Responsible Lending Act - Mortgage Lending Improvements and Uniform National Standards Act - Amends the Truth in Lending Act to define higher-cost mortgage.
Sets forth related provisions with respect to: (1) requirements for higher-cost mortgages; (2) dispute and error resolution; (3) damages, rescission and liability; (4) State law coordination; (5) State enforcement authority; (6) prepayment penalties and late charges; and (7) consumer counseling.
Expanding Housing Opportunities Through Education and Counseling Act - Amends the Department of Housing and Urban Development Act to establish, in the Office of the Secretary of Housing and Urban Development (HUD), the Office of Housing Counseling. Directs the Office to carry out HUD homeownership and rental counseling functions, including related research, grant administration, public outreach, and development of policy and performance measures.
Amends the Housing and Urban Development Act of 1968 to direct the Secretary to: (1) establish homeownership and rental counseling procedures, and a related a toll-free telephone number and World Wide Web site; (2) certify computer software programs for consumer evaluation of residential mortgage loans; (3) establish a housing counseling multimedia outreach program for vulnerable populations; (4) assist States, local government, and non-profit organizations with consumer education programs about mortgage, refinancing, home equity, or home repair loans; and (5) make grants for State, local government, and nonprofit organization housing counseling assistance.
Requires organizations to use HUD-certified counselors in order to qualify for specified HUD assistance.
Amends the Real Estate Settlement Procedures Act of 1974 to: (1) revise the mortgage information booklet; (2) set forth prohibitions on a servicer of a federally related mortgage; and (3) prohibit a creditor from providing a higher-cost mortgage to any consumer without first obtaining a written appraisal of the property.
Amends the Truth in Lending Act to require a creditor in certain transactions secured by a residence to establish an escrow or impound account for taxes and hazard insurance payments.
Directs: (1) the Secretary to conduct studies of mortgage servicing fraud, and home loan default and foreclosures; and (2) the Government Accountability Office (GAO) to conduct an appraisal process study.
Directs the Secretary to establish: (1) a national mortgage broker database; and (2) Federal mortgage broker requirements. Sets forth uniform State mortgage broker law guidelines, and states that Federal requirements shall apply to those States that have not enacted uniform laws.
Sets forth liability provisions for intentional unlawful disclosures, with a good faith exception.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1295 Introduced in House (IH)]
109th CONGRESS
1st Session
H. R. 1295
To protect consumers against unfair and deceptive practices in
connection with higher cost mortgage transactions, to strengthen the
civil remedies available to consumers under existing law, to provide
for certain uniform lending standards, to improve housing counseling,
to better mortgage servicing, to enhance appraisal standards and
oversight, to establish licensing and minimum standards for mortgage
brokers, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 15, 2005
Mr. Ney (for himself, Mr. Kanjorski, Mr. Gary G. Miller of California,
Mr. Meeks of New York, Mr. Gillmor, Mr. Crowley, Mr. Feeney, Mr. Clay,
Mr. Sherman, Mr. Scott of Georgia, Ms. Hooley, and Mr. Tiberi)
introduced the following bill; which was referred to the Committee on
Financial Services
_______________________________________________________________________
A BILL
To protect consumers against unfair and deceptive practices in
connection with higher cost mortgage transactions, to strengthen the
civil remedies available to consumers under existing law, to provide
for certain uniform lending standards, to improve housing counseling,
to better mortgage servicing, to enhance appraisal standards and
oversight, to establish licensing and minimum standards for mortgage
brokers, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Responsible Lending Act''.
SEC. 2. TABLE OF CONTENTS.
Sec. 1. Short title.
Sec. 2. Table of contents.
TITLE I--HIGHER-COST MORTGAGES
Sec. 101. Short title.
Sec. 102. Definitions relating to higher-cost mortgages.
Sec. 103. Amendments to requirements for higher-cost mortgages.
Sec. 104. Amendments relating to dispute and error resolution.
Sec. 105. Amendments to damages, rescission and liability provisions.
Sec. 106. Coordination with State law.
Sec. 107. Clarification of State enforcement authority.
Sec. 108. Prepayment penalties and late charges.
Sec. 109. Regulations.
Sec. 110. Effective dates.
TITLE II--HOUSING COUNSELING
Subtitle A--Consumer counseling
Sec. 201. Consumer counseling requirements.
Subtitle B--Expanded housing counseling opportunities
Sec. 211. Short title.
Sec. 212. Establishment of Office of Housing Counseling.
Sec. 213. Counseling procedures.
Sec. 214. Grants for housing counseling assistance.
Sec. 215. Requirements to use HUD-certified counselors under HUD
programs.
Sec. 216. Study of defaults and foreclosures.
Sec. 217. Definitions for counseling-related programs.
Sec. 218. Updating and simplification of mortgage information booklet.
Sec. 219. Option for notice of foreclosure prevention counseling
availability.
TITLE III--MORTGAGE SERVICING
Sec. 301. Escrow and impound accounts relating to certain consumer
credit transactions.
Sec. 302. Disclosure notice required for consumers who opt out of
escrow services.
Sec. 303. Mortgage servicing clarification.
Sec. 304. Real Estate Settlement Procedures Act of 1974 amendments.
Sec. 305. Mortgage servicing studies required.
TITLE IV--APPRAISAL ACTIVITIES
Sec. 401. Property appraisal requirements.
Sec. 402. Amendments relating to appraisal subcommittee of FIEC,
appraiser independence, and approved
appraiser education.
Sec. 403. Study required on improvements in appraisal process and
compliance programs.
TITLE V--REQUIREMENTS FOR MORTGAGE BROKERS
Subtitle A--Licensing and minimum standards
Sec. 501. State regulation of mortgage brokers.
Sec. 502. Federal mortgage broker requirements.
Sec. 503. Definitions.
Subtitle B--Database of licensed mortgage brokers
Sec. 511. Establishment.
Sec. 512. Database.
Sec. 513. Fees.
Sec. 514. Confidentiality of information.
Sec. 515. Liability provisions.
TITLE I--HIGHER-COST MORTGAGES
SEC. 101. SHORT TITLE.
This title may be cited as the ``Mortgage Lending Improvements and
Uniform National Standards Act''.
SEC. 102. DEFINITIONS RELATING TO HIGHER-COST MORTGAGES.
(a) Higher-Cost Mortgage Defined.--Section 103(aa) of the Truth in
Lending Act (15 U.S.C. 1602(aa)(1)) is amended--
(1) by striking all that precedes paragraph (2) and
inserting the following:
``(aa) Higher-Cost Mortgage Defined.--
``(1) In general.--The terms `higher-cost mortgage' and
`mortgage referred to in this subsection' mean a consumer
credit transaction that is secured by the consumer's principal
dwelling, other than a reverse mortgage transaction, if any of
the following apply with respect to such consumer credit
transaction:
``(A) The transaction is secured by a first
mortgage on the consumer's principal dwelling and the
annual percentage rate on the credit, 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.
``(B) The transaction is secured by a junior or
subordinate mortgage on the consumer's principal
dwelling and the annual percentage rate on the credit,
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.
``(C) The total loan amount exceeds $40,000 and
total points and fees payable on the transaction will
exceed 5 percent of the total loan amount.
``(D) The total loan amount is $40,000 or less and
total points and fees payable on the transaction will
exceed 6 percent of the total loan amount.''; and
(2) in paragraph (2)(B)(i), by striking ``that'' and
inserting ``than''.
(b) Points and Fees Defined.--Section 103(aa) of the Truth in
Lending Act (15 U.S.C. 1602(aa)) is amended--
(1) by striking paragraph (3);
(2) by striking paragraph (4) and inserting the following
new paragraph:
``(3) Points and fees defined.--
``(A) In general.--For purposes of subparagraphs
(C) and (D) of paragraph (1), the term `points and
fees' includes--
``(i) all items included in the finance
charge, except interest or the time-price
differential;
``(ii) all compensation paid directly to
mortgage brokers by or on behalf of the
consumer (other than borrower credits);
``(iii) each of the charges listed in
section 106(e), except an escrow for future
payment of taxes or insurance, unless--
``(I) the charge is bona fide,
competitive, and reasonable;
``(II) the creditor receives no
direct compensation; and
``(III) the charge is paid to a
third party; and
``(iv) all prepayment fees or penalties on
the new loan that will be incurred by the
borrower if the loan refinances a previous loan
currently held by the same creditor or an
affiliate of the creditor.
``(B) Excludable bona fide discount points.--Not
more than 2 bona fide loan discount points in
connection with the loan transaction may be excluded
from the amount of points and fees taken into account
for purposes of paragraph (1).''; and
(3) by redesignating paragraph (5) as paragraph (4).
(c) Bona Fide Discount Points and Benchmark Rate Defined.--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) Other Interest Rate Related Terms.--
``(1) Bona fide discount points.--The term `bona fide
discount points' means loan discount points that--
``(A) are knowingly paid by the borrower;
``(B) are paid for the express purpose of lowering
the interest rate;
``(C) reduce the interest rate applicable to the
loan from an interest rate that does not exceed the
benchmark rate; and
``(D) reduce the interest rate by a minimum of 25
basis points per discount point so long as all other
terms of the loan remain the same.
``(2) Benchmark rate.--The term `benchmark rate' means the
interest rate that the consumer can reduce by paying bona fide
discount points, not to exceed the sum of--
``(A) 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; and
``(B) 4 percentage points.''.
(d) Technical and Conforming Amendment.--Paragraph (2) of section
103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)(2)) is amended
by striking ``specified in paragraph (1)(A)'' and inserting ``specified
in subparagraph (A) or (B) of paragraph (1)''.
SEC. 103. AMENDMENTS TO REQUIREMENTS FOR HIGHER-COST MORTGAGES.
(a) Prepayment Penalties.--Subsection (c) of section 129 of the
Truth in Lending Act (15 U.S.C. 1639(c)) is amended to read as follows:
``(c) [Repealed]''.
(b) Balloon Payments.--Section 129(e) of the Truth in Lending Act
(15 U.S.C. 1639(e)) is amended--
(1) by striking ``Payments.--A mortgage'' and inserting
``Payments.--
``(1) In general.--A mortgage'';
(2) by striking ``having a term of less than 5 years''; and
(3) by adding at the end the following new paragraphs:
``(2) Exception.--
``(A) In general.--Paragraph (1) shall not apply
when the payment schedule is adjusted to account for
the seasonal or irregular income of the consumer or if
the purpose of the loan is a bridge loan.
``(B) Bridge loan defined.--For purposes of this
subsection, the term `bridge loan' means a loan that--
``(i) has a period to maturity of 18 months
or less; and
``(ii) is made in connection with the
acquisition or construction of a dwelling.
