Text of H.R. 1728 (111th): Mortgage Reform and Anti-Predatory Lending Act (Introduced version)

111th CONGRESS

1st Session

H. R. 1728

IN THE HOUSE OF REPRESENTATIVES

March 26, 2009

Mr. Miller of North Carolina (for himself, Mr. Watt, Mr. Frank of Massachusetts, Mr. Kanjorski, Mr. Gutierrez, Ms. Bean, and Mr. Minnick) introduced the following bill; which was referred to the Committee on Financial Services

A BILL

To amend the Truth in Lending Act to reform consumer mortgage practices and provide accountability for such practices, to provide certain minimum standards for consumer mortgage loans, and for other purposes.

(a)

This Act may be cited as the Mortgage Reform and Anti-Predatory Lending Act.

(b)

The table of contents for this Act is as follows:

Sec. 1. Short title; table of contents.

Title I—Residential Mortgage Loan Origination Standards

Sec. 101. Definitions.

Sec. 102. Residential mortgage loan origination.

Sec. 103. Prohibition on steering incentives.

Sec. 104. Liability.

Sec. 105. Regulations.

Title II—Minimum Standards For Mortgages

Sec. 201. Ability to repay.

Sec. 202. Net tangible benefit for refinancing of residential mortgage loans.

Sec. 203. Safe harbor and rebuttable presumption.

Sec. 204. Liability.

Sec. 205. Defense to foreclosure.

Sec. 206. Additional standards and requirements.

Sec. 207. Rule of construction.

Sec. 208. Effect on State laws.

Sec. 209. Regulations.

Sec. 210. Amendments to civil liability provisions.

Sec. 211. Lender rights in the context of borrower deception.

Sec. 212. Six-month notice required before reset of hybrid adjustable rate mortgages.

Sec. 213. Credit risk retention.

Sec. 214. Required disclosures.

Sec. 215. Disclosures required in monthly statements for residential mortgage loans.

Sec. 216. Legal assistance for foreclosure-related issues.

Sec. 217. Effective date.

Sec. 218. Report by the GAO.

Title III—High-Cost Mortgages

Sec. 301. Definitions relating to high-cost mortgages.

Sec. 302. Amendments to existing requirements for certain mortgages.

Sec. 303. Additional requirements for certain mortgages.

Sec. 304. Amendment to provision governing correction of errors.

Sec. 305. Regulations.

Sec. 306. Effective date.

Title IV—Office of Housing Counseling

Sec. 401. Short title.

Sec. 402. Establishment of Office of Housing Counseling.

Sec. 403. Counseling procedures.

Sec. 404. Grants for housing counseling assistance.

Sec. 405. Requirements to use HUD-certified counselors under HUD programs.

Sec. 406. Study of defaults and foreclosures.

Sec. 407. Definitions for counseling-related programs.

Sec. 408. Updating and simplification of mortgage information booklet.

Title V—Mortgage Servicing

Sec. 501. Escrow and impound accounts relating to certain consumer credit transactions.

Sec. 502. Disclosure notice required for consumers who waive escrow services.

Sec. 503. Real Estate Settlement Procedures Act of 1974 amendments.

Sec. 504. Mortgage servicing studies required.

Sec. 505. Escrows included in repayment analysis.

Title VI—Appraisal Activities

Sec. 601. Property appraisal requirements.

Sec. 602. Unfair and deceptive practices and acts relating to certain consumer credit transactions.

Sec. 603. Amendments relating to appraisal subcommittee of FIEC, appraiser independence, and approved appraiser education.

Sec. 604. Study required on improvements in appraisal process and compliance programs.

Sec. 605. Equal Credit Opportunity Act amendment.

101.

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)

(1)

Unless otherwise specified, the term Commission means the Federal Trade Commission.

(2)

The term Federal banking agencies means the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, and the National Credit Union Administration Board.

(3)

The term mortgage originator—

(A)

means any person who—

(i)

takes a residential mortgage loan application;

(ii)

assists a consumer in obtaining or applying to obtain a residential mortgage loan; or

(iii)

offers or negotiates terms of a residential mortgage loan, for direct or indirect compensation or gain, or in the expectation of direct or indirect compensation or gain;

(B)

includes any person who represents to the public, through advertising or other means of communicating or providing information (including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items), that such person can or will provide any of the services or perform any of the activities described in subparagraph (A); and

(C)

does not include any person who is not otherwise described in subparagraph (A) or (B) and who performs purely administrative or clerical tasks on behalf of a person who is described in any such subparagraph.

