passed today, and I urge my
colleagues to vote for H.R. 3915.
Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentleman from
Texas (Mr. Hensarling), who rises in opposition to the bill.
Mr. HENSARLING. I thank the gentleman for yielding.
Mr. Chairman, I do rise in opposition to what I conclude to be a bad
bill for homeowners in America. I do want to acknowledge, though, the
efforts of the ranking member to take a bad bill and turn it into a
less bad bill. There is no doubt that this Nation faces a great
challenge in the subprime market, no doubt about it at all. I am
convinced, though, that this piece of legislation is going to make it
worse, make the situation worse, and not make it better.
The first thing we need to remember as legislators is first do no
harm. What should Congress do to make sure this doesn't happen again?
Clearly, there has to be enforcement. There's no doubt that fraud has
taken place within the subprime market. But we also need effective
disclosure so that consumers know the types of transactions in which
they are entering. We need greater financial literacy. I agree, yes,
that there must be mortgage broker registration. But what Congress
should not do is essentially outlaw the American Dream for many
struggling families who may be of low income, who may have checkered
credit pasts. By bootstrapping more, more mortgage transactions into
the HOEPA standard, that is what this bill does.
Also, by having assignee liability with all these amorphous legal
doctrines and phrases that no one understands, you will drive
investment away from the secondary market at exactly the time when it
is needed more. As the market has perhaps even overcorrected, we need
more liquidity. This bill takes us to less liquidity.
I heard from one of my constituents recently from Forney, Texas, a
lady by the name of Connie Taylor. She wrote me and said: ``If it
hadn't been for subprime lending, I wouldn't have my house now. My
credit was destroyed because of divorce. I worked hard for 5 years to
clean up that credit.''
Mr. Chairman, we shouldn't take away homeowner opportunity from Ms.
Taylor in Forney, Texas, and all the other millions of people who may
have checkered credit pasts. Because of that, I urge that we defeat
this legislation.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield 2 minutes to
another member of the committee, the gentleman from Georgia (Mr.
Scott).
Mr. SCOTT of Georgia. Mr. Chairman, this is an important and urgent
and critical bill. All across this Nation, families are struggling and
suffering. In my own district of Georgia and in one of my major
counties, which is Clayton County, which is one of the leading counties
that has had over a 200 percent increase in foreclosures of homes, they
have lost over $158 million in terms of their home equity.
Now, Mr. Chairman, the speaker just spoke a moment ago about one of
the major features of this bill, and that is trying to grapple with
assigning liability. I want to just make sure that everybody
understands what we are talking about, because we are going to have
that debate. Just what is an assignee? An assignee is a mortgage broker
or lender, any loan originator that makes these loans but they don't
keep them. They repackage these loans. They often are loans that are
delivered to the secondary market to a group of investors and these are
parties that own an interest in the loan as it flows through the
investment process, and they are known as assignees.
Since these loan originators don't keep the loans they make, they
often deliver what the secondary market will buy, with little regard
for whether the homeowners can make their payments or afford these
loans. Unfortunately, many of them get into these loans on what is
known as ``teaser rates.'' They put forward a loan at a very low rate
but, unbeknownst to the homeowner, in a short period of time the
payment balloons out of kilter and the homeowner cannot afford it. Some
people say this is not by design. But in so many cases, they are by
design.
So what does that consumer have? He must have some recourse by which
to have an ability to stop the foreclosure on his home. That victim has
to hire
[[Page H13981]]
legal counsel to bring separate action against the loan originator.
This bill attempts to address that. An assignee liability is an
important feature of this measure.
Mr. BACHUS. Mr. Chairman, at this time I yield 2 minutes to the
gentleman from South Carolina (Mr. Barrett).
Mr. BARRETT of South Carolina. I thank the gentleman for yielding.
Mr. Chairman, I have a lot of faith in the American people. I believe
that, given the proper tools, they can best decide how to spend their
money. I also believe they can best determine how to borrow money, just
as lenders can best determine who should be lent money. In other words,
I trust free choice in the free market. Businesses should be able to
take risks just as consumers should be able to. With these risks, come
consequences.
However, I understand we have a major problem on our hands, a problem
that has spread far beyond the housing market to the heart of the
American economy. Some homeowners are struggling to make mortgages they
can't afford and financial institutions are stuck holding mortgages
that probably will not be repaid. But to say all subprime mortgages are
bad is an incorrect conclusion.
Unfortunately, this legislation, Mr. Chairman, will not help those
who today are in danger of losing their homes, and it will certainly
not help the availability of credit for those purchasing homes in the
future. This legislation will not add confidence to the credit market
and will not help our housing market find its footing.
I was a small business owner in another life, and I understand when
we make certain types of loans cost-prohibitive by adding burdensome
regulation or liability, all those loans will simply stop being made.
When we ban compensation for certain types of loans, the originators
have no reason to make them, especially when they are now subject again
to these new regulations and liabilities.
Rather than ensuring this market works smoothly through increased
oversight and transparency, we are effectively legislating these loans
out of existence and further tightening our credit markets. It is not a
good thing for our housing market, our economy, or the free choice of
our homeowners.
Unfortunately, Mr. Chairman, I must oppose H.R. 3915, and I urge my
colleagues to do the same.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield 2 minutes to
another member of the committee who has been very active in this issue,
the gentleman from Minnesota (Mr. Ellison).
Mr. ELLISON. First of all, let me thank the gentleman from
Massachusetts for leading this important debate in our country. No
doubt, the American Dream has always been homeownership and yet, with
exploding ARMs, with prepayment penalty and other such exotic products,
that dream of homeownership has become an American nightmare.
Mr. Chairman, I'd love to be able to take every Member of this body
through a tour of north Minneapolis. There are blocks on my community
where every other house is boarded and vacant. The fact is that for the
people who have made every single mortgage payment, and never late,
they suffer because of this crisis because their home values have been
dropping and plummeting.
We have seen our cities suffer, we have seen communities become
unattractive nuisances, which were once vibrant places where people
owned their own homes and did well. It's not because the market worked
right; it's because it worked wrong. It's because of defective
financial products, defective financial products which are addressed in
this bill.
It's important to understand that this bill is not designed to harm
the subprime market. It's designed to reform and correct it and make it
work properly, Mr. Chairman. The fact is that it does not help any
homeowner who gets into a 227 with a prepayment penalty, who eventually
can't pay the mortgage after it explodes in their face and then lose
their home. We are not better off because of something that happens
like that. That is what this bill is here to stop.
So, Mr. Chairman, let me say that this is an important part of making
the American Dream come true for middle-class Americans, making sure
that when they buy a home, they can actually keep that home and that it
will be a product that can enhance themselves and their families and
the communities they come from.
Mr. BACHUS. Mr. Chairman, I yield 3 minutes to the gentlewoman from
Illinois (Mrs. Biggert).
Mrs. BIGGERT. I thank the gentleman for yielding.
Mr. Chairman, I would like to thank Chairman Frank and Ranking Member
Bachus for working with Members from both sides of the aisle to craft
legislation to help consumers secure sound mortgages and shine a light
on the mortgage practices from day one of the home-buying process. I
would also like to associate myself with the remarks of our
distinguished ranking member, Mr. Bachus, and add just a few points.
First, I would like to thank Chairman Frank for adding two of my
bills to the underlying legislation, H.R. 3019, the Expand and Preserve
Homeownership Through Counseling Act, which has become title IV of the
bill; and H.R. 3017, the Stop Mortgage Fraud Act, which has become
section 212 of the bill.
Why are these important? Well, first, for so many, the problems out
there could have been avoided through one simple thing: housing
counseling. If consumers understand what they are getting into before
signing on the dotted line for a mortgage, they would be armed with the
ability to make better decisions about a mortgage. Title IV elevates
housing counseling within HUD, and the Office of Housing Counseling
will expand HUD's capacity to offer grants to States and local agency.
The language also tasks HUD with conducting a study on defaults and
foreclosures and launching a national housing outreach campaign so that
consumers know where to find a legitimate HUD-certified counselor. They
can get the help they need now to buy and keep their homes.
Second, section 212 of the bill authorizes additional funds for the
FBI investigators and Justice Department prosecutors to crack down on
mortgage fraud. It's no secret that organized crime gangs, many
operating in Chicago, have discovered a more lucrative business than
drugs. Mortgage fraud scam artists inflate appraisals, flip properties,
and lie about information, such as income and identity on loan
applications.
Finally, as a former real estate attorney, I know that any mortgage
legislation reform should first aim to do no harm. By that, I mean five
basic pieces. First, it should preserve access to credit and
homeownership opportunities for qualified low- and middle-income
borrows; second, facilitate transparency in the mortgage market; third,
create a level playing field; fourth, promote strong underwriting
standard; and, fifth, foster competition.
Achieving these objectives is critical for both primary and secondary
mortgage market participants, from homeowners to investors. Has the
bill under consideration fully realized these goals? I would say we
have come a long way on mortgage reform, but our work is not finished.
Today, several Members will offer amendments to improve the bill: the
manager's amendment offered by Mr. Frank and Mr. Bachus, and additional
amendments by Ms. Ginny Brown-Waite, Mr. Garrett, Mr. Hensarling, Mr.
McHenry, Mr. Gary Miller, and Mr. Price. I urge my colleagues to
support these amendments. I would like to particularly thank Mr.
Kanjorski for working with me on H.R. 3537, which we will offer as an
amendment today.
It's important for future American homeowners and our economy that we
put political agendas aside and get this right. Too much action and we
worsen the problem; too little action and we allow it to happen again.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield 2 minutes to the
gentlewoman from New York (Mrs. Maloney), chairman of the Subcommittee
on Financial Institutions of the Committee on Financial Services.
(Mrs. MALONEY of New York asked and was given permission to revise
and extend her remarks.)
Mrs. MALONEY of New York. I thank Chairman Frank and my colleagues,
Congressmen Watt and Miller, from the great State of North Carolina,
who passed legislation in the
[[Page H13982]]
State legislature first and helped build a strong bipartisan bill in
our committee that passed with a strong vote of 45-19. The economic
crisis we are facing is no longer just a subprime crisis, but a credit
crisis. Subprime losses are mounting and the economic pain is being
felt in communities across this country, as the ripple of foreclosures
spreads to neighborhoods and local economies. Economists estimate that
between 2 million and 5 million families could lose their homes by the
end of 2008, more than the number of families that lost their homes
during the Great Depression.
Democrats are working hard to help families stay in their homes and
prevent another crisis like this from happening in the future. I submit
for the Record a list of legislative actions and other actions that
Democrats in Congress have passed to help families stay in their homes.
With this bill, we take the first step towards reforms for the future.
The bill would bring mortgage brokers who are currently regulated on a
state-by-state basis under a nationwide licensing registry, establish
minimum standards for home loans, and expand certain limits on high-
cost mortgages.
{time} 1230
It also would prohibit brokers from steering consumers to mortgages
they are unlikely to be able to repay. It changes the incentives for
all market participants.
The bill would also establish some legal liability for securitizers,
but it also provides some liability protection to those companies if
they meet certain due diligence requirements in reviewing the loans
they are packaging. Any legislation on this issue must strike a very
delicate balance that provides consumer protections without
unnecessarily limiting the availability of loans to creditworthy
borrowers.
I congratulate the chairman for coming forward with a well-balanced
bill on a very difficult subject that is incredibly important. I urge
my colleagues, we must pass this bill.
Tackling the problem of subprime mortgage reform is like slaying the
many-headed Hydra of Greek mythology--unless you go about it the right
way, for each head you chop off, two more vicious ones will grow in its
place.
I congratulate Chairman Frank for producing an ambitious and
comprehensive bill that deals with many key aspects of this difficult
issue.
It is a comprehensive and sweeping reform of the mortgage industry
that would require all actors in the mortgage market to operate with
the kind of accountability and regard for the consumer's best interest
that the best mortgage lenders have always observed.
In this respect, the bill tracks the comments of Federal Reserve
Chairman Ben Bernanke, who said in testimony before the JEC that
limited and clearly defined assignee liability could prove beneficial.
To do this, the bill preempts State laws in the section dealing with
securitizers, reflecting the concern that differing State laws would
interfere with oversight of a national market. But it leaves States
free to regulate in other areas where States have traditionally led the
way in consumer protection for their citizens.