``(3) Notice required.--A creditor that offers a higher-
cost mortgage having a balloon payment term that, in accordance
with paragraph (2), is not subject to paragraph (1) shall
clearly disclose to the consumer that--
``(A) the loan contains such a term;
``(B) the balloon payment amount that will be owed
by the consumer on the loan maturity date will be equal
to the initial principal loan amount, plus interest and
costs that may be due, minus any principal payments
that may have been made over the term of the loan; and
``(C) balloon payments are permissible under the
circumstances described in paragraph (2).''.
(c) Negative Amortization.--Subsection (f) of section 129 of the
Truth in Lending Act (15 U.S.C. 1639(f)) is amended--
(1) by striking ``Amortization.--A mortgage referred to in
section 103(aa)'' and inserting ``Amortization.--
``(1) In general.--A higher-cost mortgage''; and
(2) by adding at the end the following new paragraph:
``(2) Exception for period of forbearance.--Paragraph (1)
shall not apply with respect to negative amortization resulting
from periods of temporary forbearance allowed by the
creditor.''.
(d) Financing of Points or Fees.--Section 129 of the Truth in
Lending Act (15 U.S.C. 1639) is amended by adding at the end the
following new subsection:
``(m) Restrictions on Financing of Points or Fees; Disclosures
Required.--
``(1) In general.--No creditor may, in connection with the
formation or consummation of a higher-cost mortgage
transaction, finance, directly or indirectly, any portion of
the points and fees applicable to such mortgage that exceeds an
amount equal to 5 percent of the total loan amount (or, if the
total loan amount is $40,000 or less, an amount equal to 6
percent of the total loan amount).
``(2) Disclosure.--If, in connection with the consummation
of a higher-cost mortgage, any portion of the points, fees, or
other charges payable to the creditor or any third party are
included, directly or indirectly, in the principal amount of
the loan or otherwise financed by the creditor, the creditor
shall disclose that fact to the consumer together with a
statement that the creditor cannot require that such point, fee
or charge be financed.''.
(e) Prohibition on Evasions Through Structuring Transaction or
Reciprocal Arrangements.--Section 129 of the Truth in Lending Act (15
U.S.C. 1639) is amended by inserting after subsection (n) (as added by
section 104(a) of this Act) the following new subsection:
``(o) Prohibition on Evasions Through Structuring Transaction or
Reciprocal Arrangements.--
``(1) In general.--No creditor, or any affiliate of a
creditor, may take any action for the purpose of, or with the
intent to, circumvent or evade any requirement of this title
with respect to higher-cost mortgages, including--
``(A) entering into any reciprocal arrangement;
``(B) dividing any loan transaction into separate
parts for the purpose of evading, and with the intent
to evade, the provisions of this section; and
``(C) in the case of a credit transaction that
would be a higher-cost mortgage if structured as a
consumer loan, structuring or restructuring such
transaction as a business loan or other form of credit
for the purpose of evading, and with the intent to
evade, the provisions of this section.
``(2) Rule on nonattribution.--If, in the case of 2 credit
transactions that are consummated at the same time and are
secured by the same real property, the loan-to-value ratio of 1
of such transactions is 80 percent or more, the points and fees
payable by the consumer at or before closing on such
transaction may not be imputed or attributed to the other
transaction for purposes of determining whether a creditor has
attempted to evade any requirement of this title.
``(3) Reciprocal arrangement defined.--For purposes of this
subsection, the term `reciprocal arrangement' means any
agreement, understanding, or other arrangement under which--
``(A) a creditor or affiliate of a creditor agrees
to engage in a transaction with, or on behalf of,
another creditor, or an affiliate of such other
creditor, in exchange for
``(B) the agreement of the second creditor referred
to in subparagraph (A), or any affiliate of such
creditor, to engage in a transaction with, or on behalf
of, the first creditor referred to in such
subparagraph, or any affiliate of such creditor,
for the purpose of evading any requirement or prohibition under
this title, or any other provision of any Federal law or
regulation relating to higher-cost mortgages.''.
(f) No Encouragement of Default or Nonpayment on Prior Existing
Loan.--Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is
amended by inserting after subsection (o) (as added by subsection (e)
of this section) the following new subsection:
``(p) No Encouragement of Default or Skipped Payment.--No creditor
may recommend or encourage default or nonpayment, including nonpayment
of any periodic payment, on an existing loan or other debt prior to and
in connection with the consummation or planned consummation of a
higher-cost mortgage that refinances all or any portion of such
existing loan or debt.''.
(g) Ability to Repay.--Subsection (h) of section 129 of the Truth
in Lending Act (15 U.S.C. 1639(h)) is amended to read as follows:
``(h) Prohibition on Extending Credit Without Regard to Payment
Ability of Consumer.--
``(1) In general.--A creditor shall not extend credit to a
consumer under a higher-cost mortgage based on the foreclosure
value of the consumer's principal dwelling securing the loan
without regard to the consumer's repayment ability, including
the consumer's current and expected income, current
obligations, and employment.
``(2) Presumption of ability.--
``(A) In general.--Unless a creditor knows or has
reason to know otherwise and except as provided in
paragraphs (3) and (4), a creditor may presume that a
consumer is able to make the scheduled payments to
repay the higher-cost mortgage, if, at the time the
extension of credit is approved--
``(i) the consumer's total monthly payments
due on outstanding obligations, including
amounts owed under the higher-cost mortgage, do
not exceed 50 percent of the consumer's monthly
gross income, as verified by the credit
application, the consumer's financial
statement, a credit report, or any other
reasonable means, subject to subparagraph (B);
and
``(ii) the consumer has sufficient residual
income, as determined in accordance with
regulations issued by the Board, to pay
essential monthly expenses after paying the
scheduled monthly payments and any additional
debt.
``(B) Verification of retirement and other
benefits.--If a consumer's repayment ability is based
substantially on fixed income (from any source, public
or private, including retirement or disability benefits
paid by the Social Security Administration or other
governmental agency), the income verification required
under subparagraph (A)(i) shall include reasonable
documentation of such fixed income, in addition to any
statement by the consumer.
``(C) Rule of construction.--The absence of any
means of verification described in clause (i) or (ii)
of subparagraph (A) shall not be construed as creating
a presumption of a violation of this subsection.
``(3) Presumption not applicable in case of balloon
payments.--A balloon payment or final payment on a bridge loan
otherwise permissible under subsection (e) shall not be
construed as a payment for purposes of paragraph (2)(A).
``(4) Verification of income required in case of consumer
without earned or fixed income.--A creditor may rely on a
consumer's statement of income for purposes of paragraph (2)(A)
if--
``(A) the consumer verifies his or her monthly
income on a signed financial statement or other
documentation that shows the consumer's income and
obligations before the extension of credit; and
``(B) the creditor has a reasonable basis for
believing that the income exists and will support
repayment of the transaction.''.
(h) Prohibition on Single Premium Credit Insurance.--Section 129 of
the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after
subsection (p) (as added by subsection (f) of this section) the
following new subsection:
``(q) Prohibition on Single Premium Credit Insurance.--
``(1) In general.--No consumer credit transaction involving
a higher-cost mortgage may include the offer or sale of any
credit insurance policy, or any analogous product whether
deemed to be insurance, including any debt cancellation or
suspension agreement or contract, on a single premium basis.
``(2) Collection of monthly premiums not affected.--The
prohibition in paragraph (1) shall not be construed as
affecting the right of a creditor to collect premium payments
on credit insurance or any analogous products that are
calculated and paid on a regular monthly basis.
``(3) Credit insurance defined.--For purposes of this
subsection, the term `credit insurance' means a policy of
insurance that insures, guarantees or indemnifies the creditor,
as the primary beneficiary, for the repayment of the
outstanding balance of the loan against death, illness,
accident, disability, loss of property, or unemployment of the
consumer.''.
(i) Limitations on Refinancing.--Section 129 of the Truth in
Lending Act (15 U.S.C. 1639) is amended by inserting after subsection
(q) (as added by subsection (h) of this section) the following new
subsection:
``(r) Limitations on Refinancing.--
``(1) In general.--No creditor shall knowingly or
intentionally engage in the unfair act or practice of loan
flipping.
``(2) Safe harbor.--A higher-cost mortgage shall be
presumed to provide a reasonable tangible benefit to the
consumer if any 1 of the following factors applies to the new
loan:
``(A) The purpose of the higher-cost mortgage is to
finance a personal investment or a purchase or
acquisition of real property that is not the principal
dwelling of the consumer.
``(B) The interest rate on the new fixed-rate
higher-cost mortgage is lower than the interest rate on
the fixed-rate refinanced loan and it will take 4 years
or less for the consumer to recoup the costs of the
points and fees, and other closing costs that are
required to be paid by the consumer on the new higher-
cost mortgage through savings resulting from the lower
interest rate.
``(C) The creditor makes a good-faith determination
that the consumer's monthly payment to pay the higher-
cost mortgage is a minimum of 15 percent less than the
total of all minimum monthly payments on the
obligations being financed, based on a consumer credit
report or other reasonable documentation utilized by
the creditor.
``(D) Any cash proceeds paid either to the
consumer, or on behalf of the consumer, above the
payoff of the refinanced loan are in excess of twice
the amount of total points and fees and closing costs
that are required to be paid by the consumer.
``(E) The refinanced loan is changed from a loan
that is not a fixed-rate fully-amortizing loan to a
fixed-rate fully-amortizing loan.
``(F) The terms of repayment of the refinanced loan
are changed from a longer full amortization term to a
shorter full amortization term by at least 5 years.
``(G) The consumer presents a certificate, dated
not more than 90 days prior to the date of the
application for the new higher-cost mortgage, from an
independent housing or credit counselor approved by the
United States Department of Housing and Urban
Development, or by any State regulatory agency, which
states that the consumer has received counseling with
regard to refinancing the existing loan.
``(H) The consumer provides the creditor with a
written, signed statement not prepared by the creditor,
at or before the consummation of the new higher-cost
mortgage, that the new loan is needed to meet a bona
fide personal or family financial, health or medical
emergency, or to avoid a filed foreclosure action.
``(I) The refinancing is necessary under, or in
response to, any order or judgment of a court of
competent jurisdiction.
``(3) Special mortgages.--
``(A) In general.--A higher-cost mortgage may not
be used to refinance an existing loan if--
``(i) it is apparent on the face of the
security instrument for the existing loan that
it is a special mortgage; and
``(ii) as a result of the refinancing, the
consumer would lose 1 or more of the benefits
of the special mortgage.
``(B) Exception under certain circumstances.--The
restriction in subparagraph (A) shall not apply if--
``(i) the holder of the special mortgage
being refinanced consents in writing to the new
higher-cost mortgage; and
``(ii) a credit counselor referred to in
paragraph (2)(G) certifies in writing that the
consumer has obtained counseling on the
advantages and disadvantages of the new loan.