(4)

The term Nationwide Mortgage Licensing System and Registry has the same meaning as in the Secure and Fair Enforcement for Mortgage Licensing Act of 2008.

(5)

For purposes of this subsection, a person assists a consumer in obtaining or applying to obtain a residential mortgage loan by, among other things, advising on residential mortgage loan terms (including rates, fees, and other costs), preparing residential mortgage loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan.

(6)

The term residential mortgage loan means any consumer credit transaction that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or on residential real property that includes a dwelling, other than a consumer credit transaction under an open end credit plan or a reverse mortgage.

(7)

The term Secretary, when used in connection with any transaction or person involved with a residential mortgage loan, means the Secretary of Housing and Urban Development.

(8)

The term securitization vehicle means a trust, corporation, partnership, limited liability entity, special purpose entity, or other structure that—

(A)

is the issuer, or is created by the issuer, of mortgage pass-through certificates, participation certificates, mortgage-backed securities, or other similar securities backed by a pool of assets that includes residential mortgage loans; and

(B)

holds such loans.

(9)

The term securitizer means the person that transfers, conveys, or assigns, or causes the transfer, conveyance, or assignment of, residential mortgage loans, including through a special purpose vehicle, to any securitization vehicle, excluding any trustee that holds such loans solely for the benefit of the securitization vehicle.

(10)

The term servicer has the same meaning as in section 6(i)(2) of the Real Estate Settlement Procedures Act of 1974.

102.

(a)

Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by inserting after section 129A the following new section:

129B.

(a)

(1)

The Congress finds that economic stabilization would be enhanced by the protection, limitation, and regulation of the terms of residential mortgage credit and the practices related to such credit.

(2)

It is the purpose of this section and section 129C to assure that consumers are offered and receive residential mortgage loans on terms that reasonably reflect their ability to repay the loans and that are understandable and not unfair, deceptive or abusive.

(b)

(1)

Subject to regulations prescribed under this subsection, each mortgage originator shall, in addition to the duties imposed by otherwise applicable provisions of State or Federal law—

(A)

be qualified and, when required, registered and licensed as a mortgage originator in accordance with applicable State or Federal law, including the Secure and Fair Enforcement for Mortgage Licensing Act of 2008;

(B)

with respect to each consumer seeking or inquiring about a residential mortgage loan, diligently work to present the consumer with a range of residential mortgage loan products for which the consumer likely qualifies and which are appropriate to the consumer’s existing circumstances, based on information known by, or obtained in good faith by, the originator;

(C)

make full, complete, and timely disclosure to each such consumer of—

(i)

the comparative costs and benefits of each residential mortgage loan product offered, discussed, or referred to by the originator;

(ii)

the nature of the originator’s relationship to the consumer (including the cost of the services to be provided by the originator and a statement that the mortgage originator is or is not acting as an agent for the consumer, as the case may be); and

(iii)

any relevant conflicts of interest;

(D)

certify to the creditor, with respect to any transaction involving a residential mortgage loan, that the mortgage originator has fulfilled all requirements applicable to the originator under this section with respect to the transaction; and

(E)

include the unique identifier of the originator provided by the Nationwide Mortgage Licensing System and Registry on all loan documents.

(2)

(A)

Paragraph (1)(B) shall not be construed as requiring—

(i)

a mortgage originator to present to any consumer any specific residential mortgage loan product that is offered by a creditor which does not accept consumer referrals from, or consumer applications submitted by or through, such originator; or

(ii)

a creditor to offer products that the creditor does not offer to the general public.

(B)

For purposes of paragraph (1)(B), a residential mortgage loan shall be presumed to be appropriate for a consumer if—

(i)

the mortgage originator determines in good faith, based on then existing information and without undergoing a full underwriting process, that the consumer has a reasonable ability to repay and, in the case of a refinancing of an existing residential mortgage loan, receives a net tangible benefit, as determined in accordance with regulations prescribed under subsections (a) and (b) of section 129B; and

(ii)

the loan does not have predatory characteristics or effects (such as equity stripping and excessive fees and abusive terms) as determined in accordance with regulations prescribed under paragraph (4).

(3)

No provision of this subsection shall be construed as—

(A)

creating an agency or fiduciary relationship between a mortgage originator and a consumer if the originator does not hold himself or herself out as such an agent or fiduciary; or

(B)

restricting a mortgage originator from holding himself or herself out as an agent or fiduciary of a consumer subject to any additional duty, requirement, or limitation applicable to agents or fiduciaries under any Federal or State law.

