[Congressional Record (Bound Edition), Volume 153 (2007), Part 23]
[House]
[Pages 31701-31737]
[From the U.S. 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.

[[Page 31702]]

  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.
  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.

                              {time}  1200

  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

[[Page 31703]]

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 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

[[Page 31704]]

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 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

[[Page 31705]]

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. I thank Chairman Frank and my colleagues, 
Congressmen Watt and Miller, from the great State of North Carolina, 
who passed legislation in the 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.

[[Page 31706]]

       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 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.

[[Page 31707]]

  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 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

[[Page 31708]]

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 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, DC 
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.

[[Page 31709]]

  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.
  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

[[Page 31710]]

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.
  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

[[Page 31711]]

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. 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.

[[Page 31712]]

  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 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.

[[Page 31713]]

  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.
  Ms. SCHAKOWSKY. Mr. Chairman, the time has come and gone for Congress 
to act to address the scourge of predatory lending. In the wake of the 
subprime mortgage crisis that is rocking the economy, an estimated two 
million Americans will face home foreclosures in the next two and a 
half years. These problems have caused the housing market to fall into 
its worst slump in 16 years.
  The bill we are considering today, H.R. 3915, the Mortgage Reform and 
Anti-Predatory Lending Act, takes important steps to ensure that the 
mortgage industry follows sound principles of consumer protection. Many 
of the foreclosures we have seen are the result of predatory practices, 
including ``redlining,'' poorly worded or confusing contracts, the 
steering of consumers to more expensive loan products, and mandating 
unfavorable terms that trap consumers into loans they cannot afford.
  The bill before us today begins to turn the tide. It includes 
provisions to ensure that borrowers can repay the loans they are sold 
and receive clear disclosures about the loans they are offered, and 
that mortgage bankers and bank loan officers are all licensed or 
registered. All of these consumer protections will improve the options 
available to Illinois residents who seek a mortgage from a licensed 
mortgage lender.
  However, while this bill represents a good start, I am concerned 
about Title II of the bill, which contains a state-law preemption 
provision that could weaken the value of the protections I've listed. I 
strongly believe that the laws that the Congress pass should be a 
floor, not a ceiling; we should not punish a State that may have 
stronger laws than what the Congress is able to craft. Illinois' 
licensed mortgage brokers and loan originators meet some of the 
Nation's highest standards, and it is time for Congress to make sure 
all mortgage lenders meet standards at least as high--not to punish my 
home state.
  The preemption provision eliminates the ability of a homeowner to 
raise state-law claims against the securitizer--or actual owner--of the 
loan. If homeowners cannot sue the owners of the loans, in many cases 
they will have no remedy available to them at all: in many cases the 
original issuers of the mortgage have sold the loan, gone bankrupt, or 
have gone out of business. While the owners of the loans have the 
assets to provide relief to many victimized consumers, by preempting 
state law this bill ties the hands of consumers to take action against 
them.
  I am also concerned that this language does little to address the 
higher rates caused by so-called ``yield spread premiums,'' which might 
more accurately be referred to as kickbacks. This practice, which 
allows the broker to charge a more expensive rate to the consumer than 
the broker paid for the loan and pocket the difference, has encouraged 
brokers to sell the most costly loans possible. This loophole has no 
doubt contributed to record numbers of foreclosures we have been 
seeing, and it should be closed.
  The mortgage crisis has been building and we must do everything we 
can to address its devastating impact, especially felt in states like 
Illinois, Ohio, and Michigan. I am glad that Chairman Frank has 
indicated that he will work to improve the bill, and I look forward to

[[Page 31714]]

working with him to correct the bill's deficiencies and enact the 
strongest possible protections for homeowners and tenants who are 
facing financial calamity.
  Ms. McCOLLUM of Minnesota. Mr. Chairman, I rise today in strong 
support of the Mortgage Reform and Anti-Predatory Lending Act and 
applaud Chairman Barney Frank for his work to end predatory lending and 
strengthen consumer protections.
  The United States is currently facing a subprime mortgage crisis. 
Right now, nearly 1,200 homes are vacant in Saint Paul due to 
foreclosures. These foreclosures harm the vitality of our 
neighborhoods. Further, foreclosures mean a loss of property tax 
revenue, placing a burden on local and State governments. The social 
and financial costs of this serious problem affect everyone.
  H.R. 3915 is an important step to protect American families from 
predatory lenders by requiring lenders to ensure that borrowers have a 
reasonable ability to repay and establishing a licensing system for 
mortgage brokers and bank loan officers. This legislation requires 
lenders to disclose more about loans such as, the maximum amount a 
consumer could pay on a variable rate mortgage and the amount of 
charges included in the mortgage. It also bans financial incentives for 
subprime loans and holds lenders in the secondary mortgage market 
accountable for home loans by allowing consumers to seek redress 
directly from the firms that ``securitize'' mortgages.
  The pre-loan counseling in this bill will protect families from 
predatory lending in the future. This legislation also establishes an 
Office of Housing Counseling, which will certify computer programs so 
consumers can evaluate home mortgage loan proposals, and it will also 
provide technical and financial support for States and local 
governments educating consumers about buying a home.
  Predatory lending harms our families, our neighborhoods, and our 
communities. We must do more to ensure that all individuals and 
families have safe and stable housing. I urge my colleagues to join me 
in voting for the Mortgage Reform and Anti-Predatory Lending Act.
  Mr. MILLER of North Carolina. Mr. Chairman, this legislation may be 
interpreted to have the unintended consequence of changing the federal 
regulator governing Farm Credit System lenders, who as mortgage loan 
originators will be subject to the regulatory controls in this 
legislation. As H.R. 3915 progresses through Congress, I intend to work 
with my colleagues to ensure that any regulatory controls resulting 
from this legislation to Farm Credit System institutions are managed by 
their current federal regulator, the Farm Credit Administration.
  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.
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

[[Page 31715]]

     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 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.

[[Page 31716]]

       (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.
       (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

[[Page 31717]]

     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 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

[[Page 31718]]

       ``(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--
       ``(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

[[Page 31719]]

     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:
       ``(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

[[Page 31720]]

     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 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.''.

[[Page 31721]]



     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'';
       (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

[[Page 31722]]

     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.''.
       (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

[[Page 31723]]

     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
       ``(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.

[[Page 31724]]

       ``(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--
       ``(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

[[Page 31725]]

     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 31726]]

      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--

[[Page 31727]]

       ``(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 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

[[Page 31728]]

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.
  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.--

[[Page 31729]]

       ``(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 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 2 things that the manager's amendment 
clarifies, and I have found from some on the consumer side 2 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 2 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.

[[Page 31730]]

  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 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

[[Page 31731]]

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.
  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

[[Page 31732]]

     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 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-

[[Page 31733]]

     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 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

[[Page 31734]]

     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 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.

[[Page 31735]]

       (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 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

[[Page 31736]]

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 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

[[Page 31737]]

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.

                          ____________________