[House Report 114-57]
[From the U.S. Government Publishing Office]


114th Congress    }                                      {       Report
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                      {       114-57

======================================================================



 
           COMMUNITY INSTITUTION MORTGAGE RELIEF ACT OF 2015

                                _______
                                

 April 6, 2015.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 1529]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 1529) to amend the Truth in Lending Act and the 
Real Estate Settlement Procedures Act of 1974 to modify the 
requirements for community financial institutions with respect 
to certain rules relating to mortgage loans, and for other 
purposes, having considered the same, report favorably thereon 
without amendment and recommend that the bill do pass.

                          Purpose and Summary

    H.R. 1529, the ``Community Institution Mortgage Relief Act 
of 2015,'' amends the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (P.L. 111-203) to create a legal safe 
harbor from escrow requirements for community financial 
institutions holding loans in portfolio for 3 years. This bill 
also amends the Real Estate Settlement Procedures Act (RESPA) 
to exempt servicers that annually service 20,000 or fewer 
mortgage loans from certain escrow requirements, in order to 
reduce regulatory burdens while appropriately balancing 
consumer protections.

                  Background and Need for Legislation

    Title 14 of the Dodd-Frank Act amends the Truth in Lending 
Act (15 U.S.C. 1601 et seq) (TILA) to establish certain 
requirements for escrow accounts for consumer credit 
transactions secured by a first lien on a consumer's principal 
dwelling. Sections 1461 and 1462 of the Dodd-Frank Act 
establish a minimum period for which escrows must be held for 
higher-priced mortgage loans, create a rate threshold for 
determining whether escrow accounts are required for loans 
whose principal amounts exceed the maximum eligible for 
purchase by Fannie Mae and Freddie Mac (known commonly as 
``jumbo loans''), and adds disclosure requirements concerning 
escrow accounts.
    The Dodd-Frank Act also imposes certain new requirements 
related to mortgage servicing. Section 1463 of the Dodd-Frank 
Act prohibits certain acts and practices by servicers of 
federally related mortgage loans, including, for example, a 
prohibition on obtaining force-placed hazard insurance, unless 
certain conditions are met; charging fees for responding to 
valid qualified written requests; failing to take timely action 
to respond to a borrower's requests; failing to respond within 
10 business days to a request from a borrower to provide 
information about the owner or assignee of a loan; or failing 
to comply with any other obligation found by the Bureau of 
Consumer Financial Protection (CFPB), by regulation, to be 
appropriate to carry out the consumer protection purposes of 
the Dodd-Frank Act.
    In a letter of support dated March 24, 2015, the Credit 
Union National Association said:

          Prior to the enactment of the Dodd-Frank Act, credit 
        unions were required to open escrow accounts for one 
        year on higher priced, first-lien mortgages secured by 
        borrower's principal dwelling. However, as a result of 
        new rules promulgated by the Consumer Financial 
        Protection Bureau, credit unions are required to hold 
        an escrow account open for five years. As a result, 
        some credit unions have shied away from higher-priced 
        mortgages because of the expertise that is required to 
        establish and maintain escrow accounts under the 
        requirements of the Real Estate Settlement Procedures 
        Act (RESPA). This legislation makes two important 
        changes to the Real Estate Settlements Procedures Act 
        (RESPA) to reduce the burden on small financial 
        institutions. The legislation would exempt mortgage 
        loans made by financial institutions under $10 billion 
        in assets and held in portfolio for three years from 
        RESPA's escrow requirements; the legislation would also 
        exempt mortgage servicers that service fewer than 
        20,000 mortgages annually from the requirements of 
        Section 6 of RESPA. We believe that the Bureau has the 
        authority to make these exemptions under the existing 
        authority which Congress conveyed to keep the 
        regulatory burden on community financial institutions 
        measured while the Bureau addressed its rulemaking on 
        large banks and abusers of consumers. Unfortunately, 
        the Bureau has not exercised this authority to the 
        fullest extent possible, making this legislation 
        necessary in order to ensure these rules are 
        appropriately focused. The two changes made by this 
        legislation will provide important regulatory relief to 
        credit unions and help them to continue efficiently 
        serving their members. We strongly support this 
        legislation and encourage its enactment.