(4)

(A)

The Federal banking agencies, in consultation with the Secretary, the Chairman of the State Liaison Committee to the Financial Institutions Examination Council, and the Commission, shall jointly prescribe regulations to—

(i)

further define the duty established under paragraph (1);

(ii)

implement the requirements of this subsection;

(iii)

establish the time period within which any disclosure required under paragraph (1) shall be made to the consumer; and

(iv)

establish such other requirements for any mortgage originator as such regulatory agencies may determine to be appropriate to meet the purposes of this subsection.

(B)

The agencies referred to in subparagraph (A) shall endeavor to make the required disclosures to consumers under this subsection complementary and nonduplicative with other disclosures for mortgage consumers to the extent such efforts—

(i)

are practicable; and

(ii)

do not reduce the value of any such disclosure to recipients of such disclosures.

(5)

The Federal banking agencies shall prescribe regulations requiring depository institutions to establish and maintain procedures reasonably designed to assure and monitor the compliance of such depository institutions, the subsidiaries of such institutions, and the employees of such institutions or subsidiaries with the requirements of this section and the registration procedures established under section 1507 of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008.

(b)

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 items:

129A. Fiduciary duty of servicers of pooled residential mortgages.

129B. Residential mortgage loan origination.

103.

Section 129B of the Truth in Lending Act (as added by section 102(a)) is amended by inserting after subsection (b) the following new subsection:

(c)

(1)

For any mortgage loan, the total amount of direct and indirect compensation from all sources permitted to a mortgage originator may not vary based on the terms of the loan (other than the amount of the principal).

(2)

The Federal banking agencies, in consultation with the Secretary and the Commission, shall jointly prescribe regulations to prohibit—

(A)

mortgage originators from steering any consumer to a residential mortgage loan that—

(i)

the consumer lacks a reasonable ability to repay (in accordance with regulations prescribed under section 129B(a));

(ii)

in the case of a refinancing of a residential mortgage loan, does not provide the consumer with a net tangible benefit (in accordance with regulations prescribed under section 129B(b)); or

(iii)

has predatory characteristics or effects (such as equity stripping, excessive fees, or abusive terms);

(B)

mortgage originators from steering any consumer from a residential mortgage loan for which the consumer is qualified that is a qualified mortgage (as defined in section 129B(c)(3)) to a residential mortgage loan that is not a qualified mortgage; and

(C)

abusive or unfair lending practices that promote disparities among consumers of equal credit worthiness but of different race, ethnicity, gender, or age.

(3)

No provision of this subsection shall be construed as—

(A)

affecting the mechanism for providing the total amount of direct and indirect compensation permitted to a mortgage originator;

(B)

limiting or affecting the ability of a mortgage originator to sell residential mortgage loans to subsequent purchasers;

(C)

restricting a consumer’s ability to finance, including through rate or principal, any origination fees or costs permitted under this subsection, or the originator’s ability to receive such fees or costs (including compensation) from any person, so long as such fees or costs were fully and clearly disclosed to the consumer earlier in the application process as required by 129A(a)(1)(C)(ii) and do not vary based on the terms of the loan or the consumer’s decision about whether to finance such fees or costs; or

(D)

prohibiting incentive payments to a mortgage originator based on the number of residential mortgage loans originated within a specified period of time.

104.

Section 129B of the Truth in Lending Act is amended by inserting after subsection (c) (as added by section 103) the following new subsection:

(d)

(1)

For purposes of providing a cause of action for any failure by a mortgage originator to comply with any requirement imposed under this section and any regulation prescribed under this section, subsections (a) and (b) of section 130 shall be applied with respect to any such failure by substituting mortgage originator for creditor each place such term appears in each such subsection.

(2)

The maximum amount of any liability of a mortgage originator under paragraph (1) to a consumer for any violation of this section shall not exceed the greater of actual damages or an amount equal to 3 times the total amount of direct and indirect compensation or gain accruing to the mortgage originator in connection with the residential mortgage loan involved in the violation, plus the costs to the consumer of the action, including a reasonable attorney’s fee.

105.

(a)

Section 129B of the Truth in Lending Act is amended by inserting after subsection (c) (as added by section 104) the following new subsection:

(e)

(1)

The Federal banking agencies shall, by regulations issued jointly, prohibit or condition terms, acts or practices relating to residential mortgage loans that the agencies find to be abusive, unfair, deceptive, predatory, inconsistent with reasonable underwriting standards, necessary or proper to effectuate the purposes of this section and section 129C, to prevent circumvention or evasion thereof, or to facilitate compliance with such sections, or are not in the interest of the borrower.