``(4) Definitions.--For purposes of this subsection, the
following definitions shall apply:
``(A) Loan flipping.--
``(i) In general.--The term `loan flipping'
means an extension of credit by a creditor to a
consumer for a higher-cost mortgage that--
``(I) refinances an existing home
loan that was consummated within the
prior 24 months; and
``(II) does not have a reasonable
tangible benefit to the consumer
considering all material circumstances
known to the creditor.
``(ii) Determination of reasonable tangible
benefit.--In instances where one of the safe
harbor provisions contained in subsection (r)
is inapplicable, the factors to be considered
may include the terms and conditions of both
the new and refinanced loan, the consumer's
known economic and non-economic circumstances,
the purpose of the loan, and the cost of the
new loan.
``(B) Special mortgage.--The term `special
mortgage' means a consumer credit transaction that is
originated, subsidized, or guaranteed by or through a
Federal, State, tribal, or local government,
government-sponsored enterprise (as defined in section
1404(e) of Financial Institutions Reform, Recovery, and
Enforcement Act of 1989), or nonprofit organization
(other than a mutual bank, mutual savings association,
or credit union) that either--
``(i) bears, by at least 2 percentage
points, a below-market interest rate as of the
date of its consummation; or
``(ii) has non-standard payment terms
beneficial to the consumer, such as payments
that vary with income or are limited to a
percentage of income, or terms that permit the
consumer to make no payments under specified
conditions.
``(5) Rule of construction.--No negative inference may be
drawn from the absence of any factor or circumstance described
in any subparagraph of paragraph (2) with regard to any higher-
cost mortgage so as to create a presumption of a violation of
this subsection with regard to such mortgage by reason of such
absence.
``(6) Limitation on legal fees.--Notwithstanding section
130 or any other provision of law, in any successful action
instituted by a person for a violation of paragraph (1), the
person shall not be entitled to recover the costs of the action
and attorney's fees if the court determines, in the court's
discretion, that a reasonable offer to remedy the violation and
compensate the person for the violation was made to such person
and the offer was rejected.''.
(j) Requirements Relating to Home Improvement Contracts.--Section
129(i) of the Truth in Lending Act (15 U.S.C. 1639(i)) is amended--
(1) by redesignating paragraphs (1) and (2) as
subparagraphs (A) and (B), respectively, and moving the left
margin of each such subparagraph (as so redesignated) 2 ems to
the right;
(2) by striking ``Improvement Contracts.--A creditor shall
not'' and inserting ``Improvement Contracts.--
``(1) In general.--A creditor shall not''; and
(3) by adding at the end the following new paragraph:
``(2) No payment in full without proof of completion of the
work.--
``(A) In general.--No creditor may use the proceeds
of a higher-cost mortgage to make a final payment or
payment in full to a home improvement contractor under
a home improvement contract without proof of completion
in accordance with subparagraph (B).
``(B) Proof of completion.--
``(i) Completion certificate under state
law.--A completion certificate, completed in
compliance with applicable State law, stating
that the contractor has fully performed the
contract obligations, shall be deemed proof of
completion of such obligations for purposes of
this subsection.
``(ii) Lack of availability of certificate
under state law.--If applicable State law does
not provide for or recognize completion
certificates for home improvement contractors,
a signed statement by both the consumer who
entered into the higher-cost mortgage and the
home improvement contractor referred to in
subparagraph (A) that the contractor has fully
performed the contract shall constitute proof
of completion of such obligation for purposes
of this subsection.
``(C) Inspection.--No creditor may use the proceeds
of a higher-cost mortgage to make a final payment or
payment in full to a home improvement contractor under
a home improvement contract without first arranging and
paying for an independent inspection of any home
improvements exceeding $10,000 to verify that the work
has been completed.
``(D) Disclosure.--Before making a final payment to
a home improvement contractor, the creditor shall
provide the following written disclosure to the
consumer: `You will be asked, when the job is
completed, to sign a statement confirming the work has
been completed because the lender may not make a final
payment or payment in full to the home improvement
contractor without such a statement signed by both the
contractor and you. If the work has not been completed
according to the terms of your work agreement, do not
sign the statement and notify the lender immediately.
If the improvements you are financing exceed $10,000,
the lender is required by law to arrange for an
inspection of the job. The purpose of the inspection is
to ensure that the job has been completed according to
the terms of the contract, and it is not a warranty or
guarantee of the overall quality of the work. If you
would like a more detailed inspection of the
contractor's work, you may want to arrange for an
additional inspection on your own.'.''.
(k) Additional Specific Disclosures.--Section 129(a)(1) of the
Truth in Lending Act (15 U.S.C. 1639(a)(1)) is amended by adding at the
end the following new subparagraphs:
``(C) `The interest rate and the amount of fees you
pay on this loan are higher than you would pay for a
conventional or ``prime'' rate loan. As a result, your
monthly interest payments are higher than those on a
comparable loan with a lower interest rate.'.
``(D) `The rate of interest and the amount of fees
you pay on a loan may vary depending on which lender or
broker you select. You may be able to get a loan with a
lower interest rate. Your credit score can provide an
indication of whether you may qualify for a lower-cost
prime loan. If you have a relatively good credit score,
such as a FICO score in excess of 660, you may qualify
for a ``prime'' loan. In that event, you should
consider shopping more for a lower-cost loan instead of
simply accepting the higher-cost loan that has been
offered to you.'.
``(E) `If you are taking out this loan to repay
other loans, look to see how many months it will take
to pay for this loan and what the total amount is that
you will have to pay before this loan is repaid. Even
though the total amount you will have to pay each month
for this loan may be less than the total amount you are
paying each month for those other loans, you may have
to pay on this loan for a longer period than those
other loans, and that may cost you more overall.'.
``(F) `You may get into serious financial
difficulties if you use this loan to pay off old debts
and then replace them with other new debts.'.''.
(l) No Call Provision.--Section 129 of the Truth in Lending Act (15
U.S.C. 1639) is amended by inserting after subsection (r) (as added by
subsection (i) of this section) the following new subsection:
``(s) No Call Provision.--
``(1) In general.--A higher-cost mortgage may not include
terms under which the indebtedness may be accelerated by the
creditor, in the creditor's sole discretion.
``(2) Exceptions.--Paragraph (1) shall not apply if the
repayment of the higher-cost mortgage has been accelerated--
``(A) by default or pursuant to a due-on-sale
provision or some other provision of the loan documents
unrelated to the payment schedule; or
``(B) due to any action or omission by the consumer
that adversely affects the creditor's security interest
in the dwelling or any rights of the creditor in such
security.''.
(m) Modification and Deferral Fees Prohibited.--Section 129 of the
Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after
subsection (s) (as added by subsection (l) of this section) the
following new subsection:
``(t) Modification and Deferral Fees Prohibited.--
``(1) In general.--A creditor may not charge a consumer any
fee in excess of the lesser of the amount of 1 monthly loan
payment on the existing higher-cost mortgage or $300.00 to
modify, renew, extend, or amend a higher-cost mortgage, or to
defer any payment due under the terms of such mortgage.
``(2) Exception for certain workouts.--The restrictions in
paragraph (1) shall not apply in the case of an existing
higher-cost mortgage that is in default or more than 60 days
delinquent, if the modification, renewal, extension, or
amendment is part of the resolution or workout of the default
or delinquency.''.
(n) Increased Interest Rate Upon Default 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 (m) of this section) the
following new subsection:
``(u) Increased Interest Rate Upon Default Permitted for Variable-
Rate Higher-Cost Mortgage.--In the case of a higher-cost mortgage that
is subject to a variable rate of interest, subsection (d) shall not
apply to changes in the rate of interest due to any change in the index
rate, to the extent the change of interest is not due in any part to a
default by the consumer or a permissible acceleration by the
creditor.''.
(o) Prepayment of Periodic Payments From Proceeds Prohibited.--
Subsection (g) of section 129 of the Truth in Lending Act (15 U.S.C.
1639) is amended to read as follows:
``(g) Prepayment of Periodic Payments From Proceeds Prohibited.--No
higher-cost mortgage may include terms under which more than 2
scheduled payments of interest or principal due under such mortgage may
be paid in advance or otherwise deducted from the proceeds of the
loan.''.
(p) Payoff Statements.--Section 129 of the Truth in Lending Act (15
U.S.C. 1639) is amended by inserting after subsection (u) (as added by
subsection (n) of this section) the following new subsection:
``(v) Payoff Statements.--
``(1) Fees.--
``(A) In general.--Except as provided in
subparagraphs (B) and (C), 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 higher-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 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 that are not higher-cost
mortgages.
``(C) Multiple requests.--A creditor or servicer
shall not charge any fee for the first 2 payoff
requests in any continuous 6-month period. A creditor
or servicer may charge a reasonable fee for each
additional request during any such period.
``(2) Prompt delivery.--A creditor or servicer shall send a
payoff balance within 7 business days of receipt of a written
request for such balance.''.
(q) Credit Reporting Requirements.--Section 129 of the Truth in
Lending Act (15 U.S.C. 1639) is amended by inserting after subsection
(v) (as added by subsection (p) of this section) the following new
subsection:
``(w) Duty to Report.--
``(1) In general.--Each creditor who enters into a higher-
cost mortgage, and each successor, assignee or servicer to such
creditor with respect to such mortgage shall report monthly the
complete payment history, favorable and unfavorable, of the
obligor with respect to such transaction to a consumer
reporting agency that compiles and maintains files on consumers
on a nationwide basis, while such transaction is in effect.
``(2) Exception for short-term holders.--Paragraph (1)
shall not apply to any person who holds a higher-cost mortgage
for less than 90 days.
``(3) Exception for certain circumstances.--Paragraph (1)
shall not apply in connection with a loan forbearance or
workout of a loan in default or the settlement of a dispute or
consumer complaint.''.
(r) Steering Prohibited.--Section 129 of the Truth in Lending Act
(15 U.S.C. 1639) is amended by inserting after (w) (as added by
subsection (q) of this section) the following new subsection:
``(x) Steering Prohibited.--
``(1) Creditors.--
``(A) In general.--A creditor who originates a
higher-cost mortgage shall not knowingly or
intentionally steer or direct a consumer into a loan
product offered by the creditor that is not based upon
the creditor's best credit grade that the consumer
would qualify for under the creditor's then-current
underwriting guidelines.
``(B) Notice of credit score.--A creditor who
originates a higher-cost mortgage shall, within 3
business days of the later of--
``(i) the receipt of an application for
such higher-cost mortgage loan; or
``(ii) the making of a determination that
the consumer only qualifies for a higher-cost
mortgage,
notify the consumer in writing of the consumer's credit
score.
``(C) Rescission or reformation.--
``(i) In general.--A creditor found by a
preponderance of the evidence to have violated
subparagraph (A) shall, if the creditor is the
holder of the obligation, at the consumer's
option--
``(I) rescind the loan as provided
for in section 125; or
``(II) rewrite the loan into a loan
product at the credit grade that the
consumer would have originally
qualified for but for the violation.