This is a well-balanced bill and I urge my colleagues to support it.
Democrats in Congress Are Working to Help Families Stay in Their Homes
We need to act quickly to stem the tide of foreclosures
that could ruin families, communities, and the economy.
The House has passed legislation to enable the FHA to serve
more subprime borrowers at affordable rates and terms,
attract borrowers who have turned to predatory loans in
recent years, and offer refinancing to homeowners struggling
to meet their mortgage payments.
Fannie Mae and Freddie Mac are providing much needed
liquidity in the prime market right now. We passed a GSE
reform bill in the House, but we should also raise the cap on
these entities portfolio limits, at least temporarily, and
direct all of those funds to help borrowers who are stuck in
risky adjustable rate mortgages refinance to safer mortgages.
To make servicers more able to engage in workouts with
strapped borrowers, we pushed FASB to clarify what its
Standard 140 allows for modification of a loan when default
is reasonably foreseeable, not just after default.
Congress should eliminate the cruel anomaly under Chapter
13 of the Bankruptcy Code which allows judges to modify
mortgages on a borrower's vacation home or investment
property, but not the home they actually live in. This allows
families to stay in their home while new loan terms are
worked out.
I think we should also eliminate the tax on debt
forgiveness, sparing families the double-whammy of paying
taxes on the lost value of their homes.
Democrats in Congress Are Working to Prevent Another Crisis
Our regulatory system is in serious need of renovation to
catch up to the financial innovation that has surpassed our
ability to protect consumers and hold institutions
accountable.
Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentleman from
Texas (Mr. Neugebauer) to speak in opposition to the bill.
Mr. NEUGEBAUER. Mr. Chairman, I do rise in opposition to this
legislation, not because of the spirit of compromise and bipartisanship
that was used to come to this conclusion, but because of a
philosophical difference. I believe that when markets have their ups
and downs that it is better for the Federal Government not to try to
intervene in those market cycles, so I think it is better to have
better information than to have regulation when it comes to the issue
of subprime mortgages.
I have a little bit of experience in the mortgage business in that I
was a mortgage originator. I was a homebuilder. I have sold and bought
loans in the secondary market and I have owned a home and borrowed
money on many mortgages. What I know is the system has worked, and we
have record homeownership here in America today because we have had one
of the most efficient mortgage markets in the world.
But what I do know is an important part of that transaction is that
everybody in the transaction understands what the nature of the
transaction is.
That is the reason I worked in a bipartisan way with the chairman and
ranking member, along with my colleagues Mr. Green and Mr. McHenry, to
make sure that we had a better disclosure piece of information for
borrowers to look at, a universal box, if you would, that would allow
borrowers to understand all of the terms and conditions of this
mortgage and to be able to compare that out in the marketplace. Because
what we do know is there is a lot of opportunities for people to get
mortgages in this country today, or have been up to this point. What we
want to make sure, Mr. Chairman, is in the future that they have that.
But when they do take out that mortgage, they have the ability to look
at the loan terms, the prepayment penalty, does this loan rate vary,
and, if it does, what are the implications to that borrower. Because I
believe, as one of my colleagues said earlier, the American people have
the ability to make good choices when they are given good information.
So, I am pleased that in this particular piece of legislation there
is a disclosure box that will help our consumers do a better job of
making that decision in the future.
What I am disappointed in, Mr. Chairman, is the fact that we are
going to, I think, put some very restrictive regulation on a market
that may limit the ability for people to actually use that disclosure
information in the future.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield 2 minutes to the
gentlewoman from Illinois (Ms. Bean), another hardworking member of the
committee.
Ms. BEAN. Mr. Chairman, I rise to urge support of H.R. 3915, the
Mortgage Reform and Anti-Predatory Lending Act of 2007. As an original
cosponsor, I commend Chairman Frank and Ranking Member Bachus for how
they have drafted and brought this bill to the floor. It reflects
highly on the deliberative and bipartisan nature of the Financial
Services Committee I serve on.
This is one of the most important and balanced bills we have worked
on this year, because Americans' homes are central to their lives.
Families save and sacrifice to come up with a down payment towards the
most significant and personal investment they will ever make. They
raise their families, they dream their American Dreams, and they look
forward to a retirement secured by the equity they have established.
When house prices fall, when access to credit tightens, those dreams
are threatened, and, for some, those dreams are destroyed by
foreclosure.
When talking with constituents in my district about the current
mortgage market, some are having difficulty making their monthly
payments. Most are concerned with being able to sell their home when
looking to move. All agree that we need better
[[Page H13983]]
consumer protections, simpler disclosures, and greater market
certainty. This bill does that.
I am pleased that the bill before us includes provisions from my
bill, H.R. 3894, the Negative Amortization Mortgage Loan Transparency
Act, which will make sure that all borrowers are aware of the impact a
loan with negative amortization has by, number one, making sure that it
is indicated that it is in the loan; two, a description of what that
means, in that it can increase the outstanding principal balance and
reduce the borrower's equity in their home; and, third, for first-time
subprime borrowers who select this type of loan, they will be required
to meet with a HUD-certified credit counselor.
This bill balances access to credit with necessary oversight and
industry accountability to ensure renewed investor confidence and make
sure that more Americans have access to the American Dream, but they
have access to it for the long term. I urge my colleagues to support
this bipartisan bill.
Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentlewoman from
Ohio (Ms. Pryce).
Ms. PRYCE of Ohio. I thank the gentleman for the time. I rise today
in support of this bill.
My home State of Ohio has, unfortunately, become the poster child for
the mortgage crisis nationally. During the third quarter of 2007, each
of Ohio's six largest cities were among the top 30 nationally for
foreclosure rates. In Cleveland alone, one of 57 households filed for
foreclosure during this quarter.
So while our economy may be recovering from the impact of both the
housing slump and the resulting credit crisis, and some places faster
than others, it is imperative that we don't impede this recovery; that
in our efforts to help the countless consumers and homeowners who have
been hit hardest, we don't place the prospects of homeownership and
refinancing out of the reach of families financially capable of
managing it.
This bill balances that difficult task, and it has happened in an
open, bipartisan process of negotiation. Along with the bill offered by
Mr. Kanjorski, this bill adds regulation to the unregulated and
restricts predatory products from the marketplace: adjustable rate
mortgages with high prepayment penalties, no-doc or low-doc loans,
teaser rates that reset only months after initialization, loans without
escrows for the most likely to need them.
This bill not only helps do away with these predatory products, but
it empowers consumers with the most important tool of all, information.
It is stunning to think that more than three in 10 homeowners don't
even know what kind of mortgage they have. This bill improves
disclosure at the point of sale, and the manager's amendment requires
disclosure on periodic billing statements. It is important that people
understand what they are getting into and are reminded of it on a
regular basis.
On the floor today, we will hear countless stories of heartache and
heartbreak of families devastated by the rising foreclosure rates, of
Americans losing their claim to the American Dream. This bill can
correct that.
Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentleman from
Georgia (Mr. Price) who speaks in opposition to the bill.
Mr. PRICE of Georgia. I thank my ranking member for yielding me this
time.
I rise in opposition to this legislation, legislation that prompted
the Wall Street Journal to say that this bill is essentially a
``Sarbanes-Oxley for housing, an attempt to punish business in general
for the excesses of an unscrupulous few.''
Now, while the chairman and ranking member and other members of the
staff have done really remarkable work to address some of the most
problematic provisions, this legislation still raises serious concerns
about the future access to credit. I believe that this bill will lower
homeownership. It will harm the American Dream.
A good number of the new duties and requirements which this
legislation imposes on loan originators are both vague and highly
subject. Words like ``reasonable ability to pay'' and ``net tangible
benefit,'' these are required of lenders. This is greater regulation,
and, as my friend from Texas said, greater regulation means less
liquidity. That means not as much money in the market. That means fewer
individuals able to buy homes.
Dr. Ronald Utt with the Heritage Foundation says, ``This provision
effectively deputizes the mortgage industry as a quality of life police
force by requiring them to pass judgment upon what it exactly is that a
borrower intends to do with any additional moneys required by the way
of loan refinancing.'' This creates increased litigation.
In fact, when H.R. 3915 was being marked up in committee, I asked
him, the chairman himself, if there was a disagreement between the
lender and the borrower about whether something achieved a net tangible
benefit, where would that disagreement be settled, and he said, ``Like
any disagreements in this country, they go to court.''
The legislation also creates a new civil action for rescission, the
ability to get all of one's money back. Clearly the result of this will
be less availability of money to buy a house for all, but mostly for
those at the lower end of the economic spectrum.
Now, there are alternatives. There are positive alternatives:
increasing financial literacy, greater flexibility in refinancing, and
greater penalties for fraud. And I hope as this process moves forward
that we will be able to incorporate those things in a stand-alone bill
that increases the ability to achieve the American Dream.
Mr. BACHUS. Mr. Chairman, I yield 3 minutes to the gentleman from
California (Mr. Miller) to speak in support of the bill.
Mr. GARY G. MILLER of California. Mr. Chairman, I rise in support,
but I want to express some concerns I have with the bill.
I have been a long-time advocate of antipredatory legislation that
will eliminate abusive lending practices while preserving and promoting
access to affordable mortgage credit. I want to thank Chairman Frank
for holding true to his commitment to work with me on ensuring that
section 123 of the bill will continue to give consumers viable
financing options that would not prevent mortgage originators from
being compensated.
Under the new language, consumers will continue to be able to obtain
and enjoy the benefits derived from having the option to choose zero
points or no-cost loans by financing the fees and their costs into the
rate of the loan amount. I am also pleased that the mechanism by which
the mortgage originators are compensated in such cases has been
unaffected.
According to the Mortgage Bankers Association, currently there are
slightly more than 6 million nonprime loans. Of these loans, a little
over 5 million, or 85 percent of these loans, are basically being paid
on time. Yet, according to the MBA, under the legislation, perhaps 50
percent of the nonprime loans would not be made. This means that a
significant number of consumers would not be receiving mortgage
financing and millions of legitimate loans would not be obtained.
While there is certainly no question that nonprime borrowers have
been subjected to abusive lending practices over the years, there is
also no question that the vast number of borrowers who were not victims
of such practices can become victimized by poorly crafted protective
legislation that restricts nonprime credit availability.
Under this bill, it significantly expands the scope of loans that
qualify as ``high-cost loans,'' or HOEPA loans. This section of the
bill dramatically lowers the point fee calculations, thereby capturing
a much larger number of loans than under the previous definition in
current law. The expansion of HOEPA to cover the additional loans would
provide access to credit to more nonprime borrowers.
During the markup, I attempted to amend this section to ensure that
lenders would still provide and borrowers could still obtain HOEPA
loans under this bill. My amendment would not have revised the
substantive protection provided by HOEPA as amended. Rather, it would
have limited the increase in the number of types of loans that are
subject to HOEPA.
In addition, the provisions of title III were drafted at least a year
before the drafting of titles I and II of this bill, and title III was
written without the benefit of enhanced consumer protection provided to
nonprime borrowers
[[Page H13984]]
under the other sections of the bill. I am concerned that the three
titles have been joined into a single bill without the respective
provisions being synchronized.
By expanding the scope of loans covered by HOEPA, we will further
limit liquidity and drastically shrink the availability of mortgage
credit. In fact, under current law, the liability and penalties
extended to HOEPA loans have made creditors reluctant to make these
loans.
Mr. FRANK of Massachusetts. Mr. Chairman, will the gentleman yield?
Mr. GARY G. MILLER of California. I yield to the gentleman from
Massachusetts.
{time} 1245
Mr. FRANK of Massachusetts. I thank the gentleman for yielding.
The gentleman from California and the gentleman from North Carolina,
who is a prime sponsor of this, have been in conversations.
Mr. GARY G. MILLER of California. That is correct.
Mr. FRANK of Massachusetts. And I believe it is possible to achieve
both objectives, that is, flexibility as to mode but the full
substantive protection. And so going forward, as this bill moves on and
ultimately we get to conference, I do think we can provide flexibility
as to method while preserving the full substantive protections. And
there will be conversations between the Miller brothers on that
subject.