                                Hearings

    The Committee on Financial Services did not hold hearings 
on H.R. 1529 in the 114th Congress.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
March 25, 2015 and March 26, 2015, and ordered H.R. 1529 to be 
reported favorably to the House without amendment by a recorded 
vote of 48 yeas to 10 nays (Record vote no. FC-21), a quorum 
being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole vote in committee was a motion by Chairman Hensarling to 
report the bill favorably to the House without amendment. The 
motion was agreed to by a recorded vote of 48 yeas to 10 nays 
(Record vote no. FC-21), a quorum being present.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee, based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 1529 
will reduce regulatory burdens while appropriately balancing 
consumer protections by creating a legal safe harbor from 
escrow requirements for community financial institutions in 
certain circumstances and by providing regulatory relief for 
servicers that annually service 20,000 or fewer mortgage loans.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, April 3, 2015.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1529, the 
Community Institution Mortgage Relief Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

H.R. 1529--Community Institution Mortgage Relief Act of 2015

    Under current law, mortgage lenders must establish escrow 
accounts for the payment of property taxes and certain 
insurance premiums related to the property securing the 
mortgage. H.R. 1529 would amend the Truth in Lending Act to 
exempt a lender from the requirement to hold those escrow funds 
if the lender has consolidated assets of $10 billion or less or 
if it holds the mortgage on its balance sheet for 3 years after 
the date of origination. H.R. 1529 also would direct the Bureau 
of Consumer Financial Protection (CFPB) to exempt mortgage 
servicers from certain requirements related to, among other 
things, administering escrow accounts if they service 20,000 or 
fewer mortgage loans annually.
    Based on information from the CFPB, CBO estimates that 
enacting this bill would increase direct spending by less than 
$500,000 for expenses of the CFPB to prepare and enforce new 
rules to implement the legislation. Because enacting H.R. 1529 
would affect direct spending, pay-as-you-go procedures apply. 
CBO estimates that enacting H.R. 1529 would not affect 
revenues. Implementing the bill would not affect spending 
subject to appropriation because the CFPB is permanently 
authorized to spend amounts transferred from the Federal 
Reserve System.
    H.R. 1529 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contact for this estimate is Susan Willie. 
The estimate was approved by Theresa Gullo, Assistant Director 
for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 1529 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                    Duplication of Federal Programs

    Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), 
the Committee states that no provision of H.R. 1529 establishes 
or reauthorizes a program of the Federal Government known to be 
duplicative of another Federal program, a program that was 
included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), 
the Committee estimates that H.R. 1529 requires one directed 
rulemaking as defined in such section 3(i).

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section cites H.R. 1529 as the ``Community Institution 
Mortgage Relief Act of 2015.''

Section 2. Community Financial Institution Mortgage Relief

    This section amends Section 129D of the Truth in Lending 
Act to create a legal safe harbor from the requirement that a 
creditor must establish an escrow or impound account for the 
payment of taxes and insurance in connection with the 
consummation of a mortgage loan. Under the safe harbor, a 
creditor is not in violation of the escrow requirement if the 
creditor has consolidated assets of $10 billion or less and 
holds the loan on its balance sheet (i.e., in portfolio) for 
three years. If a creditor transfers a loan due to bankruptcy, 
acquisition, or by a supervisory act or recommendation from a 
state or federal regulator, the creditor is deemed to have 
complied with the three year portfolio requirement. This 
section also requires the CFPB, by regulation, to provide 
exemptions to, or adjustments for, mortgage servicer 
requirements under Section 6 of the Real Estate Settlement 
Procedures Act of 1974 (12 U.S.C. 2605) for servicers that 
annually service 20,000 or fewer mortgage loans. [Current CFPB 
regulations exempt servicers from certain mortgage servicing 
rules only if the servicers annually service 5,000 or fewer 
mortgage loans.]