``(ii) Restitution.--In addition to the
action required under clause (i) with respect
to a creditor, or in the case of a creditor who
is not the holder of the obligation and has
been found by a preponderance of the evidence
to have violated subparagraph (A), such
creditor shall make appropriate restitution to
the consumer of all fees, interest, or other
charges paid by the consumer above those that
would have been paid had the loan not been
originated at the less favorable credit grade.
``(D) Safe harbor.--A creditor shall not be
presumed to have violated subparagraph (A) if--
``(i) the creditor had a reasonable basis
to believe that the credit grade determined by
the creditor's then-current underwriting
guidelines applied to a consumer was
appropriate, based on the information available
to that creditor, including the information
provided by the consumer; or
``(ii) the consumer voluntarily, on an
informed basis, agreed to a loan with a higher
rate than that for which the consumer would
otherwise qualify.
``(2) Brokers.--
``(A) In general.--A broker who is not a creditor
shall not knowingly or intentionally steer or direct
any prospective consumer to accept a loan product
offered by a creditor that is less favorable than the
loan products offered by the creditors with whom the
broker regularly does business and for which the
consumer would qualify for under such creditors' best
credit grade based on such creditors' then-current
underwriting guidelines.
``(B) Safe harbor.--A broker shall not be presumed
to have violated subparagraph (A) if--
``(i) the broker had a reasonable basis to
believe that the credit grade applied to a
consumer was appropriate, based on the
information available to that broker, including
the information provided by the consumer; or
``(ii) the consumer voluntarily, on an
informed basis, agreed to a loan with a higher
rate than that for which the consumer would
otherwise qualify.
``(C) Penalty.--A broker who knowingly or
intentionally violates this section shall be liable to
the consumer for an amount equal to the sum of $4,000
and the consumer's actual financial damages and
reasonable attorney's fees and court costs.''.
(s) Regulations for Disclosures.--Section 129(l) of the Truth in
Lending Act (15 U.S.C. 1639(l)) is amended by adding at the end the
following new paragraph:
``(3) Redefinition.--The Board may amend the definition and
determination of what constitutes a prime loan for purposes of
the disclosure requirements contained in subsection (a)(1).''.
SEC. 104. AMENDMENTS RELATING TO DISPUTE AND ERROR RESOLUTION.
(a) Prohibition on Arbitration Requirements.--Section 129 of the
Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after
subsection (m) (as added by subsection (d) of section 103) the
following new subsection:
``(n) Arbitration.--
``(1) In general.--A higher-cost mortgage may not include
terms that require arbitration or any other nonjudicial
procedure as the method for resolving any controversy or
settling any claim arising out of the transaction.
``(2) Post-controversy voluntary agreements.--
``(A) In general.--Subject to paragraph (3),
paragraph (1) shall not be construed as limiting the
right of the consumer and the creditor to agree
voluntarily 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.
``(B) Requirements for post-controversy
agreements.--Post-controversy voluntary agreements
shall--
``(i) establish the venue for the
arbitration in the Federal judicial district or
division in which the real property that is the
security for the higher-cost mortgage is
located;
``(ii) comply with the standards set forth
by a nationally recognized arbitration
organization, such as the Statement of
Principles of the National Consumer Dispute
Advisory Committee of the American Arbitration
Association or any comparable standards of such
other organization as may be approved by the
Board; and
``(iii) require the creditor to bear the
reasonable costs of all parties to the
arbitration, including the production of fact
witnesses and documents, during at least the
first 2 days of such arbitration.
``(3) No waiver of statutory cause of action.--No provision
of any higher-cost mortgage or any voluntary agreement between
the consumer and the creditor 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.''.
(b) Correction of Errors.--Subsection (b) of section 130 of the
Truth in Lending Act (15 U.S.C. 1640(b)) is amended to read as follows:
``(b) Correction of Errors.--
``(1) In general.--A creditor or assignee shall have no
liability under this section or section 108 or section 112 for
any failure to comply with any requirement imposed under this
chapter or chapter 5, if--
``(A) before the end of the 45-day period beginning
on the date of consummation of a loan, the creditor or
assignee notifies the consumer of the error and makes
appropriate restitution to the consumer of any amounts
collected in error, and takes the necessary action to
make all appropriate adjustments to the credit
transaction to correct the error, including, if
applicable, that the consumer will not be required to
pay an amount in excess of the charge actually
disclosed, or the dollar equivalent of the annual
percentage rate actually disclosed, whichever is less;
or
``(B) before the end of the 60-day period beginning
on the date an error is discovered, whether pursuant to
a final examination report or notice issued under
section 108(e) of this title, or through the creditor's
or assignee's own procedures, or receipt of written
notice from the consumer or service upon the creditor
or assignee of the institution of an action, the
creditor or assignee notifies the consumer of the
error, makes appropriate restitution to the consumer of
any amounts collected in error, takes the necessary
action to make all appropriate adjustments to the
credit transaction to correct the error, including, if
applicable, that the consumer will not be required to
pay an amount in excess of the charge actually
disclosed, or the dollar equivalent of the annual
percentage rate actually disclosed, whichever is less,
pays the consumer an error penalty of $2,000 and the
consumer's reasonable attorney's fees, if any, except
that no error penalty or attorney's fees shall be
assessed if the creditor or assignee discovers the
error through the creditor's or assignee's own
procedures.
``(2) Modification of terms.--In the case of a higher-cost
mortgage, appropriate restitution for purposes of paragraph (1)
above may also include a creditor modifying the terms of the
credit transaction in such a way that the transaction is no
longer a higher-cost mortgage within the meaning of this title.
``(3) Consumer remedy.--If a creditor or assignee fails to
correct the error as provided for above in paragraph (1), the
consumer may file an action or proceed with an action already
filed.
``(4) Effective date of document revisions.--Any document
revisions necessitated by and made consistent with the
procedures set forth above in subparagraph (A) or (B) of
paragraph (1) shall be deemed legally effective for all
purposes as of the original date of the document that was
revised.''.
(c) Clarification Relating to State-Regulated Transactions.--
Section 123 of the Truth in Lending Act (15 U.S.C. 1633) is amended by
striking ``The Board''and inserting ``Except with respect to higher-
cost mortgages, the Board''.
SEC. 105. AMENDMENTS TO DAMAGES, RESCISSION AND LIABILITY PROVISIONS.
(a) Increase in Amount of Civil Money Penalties for Certain
Violations.--Section 130(a) of the Truth in Lending Act (15 U.S.C.
1640(a)) is amended--
(1) in paragraph (2)(A)(iii), by striking ``$2,000'' and
inserting ``$4,000''; and
(2) in paragraph (2)(B), by striking ``$500,000'' and
inserting ``$1,000,000''.
(b) Coordination of Class-Action Damages With Actual Damages.--
Section 130 of the Truth in Lending Act (15 U.S.C. 1640) is amended by
adding at the end the following new subsection:
``(j) Class Actions Relating to Higher-Cost Mortgages.--
``(1) Coordination of class-action damages with actual
damages.--The maximum amount of general damages that may
otherwise be imposed on any person under subsection (a)(2)(B)
for violations of section 129 in a class action shall be
reduced by the aggregate amount of actual damages for which
such person is liable to members of the class under subsection
(a)(1).
``(2) Pattern and practice.--In determining the amount of
any liability of any person under subsection (a)(2)(B) for
violations of section 129 in a class action, the court shall
consider the pattern and practices of the person giving rise to
the violations, and whether or not such pattern and practices
were willful.''.
(c) Amendments Relating to Timing of Waiver by Consumer of Right of
Rescission.--Section 125(a) of the Truth in Lending Act (15 U.S.C.
1635(a)) is amended--
(1) by striking ``(a) Except as otherwise provided'' and
inserting ``(a) Right Established.--
``(1) In general.--Except as otherwise provided''; and
(2) by adding at the end the following new paragraph:
``(2) Timing of election of waiver by consumer.--No
election by a consumer to waive the right established under
paragraph (1) to rescind a transaction shall be effective if--
``(A) the waiver was required by the creditor as a
condition for the transaction; or
``(B) the creditor advised or encouraged the
consumer to waive such right of the consumer.''.
(d) 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 1st sentence, by striking ``Any action'' and
inserting ``Except as provided in the subsequent sentence, any
action'';
(2) by inserting after the first sentence the following new
sentence: ``Any action under this section with respect to any
violation of section 129 (other than subsection (x) of such
section) may be brought in any United States district court, or
in any other court of competent jurisdiction, before the end of
the 2-year period beginning on the date of the occurrence of
the violation, unless a shorter time period is herein
provided.''; and
(3) by inserting ``and except that this sentence shall not
apply to a violation of section 129(x)'' before the period at
the end of the 3rd sentence (as determined taking into account
the amendment made by paragraph (2) of this subsection).
(e) Amendments Relating to Liability of Assignees.--
(1) In general.--Paragraph (4) of section 131(d) of the
Truth in Lending Act (15 U.S.C. 1641(d)) is amended by striking
``mortgage referred to in section 103(aa)'' and inserting
``higher-cost mortgage''.
(2) Rights upon assignment of higher-cost mortgages.--
Section 131(d) of the Truth in Lending Act (15 U.S.C. 1641(d))
is amended--
(A) by redesignating paragraphs (3) and (4) as
paragraphs (4) and (5), respectively; and
(B) by striking paragraphs (1) and (2) and
inserting the following new paragraphs:
``(1) Claims and defenses.--
``(A) In general.--Any person who purchases or is
otherwise assigned a higher-cost mortgage shall be
subject to all claims and defenses with respect to that
mortgage that the consumer could assert against the
creditor of the mortgage either--
``(i) as a defense to the enforcement of
such mortgage by the purchaser or assignee
based on a default by the consumer if such
default is reasonably related to a violation of
this section by the creditor, unless the
consumer demonstrates that the purchaser or
assignee had actual knowledge of or exhibited
reckless indifference to a violation in which
case the consumer may raise any defensive claim
without regard to whether such violation is
related to the consumer's default; or
``(ii) as an affirmative claim, unless the
purchaser or assignee demonstrates, by a
preponderance of the evidence, that a
reasonable person exercising ordinary due
diligence could not determine with reasonable
certainty based on information contained in the
documentation required by this title, the
itemization of the amount financed, and other
disclosure of disbursements that a violation
had occurred.
``(B) Clarification of rights of consumer.--
Subparagraph (A) may not be construed as affecting any
rights of a consumer under subsection (a), (b), or (c)
of this section or any other provision of this title.