(2)

The regulations prescribed under paragraph (1) shall be applicable to all residential mortgage loans and shall be applied in the same manner as regulations prescribed under section 105.

(b)

The regulations required or authorized to be prescribed under this title or the amendments made by this title—

(1)

shall be prescribed in final form before the end of the 12-month period beginning on the date of the enactment of this Act; and

(2)

shall take effect not later than 18 months after the date of the enactment of this Act.

(c)

Section 129(l)(2) of the Truth in Lending Act (15 U.S.C. 1639(l)(2)) is amended by inserting referred to in section 103(aa) after loans each place such term appears.

201.

(a)

Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by inserting after section 129B (as added by section 102(a)) the following new section:

129C.

(a)

(1)

In accordance with regulations prescribed jointly by the Federal banking agencies, in consultation with the Commission, no creditor may make a residential mortgage loan unless the creditor makes a reasonable and good faith determination based on verified and documented information that, at the time the loan is consummated, the consumer has a reasonable ability to repay the loan, according to its terms, and all applicable taxes, insurance, and assessments.

(2)

If the creditor knows, or has reason to know, that 1 or more residential mortgage loans secured by the same dwelling will be made to the same consumer, the creditor shall make a reasonable and good faith determination, based on verified and documented information, that the consumer has a reasonable ability to repay the combined payments of all loans on the same dwelling according to the terms of those loans and all applicable taxes, insurance, and assessments.

(3)

A determination under this subsection of a consumer’s ability to repay a residential mortgage loan shall be based on consideration of the consumer’s credit history, current income, expected income the consumer is reasonably assured of receiving, current obligations, debt-to-income ratio, employment status, and other financial resources other than the consumer’s equity in the dwelling or real property that secures repayment of the loan.

(4)

(A)

For purposes of determining, under this subsection, a consumer’s ability to repay a variable rate residential mortgage loan that allows or requires the consumer to defer the repayment of any principal or interest, the creditor shall use a fully amortizing repayment schedule.

(B)

For purposes of determining, under this subsection, a consumer’s ability to repay a residential mortgage loan that permits or requires the payment of interest only, the creditor use the payment amount required to amortize the loan by its final maturity.

(C)

In making any determination under this subsection, a creditor shall also take into consideration any balance increase that may accrue from any negative amortization provision.

(D)

For purposes of making any determination under this subsection, a creditor shall calculate the monthly payment amount for principal and interest on any residential mortgage loan by assuming—

(i)

the loan proceeds are fully disbursed on the date of the consummation of the loan;

(ii)

the loan is to be repaid in substantially equal monthly amortizing payments for principal and interest over the entire term of the loan with no balloon payment, unless the loan contract requires more rapid repayment (including balloon payment), in which case the contract’s repayment schedule shall be used in this calculation; and

(iii)

the interest rate over the entire term of the loan is a fixed rate equal to the fully indexed rate at the time of the loan closing, without considering the introductory rate.

(5)

For purposes of this subsection, the term fully indexed rate means the index rate prevailing on a residential mortgage loan at the time the loan is made plus the margin that will apply after the expiration of any introductory interest rates.

(b)

The table of sections for chapter 2 of the Truth in Lending Act is amended by inserting after the item relating to section 129B (as added by section 102(b)) the following new item:

129C. Minimum standards for residential mortgage loans.

202.

Section 129C of the Truth in Lending Act (as added by section 201(a)) is amended by inserting after subsection (a) the following new subsection:

(b)

(1)

In accordance with regulations prescribed under paragraph (3), no creditor may extend credit in connection with any residential mortgage loan that involves a refinancing of a prior existing residential mortgage loan unless the creditor reasonably and in good faith determines, at the time the loan is consummated and on the basis of information known by or obtained in good faith by the creditor, that the refinanced loan will provide a net tangible benefit to the consumer.

(2)

A residential mortgage loan that involves a refinancing of a prior existing residential mortgage loan shall not be considered to provide a net tangible benefit to the consumer if the costs of the refinanced loan, including points, fees and other charges, exceed the amount of any newly advanced principal without any corresponding changes in the terms of the refinanced loan that are advantageous to the consumer.

(3)

The Federal banking agencies shall jointly prescribe regulations defining the term net tangible benefit for purposes of this subsection.

203.