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

                          TRUTH IN LENDING ACT




           *       *       *       *       *       *       *
TITLE I--CONSUMER CREDIT COST DISCLOSURE

           *       *       *       *       *       *       *


CHAPTER 2--CREDIT TRANSACTIONS

           *       *       *       *       *       *       *



Sec. 129D. Escrow or impound accounts relating to certain consumer 
                    credit transactions

  (a) In General.--Except as provided in subsection (b), (c), 
(d), or (e), a creditor, in connection with the 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, before 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 transaction is secured by a first mortgage or 
        lien on the consumer's principal dwelling having an 
        original principal obligation amount that--
                  (A) does not exceed the amount of the maximum 
                limitation on the original principal obligation 
                of mortgage in effect for a residence of the 
                applicable size, as of the date such interest 
                rate set, pursuant to the sixth sentence of 
                section 305(a)(2) the Federal Home Loan 
                Mortgage Corporation Act (12 U.S.C. 
                1454(a)(2)), and the annual percentage rate 
                will exceed the average prime offer rate as 
                defined in section 129C by 1.5 or more 
                percentage points; or
                  (B) exceeds the amount of the maximum 
                limitation on the original principal obligation 
                of mortgage in effect for a residence of the 
                applicable size, as of the date such interest 
                rate set, pursuant to the sixth sentence of 
                section 305(a)(2) the Federal Home Loan 
                Mortgage Corporation Act (12 U.S.C. 
                1454(a)(2)), and the annual percentage rate 
                will exceed the average prime offer rate as 
                defined in section 129C by 2.5 or more 
                percentage points; or
          (4) so required pursuant to regulation.
  (c) Exemptions.--The [Board] Bureau may, by regulation, 
exempt from the requirements of subsection (a) a creditor 
that--
          (1) operates predominantly in rural or underserved 
        areas;
          (2) together with all affiliates, has total annual 
        mortgage loan originations that do not exceed a limit 
        set by the [Board] Bureau;
          (3) retains its mortgage loan originations in 
        portfolio; and
          (4) meets any asset size threshold and any other 
        criteria the [Board] Bureau may establish, consistent 
        with the purposes of this subtitle.
  (d) 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, 
beginning with the date of the consummation of the loan, unless 
and until--
          (1) 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;
          (2) such borrower is delinquent;
          (3) such borrower otherwise has not complied with the 
        legal obligation, as established by rule; or
          (4) the underlying mortgage establishing the account 
        is terminated.
  (e) Limited Exemptions for Loans Secured by Shares in a 
Cooperative or in Which an Association Must Maintain a Master 
Insurance Policy.--Escrow accounts need not be established for 
loans secured by shares in a cooperative. Insurance premiums 
need not be included in escrow accounts for loans secured by 
dwellings or units, where the borrower must join an association 
as a condition of ownership, and that association has an 
obligation to the dwelling or unit owners to maintain a master 
policy insuring the dwellings or units.
  (f) 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.
  (g) 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] Bureau, escrow or impound accounts established 
        pursuant to subsection (b) shall be established in a 
        federally insured depository institution or credit 
        union.
---------------------------------------------------------------------------
    \54\The reference to ``Board'' probably should be to ``Bureau''. 
See amendment made by sections 1100A(2) of Public Law 111 203 and the 
corresponding effective date for such amendment in section 1100H of 
such Public Law.
---------------------------------------------------------------------------
          (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.
  (h) Disclosures Relating to Mandatory Escrow or Impound 
Account.--In the case of any impound, trust, or escrow account 
that is required under subsection (b), the creditor shall 
disclose by written notice to the consumer at least 3 business 
days before the consummation of the consumer credit transaction 
giving rise to such account or in accordance with timeframes 
established in prescribed regulations the following 
information:
          (1) The fact that an escrow or impound account will 
        be established at consummation of the transaction.
          (2) The amount required at closing to initially fund 
        the escrow or impound account.
          (3) The amount, in the initial year after the 
        consummation of the transaction, of the estimated taxes 
        and hazard insurance, including flood insurance, if 
        applicable, and any other required periodic payments or 
        premiums that reflects, as appropriate, either the 
        taxable assessed value of the real property securing 
        the transaction, including the value of any 
        improvements on the property or to be constructed on 
        the property (whether or not such construction will be 
        financed from the proceeds of the transaction) or the 
        replacement costs of the property.
          (4) The estimated monthly amount payable to be 
        escrowed for taxes, hazard insurance (including flood 
        insurance, if applicable) and any other required 
        periodic payments or premiums.
          (5) The fact that, if the consumer chooses to 
        terminate the account 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.
          (6) Such other information as the [Board] Bureau 
        determines necessary for the protection of the 
        consumer.
  (i) 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.
  (j) 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, and provides written 
                notice to the creditor or servicer of such 
                choice, 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 statement 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.
                  (D) Such other information as the [Board] 
                Bureau determines necessary for the protection 
                of the consumer.
  (k) Safe Harbor for Loans Held by Smaller Creditors.--
          (1) In general.--A creditor shall not be in violation 
        of subsection (a) with respect to a loan if--
                  (A) the creditor has consolidated assets of 
                $10,000,000,000 or less; and
                  (B) the creditor holds the loan on the 
                balance sheet of the creditor for the 3-year 
                period beginning on the date of the origination 
                of the loan.
          (2) Exception for certain transfers.--In the case of 
        a creditor that transfers a loan to another person by 
        reason of the bankruptcy or failure of the creditor, 
        the purchase of the creditor, or a supervisory act or 
        recommendation from a State or Federal regulator, the 
        creditor shall be deemed to have complied with the 
        requirement under paragraph (1)(B).