Mr. GARY G. MILLER of California. I thank the chairman. Mr. Miller
and I have discussed this in the last several days, and I know there
was not time to deal with this issue effectively prior to it reaching
the floor. I have had extended conversations with many Members on your
side of the aisle who support the concept I am trying to move forward.
I look forward to working with you before this bill comes back
through conference.
Mr. FRANK of Massachusetts. I now yield to another member of the
subcommittee who has been very much involved, particularly in the area
of manufactured housing, as well as others, the gentleman from Indiana
(Mr. Donnelly).
Mr. DONNELLY. Mr. Chairman, I rise in support of H.R. 3915, the
Mortgage Reform and Anti-Predatory Lending Act. My home State of
Indiana has been one of the hardest hit by foreclosures. We rank well
above the national average with 3 percent of our loans in foreclosure.
Subprime loans, which have affected many of our Nation's families,
account for nearly half of our States' foreclosures. Earlier this year,
it was reported in various parts of our area, 18 percent of all
subprime loans were past due. We know all too well how the subprime
fallout is weighing down our economy and spreading to others. We must
act now.
I want to thank Chairman Frank, my colleagues on the Committee on
Financial Services, Mr. Watt and Mr. Miller, for working with consumer
groups and industry representatives alike to produce a good bill that
will ensure American families have access to responsible and affordable
mortgage options while improving the health of the marketplace. I urge
my colleagues to vote in support of H.R. 3915.
Mr. BACHUS. Mr. Chairman, may I inquire as to the remaining time.
The CHAIRMAN. Both sides have 8 minutes remaining.
Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentleman from
Illinois (Mr. Roskam) to speak in opposition to the bill.
Mr. ROSKAM. I thank the gentleman for yielding.
Like many others, I very much appreciate the tone and the effort of
the chairman and the ranking member to come to terms with a very
difficult problem that is facing our country, and that is the subprime
mortgage crisis and the ripple effect, the profound ripple effect it is
having throughout the economy.
My sense, though, is that while there are some very good elements in
the bill, I appreciate the fact that it is prospective, I appreciate
the fact that it is not a bailout, and I appreciate the fact that its
focus is limited to subprime mortgages and not prime mortgages, there
is an element that is of enough concern to me to come to the floor and
bring it to the House's attention.
I am not unique in bringing it to the House's attention, but I urge a
real sense of caution, and I think we can do slightly better, and that
is the ambiguity of some of the phrases and definitions in the bill.
The gentleman from Georgia referenced these in his remarks.
But when regulatory language, as this is, has words like
``appropriate'' without further definition; ``ability to repay''
without further definition; and ``net tangible benefit'' without
further definition, I think it is a weakness in the bill, and I think
it is a fatal flaw in the bill.
My hope is that these ambiguities will be cleaned up. I am not one
that says we necessarily need to yield this turf to the regulators. I
think we as Members of Congress have that ability and that
responsibility to define these terms. Because if we don't, I think what
will happen is that capital that is currently available to subprime
borrowers will become unavailable to some subprime borrowers.
There is language that creates the purported safe harbor in the bill,
but it is a safe harbor that does not end with a period at the end of
the sentence, essentially. It is a safe harbor that has a comma at the
end and is simply a rebuttable presumption. So safe harbors are mostly
safe, but not entirely safe.
I think Americans like to be governed with a light touch and not a
heavy hand, and I hope that we can revisit this bill when it may come
back from the other body.
Mr. FRANK of Massachusetts. Mr. Chairman, I now yield to another
member of the committee who has been active on this issue, the
gentleman from Connecticut (Mr. Murphy), for 2 minutes.
Mr. MURPHY of Connecticut. I thank the gentleman for yielding.
I thank Chairman Miller and Mr. Watt for their leadership in bringing
this bill through the committee. I want to draw attention to one
provision of the bill and underscore the importance of the provisions
here that prohibit steering of borrowers into higher-cost mortgages
than they would otherwise qualify for.
This mirrors legislation that I introduced earlier this year, H.R.
3813, the Mortgage Kickback Prevention Act. The bill before us prevents
mortgage originators from inappropriately steering consumers into
higher-cost loans than they would otherwise qualify for.
This is a commonsense measure, and it is made more reasonable by the
restriction to apply this only to subprime loans. To me and my
constituents, it is pretty simple. Brokers and mortgage originators
shouldn't have an incentive to put borrowers into more expensive loans
than they would otherwise qualify for.
Frankly, as we move forward, I think it is important to understand
that disclosure doesn't do the entire trick here. Most borrowers have
no idea what it means when their broker discloses that they are going
to pay a yield-spread premium amidst the mountains of paperwork that
you are required to fill out for a residential mortgage. For these
borrowers who have the least amount of leverage in the process, we need
to have some clear lines. This bill does that.
That is why it makes sense to simply say the brokers and originators
cannot inappropriately put borrowers into loans they otherwise would
not qualify for. This Congress has responsibility, as we are doing
today, to reset the rules.
Mr. FRANK of Massachusetts. Mr. Chairman, will the gentleman yield?
Mr. MURPHY of Connecticut. I yield to the gentleman from
Massachusetts.
Mr. FRANK of Massachusetts. The gentleman has been very tough on this
issue, appropriately, and he is right.
Some people can read ambiguity into 2 plus 2, and we will deal with
that. We are lawyers. We are into redundancy. So in the colloquy I will
be having with the gentleman from North Carolina (Mr. Miller) we will
reaffirm the point that the gentleman from Connecticut is making. I
guarantee that by the time this bill comes out of conference, no one
will be able to raise any doubt about the prohibition on anybody being
compensated for costing the consumer more.
Mr. MURPHY of Connecticut. I thank the gentleman for that. He has
been very strong on this from the beginning. This prohibition on
steering is
[[Page H13985]]
a small, but very important, piece of the puzzle of solving the problem
of the subprime crisis and making sure that it doesn't occur again in
the future.
Mr. BACHUS. Mr. Chairman, I yield 3 minutes to the gentleman from
North Carolina (Mr. McHenry) to speak in opposition to the bill.
Mr. McHENRY. I thank the ranking member for yielding time, and I
appreciate his leadership and friendship on the committee. He has
worked very hard on this issue, as has the whole committee. But we have
come to different conclusions on this.
I think there are some admirable parts of this legislation. In
particular, the addition that the ranking member was able to make in
consultation with the chairman on licensing of mortgage brokers. I
think that is helpful and positive and makes consumers more aware of
people they are dealing with.
I also believe the Green-McHenry-Neugebauer amendment that we were
able to put in place in the committee is very help to the marketplace.
It gives borrowers more understanding of the financial product they are
about to take part in, the financial transaction they are about to take
part of in. I think informed consumers are better off than uninformed
consumers. Financial literacy is key; and, therefore, the process of
counseling which is within this bill is helpful.
But in the end, this is about homeownership. It is about the
opportunity for families to get a home of their choosing. It is about
families making a financial decision for themselves, not Washington,
D.C. telling them what products they can and cannot get. Unfortunately,
that is what this bill does.
This bill will limit homeownership and limit the opportunities that
families have by limiting the mortgage choices in the private sector
and in the marketplace.
Furthermore, it does nothing to fix the current crisis we are in. Let
me repeat that: this bill will do nothing to fix the current mortgage
crisis we are facing. In fact, rather, it will deepen the crisis we are
facing by limiting people's opportunities to refinance or finance their
home.
Let me give you a couple of examples. This bill I believe will
encourage more litigation and have a chilling effect on the secondary
markets. Therefore, less money will be available for people to get
mortgages.
Second, it will limit the loan terms available. In fact, it limits
the ability for people to finance the points and fees and closing costs
of many mortgage products and bans prepayment penalties.
So, in essence, if somebody currently has a prepayment penalty in
their mortgage that they have and they seek refinancing, they will be
unable to finance that prepayment penalty that they currently have,
thereby locking them into a cycle of debt and foreclosure.
I believe this bill is harmful to long-term homeownership in America
that is at an all-time high. I think what we should be doing is
encouraging homeownership in this country and making more opportunities
available to get the credit that they need in order to get a home for
their families.
So I oppose this bill on very simple grounds: that it will limit
homeownership and limit the opportunities and options that Americans
have. With that, I encourage my colleagues to vote ``no'' on this bill
and help homeownership in America.
Mr. FRANK of Massachusetts. Mr. Chairman, I now yield to a man who is
going to have a lot of free time after today because much of his life
in the last year has been helping put this bill together in a very
masterful way, the gentleman from North Carolina (Mr. Miller), for 4
minutes.
Mr. MILLER of North Carolina. I dearly wish that this bill was the
one being described by so many people on the other side of the aisle.
That sounds like a really tough bill. And this bill, I hope, will
become tougher as we go along.
I agree with many over there who said that they support the idea of
homeownership and want to make sure that there is a mortgage market
that lets people buy homes.
Mr. Chairman, the mortgages we are talking about have nothing to do
with homeownership. According to the mortgage bankers themselves, who
oppose this bill, 72 percent of subprime loans are refinances, not
purchase money mortgages. And only about one in 10 subprime loans is to
buy a first home. Lehman Brothers says that 30 percent of the subprime
loans entered last year will result in final foreclosure, a family
being turned out on the streets by a sheriff because their home was
sold at a foreclosure auction at the steps of the courthouse.
Do the math. One subprime loan in 10 helps people buy a home, a first
home, get into homeownership. Thirty percent will result in
foreclosure. The loans that we need to get at, we need to prohibit, are
costing Americans homeownership, not helping with homeownership.
Now, several speakers have said that they think the consumers should
make choices, there should be a variety of choices available to
consumers. Sometimes they say this bill will shut down market
innovation. Well, Americans are for innovation, Mr. Chairman, just as
they are for reform. Americans are fundamentally reformers so
politicians have figured out to call everything they do a ``reform,''
however obviously contrary to the public interest it is. And now
American business has learned to call everything they do an
``innovation,'' regardless of how bad it hurts consumers.
I can think of many wonderful innovations. When we think of an
innovation, we think of a scientist in a lab coat coming up with new
products.
Mr. Chairman, I am now the age my father was when he died of a heart
attack in 1965. There wasn't a thing we could do to help people with
heart disease in 1965. But I am on a cholesterol medicine because I
inherited from my father high cholesterol that I hope will allow me to
outlive my father. I think that drug is an important innovation, and I
am glad we made that innovation.
Mr. Chairman, this necktie is an innovation. Ten years ago, you could
not buy a silk necktie that was stain resistant. And for those folks
like me who tend to miss their mouth from time to time, the cost in new
neckties in any given year was hundreds of dollars. But this tie has a
nanotechnology process that causes liquids to bead up and roll off
rather than soak in and stain. This necktie is an important innovation
to me.
But what on Earth do we mean when we say that a mortgage is
innovative? It means simply that there is no end to the variety of
terms, there is a proliferation of indecipherable terms that are not
designed to help consumers.
Alan Greenspan called them ``exotic loans.'' Others have called them
``toxic loans.'' The innovation is not really about allowing consumers
to tailor narrowly the loan they get to their specific circumstances.
The late Ned Gramlich, a well-regarded former Federal Reserve Board
governor, asked why was it that the riskiest loans were being sold to
the least sophisticated consumers. It was a rhetorical question. He
knew the answer. He knew those loans were being sold to people to take
advantage of them, to separate from middle-class homeowners more and
more of the equity in their home, to trap them in a cycle of having to
borrow and borrow again, and every time they borrowed, losing more of
the equity in their homes.
Some of the other speakers have talked about the importance of
refinancing out. Mr. Chairman, a mortgage system where people have to
borrow money to pay off the mortgage they are in now is not a mortgage
system that works.
Mr. BACHUS. Mr. Chairman, at this time I recognize the gentlewoman
from West Virginia (Mrs. Capito) for 3 minutes.
{time} 1300
Mrs. CAPITO. I would like to thank the gentleman from Alabama for
recognizing me and yielding me the time, and I greatly appreciate the
leadership of the chairman and ranking member on the Committee of
Financial Services for bringing this important legislation before the
House today.
The legislation before us is a bipartisan response to a problem that
is affecting every congressional district across this Nation, the
rising number of foreclosures and a large number of impending
alternative mortgage resets, combined with a large number of
delinquencies in mortgage payments. It is very important for Members to
look at this legislation in its entirety.