Section 129C of the Truth in Lending Act is amended by inserting after subsection (b) (as added by section 202) the following new subsection:

(c)

(1)

Any creditor with respect to any residential mortgage loan, and any assignee or securitizer of such loan, may presume that the loan has met the requirements of subsections (a) and (b), if the loan is a qualified mortgage

(2)

For purposes of this subsection, the following definitions shall apply:

(A)

The term qualified mortgage means any residential mortgage loan—

(i)

with an annual percentage rate that does not exceed the average prime offer rate for a comparable transaction, as of the date the interest rate is set—

(I)

by 1.5 or more percentage points for a first lien residential mortgage loan; and

(II)

by 3.5 or more percentage points for a subordinate lien residential mortgage loan;

(ii)

for which the income and financial resources of the consumer are verified and documented;

(iii)

for which the residential mortgage loan underwriting process is based on the fully-indexed rate, and takes into account all applicable taxes, insurance, and assessments;

(iv)

that does not cause the consumer’s total monthly debts, including amounts under the loan, to exceed a percentage established by regulation of the consumer’s monthly gross income or such other maximum percentage of such income as may be prescribed by regulation under paragraph (4); and

(v)

for which the term of the loan is fixed for a period of not less than or more than 30 years.

(B)

The term average prime offer rate means an annual percentage rate that is derived from average interest rates, points, and other loan pricing terms currently offered to consumers by a representative sample of creditors for mortgage transactions that have low risk pricing characteristics.

(3)

The Board—

(A)

shall publish, and update at least weekly, average prime offer rates; and

(B)

may publish multiple rates based on varying types of mortgage transactions.

(4)

(A)

The Federal banking agencies shall jointly prescribe regulations to carry out the purposes of this subsection.

(B)

The Federal banking agencies may jointly prescribe regulations that revise, add to, or subtract from the criteria that define a qualified mortgage to the extent necessary and appropriate to effectuate the purposes of this subsection, to prevent circumvention or evasion of this subsection, or to facilitate compliance with this subsection.

204.

Section 129C of the Truth in Lending Act is amended by inserting after subsection (c) (as added by section 203) the following new subsection:

(d)

(1)

(A)

In addition to any other liability under this title for a violation by a creditor of subsection (a) or (b) (for example under section 130) and subject to the statute of limitations in paragraph (7), a civil action may be maintained against a creditor for a violation of subsection (a) or (b) with respect to a residential mortgage loan for the rescission of the loan, and such additional costs as the obligor may have incurred as a result of the violation and in connection with obtaining a rescission of the loan, including a reasonable attorney’s fee.

(B)

A creditor shall not be liable for rescission under subparagraph (A) with respect to a residential mortgage loan if, no later than 90 days after the receipt of notification from the consumer that the loan violates subsection (a) or (b), the creditor provides a cure.

(2)

Notwithstanding sections 125(e) and 131 and except as provided in paragraph (3), a civil action which may be maintained against a creditor with respect to a residential mortgage loan for a violation of subsection (a) or (b) may be maintained against any assignee or securitizer of such residential mortgage loan, who has acted in good faith, for the following liabilities only:

(A)

Rescission of the loan.

(B)

Such additional costs as the obligor may have incurred as a result of the violation and in connection with obtaining a rescission of the loan, including a reasonable attorney’s fee.

(3)

No assignee or securitizer of a residential mortgage loan shall be liable under paragraph (2) with respect to such loan if, no later than 90 days after the receipt of notification from the consumer that the loan violates subsection (a) or (b), the assignee or securitizer provides a cure so that the loan satisfies the requirements of subsections (a) and (b).

(4)

(A)

Notwithstanding the exemption provided in paragraph (3), if the creditor with respect to a residential mortgage loan made in violation of subsection (a) or (b) has ceased to exist as a matter of law or has filed for bankruptcy protection under title 11, United States Code, or has had a receiver or liquidating agent appointed, a consumer may maintain a civil action against an assignee to cure the residential mortgage loan, plus the costs and reasonable attorney’s fees incurred in obtaining such remedy.

(B)

Notwithstanding the exemption provided in paragraph (3), if the creditor with respect to a residential mortgage loan made in violation of subsection (a) or (b) and each assignee of such loan have ceased to exist as a matter of law or have filed for bankruptcy protection under title 11, United States Code, or have had receivers or liquidating agents appointed, the consumer may maintain the civil action referred to in subparagraph (A) against the securitizer.

