[Congressional Record Volume 154, Number 19 (Wednesday, February 6, 2008)]
[Senate]
[Pages S734-S739]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. FEINSTEIN (for herself and Mr. Martinez):
  S. 2595. A bill to create a national licensing system for residential 
mortgage loan originators, to develop minimum standards of conduct to 
be enforced by State regulators, and for other purposes; to the 
Committee on Banking, Housing, and Urban Affairs.
  Mrs. FEINSTEIN. Mr. President, I rise today on behalf of myself and 
Senator Martinez to introduce legislation that takes a major step 
forward in curbing the abusive lending practices which contributed to 
the subprime mortgage crisis. With foreclosures at record levels, the 
housing market in steady decline, a global credit crunch, and the 
economy nearing recession, it is imperative that we act quickly to 
restore confidence in the American dream of home ownership.
  Our legislation will eliminate bad actors from the mortgage business, 
and require that brokers and lenders meet minimum national standards 
which ensure they are professional, competent, and trustworthy.
  First, it would create a comprehensive database of all residential 
mortgage loan originators. This includes mortgage brokers and lenders, 
as well as loan officers of national banks and their subsidiaries.
  Second, it would establish national licensing standards to ensure 
that mortgage brokers and lenders are trained in legal aspects of 
lending, ethics, and consumer protection.
  Our bill is similar to H.R. 3012, introduced in the House by 
Representative Spencer Bachus, the Ranking Member of the House 
Committee on Financial Services. The national licensing concept for 
loan originators has enjoyed bipartisan support and was included in the 
comprehensive mortgage reform bill, H.R. 3915, which recently passed 
the House.
  A combination of low interest rates and sophisticated mortgage 
products, among other factors, helped increase home ownership to record 
levels just 3 years ago.
  Subprime and exotic mortgages allowed millions of Americans--many 
with little or no down payment and questionable credit--to purchase 
homes by using adjustable-rate products with low initial monthly 
payments.
  There was explosive growth in the use of these sub-prime loans: in 
just 2 years, from 2004 to 2006, the number of subprime mortgages in 
California increased 110 percent, from 273,000 to 573,000--29.4 percent 
of total mortgages in the State.
  While the majority of lenders and brokers offered these mortgages in 
a responsible fashion, many others relied upon predatory lending 
tactics to place unsuspecting borrowers in mortgages they could not 
afford. Competitive pressures and lax oversight resulted in loans of 
increasingly poor quality being written.
  To make matters worse, consumers were not adequately protected from 
bad actors in the mortgage industry.
  The FBI recently reported that complaints of mortgage fraud have 
skyrocketed over the last few years.
  In 2003, the number of suspicious activity reports reviewed by the 
FBI economic crimes unit numbered 3,000. The number of mortgage fraud 
complaints increased to 48,000 last year, representing a jump of 1500 
percent.
  Most mortgage brokers and non-bank lenders are only lightly regulated 
by State agencies. Standards of accountability have not kept pace with 
the increasing sophistication of the mortgage industry.
  As adjustable-rate mortgages reset to higher rates, many American 
families find themselves in homes they can no longer afford. The 
percentage of homeowners currently behind on their mortgage payments is 
at its highest level in 21 years.
  Mr. President, 2.2 million homeowners filed for foreclosure last year 
and many lenders have gone out of business or sought bankruptcy 
protection.
  It is projected that as many as 2 million Americans will be forced to 
file for foreclosure before this crisis abates, representing $160 
billion in lost equity. The Center for Responsible Lending has 
projected that one out of every five subprime loans issued between 2005 
and 2006 will fail.
  California has been especially hard hit. Mr. President, 5 of the 10 
metropolitan areas with the highest foreclosure rate in the Nation are 
in California. The foreclosure rate in California is roughly twice the 
national average, with 1 foreclosure filing for every 258 households in 
the State.
  Lenders repossessed 84,375 California homes last year, a sixfold 
increase from 12,672 in 2006. Default notices--the initial step in the 
foreclosure process--increased 143 percent between 2006 and 2007, 
rising from 104,977 in 2006 to 254,824 in 2007. In San Diego County 
alone, foreclosures were up 353 percent in 2007.
  According to the FBI economic crimes unit, California has been 
identified as one of the top 10 ``mortgage fraud hot spots'' in the 
Nation.
  American families are hurting, and Californians are at the center of 
the storm. With close to 500,000 adjustable-rate mortgages scheduled to 
reset in California over the next 2 years, the situation is likely to 
worsen in 2008.
  The subprime mortgage crisis has threatened both the global economy 
and the American dream of home ownership. Accountability, professional 
standards, and oversight must be enhanced for everyone in the mortgage 
industry.
  This bill will make it so, and will help to ensure such a crisis 
never happens again.
  Specifically, the S.A.F.E. Mortgage Licensing Act would require that 
all residential mortgage loan originators are licensed, providing 
fingerprints, a summary of work experience, and consent for a 
background check to authorities.
  Additionally, minimum criteria are established that individuals must 
meet to obtain a license, including: no felony