           *       *       *       *       *       *       *

                              ----------                              


             REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974



           *       *       *       *       *       *       *
   servicing of mortgage loans and administration of escrow accounts

  Sec. 6. (a) Disclosure to Applicant Relating to Assignment, 
Sale, or Transfer of Loan Servicing.--Each person who makes a 
federally related mortgage loan shall disclose to each person 
who applies for the loan, at the time of application for the 
loan, whether the servicing of the loan may be assigned, sold, 
or transferred to any other person at any time while the loan 
is outstanding.
  (b) Notice by Transferor or Loan Servicing at Time of 
Transfer.--
          (1) Notice requirement.--Each servicer of any 
        federally related mortgage loan shall notify the 
        borrower in writing of any assignment, sale, or 
        transfer of the servicing of the loan to any other 
        person.
          (2) Time of notice.--
                  (A) In general.--Except as provided under 
                subparagraphs (B) and (C), the notice required 
                under paragraph (1) shall be made to the 
                borrower not less than 15 days before the 
                effective date of transfer of the servicing of 
                the mortgage loan (with respect to which such 
                notice is made).
                  (B) Exception for certain proceedings.--The 
                notice required under paragraph (1) shall be 
                made to the borrower not more than 30 days 
                after the effective date of assignment, sale, 
                or transfer of the servicing of the mortgage 
                loan (with respect to which such notice is 
                made) in any case in which the assignment, 
                sale, or transfer of the servicing of the 
                mortgage loan is preceded by--
                          (i) termination of the contract for 
                        servicing the loan for cause;
                          (ii) commencement of proceedings for 
                        bankruptcy of the servicer; or
                          (iii) commencement of proceedings by 
                        the Federal Deposit Insurance 
                        Corporation or the Resolution Trust 
                        Corporation for conservatorship or 
                        receivership of the servicer (or an 
                        entity by which the servicer is owned 
                        or controlled).
                  (C) Exception for notice provided at 
                closing.--The provisions of subparagraphs (A) 
                and (B) shall not apply to any assignment, 
                sale, or transfer of the servicing of any 
                mortgage loan if the person who makes the loan 
                provides to the borrower, at settlement (with 
                respect to the property for which the mortgage 
                loan is made), written notice under paragraph 
                (3) of such transfer.
          (3) Contents of notice.--The notice required under 
        paragraph (1) shall include the following information:
                  (A) The effective date of transfer of the 
                servicing described in such paragraph.
                  (B) The name, address, and toll-free or 
                collect call telephone number of the transferee 
                servicer.
                  (C) A toll-free or collect call telephone 
                number for (i) an individual employed by the 
                transferor servicer, or (ii) the department of 
                the transferor servicer, that can be contacted 
                by the borrower to answer inquiries relating to 
                the transfer of servicing.
                  (D) The name and toll-free or collect call 
                telephone number for (i) an individual employed 
                by the transferee servicer, or (ii) the 
                department of the transferee servicer, that can 
                be contacted by the borrower to answer 
                inquiries relating to the transfer of 
                servicing.
                  (E) The date on which the transferor servicer 
                who is servicing the mortgage loan before the 
                assignment, sale, or transfer will cease to 
                accept payments relating to the loan and the 
                date on which the transferee servicer will 
                begin to accept such payments.
                  (F) Any information concerning the effect the 
                transfer may have, if any, on the terms of or 
                the continued availability of mortgage life or 
                disability insurance or any other type of 
                optional insurance and what action, if any, the 
                borrower must take to maintain coverage.
                  (G) A statement that the assignment, sale, or 
                transfer of the servicing of the mortgage loan 
                does not affect any term or condition of the 
                security instruments other than terms directly 
                related to the servicing of such loan.
  (c) Notice by Transferee of Loan Servicing at Time of 
Transfer.--
          (1) Notice requirement.--Each transferee servicer to 
        whom the servicing of any federally related mortgage 
        loan is assigned, sold, or transferred shall notify the 
        borrower of any such assignment, sale, or transfer.