[[Page H13986]]
When combined on the whole, the components of this legislation will
provide consumers with the necessary tools and protections to hopefully
avoid another housing crisis like we are experiencing, but also realize
the importance of not clamping down so hard, and we have heard some
folks express concern about this, that we still have the innovations
and we still have the ability of subprime mortgages for those who are
now living because of the benefits that subprime benefits allows them.
In this bill, we require the registration of all originators under a
national registry will be established by the Conference of State Bank
Supervisors and the American Association of Residential Mortgage
Regulators. These new licensing requirements, coupled with the national
registry, will make it much more difficult for fraudulent originators
to bounce from State to State. This is a problem my State of West
Virginia has expressed concern about.
Another component that Mrs. Biggert talked about in her statement is
to provide consumers with greater access to housing counseling. The
availability of counseling will help individuals learn and understand
the complicated financial disclosures, all of the paperwork and
technical languages that come along with securing and purchasing a
mortgage.
Another important reform that was adopted during our committee markup
is the inclusion of a one-page estimate outlining the total cost and
potential changes in the cost for the consumer over the life of the
mortgage product. I have been lucky enough to be a homeowner, and I
know when we go in to close at the time to secure our mortgage, the
amount of paper and signatures that you have to go through to try to
figure out what you are doing is very intimidating. So to have this
one-page disclosure I think gives the consumer the ability to have this
information right in front of them so they can know what they are
getting into and making this process easier.
This legislation also provides more certainty and clarity for the
liability of the entities that purchase mortgages on the secondary
market.
I would like to particularly thank the chairman of the committee for
helping me work through the technicalities of this language to explain
to my local newspaper and my local consumer advocates what this
language means in the bill. We live in a national economy and must
recognize the need for consistency across the board.
In addition to the bipartisan underlying legislation, we will also be
considering I think a very important addition to this bill, an
amendment I have worked on with Mr. Kanjorski and Mrs. Biggert that
will provide additional protection for consumers. This amendment will
now require escrow accounts for some mortgages and will provide
borrowers with the budgeting tools necessary to properly manage taxes
and insurances on their property. This amendment will also include
Federal appraisal standards with serious penalties.
I fully support this bill and thank the chairman and the ranking
member.
The CHAIRMAN. The time of the gentleman from Alabama has expired.
Mr. FRANK of Massachusetts. How much time do I have remaining, Mr.
Chairman?
The CHAIRMAN. The gentleman has 2 minutes.
Mr. FRANK of Massachusetts. I yield myself my remaining time to enter
into a colloquy with my colleague from Alabama.
Mr. Chairman, the gentleman from Alabama, this has been a
collaborative effort in many ways. We have had some disagreements, but
there has been a lot of agreement. And the gentleman from Alabama in
particular took the lead in the language that went into the bill in
committee and is being refined here dealing with nationwide
registration requirements, a prerequisite for any kind of enforcement.
Now, I appreciated the work he did and the committee benefited from it.
Community banks are obviously very important in this. And, indeed, if
only community banks had made loans for mortgages, we wouldn't have a
crisis. But we don't want to interfere with their ability to help going
forward.
I would just yield to the gentleman in a minute to have him give his
interpretation. My view is, and I defer to him as the spokesperson for
the committee on this, because we are here talking about language which
he developed and which we incorporated. We do have some regulatory
requirements here that would affect not just the brokers but community
banks. And I assume my colleague from Alabama, in drafting this,
certainly intended and we meant to do this in the language, that the
regulatory agencies would be able to show some flexibility in terms of
the impact of these requirements on our community banks.
I would yield to my friend from Alabama on that point.
Mr. BACHUS. The chairman is correct. Section 107 was designed and
implemented to give the Federal bank regulators flexibility in
implementing the national registry. And it is the intention of the
committee, of the entire committee, that, as they do this
implementation, that they give proper consideration to its impact on
small financial institutions, smaller impact, and that they try to
minimize that impact.
Mr. FRANK of Massachusetts. I thank the gentleman. In my closing
seconds, let me just reiterate an important point.
Attorneys General have been concerned about their ability to
prosecute and defend against certain abuses. Thanks to the gentleman
from North Carolina (Mr. Watt), the effective date of this bill and all
of its provisions will be the date of enactment. What that means is
that any transaction that occurred before the bill becomes law, any
loan that was made, will not be subject to the preemption. So we do
want to reassure any law enforcement official out there that their
rights to go against people who have been abusive will in no way, up
until new loans are made, be in any way diminished.
Ms. JACKSON-LEE of Texas. Mr. Chairman, I rise today in strong
support of H.R. 3915, the Mortgage Reform and Anti-Predatory Lending
Act of 2007, introduced by my distinguished colleague from North
Carolina, Representative Brad Miller. This important legislation will
address and reform the mortgage lending processes ``to avert a
recurrence of the current situation with rising defaults and
foreclosures, especially in the sub-prime market.''
Mr. Chairman, it is essential that this Congress protects the needs
of American families and nothing is more imperative than ensuring that
all people have a home. Recent studies have reported that 92 percent of
the American population has at some point feared being homeless and
this legislation is an important step in alleviating those fears. The
current lending crisis must be addressed.
The Federal Government must play an important role in revitalizing
and restoring opportunities for Americans to reach the American dream
of owning a home. One of the major contributors of the affordable
housing shortage is the sub-prime lending crisis that has caused
serious negative economic and social consequences that resulted from
too little regulation. Because of the lack of regulation by the Federal
Government, many loans were accompanied by fraud, inadequate
information and other failures of responsible marketing. Foreclosure
rates are at 14 percent and are rising at an alarming rate and
homeowners across America are losing their homes. Throughout the
country, homeowners are surprised to find out that their monthly
payments are spiking and they are struggling to make these increasingly
high payments.
The sub-prime mortgage crisis has impacted families and communities
across the country. Home foreclosure filings rose to 1.2 million in
2006--a 42 percent jump--due to rising mortgage bills and a slowing
housing market. In Iowa, 3,445 families experienced foreclosure last
year, up 64 percent from 2005.
Nationally, as many as 2.4 million sub-prime borrowers have either
lost their homes or could lose them in the next few years.
The Democratic-led House Financial Services Committee has been
intently focused on this and other issues and is working toward a
balanced solution that helps stabilize the mortgage market, stops
abuses, preserves access to credit, and aids stable homeownership.
Creating more affordable housing opportunities will increase more job
opportunities for the people of Houston and Harris County. We hope that
an increase in affordable housing and job opportunities will also
reduce the high rates of homelessness among Houston residents. As you
may know:
Houston's homeless population increased to approximately 14,000 in
2005 before Hurricanes Katrina and Rita.
Hurricane evacuees remaining in the Houston area could result in the
homeless population increasing by some 23,000 to 30,000.
Houston's homeless population includes an estimated 28 percent of
American Veterans.
[[Page H13987]]
Some 59 percent became homeless because of job loss.
A full 10 percent of the city's homeless are believed to be able to
return to self-sufficiency with 12-18 months of assistance and
affordable housing.
Shelter and housing for Houston's homeless currently is reported at
around 4,235 beds and or units, leaving 10,000 on the streets.
I have cosponsored a number of bills to address the housing crisis in
this country. In the 109th Congress I cosponsored H.R. 1182, the
Prohibit Predatory Lending Act, and H.R. 1994, the Predatory Mortgage
Lending Reduction Act. I will continue to support legislation to
address the housing crisis facing the people of this country.
This important piece of legislation will ``create a licensing system
for residential mortgage loan originators, establish a minimum standard
requiring that borrowers have a reasonable ability to repay a loan, and
will attach a limited liability to secondary market securitizers.''
This is extremely significant in the sense that it will ensure that
Americans who dream of home ownership will not engage in loans that
they will be unable to repay. It will enhance and expand consumer
protections against ``high-cost loans.'' It will protect renters of
foreclosed homes and establish through the Department of Housing and
Urban Development an Office of Housing Counseling that will ensure that
consumers will be fully aware of all possible avenues.
While this legislation is a step in the right direction, we must
ensure that this legislation does not hurt those who it is intended to
protect. We must ensure that families with a less-than-perfect credit
history are not denied outright their dream of home-ownership and that
lenders do not abuse their discretionary powers. This legislation
creates a standard licensing system for residential mortgage loan
originators that will ensure a consistent rubric for loans and protect
American families from would-be predatory lenders. It further expands
consumer protections from high-cost loans by: prohibiting the financing
of points and fees; prohibiting excessive fees for payoff information,
modifications, or late payments; prohibiting practices that increase
the risk of foreclosure, such as balloon payments, encouraging a
borrower to default, and call provisions, and requiring pre-loan
counseling. This is an unprecedented step forward for hard working
Americans with the dream of home-ownership and I applaud this
legislation for this significant first step towards helping Americans
realize their dreams.
Finally, let me acknowledge the concerns of strong advacates for the
housing needs of the vulnerable--ACORN and the NAACP, among others, and
I look to working on changes in this legislation as the bill moves to
address their concerns.
Mr. CAPPS. Mr. Chairman, I rise today in strong support of the
Mortgage Reform and Anti-Predatory Lending Act.
This bill continues the Democratic-led Congress' efforts to protect
and promote the American Dream of homeownership.
We can now see clearly that questionable and even discriminatory
lending practices were a part of the real estate ``boom'' in our
country.
In my district, these unscrupulous practices will result in about a
half billion dollar loss in home equity for my constituents.
This translates into over 80,000 homes devalued and the certainty of
foreclosure for many.
That is 80,000 families that entered into their mortgage contracts in
good faith.
They did not anticipate that all of their hard work would be wiped
out with one interest rate hike.
Many nonprofits and other economic development groups in my district,
like the Cabrillo Economic Development Center, have stepped up to help
these families restructure their loans and keep their homes.
And I am happy to say that today the House will do its part to stop
harmful predatory lending practices.
This bill will create minimum standards for mortgage loan
originators, and require the determination that a consumer has a
reasonable ability to repay their loan.
Importantly, it also discourages ``steering'' a consumer toward a
higher-cost loan when they in fact qualify for a lower interest rate.
Mr. Chairman, I urge my colleagues to support this important bill and
put our families back on track to achieving the American Dream.
Ms. LORETTA SANCHEZ of California. Mr. Chairman, I rise in support of
H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007.
H.R. 3915 restricts the harmful mortgage lending products that have
wreaked havoc on our local communities.
In my district in Orange County, California, the cities of Anaheim
and Santa Ana are feeling the effects of irresponsible lending
practices that resulted in numerous foreclosures.
One-third of the homes on the market in those cities are available
because they were foreclosed on.
Borrowers who will only purchase a home once or twice in their
lifetimes should not be blamed for the current situation.
Through the licensing of mortgage loan originators, the establishment
of loan origination standards, and the enhancement of consumer
protections, H.R. 3915 takes appropriate steps to stop predatory
lending practices without placing an undue burden on responsible
mortgage originators and lenders.
These new standards will provide needed safeguards without preventing
potential homebuyers from obtaining loans.
Eventually, the financial services industry will recover from the
current mortgage crisis, and we must ensure that the predatory
practices of the past are not repeated in the future.
Mrs. JONES of Ohio. Mr. Chairman, I rise in support of H.R. 3915, The
Mortgage Reform and Anti-Predatory Lending Act of 2007. For the past 8
years I have introduced the Predatory Lending Practices Reduction Act,
which seeks to establish a mortgage licensing system for mortgage
brokers. It also provides grants to nonprofit community development
corporations to educate and train borrowers and community groups
regarding illegal and inappropriate predatory lending practices.
I am pleased that H.R. 3915 incorporates language from my bill that
establishes a nationwide mortgage licensing system and registry to
license and register individual mortgage brokers, and register bank
employees that originate mortgages. I believe that brokers should be
prohibited from being the original provider of loans, loan originators,
without having first obtained, and continue to maintain, registration
within the NMLSR.
This legislation has been warranted for a very long time. I have been
preaching about this issue since I came to Congress as a member of the
Financial Services Committee. We are facing a national housing crisis
and without this legislation, the problem will only get much worse.