[[Page S735]]

convictions; no similar license revoked; a demonstrated record of 
financial responsibility; successful completion of education 
requirements, 20 hours of approved courses, to include at least 3 hours 
related to Federal laws, 4 hours on ethics and consumer protection in 
mortgage lending, and 2 hours on the subprime mortgage marketplace; 
and, passage of a written exam, the exam must be at least 100 questions 
and a minimum score of 75 percent is required to pass.
  The Federal Reserve, Treasury, and Federal Deposit Insurance 
Corporation must also register all residential mortgage loan 
originators employed by national banks.
  Lastly, State regulators must develop a satisfactory licensing system 
within 1 year following enactment of this legislation.
  If this does not occur, the Housing and Urban Development Secretary 
is empowered to develop the national registry and license, generating 
revenue for its implementation through fees to license applicants.
  The subprime mortgage crisis is wreaking havoc on American homeowners 
and the national economy. The damage is truly staggering--more than 2 
million foreclosure filings last year and another 2 million expected 
before this year is over.
  Many Americans simply cannot keep pace with adjustable-rate mortgages 
that are resetting, and some were steered into these obligations by 
unscrupulous actors.
  It is essential that this body take action to address some of the 
factors that got us here.
  This legislation does not assign blame, but rather provides a 
workable solution to protect homebuyers and begin to restore confidence 
in the American dream of homeownership.
  I hope that my colleagues will join us in moving this important bill 
through the Senate quickly.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2595

       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 ``Secure and 
     Fair Enforcement for Mortgage Licensing Act of 2008'' or 
     ``S.A.F.E. Mortgage Licensing Act of 2008''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Purposes and methods for establishing a mortgage licensing 
              system and registry.
Sec. 3. Definitions.
Sec. 4. License or registration required.
Sec. 5. State license and registration application and issuance.
Sec. 6. Standards for State license renewal.
Sec. 7. System of registration administration by Federal banking 
              agencies.
Sec. 8. Secretary of Housing and Urban Development backup authority to 
              establish a loan originator licensing system.
Sec. 9. Backup authority to establish a nationwide mortgage licensing 
              and registry system.
Sec. 10. Fees.
Sec. 11. Background checks of loan originators.
Sec. 12. Confidentiality of information.
Sec. 13. Liability provisions.
Sec. 14. Enforcement under HUD backup licensing system.
Sec. 15. Preemption of State law.
Sec. 16. Reports and recommendations to Congress.
Sec. 17. Study and reports on defaults and foreclosures

     SEC. 2. 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, 
     offered at no charge, utilizing electronic media, including 
     the Internet, regarding the employment history of, and 
     publicly adjudicated disciplinary and enforcement actions 
     against, loan originators.

     SEC. 3. DEFINITIONS.