          (2) Time of notice.--
                  (A) In general.--Except as provided in 
                subparagraphs (B) and (C), the notice required 
                under paragraph (1) shall be made to the 
                borrower not more than 15 days after the 
                effective date of transfer of the servicing of 
                the mortgage loan (with respect to which such 
                notice is made).
                  (B) Exception for certain proceedings.--The 
                notice required under paragraph (1) shall be 
                made to the borrower not more than 30 days 
                after the effective date of assignment, sale, 
                or transfer of the servicing of the mortgage 
                loan (with respect to which such notice is 
                made) in any case in which the assignment, 
                sale, or transfer of the servicing of the 
                mortgage loan is preceded by--
                          (i) termination of the contract for 
                        servicing the loan for cause;
                          (ii) commencement of proceedings for 
                        bankruptcy of the servicer; or
                          (iii) commencement of proceedings by 
                        the Federal Deposit Insurance 
                        Corporation or the Resolution Trust 
                        Corporation for conservatorship or 
                        receivership of the servicer (or an 
                        entity by which the servicer is owned 
                        or controlled).
                  (C) Exception for notice provided at 
                closing.--The provisions of subparagraphs (A) 
                and (B) shall not apply to any assignment, 
                sale, or transfer of the servicing of any 
                mortgage loan if the person who makes the loan 
                provides to the borrower, at settlement (with 
                respect to the property for which the mortgage 
                loan is made), written notice under paragraph 
                (3) of such transfer.
          (3) Contents of notice.--Any notice required under 
        paragraph (1) shall include the information described 
        in subsection (b)(3).
  (d) Treatment of Loan Payments During Transfer Period.--
During the 60-day period beginning on the effective date of 
transfer of the servicing of any federally related mortgage 
loan, a late fee may not be imposed on the borrower with 
respect to any payment on such loan and no such payment may be 
treated as late for any other purposes, if the payment is 
received by the transferor servicer (rather than the transferee 
servicer who should properly receive payment) before the due 
date applicable to such payment.
  (e) Duty of Loan Servicer To Respond to Borrower Inquiries.--
          (1) Notice of receipt of inquiry.--
                  (A) In general.--If any servicer of a 
                federally related mortgage loan receives a 
                qualified written request from the borrower (or 
                an agent of the borrower) for information 
                relating to the servicing of such loan, the 
                servicer shall provide a written response 
                acknowledging receipt of the correspondence 
                within 5 days (excluding legal public holidays, 
                Saturdays, and Sundays) unless the action 
                requested is taken within such period.
                  (B) Qualified written request.--
    For purposes of this subsection, a qualified written 
request shall be a written correspondence, other than notice on 
a payment coupon or other payment medium supplied by the 
servicer, that--
                          (i) includes, or otherwise enables 
                        the servicer to identify, the name and 
                        account of the borrower; and
                          (ii) includes a statement of the 
                        reasons for the belief of the borrower, 
                        to the extent applicable, that the 
                        account is in error or provides 
                        sufficient detail to the servicer 
                        regarding other information sought by 
                        the borrower.
          (2) Action with respect to inquiry.--Not later than 
        30 days (excluding legal public holidays, Saturdays, 
        and Sundays) after the receipt from any borrower of any 
        qualified written request under paragraph (1) and, if 
        applicable, before taking any action with respect to 
        the inquiry of the borrower, the servicer shall--
                  (A) make appropriate corrections in the 
                account of the borrower, including the 
                crediting of any late charges or penalties, and 
                transmit to the borrower a written notification 
                of such correction (which shall include the 
                name and telephone number of a representative 
                of the servicer who can provide assistance to 
                the borrower);
                  (B) after conducting an investigation, 
                provide the borrower with a written explanation 
                or clarification that includes--
                          (i) to the extent applicable, a 
                        statement of the reasons for which the 
                        servicer believes the account of the 
                        borrower is correct as determined by 
                        the servicer; and