The nonprofit Center for Responsible Lending projects that as this
year ends, 2.5 million households in the sub-prime market will either
have lost their homes to foreclosure or hold sub-prime mortgages that
will fail over the next several years. These foreclosures will cost
homeowners as much as $164 billion, primarily in lost home equity.
In Ohio, and particularly in my congressional district, the problem
has gone from bad to worse with nearly 42 percent of loans generated in
the past year being sub-prime, and an estimated one in six sub-prime
loans in the district will ultimately end in foreclosure. These sub-
prime foreclosures will result in price declines for more than 198,000
surrounding homes, with homeowners in my district losing about $249
million in equity.
Mr. Chairman, I commend Chairman Frank and the Financial Services
Committee on their hard work and commitment to this issue. I am glad to
see this bill on the floor today, and I urge my colleagues to join me
in supporting this meaningful and necessary legislation.
Ms. WATERS. Mr. Chairman, I rise in support of the Mortgage Reform
and Anti-Predatory Lending Act of 2007. Each month brings new figures
that reinforce the importance of putting in place a Federal legislative
and regulatory framework that prevents us from reliving this crisis in
the mortgage markets. I have a keen interest in this legislation
because of the disproportionate impact of the foreclosure wave on my
home State. California's third-quarter foreclosure rate of one
foreclosure filing for every 88 households ranked second highest among
all States, and reflects a near quadrupling of the number reported for
the same period last year. Five of the top 10 metro areas in
foreclosure filings are in California.
Clearly, we need to prevent the now widespread practice of getting
people into loans they can't afford. H.R. 3915 takes critical steps in
this respect, including--for the first time--imposing a Federal duty of
care on all mortgage originators and setting minimum Federal standards
on all mortgages. Anchoring the bill's approach are newly established
minimum standards regarding the borrower's ability to repay and net
tangible benefit to the consumer. This is a sound strategy given that
Federally regulated mortgage originators have long had to meet similar
benchmarks, and not coincidentally, we have seen few problems in that
sector of the market.
H.R. 3915 also seeks to reduce the incentives to market inappropriate
credit products to borrowers. I am particularly pleased that H.R.
3915--again for the first time--removes the most destructive of such
incentives, severing the link between the compensation of the
originator and the terms of the loan. Minority borrowers have been
disproportionately steered to costly loans, in part because the fees
such loans generate for originators are higher than more appropriate
products. H.R. 3915 correctly prohibits this practice outright.
I am proud to have been an original co-sponsor of this ambitious
legislation, and urge my colleagues to support its passage today.
[[Page H13988]]
But I would not be telling the truth if I said I lacked any concerns
about the potential impact of our ambition over time. Mr. Chairman, I
do want to thank you and Ranking Member Bachus for your diligent work
in the Manager's Amendment to address one such concern I raised during
the Financial Services Committee markup of the bill, namely, the extent
to which the assignee liability and remedies this bill creates should
preempt State law. We want to make sure that consumers are protected to
the greatest extent possible--and, historically, many of these
protections have been initiated by States, especially in the sub-prime
market. But we also don't want to shut down the secondary mortgage
market that has critical to expanding homeownership nationally.
I appreciate the effort that the Manager's Amendment makes to better
strike this delicate balance. The Manager's Amendment now clarifies
that the bill does not preempt state laws such as fraud and civil
rights statutes. In particular, I appreciate that the Manager's
Amendment makes crystal clear that securitizers will be held to account
when they directly participate in a fraud--as in the egregious First
Alliance case I mentioned at Committee markup. However, attorneys who
have been working on predatory lending issues in my district and State
for decades, continue to be concerned that the legal meaning of this
provision is unclear. As such, federal courts may impart this meaning
in ways that roll back important consumer remedies under State law.
This, in turn, raises the question of whether we have yet reached the
right balance of Federal rights and remedies in the bill, given that we
may be displacing a lot of State and private activity in this financial
sector. Certainly, national organizations representing consumers remain
concerned about this, and many have declined to endorse the bill. As
you have noted, Mr. Chairman, that industry groups seem equally
ambivalent about the bill suggests that perhaps we are approaching the
proper ``unhappiness quotient'' among the stakeholders. As this bill
moves to the Senate and to conference, though, I urge that continue to
take seriously and re-examine issues surrounding preemption and
strength of remedies.
To conclude, however, I want to be clear that I believe this
groundbreaking bill should be passed today. Accordingly, I urge my
colleagues to vote for H.R. 3915. Thank you again, Mr. Chairman, for
all of your work on this bill.
Mr. JOHNSON of Georgia. Mr. Chairman, I rise today in support of
Representative Watt's amendment as a way to strengthen the enforcement
provisions of this mortgage bill. Subprime lending has devastated
communities throughout Atlanta and my district. Thirty-five percent of
all loans made to my constituents are subprime loans--that's much
higher than the national average of twenty-eight percent. Seventeen
percent of those loans result in foreclosure, which means, in DeKalb
County, nearly 1,000 families enter foreclosure each month. In my
entire district, it means my constituents who don't lose their homes
will still lose nearly $200 million in home equity as foreclosures
decrease the values of surrounding homes. Unfortunately, all indicators
point to foreclosures continuing to rise well into 2008. These
foreclosures have a devastating effect on the families in my district
who work hard to buy a house. And they aren't just the result of a
downturn in the housing market or because people don't pay their bills
on time. No, my constituents have been victims of widespread mortgage
fraud and predatory lending. Chairman Frank's bill takes a step in the
right direction toward helping my constituents. And this amendment and
the others submitted by Representatives Watt and Miller will help to
make this bill stronger so that Americans are protected from lenders
and brokers who prey on low-income and minority populations. With
stronger enforcement mechanisms, this bill will help my constituents
keep their hard-earned roofs over their heads. I urge my colleagues to
support Mr. Watt's and Mr. Miller's amendments and Chairman Frank's
bill and put a stop to predatory lending.
Mr. HALL of New York. Mr. Chairman, today, during the consideration
of H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of
2007 I voted against the Motion to Recommit forthwith. If passed, that
motion would have required anyone seeking to get a residential mortgage
loan to produce one of four forms of identification prior to approval;
a Social Security card and picture ID, a Real ID drivers license, a
U.S. or foreign passport or an ID card issued by the Department of
Homeland Security.
I am opposed to giving illegal immigrants access to mortgages.
However, the language contained in the Motion to Recommit forthwith
would not only have failed to meet the goal of denying mortgages to
illegal immigrants, but it could have actually made it more difficult
for legal citizens of New York and other states to obtain these same
housing funds. The motion could have made it more difficult for people
from states that have not yet adopted Real ID standards or do not have
ready access to other documentation to qualify. However; any illegal
immigrant with a passport from their native country would have no
difficulty in using that passport to get a mortgage. That is not the
kind of requirement we want or need.
I believe it is important that Americans have the opportunity to
qualify for mortgages. Owning one's home is a vital part of the
American dream. I cannot and will not support legislation that will
make it more difficult for citizens and legal immigrants to get
mortgages, and easier for illegal immigrants to do so. This motion
would have done just that, and as a result I could not support it.
Mr. LANGEVIN. Mr. Chairman, I rise in support of the Mortgage Reform
and Anti-Predatory Lending Act, which will bring greater transparency
to lending practices nationwide. The housing market is under
significant stress, and many families cannot keep pace with ballooning
mortgage payments.
Unconventional mortgages have left countless Americans facing
foreclosure. Unless we act soon, millions more may lose their homes.
With this bill, we combat unscrupulous lending practices and bring
transparency to the process by requiring mortgage originators to be
licensed and mandating full disclosure of loan terms. Perhaps most
importantly, mortgage originators must certify that consumers have a
reasonable ability to pay back loans and that they are not predatory in
nature. We have seen too many lenders steer consumers into loans they
cannot afford.
This measure will address persistent problems in the housing market
and bring financial stability to families. I thank Chairman Frank for
his leadership, and I urge support for the bill.
Mr. UDALL of Colorado. Mr. Chairman, I rise in support of the
``Mortgage Reform and Anti-Predatory Lending Act of 2007.'' Homeowners
in Colorado and nationwide continue to face an impending crisis.
Millions of borrowers have found themselves with unmanageable loans
that not only threaten the financial security of their families and
communities, but also undermine the Nation's economy as a whole.
Passage of this bill will address irresponsible business practices in
the mortgage industry that have played a part in creating this
situation.
There are grave problems in the housing market. Foreclosure rates are
rising, housing prices are stagnating and too many Americans are
overwhelmed by the rise in their monthly payments. And housing is not
the only sector of the economy that has been affected by the tremors
whose epicenter is located within the financial institutions involved
in mortgage funding.
This bill responds to problems that have come to light as those
tremors have spread. Its main benefit may be to reduce the likelihood
of similar shocks in the future, by reforming mortgage lending
practices to soften the impact of rising defaults and foreclosures,
especially in the subprime market.
The bill establishes a Federal duty of care for mortgage originators.
It prohibits steering consumers to mortgages with predatory
characteristics and other abusive practices in the subprime mortgage
market, and establishes a licensing and registration system for loan
originators. It also expands and enhances consumer protections for
``high-cost loans'' under the Home Ownership and Equity Protection Act;
requires additional disclosures to consumers, and includes protections
for renters of foreclosed properties.
I am particularly pleased that this legislation establishes an Office
of Housing Counseling within the Department of Housing and Urban
Development (RUD). This provision will provide financial and technical
assistance to States, local governments, and nonprofit organizations to
establish and operate consumer education programs. These programs will
both enhance the consumer's financial literacy and also provide people
with better information about mortgage and refinancing opportunities.
I do have some concerns about the bill, particularly regarding the
extent to which its preemption provisions could interfere with
implementation of State laws regarding loan liability. Fortunately,
this risk has been reduced through adoption of an amendment to narrow
the preemptive effect of the bill. It is my hope that these provisions
can be further reformed in the Senate and conference committee before
the bill is sent to the President.
I am also concerned about the possible effects of an amendment
offered on the House floor that could have created a major new
liability for mortgage originators, assignees, and securitizers by
establishing a ``pattern and practice'' violation with penalties of not
less than $25,000 per loan and $1 million for the violation itself. As
I understand it, the amendment would characterize as a ``pattern or
practice'' as few as two loans, which might mean that a lender who has
acted in good faith in making a loan may be found to have violated this
very subjective standard--with massive liability. I found persuasive
the argument that
[[Page H13989]]
such a potential for increased liability could have a chilling effect
in the secondary market, making liquidity less available. Fortunately,
this amendment was not adopted.
Mr. Chairman, this bill is a good measure that deserves support.
Further legislation may be required to address our Nation's mortgage
crisis and assist families in Colorado and across the country in
restructuring loans and recovering from this financial disaster, but
this bill is a necessary part of the response to problem that might
have terribly negative impacts on our economic future--and I urge its
passage.
Mr. McNERNEY. Mr. Chairman, we are in a housing crisis that has led
to instability and increases in criminal activity that is destroying
our communities. While some people took out risky loans that they could
not afford, many were caught up in exaggerated promises and the
predatory lending practices that blossomed in recent years.
Stockton, California, in my congressional district, is unfortunately
at the center of it all. One out of every 31 homes in Stockton faces
foreclosure--the highest rate in the country.
While there is no magic bullet to solve the problems in the housing
market, the bill we are voting on today is an important part of our
nation's comprehensive response to the surge in foreclosures.
We are establishing common-sense homebuyer protections to ensure that
responsible real estate professionals can provide safe mortgage
products.
Owning one's own home is the American Dream and promoting responsible
home ownership is a policy that makes sense. In Congress, I will
continue working for sensible policies to encourage home ownership and
the stable communities it creates.
I am proud to support this bill, and I urge my colleagues to do the
same.
Mr. CONYERS. Mr. Chairman, I rise in support of H.R. 3915, the
Mortgage Reform and Anti-Predatory Lending Act of 2007, legislation to
combat abusive practices and improve oversight of the mortgage
industry.