``(C) Exclusion.--This section shall not apply if a
purchaser or assignee has exercised such due diligence
by demonstrating that such purchaser or assignee--
``(i) has in place at the time of the
purchase or assignment of the loans, policies
that expressly prohibit the purchase or
acceptance of assignment, by such purchaser or
assignee, of either any higher-cost mortgage at
all or any higher-cost mortgage containing such
violations;
``(ii) requires, by the applicable purchase
contract, that a seller or assignor of such
loans to the purchaser or assignee represents
and warrants to the purchaser or assignee as of
the applicable sale date that either--
``(I) the seller or assignor will
not sell or assign to the purchaser or
assignee either any higher-cost
mortgage at all or any higher-cost
mortgage containing such violations; or
``(II) the seller or assignor is a
beneficiary of a representation and
warranty from a previous seller or
assignor to that effect, and, as a
result of its purchase of the loans,
the purchaser or assignee is a
beneficiary of such representation and
warranty; and
``(iii) exercises reasonable due diligence
at or before the time of the purchase or
assignment of home loans, or within a
reasonable period of time after the purchase or
assignment of such home loans, that is intended
by the purchaser or assignee to prevent the
purchaser or assignee from purchasing or taking
assignment of either any higher-cost mortgages
at all or any higher-cost mortgages containing
such violations.
``(D) Reasonable due diligence.--The reasonable due
diligence requirement referred to in subparagraph
(C)(iii) may be met by employing a statistically
significant sampling methodology and shall not require
loan-by-loan review, for purposes of this subsection.
``(2) Limitation on relief.--
``(A) In general.--Notwithstanding any other
provision of law, relief provided as a result of any
action made permissible by paragraph (1) may not exceed
the greater of--
``(i) with respect to actions based upon a
violation of this title, the amount specified
in section 130; or
``(ii) with respect to other actions, as
specified in paragraph (1)(A)(i), the sum of--
``(I) the amount of all remaining
indebtedness; and
``(II) the total amount paid by the
consumer in connection with the
transaction.
``(B) Factors for the court to consider.--In
determining the amount of the award in any action
referred to in clause (i) or (ii) of subparagraph (A),
the court shall consider, among other relevant
factors--
``(i) the amount of any actual economic
damages awarded and the extent to which the
noneconomic harm suffered from the violation
should be compensable by general damages;
``(ii) the lack of such purchaser's or
assignee's knowledge of or participation in the
facts or circumstances giving rise to the
violations and claim and defenses;
``(iii) the materiality of the violation;
and
``(iv) the relative harm to the consumer.
``(C) Limitation on damages for wrongs not creating
financial losses.--Unless the consumer demonstrates
that the purchaser or assignee had actual knowledge of
or exhibited reckless indifference to a violation of
this title or other applicable law, the damages for
which a purchaser or assignee shall be liable shall be
limited to the amounts specified in paragraphs (1) and
(2) of section 130(a), which consist of damages for
actual financial losses and attorney's fees.
``(3) clarification of terms.--For purposes of determining
the liability of assignees under this section, the terms
`purchaser' and `assignee' shall not include--
``(A) persons whose interest in higher-cost
mortgages is limited to a security interest or who
acquire title as a result of the foreclosure of such
security interest;
``(B) broker-dealers and their affiliates that
trade in mortgage loans and related mortgage securities
and otherwise are not involved in any material respect
in the terms and conditions under which such mortgage
loans were made or such securities were issued;
``(C) passive investors in securities, or interests
in securities, including investors who guarantee the
payment of principal and interest of securities to
other investors, based on and backed by a pool of
residential mortgage loans; or
``(D) purchasers of mortgage loans that do not take
record title to such loans where, within 1 year
following the initial sale, the seller is obligated by
written agreement to repurchase the loans or the
purchaser is obligated by written agreement to deliver
the loans to a third party at the direction of a
seller.''.
SEC. 106. COORDINATION WITH STATE LAW.
Section 111 of the Truth in Lending Act (15 U.S.C. 1610) is
amended--
(1) by adding at the end the following new subsection:
``(f) Higher-Cost Mortgages.--
``(1) In general.--The provisions of this title shall
supersede any provision of the law of any State to the extent
that such provision of law attempts, directly or indirectly, to
regulate, or has the effect of regulating, mortgage lending
activities by or through--
``(A) the imposition of a high-cost limitation,
including--
``(i) through limitations or prohibitions
in connection with contracts for other business
with any such State or any political
subdivision of any such State;
``(ii) by making any conduct in connection
with any such activities subject to civil or
criminal penalties; or
``(iii) by making activities regulated
under real estate, foreclosure, or other laws
of such State or political subdivision
contingent upon the manner in which mortgage
lending activities are conducted; or
``(B) any requirement, limitation, or prohibition
without regard to whether the provisions of the
requirement, limitation, or prohibition are consistent
or inconsistent with section 129 or 129A or whether the
consumer credit transaction subject to such requirement
is a higher-cost mortgage,
without respect to whether or the extent to which such
provision of law may afford greater protection, substantive or
otherwise, to consumers.
``(2) Definitions.--For purposes of this subsection, the
following definitions shall apply:
``(A) Mortgage lending activities.--The term
`mortgage lending activities' includes any
advertisement, solicitation, offer, negotiation,
placement, application, processing, underwriting,
originating, closing, funding, recording, assignment,
purchase, pledge, securitization, holding, servicing,
collection, modification, satisfaction, or foreclosure
in connection with or arising out of a consumer credit
transaction secured by a lien against a consumer's
dwelling, by or on behalf of a broker, creditor,
secured creditor, purchaser, servicer, trustee,
certificate or securities holder, or any other person
or entity that may engage in any of the above
enumerated activities and their respective agents,
contractors, employees, officers, and directors.
``(B) Law of any state.--The term `law of any
State' includes any constitutional provision, statute,
rule, regulation, or ordinance of any State or any
political subdivision of any State, including any State
law as to which the Board has made a determination
under section 123, and any judicial decision or
determination rendered in connection therewith.
``(C) High-cost limitation.--The term `high-cost
limitation' means any requirement, limitation, or
prohibition on any mortgage lending activities in
connection with a consumer credit transaction secured
by a lien against a consumer's dwelling when the
applicability of such requirement, limitation or
prohibition is based in whole or in part on whether the
actual or contingent, direct or indirect, interest
rate, costs, fees, price or finance charges to the
consumer associated with such consumer credit
transaction exceed any particular threshold, however
such threshold may be defined, without regard to
whether the consumer credit transaction subject to such
requirement, limitation, or prohibition is a higher-
cost mortgage.
``(3) Clarification of preemption.--Any law of any State
preempted under paragraph (1) of this subsection shall, without
in any way limiting the effect of paragraph (1) of this
subsection, include any law of any State that directly or
indirectly--
``(A) limits a creditor's ability to extend new
credit to a consumer;
``(B) limits the rights, claims, defenses, or other
remedies at law or equity available to a creditor,
secured creditor, servicer, assignee or other direct or
indirect holder, and their respective agents or
contractors, including without limitation, the right to
foreclose on the lien against the consumer's dwelling
in respect of a consumer's default under the related
loan documents; or
``(C) imposes legal liability on any party for the
violations of law by another party by virtue of such
first party's acquisition of any direct or indirect
right, title or interest in and to, or contractual
responsibility for the servicing or administration of,
a higher-cost mortgage.
``(4) Exclusions.--Notwithstanding paragraphs (1), (2), and
(3), the following laws are expressly excluded from the
preemption established under paragraph (1):
``(A) Any law of any State, not otherwise preempted
under Federal law, limiting the rate of interest
reflected in the note or other instrument evidencing an
extension of consumer credit secured by a lien against
a consumer's dwelling, to the extent that such law does
not require compliance with any law that is otherwise
preempted under paragraphs (1), (2), and (3) as a
condition of contracting for, charging, or collecting
any rate of interest otherwise permitted by such law.
``(B) Any law of any State requiring the licensing,
registration, or authorization of any person engaged in
mortgage-lending activities, except that the law of any
State will be preempted to the extent that such law
conditions the issuance or maintenance of such a
license, registration or other authorization, or the
authority granted thereby, on compliance with any law
that is otherwise preempted under paragraphs (1), (2)
and (3).
``(5) Prompt determination by board of governors.--
``(A) In general.--In response to a request from
any person, the Board, or any official or employee of
the Board duly authorized by the Board, shall--
``(i) promptly determine whether and to the
extent to which the specific law of any State
identified in such request is preempted by
operation of this subsection; and
``(ii) cause such determination to be
published in the Federal Register.
``(B) Effect of publication.--The preemption
provided under this section shall be self-executing,
and the publication of a finding or preemption by the
Board shall not be required in order for preemption to
occur in accordance with the terms of this section.'';
(2) in subsection (a)(1), by striking the 1st sentence and
inserting the following new sentence: ``Except as provided in
subsections (e) and (f), no provision of chapter 1, 2, or 3
shall be construed as annulling, altering, or affecting the
laws of any State relating to the disclosure of information in
connection with credit transactions, except to the extent that
those laws are inconsistent with the provisions of this title,
and then only to the extent of the inconsistency.'';
(3) in subsection (b)--
(A) by striking ``section 129'' the 1st place such
term appears and inserting ``subsection (f) and
sections 129, 129A, and 129B''; and
(B) by inserting ``, 129A, or 129B'' after
``section 129'' each place such term appears after the
1st place; and
(4) in subsection (d), by striking ``sections 125, 130, and
166'' and inserting ``subsection (f) and sections 125, 130, and
166''.
SEC. 107. CLARIFICATION OF STATE ENFORCEMENT AUTHORITY.
Subsection (e) of section 130 of Truth in Lending Act (15 U.S.C.
1640(e)) (as amended by section 105(d) of this Act) is amended--
(1) by striking ``(e) Except as provided in the subsequent
sentence, any action'' and inserting ``(e) Jurisdiction;
Statute of Limitations.--
``(1) In general.--Except as provided in the subsequent
sentence, any action''; and
(2) by adding at the end the following new paragraph:
``(2) Clarification of primary enforcement authority with
respect to state-chartered or licensed entities.--In addition
to the authority provided under subsection (1), no provision of
this title shall be construed as limiting the authority of any
State to enforce the provisions of this title, as the primary
enforcement authority, with regard to any person licensed or
chartered by such State.''.
SEC. 108. PREPAYMENT PENALTIES AND LATE CHARGES.
(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. Prepayment penalties and late charges
``Except as otherwise provided by this title, any consumer credit
transaction that is secured by a dwelling that is, or upon the
consummation of the transaction will be, occupied by the consumer as
his principal dwelling, may contain--
``(1) a provision for the imposition of a prepayment
penalty for the prepayment of the credit transaction, only if--
``(A) the penalty cannot be imposed if the debt is
accelerated as a result of default or any other breach
of the loan documents;
``(B) the penalty does not apply after the end of
the 36-month period beginning on the date the
transaction is consummated;
``(C) the consumer is offered a choice of another
similar loan without a prepayment penalty and is given
a description of the benefit the consumer will receive,
and the consequences the consumer might encounter, for
accepting a loan with the prepayment penalty; and
``(D) the penalty does not exceed an amount equal
to the payment of 6 months advance interest on the
amount prepaid in any 12-month period in excess of 20
percent of the original principal amount; and
``(2) a provision for the imposition of unanticipated late
payment, only if the late-payment fee--
``(A) is not in excess of 5 percent of the amount
of the scheduled payment past due;
``(B) may only be assessed on a payment past due
for 15 days or more; and
``(C) may not be charged more than once with
respect to a single late payment.''.