       For purposes of this Act, 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 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.
       (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

[[Page S736]]

     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 9.
       (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 wholly-owned 
     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 
     wholly-owned subsidiary of a depository institution; and
       (C) is licensed by a State or by the Secretary under 
     section 8 and registered as a loan originator with, and 
     maintains a unique identifier through, the Nationwide 
     Mortgage Licensing System and Registry.
       (10) Subprime mortgage.--The term ``subprime mortgage'' 
     means a residential mortgage loan--
       (A) that is secured by real property that is used or 
     intended to be used as a principal dwelling;
       (B) that is typically offered to borrowers having weakened 
     credit histories and reduced repayment capacity, as measured 
     by lower credit scores, debt-to-income ratios, and other 
     relevant criteria; and
       (C) the characteristics of which may include--
       (i) low initial payments based on a fixed introductory rate 
     that expires after a short period and then adjusts to a 
     variable index rate plus a margin for the remaining term of 
     the loan;
       (ii) very high or no limits on how much the payment amount 
     or the interest rate may increase (referred to as ``payment 
     caps'' or ``rate caps'') on reset dates;
       (iii) limited or no documentation of the income of the 
     borrower;
       (iv) product features likely to result in frequent 
     refinancing to maintain an affordable monthly payment; and
       (v) substantial prepayment penalties or prepayment 
     penalties that extend beyond the initial fixed interest rate 
     period.
       (11) 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. 4. 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, through an annual renewal--
       (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 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. 5. 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 never had a loan originator or 
     similar license revoked in any governmental jurisdiction.
       (2) The applicant has never been convicted of, or pled 
     guilty or nolo contendere to, a felony in a domestic, 
     foreign, or military court.
       (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 Act.
       (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--
       (A) 3 hours of Federal law and regulations;
       (B) 3 hours of ethics, which shall include instruction on 
     fraud, consumer protection, and fair lending issues; and
       (C) 2 hours of training related to lending standards for 
     the subprime mortgage marketplace.
       (2) Approved educational courses.--For purposes of 
     paragraph (1), pre-licensing education courses shall be 
     reviewed, and approved by the Nationwide Mortgage Licensing 
     System and Registry.
       (3) Limitation and standards.--
       (A) Limitation.--To maintain the independence of the 
     approval process, the Nationwide Mortgage Licensing System 
     and Registry shall not directly or indirectly offer pre-
     licensure educational courses for loan originators.
       (B) Standards.--In approving courses under this section, 
     the Nationwide Mortgage Licensing System and Registry shall 
     apply reasonable standards in the review and approval of 
     courses.
       (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 by 
     the Nationwide Mortgage Licensing System and Registry and 
     administered by an approved test provider.
       (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;
       (iii) State law and regulation pertaining to mortgage 
     origination; and
       (iv) Federal and State law and regulation, including 
     instruction on fraud, consumer protection, subprime mortgage 
     marketplace, and fair lending issues.
       (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.
       (e) Mortgage Call Reports.--Each mortgage licensee shall 
     submit to the Nationwide Mortgage Licensing System and 
     Registry reports of condition, which shall be in such form 
     and shall contain such information as the Nationwide Mortgage 
     Licensing System and Registry may require.

     SEC. 6. 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.--

[[Page S737]]

       (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--
       (A) 3 hours of Federal law and regulations;
       (B) 2 hours of ethics, which shall include instruction on 
     fraud, consumer protection, and fair lending issues; and
       (C) 2 hours of training related to lending standards for 
     the subprime mortgage marketplace.
       (2) Approved educational courses.--For purposes of 
     paragraph (1), continuing education courses shall be 
     reviewed, and approved 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.
       (5) Limitation and standards.--
       (A) Limitation.--To maintain the independence of the 
     approval process, the Nationwide Mortgage Licensing System 
     and Registry shall not directly or indirectly offer any 
     continuing education courses for loan originators.
       (B) Standards.--In approving courses under this section, 
     the Nationwide Mortgage Licensing System and Registry shall 
     apply reasonable standards in the review and approval of 
     courses.