(5)

For purposes of this subsection, the term cure means, with respect to a residential mortgage loan that violates subsection (a) or (b), the modification or refinancing, at no cost to the consumer, of the loan to provide terms that would have satisfied the requirements of subsections (a) and (b) if the loan had contained such terms as of the origination of the loan and the payment of such additional costs as the obligor may have incurred as a result of the violation and in connection with obtaining a cure of the loan, including a reasonable attorney’s fee.

(6)

If any creditor, assignee, or securitizer and a consumer fail to reach agreement on a cure with respect to a residential mortgage loan that violates subsection (a) or (b), or the consumer fails to accept a cure proffered by a creditor, assignee, or securitizer—

(A)

the creditor, assignee, or securitizer may provide the cure; and

(B)

the consumer may challenge the adequacy of the cure during the 6-month period beginning when the cure is provided.

If the consumer’s challenge, under this paragraph, of a cure is successful, the creditor, assignee, or securitizer shall be liable to the consumer for rescission of the loan and such additional costs under paragraph (2).

(7)

If a creditor, assignee, or securitizer cannot provide, or a consumer cannot obtain, rescission under paragraph (1) or (2), the liability of such creditor, assignee, or securitizer shall be met by providing the financial equivalent of a rescission, together with such additional costs as the obligor may have incurred as a result of the violation and in connection with obtaining a rescission of the loan, including a reasonable attorney’s fee.

(8)

Only individual actions may be brought against an assignee or securitizer of a residential mortgage loan for a violation of subsection (a) or (b).

(9)

The liability of a creditor, assignee, or securitizer under this subsection shall apply in any original action against a creditor under paragraph (1) or an assignee or securitizer under paragraph (2) which is brought before—

(A)

in the case of any residential mortgage loan other than a loan to which subparagraph (B) applies, the end of the 3-year period beginning on the date the loan is consummated; or

(B)

in the case of a residential mortgage loan that provides for a fixed interest rate for an introductory period and then resets or adjusts to a variable rate or that provides for a nonamortizing payment schedule and then converts to an amortizing payment schedule, the earlier of—

(i)

the end of the 1-year period beginning on the date of such reset, adjustment, or conversion; or

(ii)

the end of the 6-year period beginning on the date the loan is consummated.

(10)

In the case of residential mortgage loans acquired or aggregated for the purpose of including such loans in a pool of assets held for the purpose of issuing or selling instruments representing interests in such pools including through a securitization vehicle, the terms assignee and securitizer, as used in this section, do not include the securitization vehicle, the pools of such loans or any original or subsequent purchaser of any interest in the securitization vehicle or any instrument representing a direct or indirect interest in such pool.

205.

Section 129C of the Truth in Lending Act is amended by inserting after subsection (d) (as added by section 204) the following new subsection:

(e)

Notwithstanding any other provision of law—

(1)

when the holder of a residential mortgage loan or anyone acting for such holder initiates a judicial or nonjudicial foreclosure—

(A)

a consumer who has the right to rescind under this section with respect to such loan against the creditor or any assignee or securitizer may assert such right as a defense to foreclosure or counterclaim to such foreclosure against the holder, or

(B)

if the foreclosure proceeding begins after the end of the period during which a consumer may bring an action for rescission under subsection (c) and the consumer would have had a valid basis for such an action if it had been brought before the end of such period, the consumer may seek actual damages incurred by reason of the violation which gave rise to the right of rescission, together with costs of the action, including a reasonable attorney’s fee against the creditor or any assignee or securitizer; and

(2)

such holder or anyone acting for such holder or any other applicable third party may sell, transfer, convey, or assign a residential mortgage loan to a creditor, any assignee, or any securitizer, or their designees, to effect a rescission or cure.

206.

(a)

Section 129C of the Truth in Lending Act is amended by inserting after subsection (e) (as added by section 205) the following new subsections:

(f)

(1)

A residential mortgage loan that is not a qualified mortgage may not contain terms under which a consumer must pay a prepayment penalty for paying all or part of the principal after the loan is consummated.

(2)

A qualified mortgage (as defined in subsection (c)) may not contain terms under which a consumer must pay a prepayment penalty for paying all or part of the principal after the loan is consummated in excess of the following limitations:

(A)

During the 1-year period beginning on the date the loan is consummated, the prepayment penalty shall not exceed an amount equal to 3 percent of the outstanding balance on the loan.

(B)

During the 1-year period beginning after the period described in subparagraph (A), the prepayment penalty shall not exceed an amount equal to 2 percent of the outstanding balance on the loan.

(C)

During the 1-year period beginning after the 1-year period described in subparagraph (B), the prepayment penalty shall not exceed an amount equal to 1 percent of the outstanding balance on the loan.