(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. Prepayment penalties and late charges.''.
SEC. 109. REGULATIONS.
Notwithstanding any provision of the Truth in Lending Act, the
Board of Governors of the Federal Reserve System shall--
(1) prescribe such regulations implementing this title and
the amendments made by this title as the Board may determine to
be appropriate; and
(2) publish such regulations in final form in the Federal
Register before the end of the 12-month period beginning on the
date of the enactment of this Act.
SEC. 110. EFFECTIVE DATES.
(a) In General.--This title, and the amendments made by this title,
shall take effect at the end of the 3-month period beginning on the
date of the enactment of this Act.
(b) Scope of Application.--This title, and the amendments made by
this title, shall apply with respect to applications for consumer
credit transactions received on or after the effective date of this
Act.
TITLE II--HOUSING COUNSELING
Subtitle A--Consumer Counseling
SEC. 201. CONSUMER COUNSELING REQUIREMENTS.
Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended
by inserting after subsection (x) (as added by section 103(r) of this
Act) the following:
``(y) Consumer Counseling Requirements.--
``(1) In general.--A creditor may not extend any credit in
the form of a higher-cost mortgage to any consumer unless the
creditor has provided to the consumer, at such time before the
consummation of the mortgage and in such manner as the Board
shall provide by regulation--
``(A) a separate written statement recommending
that the consumer take advantage of available home
ownership or credit counseling services before agreeing
to the terms of any higher-cost mortgage; and
``(B) a written statement containing the names,
addresses and telephone numbers of counseling agencies
or programs reasonably available to the consumer that
have been certified or approved and made publicly
available by the Secretary of Housing and Urban
Development, a State housing finance authority (as
defined in section 1301 of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989), or the
agency referred to in subsection (a) or (c) of section
108 with jurisdiction over the creditor as qualified to
provide counseling on--
``(i) the advisability of a higher-cost
mortgage transaction; and
``(ii) the appropriateness of a higher-cost
mortgage for the consumer.
``(2) Complete and updated lists required.--A creditor
shall be deemed to be in compliance with the requirements of
this subsection if the creditor provides the consumer with a
reasonably complete or updated list of counseling agencies
required by section 5(a) of the Real Estate Settlement
Procedures Act of 1974.''.
Subtitle B--Expanded Housing Counseling Opportunities
SEC. 211. SHORT TITLE.
This subtitle may be cited as the ``Expanding Housing Opportunities
Through Education and Counseling Act''.
SEC. 212. 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 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(h)(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(h) 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 216 of the Expanding Housing
Opportunities Through Education and Counseling
Act;
``(vii) providing for operation of the
advisory committee established under paragraph
(4) of this subsection; and
``(viii) collaborating with community-based
organizations with expertise in the field of
housing counseling.
``(4) Advisory committee.--
``(A) In general.--The Secretary shall appoint an
advisory committee to provide advice and oversight
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 three 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, four
shall be appointed for a term of one year and four
shall be appointed for a term of two 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. 213. COUNSELING PROCEDURES.
(a) In General.--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) 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) Toll-free telephone number and web site.--The
Secretary shall provide for the establishment, operation, and
publication of a toll-free telephone number and a World Wide
Web site through which persons interested in homeownership or
rental housing counseling services may locate and obtain names
and contact information of persons and organizations certified
under section 106(e) of the Housing and Urban Development Act
of 1968 to provide such services.
``(3) Standards for materials.--The Secretary, in
conjunction with the advisory committee established under
subsection (g)(4), 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).
``(4) 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 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.
``(5) Outreach to vulnerable populations.--The Secretary
shall develop a multimedia outreach program designed to make
elderly persons, persons who face language barriers, low-income
persons, and other potentially vulnerable consumers aware that
it is advisable, before seeking a residential mortgage loan, to
obtain homeownership counseling from an unbiased and reliable
source and that such homeownership counseling is available,
including through programs of the Department of Housing and
Urban Development.
``(6) 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 (II), by striking ``and'' at the end;
(2) in subclause (III) by striking the period at the end
and inserting ``; and''; and
(3) by inserting after subclause (III) the following new
subclause:
``(IV) notify the housing or
mortgage applicant of the availability
of mortgage software systems provided
pursuant to subsection (h)(4).''.
SEC. 214. 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 (h)(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 $75,000,000 for each of fiscal
years 2006 through 2009 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 (6) of subsection (h); and
``(iii) assistance pursuant to this paragraph for
entities providing homeownership and rental
counseling.''.
SEC. 215. 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 (h)(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. 216. 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. 217. 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:
``(i) 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. 218. UPDATING AND SIMPLIFICATION OF MORTGAGE INFORMATION BOOKLET.
Section 5 of the Real Estate Settlement Procedures Act of 1974 (12
U.S.C. 2604) is amended--
(1) in the section heading, by striking ``special'' and
inserting ``home buying'';
(2) by striking subsections (a) and (b) and inserting the
following new subsections:
``(a) Preparation and Distribution.--The Secretary shall prepare,
at least once every 5 years, a booklet to help consumers applying for
federally related mortgage loans to understand the nature and costs of
real estate settlement services. The Secretary shall prepare the
booklet in various languages and cultural styles, as the Secretary
determines to be appropriate, so that the booklet is understandable and
accessible to homebuyers of different ethnic and cultural backgrounds.
The Secretary shall distribute such booklets to all lenders that make
federally related mortgage loans. The Secretary shall also distribute
to such lenders lists, organized by location, of homeownership
counselors certified under section 106(e) of the Housing and Urban
Development Act of 1968 (12 U.S.C. 1701x(e)) for use in complying with
the requirement under subsection (c) of this section.
``(b) Contents.--Each booklet shall be in such form and detail as
the Secretary shall prescribe and, in addition to such other
information as the Secretary may provide, shall include in plain and
understandable language the following information:
``(1) A description and explanation of the nature and
purpose of the costs incident to a real estate settlement or a
federally related mortgage loan. The description and
explanation shall provide general information about the
mortgage process as well as specific information concerning, at
a minimum--
``(A) balloon payments;
``(B) prepayment penalties; and
``(C) the trade-off between closing costs and the
interest rate over the life of the loan.
``(2) An explanation and sample of the uniform settlement
statement required by section 4.
``(3) A list and explanation of lending practices,
including those prohibited by the Truth in Lending Act or other
applicable Federal law, and of other unfair practices and
unreasonable 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 striking the last sentence and
inserting 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.''.
SEC. 219. OPTION FOR NOTICE OF FORECLOSURE PREVENTION COUNSELING
AVAILABILITY.
Section 4 of the Real Estate Settlement Procedures Act of 1974 (12
U.S.C. 2603) is amended by adding at the end the following new
subsection:
``(c) Option for Notice of Foreclosure Prevention Counseling
Availability.--
``(1) Option.--In connection with any federally related
mortgage loan, the mortgagee shall provide the borrower, at the
time of the execution of the mortgage, an optional written
agreement that, if signed by the borrower, allows, but does not
require, the mortgagee to provide the notice described in
paragraph (2) to a homeownership counseling entity that has
agreed to provide the notice and counseling required under
paragraph (3) and is approved by the Secretary.
``(2) Notice to counseling agency.--The notice described in
this paragraph, with respect to any federally related mortgage
loan, is notice, provided at the earliest time practicable
after the borrower becomes 60 days delinquent with respect to
any payment due under the mortgage, that the borrower is so
delinquent and of how to contact the borrower. Such notice may
only be provided once with respect to each delinquency period
for a mortgage.
``(3) Notice to mortgagor.--Upon notice from a mortgagee
that a borrower is 60 days delinquent with respect to payments
due under the mortgage, the homeownership counseling entity
shall at the earliest time practicable notify the borrower of
such delinquency, that the entity makes available foreclosure-
prevention counseling that may assist the mortgagor in
resolving the delinquency, and of how to contact the entity to
arrange for such counseling.
``(4) Ability to cure.--Failure to provide the optional
written agreement required under paragraph (1) may be corrected
by sending such agreement to the borrower not later than the
earliest time practicable after the mortgagor first becomes 60
days delinquent with respect to payments due under the
mortgage. Mortgage insurance, if any, provided in connection
with such federally related mortgage loan may not be terminated
and penalties for such failure may not be prospectively or
retroactively imposed if such failure is corrected in
accordance with this paragraph.
``(5) Penalties for failure to provide agreement.--The
Secretary may establish and impose appropriate penalties for
failure of a mortgagee to provide the optional written
agreement required under paragraph (1).
``(6) Limitation on liability of mortgagee.--A mortgagee
shall not incur any liability or penalties for any failure of a
homeownership counseling entity to provide notice under
paragraph (3).
``(7) No private right of action.--This subsection shall
not create any private right of action on behalf of the
borrower.
``(8) Definitions.--For purposes of this subsection, the
following definitions shall apply:
``(A) Delinquency period.--The term `delinquency
period' means, with respect to a mortgage, a period
that begins upon the borrower becoming delinquent with
respect to payments due under the mortgage and ends
upon the first subsequent occurrence of such payments
under the mortgage becoming current or the property
subject to the mortgage being foreclosed or otherwise
disposed of.
``(B) Homeownership counseling entity.--The term
`homeownership counseling entity' means any State, unit
of general local government, or nonprofit organization
that provides homeownership counseling (as defined in
section 106(h)(1)(B) of the Housing and Urban
Development Act of 1968).''.
TITLE III--MORTGAGE SERVICING
SEC. 301. 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 129A (as added by
section 108 of this Act) the following new section:
``SEC. 129B. 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 the principal dwelling of the
consumer, shall establish, at the time of the consummation of such
transaction, an escrow or impound account for the payment of taxes and
hazard insurance as provided in, and in accordance with, this section.
``(b) When Required.--No impound, trust, or other type of account
for payment of taxes on the property, 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 deed of trust or
mortgage on real property containing only a single-family, owner-
occupied dwelling, 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 taking into
account income from all sources including the consumer's
employment exceeds 45 percent;
``(4) a consumer obtains a higher-cost mortgage;
``(5) the original principal amount of such loan is--
``(A) 90 percent or more of the sale price, if the
property involved is sold; or
``(B) 90 percent or more of the appraised value of
the property securing the loan;
``(6) 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; or
``(7) so required by the Board pursuant to regulation.
``(c) Duration of Escrow or Impound Account.--An escrow or impound
account established pursuant to this section, shall remain in existence
for a minimum period of 5 years, unless the underlying mortgage is
terminated.