     SEC. 7. SYSTEM OF REGISTRATION ADMINISTRATION BY FEDERAL 
                   BANKING AGENCIES.

       (a) Development.--
       (1) In general.--The Federal banking agencies shall 
     jointly, through the Federal Financial Institutions 
     Examination Council, 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 wholly-owned 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 
     authorization for the Nationwide Mortgage Licensing System 
     and Registry to obtain information related to any 
     administrative, civil or criminal findings by any 
     governmental jurisdiction.
       (b) Coordination.--
       (1) 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.
       (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.
       (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 4(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 Act.

     SEC. 8. 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 5 and 6 
     and subsection (d) of this section, 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 5 and 6 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.
       (e) Temporary Extension of Period.--The Secretary may 
     extend, by not more than 12 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 5 and 6 
     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.
       (g) Contracting Authority.--The Secretary may enter into 
     contracts with qualified independent parties, as necessary to 
     efficiently fulfill the obligations of the Secretary under 
     this Section.

     SEC. 9. 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 Act 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 Act and the 
     effective registration and regulation of loan originators.

     SEC. 10. 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 that such fees 
     are not charged to consumers for access to such system and 
     registry.

     SEC. 11. 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. 12. 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 9, and any privilege

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     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. 13. 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 9, 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. 14. 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 8; 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 Act.
       (b) Examination Authority.--
       (1) In general.--If the Secretary establishes a licensing 
     system under section 8 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 8 whenever the Secretary 
     determines an examination of any loan originator is necessary 
     to determine the compliance by the originator with this Act.
       (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 8, 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 8 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 Act, or any regulation thereunder, with respect to a 
     State which is subject to a licensing system established by 
     the Secretary under section 8, 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 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 Act 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 8, 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

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     this Act or any regulation prescribed by the Secretary under 
     this Act 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.

     SEC. 15. PREEMPTION OF STATE LAW.

       Nothing in this Act may be construed to preempt the law of 
     any State, to the extent that such State law provides greater 
     protection to consumers than is provided under this Act.

     SEC. 16. REPORTS AND RECOMMENDATIONS TO CONGRESS.

       (a) Annual Reports.--Not later than 1 year after the date 
     of enactment of this Act, and annually thereafter, the 
     Secretary shall submit a report to Congress on the 
     effectiveness of the provisions of this Act, including 
     legislative recommendations, if any, for strengthening 
     consumer protections, enhancing examination standards, and 
     streamlining communication between all stakeholders involved 
     in residential mortgage loan origination and processing.
       (b) Legislative Recommendations.--Not later than 6 months 
     after the date of enactment of this Act, the Secretary shall 
     make recommendations to Congress on legislative reforms to 
     the Real Estate Settlement Procedures Act of 1974, that the 
     Secretary deems appropriate to promote more transparent 
     disclosures, allowing consumers to better shop and compare 
     mortgage loan terms and settlement costs.

     SEC. 17. STUDY AND REPORTS ON DEFAULTS AND FORECLOSURES.

       (a) Study Required.--The Secretary shall conduct an 
     extensive study of the root causes of default and foreclosure 
     of home loans, using as much empirical data as is available.
       (b) Preliminary Report to Congress.--Not later than 6 
     months after the date of enactment of this Act, the Secretary 
     shall submit to Congress a preliminary report regarding the 
     study required by this section.
       (c) Final Report to Congress.--Not later than 12 months 
     after the date of enactment of this Act, the Secretary shall 
     submit to Congress a final report regarding the results of 
     the study required by this section, which shall include any 
     recommended legislation relating to the study, and 
     recommendations for best practices and for a process to 
     provide targeted assistance to populations with the highest 
     risk of potential default or foreclosure.
                                 ______