                          (ii) the name and telephone number of 
                        an individual employed by, or the 
                        office or department of, the servicer 
                        who can provide assistance to the 
                        borrower; or
                  (C) after conducting an investigation, 
                provide the borrower with a written explanation 
                or clarification that includes--
                          (i) information requested by the 
                        borrower or an explanation of why the 
                        information requested is unavailable or 
                        cannot be obtained by the servicer; and
                          (ii) the name and telephone number of 
                        an individual employed by, or the 
                        office or department of, the servicer 
                        who can provide assistance to the 
                        borrower.
          (3) Protection of credit rating.--During the 60-day 
        period beginning on the date of the servicer's receipt 
        from any borrower of a qualified written request 
        relating to a dispute regarding the borrower's 
        payments, a servicer may not provide information 
        regarding any overdue payment, owed by such borrower 
        and relating to such period or qualified written 
        request, to any consumer reporting agency (as such term 
        is defined under section 603 of the Fair Credit 
        Reporting Act).
          (4) Limited extension of response time.--The 30-day 
        period described in paragraph (2) may be extended for 
        not more than 15 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.
  (f) Damages and Costs.--Whoever fails to comply with any 
provision of this section shall be liable to the borrower for 
each such failure in the following amounts:
          (1) Individuals.--In the case of any action by an 
        individual, an amount equal to the sum of--
                  (A) any actual damages to the borrower as a 
                result of the failure; and
                  (B) any additional damages, as the court may 
                allow, in the case of a pattern or practice of 
                noncompliance with the requirements of this 
                section, in an amount not to exceed $2,000.
          (2) Class actions.--In the case of a class action, an 
        amount equal to the sum of--
                  (A) any actual damages to each of the 
                borrowers in the class as a result of the 
                failure; and
                  (B) any additional damages, as the court may 
                allow, in the case of a pattern or practice of 
                noncompliance with the requirements of this 
                section, in an amount not greater than $2,000 
                for each member of the class, except that the 
                total amount of damages under this subparagraph 
                in any class action may not exceed the lesser 
                of--
                          (i) $1,000,000; or
                          (ii) 1 percent of the net worth of 
                        the servicer.
          (3) Costs.--In addition to the amounts under 
        paragraph (1) or (2), in the case of any successful 
        action under this section, the costs of the action, 
        together with any attorneys fees incurred in connection 
        with such action as the court may determine to be 
        reasonable under the circumstances.
          (4) Nonliability.--A transferor or transferee 
        servicer shall not be liable under this subsection for 
        any failure to comply with any requirement under this 
        section if, within 60 days after discovering an error 
        (whether pursuant to a final written examination report 
        or the servicer's own procedures) and before the 
        commencement of an action under this subsection and the 
        receipt of written notice of the error from the 
        borrower, the servicer notifies the person concerned of 
        the error and makes whatever adjustments are necessary 
        in the appropriate account to ensure that the person 
        will not be required to pay an amount in excess of any 
        amount that the person otherwise would have paid.
  (g) Administration of Escrow Accounts.--If the terms of any 
federally related mortgage loan require the borrower to make 
payments to the servicer of the loan for deposit into an escrow 
account for the purpose of assuring payment of taxes, insurance 
premiums, and other charges with respect to the property, the 
servicer shall make payments from the escrow account for such 
taxes, insurance premiums, and other charges in a timely manner 
as such payments become due. 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.
  (h) Preemption of Conflicting State Laws.--Notwithstanding 
any provision of any law or regulation of any State, a person 
who makes a federally related mortgage loan or a servicer shall 
be considered to have complied with the provisions of any such 
State law or regulation requiring notice to a borrower at the 
time of application for a loan or transfer of the servicing of 
a loan if such person or servicer complies with the 
requirements under this section regarding timing, content, and 
procedures for notification of the borrower.
  (i) Definitions.--For purposes of this section:
          (1) Effective date of transfer.--The term ``effective 
        date of transfer'' means the date on which the mortgage 