``(d) Administration of 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 this section may be
established in an insured depository institution in the State
where the creditor, or servicer, if not the creditor, is
located.
``(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; and
``(B) the law of the State where the real property
securing the consumer credit transaction is located.
``(3) Payment of interest.--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 applicable Federal or State law.
``(e) Disclosures Relating to Escrow or Impound Account.--
``(1) In general.--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 within 3
business days before the consummation of the consumer credit
transaction giving rise to such account the following
information:
``(A) The fact that an escrow or impound account
will be established at consummation of the transaction.
``(B) The amount required at closing to initially
fund the escrow or impound account.
``(C) The amount in the initial year of the
estimated taxes and hazard insurance premiums.
``(D) The estimated monthly amount payable for
taxes and hazard insurance.
``(E) The fact that if the consumer chooses to
terminate the account after 5 years, the consumer will
become responsible for the payment of all taxes and
hazard insurance on the property unless a new escrow or
impound account is established.
``(2) Regulations.--The Board shall prescribe by regulation
the contents of the notice required in paragraph (1) no later
than 90 days after the date of the enactment of the Responsible
Lending Act.
``(f) Hazard Insurance Defined.--For purposes of this section, the
term `hazard insurance' shall have the same meaning as provided under
the law of the State where the real property securing the consumer
credit transaction is located.
``(g) Exclusions.--
``(1) Not included in points and fees.--Amounts paid for
escrow, trust, or impound accounts in accordance with this
section shall not be treated as points or fees under section
103(aa).
``(2) Exclusions by board.--The Board may exclude, by
regulation, any category or type of loan from the requirements
of this section.''.
(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:
``129B. Escrow or impound accounts relating to certain consumer credit
transactions.''.
SEC. 302. DISCLOSURE NOTICE REQUIRED FOR CONSUMERS WHO OPT OUT OF
ESCROW SERVICES.
Section 129B of the Truth in Lending Act (as added by section 301
of this title) is amended by adding at the end the following new
subsection:
``(h) Disclosure Notice Required for Consumers Who Opt Out of
Escrow Services.--
``(1) In general.--If an impound, trust, or other type of
account for the payment of property taxes, insurance premiums,
or other purposes relating to property securing a consumer
credit transaction is not established in connection with the
transaction, or if a consumer chooses, at any time after such
an account is established in connection with any such
transaction, to close such account, the creditor 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, including--
``(A) information concerning any applicable fees
associated with either the nonestablishment of any such
account at the time of the transaction, or any
subsequent closure of any such account;
``(B) 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
``(C) a clear explanation of the consequences of
any failure to pay non-escrowed items, including the
possible requirement for direct placement of insurance
by the creditor 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.
``(2) Regulations.--The Board shall prescribe such
regulations as are necessary to implement the requirements of
this subsection in final form before the end of the 12-month
period beginning on the date of the enactment of the
Responsible Lending Act.''.
SEC. 303. MORTGAGE SERVICING CLARIFICATION.
(a) In General.--The Fair Debt Collection Practices Act (15 U.S.C.
1692 et seq.) is amended--
(1) by redesignating section 818 as section 819; and
(2) by inserting after section 817 the following new
section:
``Sec. 818. Mortgage servicer exemption
``(a) Exemption.--A covered mortgage servicer who, whether by
assignment, sale or transfer, becomes the person responsible for
servicing federally related mortgage loans secured by first liens that
include loans that were in default at the time such person became
responsible for the servicing of such federally related mortgage loans
shall be exempt from the requirements of section 807(11) in connection
with the collection of any debt arising from such defaulted federally
related mortgage loans.
``(b) Definitions.--For purposes of this section, the following
definitions shall apply:
``(1) Covered mortgage servicer.--The term `covered
mortgage servicer' means any servicer of federally related
mortgage loans secured by first liens--
``(A) who is also a debt collector; and
``(B) for whom the collection of delinquent debts
is incidental to the servicer's primary function of
servicing current federally related mortgage loans.
``(2) Federally related mortgage loan.--The term `federally
related mortgage loan' has the meaning given to such term in
section 3(1) of the Real Estate Settlement Procedures Act of
1974, except that, for purposes of this section, such term
includes only loans secured by first liens.
``(3) Person.--The term `person' has the meaning given to
such term in section 3(5) of the Real Estate Settlement
Procedures Act of 1974.
``(4) Servicer; servicing.--The terms `servicer' and
`servicing' have the meanings given to such terms in section
6(i) of the Real Estate Settlement Procedures Act of 1974.''.
(b) Clerical Amendment.--The table of sections for the Fair Debt
Collection Practices Act (15 U.S.C. 1692 et seq.) is amended--
(1) by redesignating the item relating to section 818 as
section 819; and
(2) by inserting after the item relating to section 817 the
following new item:
``818. Mortgage servicer exemption.''.
SEC. 304. 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 subsection:
``(k) Servicer Prohibitions.--A servicer of a federally related
mortgage shall not--
``(1) force place 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;
``(2) charge fees for responding to valid qualified written
requests under this section;
``(3) 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;
``(4) fail to respond within 10 business days to a request
from a borrower to provide the identity, address and other
relevant information about the owner assignee of the loan; or
``(5) fail to comply with any other obligation found by the
Secretary to be appropriate to carry out the consumer
protection purposes of this Act.''.
(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 ``15 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 receipt
of a written request for such balance from or on behalf of the
borrower by first-class mail.''.
(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 at the time the loan is paid off shall be
promptly returned to the borrower.''.
SEC. 305. MORTGAGE SERVICING STUDIES REQUIRED.
(a) Mortgage Servicing Fraud.--
(1) Study.--The Secretary of Housing and Urban Development,
in consultation with the Board of Governors of the Federal
Reserve System and the Federal Trade Commission, shall conduct
a comprehensive study on mortgage servicing fraud.
(2) Issues to be included.--In addition to other issues the
Secretary, Board, and 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 posting of payments by
servicers.
(B) The use of force placed insurance.
(C) The employment of daily interest when payments
are made after a due date.
(D) The charging of late fees on the entire
outstanding principal.
(E) The charging of interest on servicing fees.
(F) The utilization of abusive collection
practices.
(G) The charging of prepayment penalties when not
authorized by either the note or law.
(H) The employment of unconscionable forbearance
agreements.
(I) Foreclosure abuses.
(3) 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.
(b) Mortgage Servicing Improvements.--
(1) Study.--The Secretary of Housing and Urban Development,
in consultation with the Board of Governors of the Federal
Reserve System 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 24-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.
TITLE IV--APPRAISAL ACTIVITIES
SEC. 401. PROPERTY APPRAISAL REQUIREMENTS.
Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended
by inserting after subsection (y) (as added by section 201 of this Act)
the following new subsection:
``(z) Property Appraisal Requirements.--
``(1) In general.--A creditor may not extend credit in the
form of a higher-cost mortgage 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 inspection.--An appraisal of
property to be secured by a higher-cost mortgage does
not meet the requirement of this subsection unless it
is performed by a qualified appraiser who conducts a
physical inspection of the mortgaged property.
``(B) Second appraisal under certain
circumstances.--
``(i) In general.--If the purpose of the
higher-cost mortgage 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 second
qualified appraiser that supports the current
sale price of the property.
``(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 property to be appraised is located;
and
``(ii) performs each appraisal in
conformity with the Uniform Standards of
Professional Appraisal Practice and Title XI of
the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989, and the
regulations prescribed under such title, as in
effect on the date of the appraisal.
``(3) Free copy of appraisal.--A creditor shall provide 1
copy of each appraisal conducted in accordance with this
subsection in connection with a higher-cost mortgage to the
consumer without charge.
``(4) 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. 402. AMENDMENTS RELATING TO APPRAISAL SUBCOMMITTEE OF FIEC,
APPRAISER INDEPENDENCE, AND APPROVED APPRAISER EDUCATION.
(a) Annual Report of Appraisal Subcommittee.--Section 1103(a)(4) of
Financial Institutions Reform, Recovery, and Enforcement Act of 1989
(12 U.S.C. 3332(a)(4)) is amended by inserting ``in detail the
activities of the Appraisal Subcommittee and'' after ``which
describes''.
(b) Open Meetings.--Section 1104(b) of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3333(b)) is
amended by inserting ``in public session after notice to the general
public'' after ``shall meet''.
(c) Regulations.--Section 1106 of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3335) is
amended by inserting ``prescribe regulations after notice and
opportunity for comment,'' after ``hold hearings''.
(d) Criteria.--Section 1116 of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (12 U.S.C. 3345) is amended--
(1) in subsection (c), by inserting ``whose criteria for
the licensing of a real estate appraiser currently meet or
exceed the minimum criteria issued by the Appraiser
Qualifications Board of The Appraiser Foundation for the
licensing of real estate appraisers'' before the period at the
end; and
(2) by striking subsection (e).
(e) Temporary Practice.--Section 1122(a)(1) of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C.
3351(a)(1)) is amended--
(1) by striking subparagraph (A);
(2) by redesignating subparagraphs (B) and (C) as
subparagraphs (A) and (B), respectively; and
(3) by moving the left margin of such subparagraphs 2 ems
to the right.
(f) Reciprocity.--Subsection (b) of section 1122 of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C.
3351(b)) is amended to read as follows:
``(b) 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
the requirements for certification and licensing as established
by the Appraiser Qualifications Board of The Appraisal
Foundation.''.
(g) Consideration of Professional Appraisal Designations.--Section
1122(d) of the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 (12 U.S.C. 3351(d)) is amended by adding at the end the
following new sentence: ``Consideration may be given for professional
appraisal designations conferred by sponsoring organizations of The
Appraisal Foundation as an indication of proficiency in addition to the
criteria established by certification or licensing.''.
(h) Appraiser Independence.--Section 1122 of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C.
3351) is amended by adding at the end the following new subsection:
``(g) Appraiser Independence.--
``(1) In general.--No mortgage lender, mortgage broker or
mortgage banker, real estate broker, 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, 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, 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.
``(B) Provide further detail, substantiation, or
explanation for the appraiser's value conclusion.
``(C) Correct errors in the appraisal report.''.
(i) Appraiser Education.--Section 1122 of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C.
3351) is amended by inserting after subsection (g) (as added by
subsection (h) of this section) the following new subsection:
``(h) Approved Education.--A State certifying or licensing agency
shall accept courses and seminars approved by the Appraiser
Qualification Board's Course Approval Program.''.
SEC. 403. 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 Financial Institutions Reform, Recovery,
and Enforcement Act of 1989.
(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.
TITLE V--REQUIREMENTS FOR MORTGAGE BROKERS
Subtitle A--Licensing and Minimum Standards
SEC. 501. STATE REGULATION OF MORTGAGE BROKERS.
(a) In General.--The Federal mortgage broker requirements
established pursuant to this title shall apply only with respect to
States that, upon the expiration of the 3-year period beginning on the
date of the enactment of this Act, have not enacted and do not have in
effect uniform State laws and regulations described in subsection (b).