The Mortgage Reform and Anti-Predatory Lending Act of 2007 will
reform mortgage practices in three areas. First, the bill will
establish a Federal duty of care, prohibit steering, and call for
licensing and registration of mortgage originators, including brokers
and bank loan officers. Second, the new legislation will set a minimum
standard for all mortgages which states that borrowers must have a
reasonable ability to repay. Third, the legislation attaches limited
liability to secondary market securitizers who package and sell
interest in home mortgage loans outside of these standards. However,
individual investors in these securities would not be liable. Finally,
the bill expands and enhances consumer protections for ``high-cost
loans'' under the Home Ownership and Equity Protection Act and includes
important protections for renters of foreclosed homes.
Passage of H.R. 3915 could potentially help hundreds of thousands of
homeowners across this Nation who are facing home foreclosures, and
need more flexible terms in paying back their mortgages given that we
are experiencing increased job layoffs; especially in Detroit and the
State of Michigan. According to the Michigan Association of Realtors,
the State of Michigan is in deep systematic recession. The auto
industry has lost tens of thousands of jobs in the past few years, and
there are more cuts to come.
In fact, Michigan saw 11,554 new foreclosures filings in February
2007. That put one of every 366 Michigan households at risk of losing a
home because of missed mortgage payments. The Wayne County/Detroit area
reported 6,653 new foreclosures in January of 2007, more than twice the
number reported in December 2007. That amounts to one new filing for
every 124 households. H.R. 3915 would create a more progressive and
equitable home mortgage loan policy that will help scores of working
families across this Nation and Michigan keep their homes; and prevent
them from becoming homeless. This legislation will address the ongoing
practice of routing unsuspecting borrowers into loans that are not
appropriate for their needs and that they can't afford. H.R. 3915 will
also stop the practice of creative loan financing by unscrupulous
brokers who may unnecessarily increase the fees and costs to write the
loan.
Treasury Secretary Henry Paulson called the housing downtown ``the
most significant current risk to the U.S. economy.'' Last week Federal
Reserve Chairman Ben Bernanke said the situation will get worse before
it gets better. Many believe that faulty mortgage lending practices
have precipitated this credit crisis, and that the situation will get
worse before it gets better. Therefore, I believe that this legislative
remedy is a much needed remedy in a time of crisis.
I want to thank my friend Chairman Barney Frank and my Republican
colleagues for their bipartisan work to create an outstanding piece of
legislation that moves us in a proactive direction. In conclusion, let
me say that this comprehensive bill brings sweeping and much-needed
changes to the mortgage market. It will reform many of the flaws in the
current system that has led to the mortgage foreclosure crisis. The
American people have asked us to provide the tools and oversight
necessary to address this crisis and we have been able to achieve that
goal. I whole heartedly give my complete support to this legislation.
It is my belief that this bill reflects the principles of the
Democratic Party which historically has ensured that the Federal
Government will provide a safety net and protection for working
families in a time of need.
Mr. SHAYS. Mr. Chairman, H.R. 3915, the Mortgage Reform and Anti-
Predatory Lending Act is a measure response to the ongoing subprime
mortgage crisis that sets some minimum Federal standards for home loans
and reasonable accountability standards for lenders.
Setting restrictive standards on borrowers with weak credit profiles
and higher risk of default could be counterproductive and limit access
to credit to individuals who, without the subprime market, would be
unable to get loans and have a part of the American Dream.
Recent increases in subprime borrower foreclosures and lender
bankruptcies, however, have prompted concerns that some lenders'
underwriting guidelines are too loose and that some borrowers have not
fully understood the risks of the mortgage products they chose.
To remedy this problem, the bill would require lenders to first
document that prospective borrowers can repay both during any
discounted introductory period and after the rate rises to market
levels. In language that would directly expose lenders to liability,
the loans would be required to have a ``net tangible benefit'' for the
borrowers.
While I agree with the bill's approach, I am concerned about some
provisions. For example, I am not certain that prohibiting mortgage
brokers from earning yield spread premiums on loans they make to
individuals in the subprime market will prevent a great deal of fraud
and abuse, and it could lead to mortgage brokers being locked out of
this market.
There is wide agreement, however, that the bill's licensing standards
for lenders are needed, and these standards are a primary factor in my
support for the legislation. Licensing will lead to more educated
lenders, which will in turn lead to borrowers who end up with the most
suitable mortgage.
The CHAIRMAN. All time for general debate has expired.
Pursuant to the rule, the amendment in the nature of a substitute
printed in the bill shall be considered as an original bill for the
purpose of amendment under the 5-minute rule and shall be considered
read.
The text of the committee amendment is as follows:
H.R. 3915
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. Anti-steering.
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.
[[Page H13990]]
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. Required disclosures.
Sec. 212. Authorization of appropriations.
Sec. 213. Effective date.
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 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 performs purely
administrative or clerical tasks and is not otherwise
described in this subparagraph; and
(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
[[Page H13991]]
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.
(2) Approved educational courses.--For purposes of
paragraph (1), pre-licensing education courses shall be
reviewed, approved and published by the Nationwide Mortgage
Licensing System and Registry.
(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 and
administered by the Nationwide Mortgage Licensing System and
Registry.
(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; and
(iii) State law and regulation pertaining to mortgage
origination.
(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.
(2) Approved educational courses.--For purposes of
paragraph (1), continuing education courses shall be
reviewed, approved, 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.
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--
(i) an independent credit report obtained from a consumer
reporting agency described in section 603(p) of the Fair
Credit Reporting Act; and
(ii) information related to any administrative, civil or
criminal findings by any governmental jurisdiction.
(b) 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.
(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.
[[Page H13992]]
(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
[[Page H13993]]
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.''.
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, registered, and, when required,
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 receives a net tangible benefit (as
determined in accordance with regulations prescribed under
section 129B(a)); and
``(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 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--
[[Page H13994]]
``(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. ANTI-STEERING.
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) In general.--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) 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) Anti-steering 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;
``(ii) does not provide the consumer with a net tangible
benefit; 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
origination fees to the extent that such fees were fully
disclosed to the consumer earlier in the application process
and do not vary based on the terms of the loan or the
consumer's decision about whether to finance such fees; 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:
[[Page H13995]]
``(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; and
``(iii) a loan made or guaranteed by the Secretary of
Veterans Affairs.
``(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) 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
subsection (a) and (b) if the loan had contained such terms
as of the origination of the loan.
``(5) 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).
``(6) Inability to provide rescission.--If a creditor,
assignee, or securitizer cannot provide 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.
``(7) 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).
``(8) 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
[[Page H13996]]
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.
``(9) 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), 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) 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.
``(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 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.
``(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) any bona fide lease made to a bona fide tenant
entered into before the notice of foreclosure; and
``(B) the rights of any bona fide tenant without a lease or
with a lease terminable at will under State law and the
provision, by the successor in interest, of a notice to
vacate to the tenant at least 90 days before the effective
date of the notice.
``(2) Bona fide lease or tenancy.--For purposes of this
section, a lease or tenancy shall be considered bona fide
only if--
``(A) the lease or tenancy was the result of an arms-length
transaction; or
``(B) the lease or tenancy requires the tenant to pay 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 first-time 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) the consumer 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
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 (relating to ability to repay or net tangible
benefit) or any other State law arising out of or relating to
the specific subject matter of subsection (a) or (b) of such
section 129B.
(b) Rule of Construction.--No provision of this section
shall be construed as limiting the application of any State
law against a creditor. Nor shall any provision of this
section be construed as limiting the application of any State
law against any assignee, securitizer, or securitization
vehicle that does not arise out of or relate to, or provide
additional remedies in connection with, the specific subject
matter of subsection (a) or (b) of section 129B of the Truth
in Lending Act.
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'';
[[Page H13997]]
(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. 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. 212. 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. 213. 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.
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 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 (8 percent if the dwelling is personal property) 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.''.
[[Page H13998]]
(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 paragraphs (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
[[Page H13999]]
``(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, tangible net
benefit 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.
``(3) Tangible net benefit.--The Board may prescribe
regulations, in the discretion of the Board, defining the
term `tangible net benefit' for purposes of this
subsection.''.
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 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 on or after that
date.
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--
[[Page H14000]]
``(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
[[Page H14001]]
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
[[Page H14002]]
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.
The CHAIRMAN. No amendment to the committee amendment is in order
except those printed in House Report 110-450. Each amendment may be
offered only in the order printed in the report; by a Member designated
in the report; shall be considered read; shall be debatable for the
time specified in the report, equally divided and controlled by the
proponent and an opponent of the amendment; shall not be subject to
amendment except as specified in the report; and shall not be subject
to a demand for division of the question.
Amendment No. 1 Offered by Mr. Frank of Massachusetts
The CHAIRMAN. It is now in order to consider amendment No. 1 printed
in House Report 110-450.
Mr. FRANK of Massachusetts. Mr. Chairman, I offer an amendment.
The CHAIRMAN. The Clerk will designate the amendment.
[[Page H14003]]
The text of the amendment is as follows:
Amendment No. 1 offered by Mr. Frank of Massachusetts:
Page 6, strike line 19 and all that follows through line 22
and insert the following new clause:
(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.
Page 19, strike line 16 and all that follows through line
24, and insert the following new subparagraph:
(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.
Page 20, line 1, strike ``(b) Unique Identifier.--The
Federal banking agencies'' and insert ``(b) Coordination.--
``(1) Unique identifier.--The Federal banking agencies''.
Page 20, after line 9, insert the following new paragraph:
(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.
Page 37, line 22, strike the closing quotation marks and
the second period.
Page 37, after line 22, insert the following new paragraph:
``(10) Servicer.--The term `servicer' has the same meaning
as in section 6(i)(2) of the Real Estate Settlement
Procedures Act of 1974.''.
Page 38, beginning on line 12, strike ``, registered, and,
when required, licensed'' and insert ``and, when required,
registered and licensed''.
Page 40, line 22, strike ``to repay and'' and all that
follows through line 25 and insert ``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.''
Page 41, line 20, insert ``, the Chairman of the State
Liaison Committee to the Financial Institutions Examination
Council,'' after ``Secretary''.
Page 43, line 13, strike ``ANTI-STEERING'' AND INSERT
``PROHIBITION ON STEERING INCENTIVES''.
Page 43, line 18, strike ``In general'' and insert ``Amount
of originator compensation cannot vary based on terms''
Page 43, beginning on line 20, strike ``(including yield
spread premium)'' and insert ``, including yield spread
premium or any equivalent compensation or gain,''.
Page 44, line 1, strike ``Anti-steering regulations'' and
insert ``Regulations''.
Page 44, line 9, insert ``(in accordance with regulations
prescribed under section 129B(a))'' before the semicolon.
Page 44, line 10, insert ``in the case of a refinancing of
a residential mortgage loan,'' after (ii).
Page 44, line 11, insert ``(in accordance with regulations
prescribed under section 129B(b))'' before the semicolon.
Page 45, strike line 6 and all that follows through line 11
and insert the following new subparagraph:
``(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''.
Page 61, after line 15, insert the following new paragraph
(and redesignate subsequent paragraphs accordingly):
``(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.''.
Page 61, line 23, insert ``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'' before the
period.
Page 62, line 15, insert ``or obtain'' after ``provide''.
Page 62, line 16, insert ``, or a consumer cannot obtain,''
after ``cannot provide''.
Page 65, line 6, insert ``and the consumer would have had a
valid basis for such an action if it had been brought before
the end of such period'' after ``subsection (d)''.
Page 66, beginning on line 21, strike ``that insurance
premiums'' and insert ``that--
``(1) insurance premiums''.
Page 66, line 24, strike the period and insert ``; and''.
Page 66, after line 24, insert the following new paragraph:
``(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.''.
Page 69, strike line 1 and all that follows through line 9
and insert the following new subparagraphs:
``(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.
``(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); and''.
Page 69, after line 12, insert the following new
subparagraph (and redesignate subsequent subparagraphs
accordingly):
``(A) the mortgagor under the contract is not the
tenant;''.
Page 69, beginning on line 15, strike ``tenant to pay'' and
insert ``receipt of''.
Page 69, line 19, strike ``first-time''.
Page 70, line 17, strike ``the consumer'' and insert ``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''.
Page 71, line 25, insert ``or application thereof'' after
``State law''.
Page 72, strike line 5 and all that follows through line 8,
and insert ``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.''.
Page 72, strike line 9 and all that follows through line 17
and insert the following new subsection:
(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.