        payment of a borrower is first due to the transferee 
        servicer of a mortgage loan pursuant to the assignment, 
        sale, or transfer of the servicing of the mortgage 
        loan.
          (2) Servicer.--The term ``servicer'' means the person 
        responsible for servicing of a loan (including the 
        person who makes or holds a loan if such person also 
        services the loan). The term does not include--
                  (A) the Federal Deposit Insurance Corporation 
                or the Resolution Trust Corporation, in 
                connection with assets acquired, assigned, 
                sold, or transferred pursuant to section 13(c) 
                of the Federal Deposit Insurance Act or as 
                receiver or conservator of an insured 
                depository institution; and
                  (B) the Government National Mortgage 
                Association, the Federal National Mortgage 
                Association, the Federal Home Loan Mortgage 
                Corporation, the Resolution Trust Corporation, 
                or the Federal Deposit Insurance Corporation, 
                in any case in which the assignment, sale, or 
                transfer of the servicing of the mortgage loan 
                is preceded by--
                          (i) termination of the contract for 
                        servicing the loan for cause;
                          (ii) commencement of proceedings for 
                        bankruptcy of the servicer; or
                          (iii) commencement of proceedings by 
                        the Federal Deposit Insurance 
                        Corporation or the Resolution Trust 
                        Corporation for conservatorship or 
                        receivership of the servicer (or an 
                        entity by which the servicer is owned 
                        or controlled).
          (3) Servicing.--The term ``servicing'' means 
        receiving any scheduled periodic payments from a 
        borrower pursuant to the terms of any loan, including 
        amounts for escrow accounts described in section 10, 
        and making the payments of principal and interest and 
        such other payments with respect to the amounts 
        received from the borrower as may be required pursuant 
        to the terms of the loan.
  (j) Transition.--
          (1) Originator liability.--A person who makes a 
        federally related mortgage loan shall not be liable to 
        a borrower because of a failure of such person to 
        comply with subsection (a) with respect to an 
        application for a loan made by the borrower before the 
        regulations referred to in paragraph (3) take effect.
          (2) Servicer liability.--A servicer of a federally 
        related mortgage loan shall not be liable to a borrower 
        because of a failure of the servicer to perform any 
        duty under subsection (b), (c), (d), or (e) that arises 
        before the regulations referred to in paragraph (3) 
        take effect.
          (3) Regulations and effective date.--The Bureau shall 
        establish any requirements necessary to carry out this 
        section. Such regulations shall include the model 
        disclosure statement required under subsection (a)(2).
  (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 Bureau of Consumer 
                Financial Protection 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 or assignee of the 
                loan; or
                  (E) fail to comply with any other obligation 
                found by the Bureau of Consumer Financial 
                Protection, 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 clause 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, or as otherwise required by the 
        Bureau of Consumer Financial Protection.
          (3) Termination of force-placed insurance.--Within 15 
        days of the receipt by a servicer of confirmation of a 
        borrower's existing insurance coverage, the servicer 
        shall--
                  (A) terminate the force-placed insurance; and
                  (B) refund to the consumer all force-placed 
                insurance premiums paid by the borrower during 
                any period during which the borrower's 
                insurance coverage and the force-placed 
                insurance coverage were each in effect, and any 
                related fees charged to the consumer's account 
                with respect to the force-placed insurance 
                during such period.
          (4) Clarification with respect to flood disaster 
        protection act.--No provision of this section shall be 
        construed as prohibiting a servicer from providing 
        simultaneous or concurrent notice of a lack of flood 
        insurance pursuant to section 102(e) of the Flood 
        Disaster Protection Act of 1973.
  (m) Limitations on Force-placed Insurance Charges.--All 
charges, apart from charges subject to State regulation as the 
business of insurance, related to force-placed insurance 
imposed on the borrower by or through the servicer shall be 
bona fide and reasonable.
  (n) Small Servicer Exemption.--The Bureau shall, by 
regulation, provide exemptions to, or adjustments for, the 
provisions of this section for a servicer that annually 
services 20,000 or fewer mortgage loans, in order to reduce 
regulatory burdens while appropriately balancing consumer 
protections.

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