(D)

After the end of the 3-year period beginning on the date the loan is consummated, no prepayment penalty may be imposed on a qualified mortgage.

(3)

A qualified mortgage with a fixed interest rate for an introductory period that adjusts or resets after such period may not contain terms under which a consumer must pay a prepayment penalty for paying all or part of the principal after the beginning of the 3-month period ending on the date of the adjustment or reset.

(4)

A creditor may not offer a consumer a residential mortgage loan product that has a prepayment penalty for paying all or part of the principal after the loan is consummated as a term of the loan without offering the consumer a residential mortgage loan product that does not have a prepayment penalty as a term of the loan.

(g)

No creditor may finance, directly or indirectly, in connection with any residential mortgage loan or with any extension of credit under an open end consumer credit plan secured by the principal dwelling of the consumer (other than a reverse mortgage), any credit life, credit disability, credit unemployment or credit property insurance, or any other accident, loss-of-income, life or health insurance, or any payments directly or indirectly for any debt cancellation or suspension agreement or contract, except that—

(1)

insurance premiums or debt cancellation or suspension fees calculated and paid in full on a monthly basis shall not be considered financed by the creditor; and

(2)

this subsection shall not apply to credit unemployment insurance for which the unemployment insurance premiums are reasonable and at no additional cost to the consumer, the creditor receives no direct or indirect compensation in connection with the unemployment insurance premiums, and the unemployment insurance premiums are paid pursuant to another insurance contract and not paid to an affiliate of the creditor.

(h)

(1)

No residential mortgage loan and no extension of credit under an open end consumer credit plan secured by the principal dwelling of the consumer, other than a reverse mortgage, may include terms which require arbitration or any other nonjudicial procedure as the method for resolving any controversy or settling any claims arising out of the transaction.

(2)

Subject to paragraph (3), paragraph (1) shall not be construed as limiting the right of the consumer and the creditor, any assignee, or any securitizer to agree to arbitration or any other nonjudicial procedure as the method for resolving any controversy at any time after a dispute or claim under the transaction arises.

(3)

No provision of any residential mortgage loan or of any extension of credit under an open end consumer credit plan secured by the principal dwelling of the consumer (other than a reverse mortgage), and no other agreement between the consumer and the creditor relating to the residential mortgage loan or extension of credit referred to in paragraph (1), shall be applied or interpreted so as to bar a consumer from bringing an action in an appropriate district court of the United States, or any other court of competent jurisdiction, pursuant to section 130 or any other provision of law, for damages or other relief in connection with any alleged violation of this section, any other provision of this title, or any other Federal law.

(i)

Any securitizer shall reserve the right and preserve an ability, in any document or contract establishing any pool of assets that includes any residential mortgage loan—

(1)

to identify and obtain access to any such loan in the pool; and

(2)

to provide for and obtain a remedy under this title for the obligor under any such loan.

(j)

No creditor may extend credit to a borrower in connection with a consumer credit transaction under an open or closed end consumer credit plan secured by a dwelling or residential real property that includes a dwelling, other than a reverse mortgage, that provides or permits a payment plan that may, at any time over the term of the extension of credit, result in negative amortization unless, before such transaction is consummated—

(1)

the creditor provides the consumer with a statement that—

(A)

the pending transaction will or may, as the case may be, result in negative amortization;

(B)

describes negative amortization in such manner as the Federal banking agencies shall prescribe;

(C)

negative amortization increases the outstanding principal balance of the account; and

(D)

negative amortization reduces the consumer’s equity in the dwelling or real property; and

(2)

in the case of a first-time borrower with respect to a residential mortgage loan that is not a qualified mortgage, the first-time borrower provides the creditor with sufficient documentation to demonstrate that the consumer received homeownership counseling from organizations or counselors certified by the Secretary of Housing and Urban Development as competent to provide such counseling.

(k)

At least once annually and whenever there is a change in ownership of a residential mortgage loan, the servicer with respect to a residential mortgage loan shall provide a written notice to the consumer identifying the name of the creditor or any assignee or securitizer who should be contacted by the consumer for any reason concerning the consumer’s rights with respect to the loan.

(l)

(1)

In the case of any foreclosure on any dwelling or residential real property, after the date of the enactment of the Mortgage Reform and Anti-Predatory Lending Act, any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to—

(A)

except as provided in paragraph (2), the rights of any bona fide tenant, as of the date of foreclosure under any bona fide lease entered into before the notice of foreclosure, to occupy the premises until the end of the remaining term of the lease; and

(B)

the rights of any bona fide tenant, as of the date of foreclosure, without a lease or with a lease terminable at will under State law, subject to the provision by the immediate successor in interest and the receipt by the tenant in the unit, of a notice to vacate at least 90 days before the effective date of such notice.