Page 79, after line 2, insert the following new section
(and redesignate the subsequent sections accordingly):
SEC. 212. 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
[[Page H14004]]
statements required may be transmitted in writing or
electronically.''.
Page 80, line 23, insert ``(10 percentage points, if the
dwelling is personal property and the transaction is for less
than $50,000)'' after ``8 percentage points''.
Page 81, beginning on line 19, strike ``(8 percent if the
dwelling is personal property)''.
Page 100, line 6, strike ``tangible net benefit'' and
insert ``net tangible benefit (as determined in accordance
with regulations prescribed under section 129B(b))''.
Page 100, line 10, after the period, insert closing
quotation marks and a second period.
Page 100, strike line 11 and all that follows through line
14.
Page 102, line 23, insert ``at the end of the 6-month
period beginning'' before ``on the date of''.
Page 102, beginning on line 25, strike ``on or after the
date'' and insert ``after the end of such period''.
The CHAIRMAN. Pursuant to House Resolution 825, the gentleman from
Massachusetts (Mr. Frank) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentleman from Massachusetts.
Mr. FRANK of Massachusetts. Mr. Chairman, first, this bill makes some
substantive changes, including one of the things we came across was the
problem of people who were renting who lost their right to live there
when there was a foreclosure.
We have compromised in this. I have had some conversations; I will
have some further ones with the gentleman from Colorado. But we do try
to preserve some protection for the renters in the bill. As passed by
committee, we had 12 months. This reduces it some to 6 months as the
maximum. We will talk more about it.
Beyond that, there are two things that the manager's amendment
clarifies, and I have found from some on the consumer side two
objections in this bill, and we deal with these in the manager's
amendment and we will deal with them further. One is the issue of
preemption.
I think a certain amount of preemption is essential if we are going
to have a secondary market, but it is possible to read the language
previously as preempting more than we meant to. What this amendment
does is to make very clear that, no matter what the issue is, if the
problem was based on fraud or misrepresentation, deception, or false
advertising, there is no preemption. The ability of people to go after
anything that was based on misrepresentation or fraud is fully
preserved, whether or not it affected their ability to pay.
Secondly, we have--and I am pleased to note that La Raza and the
NAACP support this bill--we included at the insistence of the gentleman
from North Carolina and the gentleman from California specific language
about civil rights violations. No civil rights violation that a State
may have would be preempted.
So we have narrowed the preemption. We have made it clear it does not
preempt anything growing out of fraud.
The second issue that has led to some concern, and I am about to
yield to my friend from North Carolina (Mr. Miller) has to do with
compensation. It was our intention to say that no one who was
originating a loan should be given an incentive to put the consumer in
a loan that would charge that consumer more than he or she could
otherwise get, and we dealt with that.
The question then came about the way in which brokers are
compensated, and we tried to provide two things: One, an absolute
prohibition on any incentive to charge people more, but, two, not an
interference with the way in which people chose to make those payments.
We thought we had the language clear. Some people think it isn't
clear enough. One of the things we will do is to make that clearer.
And I would yield on this point to the gentleman from North Carolina.
Mr. MILLER of North Carolina. I thank the gentleman.
I would now like to engage in a colloquy with Mr. Frank concerning
this. And, Mr. Chairman, both Mr. Frank and I would deeply appreciate a
slow gavel on this particular point.
Mr. Frank, please direct your attention to the language at the bottom
of page 5 of the manager's amendment, clarifying the prohibition
against payments to loan originators that vary with the terms of the
subprime mortgage, which, as Mr. Murphy of Connecticut has already
pointed out, is an important antisteering provision. The abuse that the
prohibition addresses is the payment by lenders to originators, most
often brokers, known as a yield spread premium.
Under widespread practice now, lenders pay brokers an additional
percentage point in a yield spread premium for every additional half
point in interest on the mortgage above the rate that the borrower
qualified for. Although borrowers sign a piece of paper agreeing to the
payment by the lender, the broker hands the borrower the paper and
tells the borrower what the borrower is signing, and most borrowers
never realize that the broker makes more money the more that the
borrower pays for the mortgage.
I agree with Mr. Murphy of Connecticut, that is a kickback. It is not
a legitimate business practice. It needs to change.
Mr. Frank, as I understand it, the clarifying language in the new
subparagraph does not simply permit what the previous subparagraph
forbids, but it is directed to limited circumstances and does not allow
any additional total compensation for an originator. Just as a buyer
may pay discount points at closing to buy down the interest rate over
the life of the loan, subparagraph (B) allows a consumer to pay more in
interest over the life of the loan in return for lower costs and fees
at closing.
Is that correct?
Mr. FRANK of Massachusetts. Yes. That is absolutely what I believe
the language says, and it is certainly our intent.
Mr. MILLER of North Carolina. And is it also correct that any payment
by the lender to the broker, or to use the language of the bill, any
incentive compensation paid by any person to any originator, based on a
higher interest rate, is still forbidden?
Mr. FRANK of Massachusetts. Yes. I would say, and let me just read
the language at the bottom of page 4 of the manager's amendment. Those
payments ``do not vary based on the terms of the loan or the consumer's
decision about whether to finance.''
So we have tried to make it very explicit: Flexibility in method does
not in any way reduce the prohibitions that have been stated against an
incentive to charge more. And if it is necessary for us to say that
again more clearly, as some people may think it is, we will find new
ways to say it.
Mr. MILLER of North Carolina. I am glad that Mr. Frank earlier
embraced redundancy as a virtue, but I want to continue even though it
may be redundant.
The CHAIRMAN. The gentleman's time has expired.
Mr. FRANK of Massachusetts. Will the gentleman yield me 15 seconds
out of his time?
The CHAIRMAN. The gentleman from Alabama has not yet been recognized.
Does the gentleman rise in opposition to the bill?
Mr. BACHUS. Mr. Chairman, I claim time in opposition, although I am
not opposed to the bill.
The CHAIRMAN. Without objection, the gentleman from Alabama is
recognized for 5 minutes.
There was no objection.
Mr. BACHUS. I yield 15 seconds to the chairman of the committee.
Mr. MILLER of North Carolina. So a mortgage originator under this
subparagraph, the one we were speaking of a moment ago, will get paid
exactly the same in total compensation, including both the compensation
paid by the borrower and the compensation paid by the lender, whether
the interest rate is 6 or 8 or 10. Is that right?
Mr. FRANK of Massachusetts. Yes. And also, the total cost of the loan
has to be the same.
Mr. MILLER of North Carolina. And so any compensation paid by the
lender will be backed out dollar for dollar from what the borrower had
agreed to pay; is that correct?
Mr. FRANK of Massachusetts. Yes, yes, yes. I feel like I am in
Ulysses here.
Mr. MILLER of North Carolina. I thank the gentleman.
Mr. BACHUS. Mr. Chairman, I yield 2 minutes to the gentleman from
Florida (Mr. Feeney).
Mr. FEENEY. I am grateful to my friend the ranking member and to the
chairman, and I do oppose the manager's amendment and the bill. And I
don't think there is any difference of
[[Page H14005]]
opinion about the crisis in the mortgage markets in America today. I
think the difference is on the impact that this bill will have.
The problem in mortgage markets in America today is that for years we
had lenders that were giving teaser rate loans, that were taking no
paperwork requirements to prove that borrowers had the ability to buy
the home and pay for it. And we had lenders making 100 percent, 110
percent, 120 percent loan-to-value loans. And, obviously, that worked
fine when property values were increasing. When property values
declined, you have got a crisis.
In essence, what has happened is that we have had this wild galloping
horse in the credit markets of mortgages that has gotten loose. Now
that horse has gotten very sick. There are none of these loans being
made. As a matter of fact, credible buyers with paperwork, with 20 or
30 percent equity, can't get access to mortgage loans today in many
instances.
What we are doing for this sick horse is to feed it strychnine. The
markets having overreacted, we as Congress are going to pile on and
kill the horse with poison. And the difference we have about this bill
and this manager's amendment is on the impact it will have.
Does it help poor people, middle-income people that want to get
access to homeownership? No.
{time} 1315
And I would submit for the Record an article by Star Parker, who
entitles this bill, ``How to Limit Homeownership for the Poor.''
Does this bill help existing homeowners? No, because it will decrease
credit availability, which means fewer people will get access to loans.
There will be fewer buyers for your home. And the law of supply and
demand means that all of our homes will decrease in value because there
will be fewer people available to buy.
Who does this bill help? Well, this bill does help landlords. Very
few people will be able to buy homes in the future. Very few people
will qualify for the credit. So if you are a landlord, you should be
thankful. It helps lawyers. As the Wall Street Journal said, this is
the 1-800 Sue Your Banker Act. This is the lawyers and landlords relief
act.
[From Scripps Howard News Service, Nov. 9, 2007]
How To Limit Home Ownership for the Poor
(By Star Parker)
The Mortgage Reform and Anti-Predatory Lending Act of 2007
has passed out of Chairman Barney Frank's House Financial
Services Committee. It's now headed to the full House for a
vote. In the name of protecting the poor from market
predators it will in actuality protect the poor from wealth.
This is yet a new chapter in the grand liberal tradition
that advances the illusion that government micromanagement of
private lives and markets will make us better off. We already
have laws against fraud and theft. But for liberals,
government isn't there to enforce the law. It's there to run
our lives.
The legislation assumes that when private individuals make
mistakes they can't figure out what they did wrong and make
adjustments and that even if they could they wouldn't.
We're going to wind up with new and onerous regulations in
the business of making loans to consumers for purchasing
homes, and as a result, fewer loans will be made and we'll
all be worse off. Those who will be penalized the most will
be the low-income families who the new regulations will
supposedly protect.
Should fraud be permitted in our society? No. Should
government interfere with private individuals' latitude to
determine on their own what risks they wish to take and the
willingness of others to finance those risks? Absolutely not.
Frank's bill crosses far over the line into regulating
private lives and behavior where he and government have no
business.
Why will this hurt the very low-income families it purports
to protect?
We already have plenty of experience with the costs of so-
called consumer protection laws in general and those designed
to regulate mortgage lending in particular.
In a recently published article in the Cato Supreme Court
Review, Professor Marcus Cole of the Stanford University Law
School discusses the fallout of lending laws in Illinois.
The Illinois Fairness in Lending Act passed in 2005 gives
the state oversight authority on loans made in nine
designated zip codes in the state. These zip codes are, of
course, areas in which residents are mostly lower-income
households.
The law places authority in a state bureaucracy to review
all applications for mortgages in these designated zip codes.
The bureaucrats who review these applications determine if
the borrower needs credit counseling and requires the lender
to pay for it if required.
The costs of the counseling are estimated to be as high as
$700 and can delay the processing of the loan up to a month.
The borrower has no option to forego this counseling, whose
objective is ``to protect homebuyers from predatory lending
in Cook County's at-risk communities and reduce the incidence
of foreclosures.''
What's the result?
Cole reports the following: ``Instead of protecting
hardworking would-be homeowners from predatory lending, the
new law protected them from credit. Within just a few months
more than 30 mortgage lenders refused to lend on homes
purchased in the targeted zip codes. Those lenders determined
to service these communities saw a rise in their costs, which
translated into higher interest rates on their loans.''
The purported cure was worse than the disease. Cole goes on
to note that, ``home sales in the designated zip codes
dropped an average of 45 percent in just one month after the
bill took effect. Home prices plummeted, draining relatively
poor but hardworking people of what little equity they had in
their homes.''
The experience is similar in other states where governments
have authorized bureaucrats to insert themselves between
lenders and borrowers. Yes, the number of defaults have
declined. They have declined because the number of loans have
declined.
The Wall Street Journal reports that currently ``80 percent
of subprime loans are being repaid on time and another 10
percent are only 30 days behind.''
These are overwhelmingly loans to low-income families.
Probably, under Barney Frank's new regulatory regime, many of
these loans would not have been made and the families in
these homes would be renting and considerably less wealthy
than they are today.
To quote former Texas Rep. Dick Armey, ``freedom works.''
But it can only work if we let it.
Many have paid and are paying a great price for the errors
and excesses of recent years. We now should allow private
individuals and private markets the opportunity to self
correct, which is what will happen.