(b) Uniform State Laws.--
(1) In general.--Laws and regulations described in this
subsection are laws and regulations that--
(A) require licensing for mortgage brokers;
(B) require, as a condition of the issuance of a
license, that an applicant submit a written application
for a license;
(C) require, as a condition of the issuance of a
license, that an applicant complete at least 24 hours
of education on primary and subordinate mortgage
financing and pass a written examination upon the
completion of such training;
(D) require a criminal background check to be
performed on the applicant;
(E) establish minimum testing standards for
mortgage brokers;
(F) require continuing education of mortgage
brokers, including at least 12 hours of education on a
biennial basis, a minimum of 2 hours of which shall
address ethics education;
(G) require the public agency or official in the
State that is responsible for the licensing of mortgage
brokers to provide, directly or otherwise to the
national mortgage database established under subtitle
B, such information as may be necessary to ensure that
such database is effective for the purposes for which
it is established; and
(H) comply with such standards regarding uniformity
of information submitted to the national database of
mortgage brokers established under subtitle B as the
Secretary of Housing and Urban Development considers
necessary to facilitate the operation of the database.
(2) Exemptions.--For purposes of this subsection, the term
``mortgage broker'' has the meaning provided in section 503(3),
except that the laws and regulations of a State shall exempt
from treatment as mortgage brokers the following persons:
(A) Any bank, savings bank, savings and loan
association, or credit union organized under the laws
of a State or the United States, or a subsidiary or
affiliate of a bank, savings bank, savings and loan
association, or credit union.
(B) Any budget or debt counseling service, as
defined by the Secretary, that is a nonprofit
organization exempt from taxation under section
501(c)(3) of the Internal Revenue Code of 1986 (26
U.S.C. 501(c)(3)).
(C) Any consumer reporting agency that is in
substantial compliance with the Fair Credit Reporting
Act (15 U.S.C. 1681 et seq.).
(D) Any political subdivision, or any governmental
or other public entity, corporation, or agency, in or
of the United States or any State.
(E) Any college or university, or entity that is
controlled by a college or university, as determined by
the Secretary.
(F) Any person who--
(i) makes, services, buys, or sells
mortgage loans;
(ii) underwrites the loans; and
(iii)(I) has been approved by the Secretary
of Housing and Urban Development as a
nonsupervised mortgagee with participation in
the direct endorsement program, but not
including a mortgagee approved as a loan
correspondent;
(II) has been approved by the Federal
National Mortgage Association as a seller or
servicer;
(III) has been approved by the Federal Home
Loan Mortgage Corporation as a seller or
servicer;
(IV) has been approved by the Secretary of
Veterans Affairs as a nonsupervised automatic
lender, but not including a person approved by
the Secretary as a nonsupervised lender, an
agent of a nonsupervised automatic lender, or
an agent of a nonsupervised lender; or
(V) is a creditor (as defined in section
103(f) of the Truth in Lending Act) who makes
or invests in residential real estate loans
aggregating more than $1,000,000 per year, and
irrespective of whether such creditor is
licensed or supervised by an agency of a State.
(G) Any person created solely for the purpose of
packaging and selling, as a unit of sale as investment
securities, mortgage loans that are secured by an
interest in real estate, if the person does not service
the loans.
(H) Any officer or employee of any of the persons
described in a preceding subparagraph of this paragraph
while such officer or employee is acting within the the
scope of the office or employment.
(c) Determination.--
(1) HUD determination.--At the end of the 3-year period
beginning on the date of the enactment of this Act, the
Secretary of Housing and Urban Development shall determine, in
consultation with the Federal banking agencies (as defined in
section 3 of the Federal Deposit Insurance Act) and the
National Credit Union Administration, whether the uniformity
necessary to comply with subsection (a) has been achieved.
(2) Judicial review.--The appropriate United States
district court shall have exclusive jurisdiction over any
challenge to the determination pursuant to paragraph (1) and
such court shall apply the standards set forth in section 706
of title 5, United States Code, when reviewing any such
challenge.
(d) Continued Application.--If, at any time, the Secretary
determines that a State no longer has in effect laws and regulations
described in subsection (a) or the uniformity necessary to comply with
subsection (a) no longer exists with respect to a State, the Federal
mortgage broker requirements shall take effect with respect to such
State 2 years after the date on which such determination was made,
unless the State has in effect such laws or regulations, or the
uniformity necessary to comply with subsection (a) is satisfied, before
the expiration of such 2-year period.
(e) Monitoring.--The Secretary shall monitor the laws and
regulations of the States governing the matters referred to in
subsection (a) for purposes of making determinations under subsection
(d).
SEC. 502. FEDERAL MORTGAGE BROKER REQUIREMENTS.
(a) In General.--Not later than 3 years after the date of the
enactment of this Act, the Secretary of Housing and Urban Development
shall, by regulation and in consultation with the Federal banking
agencies (as defined in section 3 of the Federal Deposit Insurance Act)
and the National Credit Union Administration, establish Federal
mortgage broker requirements under this section that meet the
requirements established in section 501(b)(1).
(b) Rulemaking.--The regulations required under subsection (a)
shall be issued after notice and opportunity for public comment
pursuant to the provisions of section 553 of title 5, United States
Code (notwithstanding subsections (a)(2), (b)(B), and (d)(3) of such
section).
SEC. 503. DEFINITIONS.
For purposes of this title, the following definitions shall apply:
(1) Buyer.--The term ``buyer'' means an individual who is
solicited to purchase, or who purchases, the services of a
mortgage broker for purposes other than obtaining a business
loan.
(2) Mortgage.--The term ``mortgage'' means any indebtedness
secured by a deed of trust, security deed, or other lien on
real property.
(3) Mortgage broker.--The term ``mortgage broker'' means a
person who engages for compensation, either directly or
indirectly, in the acceptance of applications for mortgage
loans for others, solicitation of mortgage loans on behalf of
borrowers, or negotiation of terms or conditions of loans on
behalf of borrowers or lenders.
(4) Secretary.--The term ``Secretary'' means the Secretary
of Housing and Urban Development.
Subtitle B--Database of Licensed Mortgage Brokers
SEC. 511. ESTABLISHMENT.
(a) In General.--The Secretary of Housing and Urban Development
(hereafter in this subtitle referred to as the ``Secretary'') shall
provide for the establishment and maintenance of a national database of
mortgage brokers.
(b) Administration.--The Secretary shall either maintain and
administrate the database established under this subtitle or enter into
a contract with a private regulatory organization to maintain and
administrate the database. The Secretary shall consult with the
American Association of Residential Mortgage Regulators, the Conference
of State Bank Supervisors, and other appropriate organizations in
determining the information to be maintained in the database and, if
the Secretary provides for any other organization to maintain and
administrate the database, in selecting such organization.
(c) Competitively Procured Contract.--If the Secretary decides to
select a private regulatory organization to maintain and administrate
the database, the Secretary shall enter into any contract for
administration of the database using competitive procedures (as such
term is defined in section 4 of the Office of Federal Procurement
Policy Act).
(d) Performance Review.--The Secretary--
(1) shall periodically review the performance of any
organization serving as administrator of the database; and
(2) may replace any such other organization with another
qualified organization, pursuant to competitive procedures if
the Secretary determines in writing that the organization
serving as administrator is not fulfilling the terms of the
contract or upon the expiration of the contract.
SEC. 512. DATABASE.
The national database of mortgage brokers maintained pursuant to
this title shall--
(1) include a listing of each person licensed under State
law or regulation or under Federal mortgage broker requirements
under section 502 to act as a mortgage broker;
(2) make available to the public information regarding
complaints made, and final disciplinary and enforcement actions
taken, against each licensed mortgage broker;
(3) make available to the Secretary of Housing and Urban
Development and to each public agency or official in a State
responsible for licensing or testing under the laws or
regulations referred to in section 501(b) such information
regarding mortgage brokers as the Secretary, by regulation,
considers appropriate for the Secretary and such agencies and
officials to carry out their functions regarding regulation,
licensing, or testing of mortgage brokers, including
information regarding employment histories and criminal
backgrounds of mortgage brokers;
(4) make available to persons employing or using the
services of mortgage brokers such information regarding
mortgage brokers as the Secretary, by regulation, considers
appropriate; and
(5) provide for the maintenance of such other information
as the Secretary considers appropriate.
SEC. 513. FEES.
The Secretary may provide for the national database of mortgage
brokers to charge reasonable fees to cover costs of maintaining and
providing access to information from the database to the extent such
fees are not charged to the general public.
SEC. 514. CONFIDENTIALITY OF INFORMATION.
(a) In General.--
(1) Database.--Except as otherwise provided in this
section, any requirement under Federal or State law regarding
the privacy or confidentiality of any information or material
in the possession of the Secretary or any other organization
serving as the administrator of the database, 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 database.
(2) Nonapplicability of certain requirements.--Information
or material that is subject to a privilege or confidentiality
under any other paragraph of this subsection shall not be
subject to--
(A) 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
(B) subpoena or discovery, or admission into
evidence, in any private civil action or administrative
process,
unless with respect to any privilege held by the Secretary with
respect to such information or material, the participant
waives, in whole or in part, in the discretion of the
participant, such privilege.
(b) Preemption of State 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.
SEC. 515. LIABILITY PROVISIONS.
(a) No Liability for Good-Faith Disclosures.--Any State official or
agency, or employee thereof, 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, while acting within the scope
of office or employment, relating to collecting, furnishing, or
disseminating of information concerning persons who are mortgage
brokers or are applying for licensing as mortgage brokers, whether
directly or through the national database established under this
subtitle.
(b) Criminal Liability for Intentional Unlawful Disclosures.--
(1) In general.--It shall be unlawful to willfully disclose
to any person any information concerning any person who is a
mortgage broker or is applying for licensing as a mortgage
broker knowing the disclosure to be in violation of any
provision of this title--
(A) requiring the confidentiality of such
information; or
(B) establishing a privilege from disclosure for
such information that has not been waived by the
Secretary and the person who is a mortgage broker or is
applying for licensing as a mortgage broker.
(2) Penalty.--Notwithstanding section 3571 of title 18,
United States Code, any person who violates paragraph (1) shall
be fined an amount not to exceed the greater of $100,000 or the
amount of the actual damages sustained by any person as a
result of such violation, or imprisoned not more than 5 years,
or both.
(c) Full, Continued Protection Under the So-Called ``Federal Tort
Claims Act''.--No provision of this Act shall be construed as reducing
or limiting any protection provided for any Federal agency, or any
officer or employee of any Federal agency, under section 2679 of title
28, United States Code.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Referred to the Subcommittee on Financial Institutions and Consumer Credit.
Referred to the Subcommittee on Housing and Community Opportunity.
Sponsor introductory remarks on measure. (CR H5182)
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