If government steps in to pre-empt the market and Barney
Frank is the one to decide who gets loans, the rich will stay
rich, the poor will stay poor, and we'll have one more reason
for already skeptical Americans to question the American
dream.
Mr. BACHUS. Mr. Chairman, I rise in support of the bipartisan
manager's amendment. It makes both technical and substantive changes in
the legislation, and I think significant contributions. For example,
the amendment incorporates language authored by the gentleman from
California (Mr. Gary G. Miller). His amendment clarifies the bill's
anti-steering provisions to ensure that consumers retain the ability to
finance points and fees in connection with a mortgage transaction. It
also corrects certain problems in the provisions dealing with renters
and foreclosed properties that Mr. Marchant from Texas raised during
the markup. And it addresses some of those problems.
The amendment also includes provisions drafted by the gentlelady from
Ohio (Ms. Pryce) that will give consumers regular updates on the term
of their mortgages and advance notice of any impending interest rate
adjustments. Now, these are important improvements in the bill. And I
again thank Chairman Frank and the other members who contributed to the
manager's amendment, and urge support for the manager's amendment.
I would yield the remaining time that I have to the gentleman from
California (Mr. Campbell).
The CHAIRMAN. The gentleman from California is recognized for 1\3/4\
minutes.
Mr. CAMPBELL of California. I thank the ranking member for yielding.
I wish this manager's amendment was going to make this a good bill
and improve this bill, but it is not making it a good bill.
We have a patient that is sick. That is the mortgage market. But what
we are doing here is practicing medieval medicine. We are bleeding the
patient. We're going to make the patient worse.
There's no argument that we ought to be doing something to improve
the subprime and generally the mortgage market in this country as it
goes forward, but we should not make it worse. And that's what this
will do. And it will make it worse by drying up credit. And that's the
biggest problem we have right now. People can't get loans for houses.
And this is going to make it ever more difficult because it restricts
the amount of loans they can get, and it puts in liability as well.
[[Page H14006]]
And, you know, it won't hurt the person buying a $1 million house
with 50 percent down. That person will be fine. Who it's going to hurt
is the person out there buying a $200,000 house with $2,500 in cash and
a loan from their uncle. But they've got a good job and they think they
can get this thing done. But under this bill, banks and lenders are not
going to make that loan. And that's the problem with this bill, and
that's why this bill should be roundly defeated.
The CHAIRMAN. The question is on the amendment offered by the
gentleman from Massachusetts (Mr. Frank).
The amendment was agreed to.
Amendment No. 2 Offered by Mr. Kanjorski
The CHAIRMAN. It is now in order to consider amendment No. 2 printed
in House Report 110-450.
Mr. KANJORSKI. Mr. Chairman, I offer an amendment.
The CHAIRMAN. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 2 offered by Mr. Kanjorski:
Page 134, after line 13 insert the folowing new titles (and
conform the table of contents accordingly):
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
[[Page H14007]]
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
[[Page H14008]]
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
[[Page H14009]]
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
[[Page H14010]]
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.''.
The CHAIRMAN. Pursuant to House Resolution 825, the gentleman from
Pennsylvania (Mr. Kanjorski) and a member opposed each will control 5
minutes.
The Chair recognizes the gentleman from Pennsylvania.
Mr. KANJORSKI. Mr. Chairman, I've long said that predatory lending is
a complex problem that requires a comprehensive solution. The adoption
of my amendment will make this bill more complete.
This amendment is based on the Escrow, Appraisal and Mortgage
Servicing Improvements Act, H.R. 3837, which the Financial Services
Committee approved last week on a voice vote. In brief, this amendment
would improve mortgage servicing, better escrowing practices, and
enhance appraiser oversight.
I am pleased that several Members of both sides of the aisle have
joined me to put forward this worthwhile amendment. This proposal also
has the support of many outside of this Chamber, including the
Appraisal Institute, the National Association of Realtors, the National
Association of Mortgage Brokers, and the Center for Responsible
Lending, to name a few.
While there are many components to this proposal, I would like to
highlight three of its key provisions. First, it would mandate the
establishment of escrows for those borrowers who meet certain tests to
protect them from tax liens and costly force placed insurance. We have
learned that the subprime borrowers are substantially less likely than
prime borrowers to have escrows, even though they are more likely to
need help in budgeting for these substantial expenses.
Secondly, the amendment reforms mortgage servicing by mandating
swifter response times to consumer inquiries. This change ought to help
ensure that those homeowners who need help in the coming months will
receive expedited assistance from their mortgage servicers.
Third, the amendment would establish enforceable national appraisal
independence standards with sufficient penalties. The appraisal field
is one that demands reform, as evidenced by 90 percent of the
appraisers reporting pressure to inflate values. Appraisals verify the
value of the collateral for the buyer, the seller, the lender, and the
investor. Protection from pressure is, therefore, vital.
Two other issues in this amendment that deserve mention today include
the prompt crediting of payments by servicers and providing borrowers
with timely access to all appraisals. Going forward, we will work to
polish the wording of the former. We will also conform the language of
the latter to the existing standards of the Equal Credit Opportunity
Act.
In sum, Mr. Chairman, my amendment should be part of the legislative
response to improve lending practices and enhance accountability. I
encourage every one of my colleagues to support this.
I reserve the balance of my time.
Mrs. BIGGERT. Mr. Chairman, I claim the time in opposition, although
I am not opposed.
The CHAIRMAN. Without objection, the gentlewoman from Illinois is
recognized for 5 minutes.
There was no objection.
Mrs. BIGGERT. Mr. Chairman, I would like to echo the remarks of Mr.
Kanjorski and thank him and my colleagues, Mr. Hodes, Mrs. Capito and
Ms. Moore, for working on this amendment, which is based on H.R. 3837,
the Escrow, Appraisal and Mortgage Servicing Improvements Act.
Overall, this amendment addresses deceptive, abusive and fraudulent
mortgage lending practices related to titles on escrow accounts,
mortgage servicing and appraisals. We worked hard following our markup
last week to clean up language in this amendment regarding the prompt
crediting of payments and Truth in Lending Act and the Real Estate
Settlement Procedures Act, commonly known as RESPA, liability, in
addition to making several more technical changes.
We have more to do, especially further developing the language in the
payments and escrow sections in this bill; but I'm confident that,
based on the bipartisan progress that we've made this far, we can work
out our differences as the bill continues to move through the
legislative process.
Again, I thank Mr. Kanjorski and my colleagues from both sides of the
aisle for their hard work and cooperation on this amendment. It has
broad bipartisan support, and I urge my colleagues to vote for it.
I reserve the balance of my time.
Mr. KANJORSKI. Mr. Chairman, may I inquire what time we have left.
The CHAIRMAN. The gentleman from Pennsylvania has 2 minutes. The
gentlewoman from Illinois has 3\1/2\ minutes.
Mr. KANJORSKI. Mr. Chairman, I yield 1 minute to the gentleman from
New Hampshire (Mr. Hodes).
Mr. HODES. Mr. Chairman, I thank Representative Kanjorski, the
chairman of the Capital Markets Subcommittee, for yielding me this
time.
I believe that this amendment is a good complement to Chairman
Frank's antipredatory lending bill, and I commend colleagues on both
sides of the
[[Page H14011]]
aisle for the bipartisan nature of this amendment, which is similar to
H.R. 3837, the bill of which I was a proud cosponsor.
Many of my constituents have had problems with their mortgage
servicers. This amendment makes sure that servicers provide faster
responses to consumer inquiries and provides increased penalties for
abusive servicing practices.
Escrows help homeowners pay their property taxes on time, but many
homeowners are unaware of the total cost of the loan because the exact
amount of taxes and insurance isn't disclosed at the time of closing.
This amendment would make sure that homeowners are informed of the
actual amount of the loan, including the escrow payments.
And also, lastly, faulty appraisals have been a huge problem and can
have a devastating impact on a family's single largest investment,
their home. If the initial appraisal is inaccurate, reselling the home
for what the family paid can be nearly impossible.
The amendment creates a Federal independent standard for appraisals
enforced by tough penalties.
I urge my colleagues to support the amendment.
Mrs. BIGGERT. Mr. Chairman, I reserve the balance of my time.
Mr. KANJORSKI. Mr. Chairman, I yield 1 minute to the gentlelady from
Wisconsin (Ms. Moore).
Ms. MOORE of Wisconsin. Mr. Chairman, I'll be brief.
I hope that with Mr. Frank's bill, we can see that these exotic
products have created a crisis in the mortgage industry. But as
Attorney General Cuomo from New York said, any real estate scam, at the
very base and root of it, is a faulty and a bad appraisal.
This is a very commonsense regulation, and I congratulate Mr.
Kanjorski and my other co-authors for bringing this forward.
This amendment is about putting the interests of homebuyers first.
Buying a home is daunting enough without having to worry that the
people that supposedly work for you aren't on your side.
The safeguards in this amendment--the independence standards for
appraisers and provisions that strengthen Federal oversight of the
appraisal process will assure homebuyers that the home they are
purchasing hasn't been inflated in ``perceived'' value by an
unscrupulous appraiser.
A bad appraisal can also make it impossible for a subprime borrower
to refinance--what happens when they try to get into a prime loan and a
responsible bank wants a responsible appraisal done? That's when the
other shoe drops and the homeowner finds out they've been duped.
These safeguards would protect consumers, but would also benefit the
secondary market and our economy.
When a mortgage is sold on the secondary market, investors need to
know that the securities they hold are backed up by a home that has
been appraised accurately.
Further, the amendment's requirements that subprime and other at-risk
borrowers receive an escrow account will protect those borrowers from
huge end-of-the-year tax bills and will reduce foreclosures.
I urge my colleagues to support the Kanjorski-Biggert-Capito-Hodes-
Moore amendment.
Mrs. BIGGERT. Mr. Chairman, I yield the remainder of my time to the
gentleman from Alabama, the ranking member, Mr. Bachus.
Mr. BACHUS. Mr. Chairman, I rise in strong support of this bipartisan
amendment offered by the gentleman from Pennsylvania (Mr. Kanjorski).
The amendment, among other things, enhances the integrity of the
appraisal process, and requires the taxes and insurance on subprime
mortgages be escrowed. These are two glaring problems in today's
subprime market, and I think both these requirements will go a long way
towards making these loans sounder and reducing the number of
foreclosures and delinquencies.
These issues are ones that the gentleman from Pennsylvania has worked
on for many years. He deserves credit for an amendment that will
improve many key aspects of the mortgage origination, servicing, and
appraisal process; and I compliment him.
Chairman Kanjorski worked closely with my colleagues, Ranking Members
Judy Biggert and Shelley Moore Capito, in crafting the amendment. And
the three of them actually offered the amendment that addresses
legitimate administrative and operational concerns that have been
raised, not only by consumer groups, but by the industry itself. And
the mortgage appraisers, or the Appraisers Institute, actually endorsed
this measure. And it maintains the underlying bill's strong consumer
protection.
{time} 1330
And this amendment offers additional strong protections.
I commend all three of our colleagues for their efforts and urge
support for the amendment.
Mr. Chairman, I yield back the balance of my time.
Mr. KANJORSKI. I thank the ranking member and the ranking lady of the
subcommittee. What a pleasure it was to work on this.
I want to say to all my colleagues that may be listening to our
discussion today, this is a perfect example of how this House can find
bipartisan support for a very complicated issue.
This amendment sounds like an amendment, but it's a 44-page bill
standing on its own, which we are hoping to attach to Mr. Frank's bill
so that we solve all of the major problems remaining that can be solved
today and then move on to mitigation of loss in the future.
I urge all of my colleagues to support this amendment.
The CHAIRMAN. The question is on the amendment offered by the
gentleman from Pennsylvania (Mr. Kanjorski).
The amendment was agreed to.
Mr. FRANK of Massachusetts. Mr. Chairman, I move that the Committee
do now rise.
The motion was agreed to.
Accordingly, the Committee rose; and the Speaker pro tempore (Ms.
Kaptur) having assumed the chair, Mr. Cardoza, Chairman of the
Committee of the Whole House on the state of the Union, reported that
that Committee, having had under consideration the bill (H.R. 3915) 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, had come to no resolution thereon.
____________________