(2)

Notwithstanding paragraph (1), if the immediate successor in interest of any dwelling or residential real property that is otherwise subject to paragraph (1) is a purchaser who will occupy a unit of the dwelling or residential real property as a primary residence, or such successor in interest sells the dwelling or residential real property to a purchaser who will occupy a unit of the dwelling or residential real property, as a primary residence—

(A)

such purchaser may terminate a lease relating to such unit on the effective date of a notice to vacate; and

(B)

such notice to vacate shall be provided by the purchaser to the tenant in such unit at least 90 days before the effective date of such notice.

(3)

For purposes of this section, a lease or tenancy shall be considered bona fide only if—

(A)

the mortgagor under the contract is not the tenant;

(B)

the lease or tenancy was the result of an arms-length transaction; or

(C)

the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property.

(4)

No provision of this subsection shall be construed as affecting the requirements—

(A)

for termination of any Federal- or State-subsidized tenancy; or

(B)

of any State or local law that provides longer time periods or other additional protections for tenants.

(b)

Paragraph (7) of section 8(o) of the United States Housing Act of 1937 (42 U.S.C. 1437f(o)(7)) is amended—

(1)

in subparagraph (C), by inserting before the semicolon at the end the following:

, and in the case of an owner who is an immediate successor in interest pursuant to foreclosure—

(i)

during the initial term of the tenant’s lease having the property vacant prior to sale shall not constitute good cause; and

(ii)

in subsequent lease terms, having the property vacant prior to sale may constitute good cause if the property is unmarketable while occupied, or if such owner will occupy the unit as a primary residence

;

(2)

in subparagraph (E), by striking and at the end;

(3)

by redesignating subparagraph (F) as subparagraph (G); and

(4)

by inserting after subparagraph (E) the following:

(F)

shall provide that in the case of any foreclosure on any residential real property in which a recipient of assistance under this subsection resides, the immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to the lease between the prior owner and the tenant and to the housing assistance payments contract between the prior owner and the public housing agency for the occupied unit; if a public housing agency is unable to make payments under the contract to the immediate successor in interest after foreclosure, due to action or inaction by the successor in interest, including the rejection of payments or the failure of the successor to maintain the unit in compliance with paragraph (8) or an inability to identify the successor, the agency may use funds that would have been used to pay the rental amount on behalf of the family—

(i)

to pay for utilities that are the responsibility of the owner under the lease or applicable law, after taking reasonable steps to notify the owner that it intends to make payments to a utility provider in lieu of payments to the owner, except prior notification shall not be required in any case in which the unit will be or has been rendered uninhabitable due to the termination or threat of termination of service, in which case the public housing agency shall notify the owner within a reasonable time after making such payment; or

(ii)

for the family’s reasonable moving costs, including security deposit costs;

except that this subparagraph and the provisions related to foreclosure in subparagraph (C) shall not affect any State or local law that provides longer time periods or other additional protections for tenants.

(c)

Section 108(a) of the Truth in Lending Act (15 U.S.C. 1607(a)) is amended by inserting after paragraph (6) the following new paragraph:

(7)

sections 21B and 21C of the Securities Exchange Act of 1934, in the case of a broker or dealer, other than a depository institution, by the Securities and Exchange Commission.

207.

Except as otherwise expressly provided in section 129B or 129C of the Truth in Lending Act (as added by this Act), no provision of such section 129B or 129C shall be construed as superseding, repealing, or affecting any duty, right, obligation, privilege, or remedy of any person under any other provision of the Truth in Lending Act or any other provision of Federal or State law.

208.

(a)

Section 129C(d) of the Truth in Lending Act (as added by section 204) shall supersede any State law or application thereof that provides additional remedies against any assignee, securitizer, or securitization vehicle, and the remedies described in such section shall constitute the sole remedies against any assignee, securitizer, or securitization vehicle, for a violation of subsection (a) or (b) of section 129C of such Act or any other State law the terms of which address the specific subject matter of subsection (a) (determination of ability to repay) or (b) (requirement of a net tangible benefit) of such section 129C.

(b)

No provision of this section shall be construed as limiting—

(1)

the application of any State law against a creditor for a particular residential mortgage loan regardless of whether such creditor also acts as assignee, securitizer, or securitization vehicle for such mortgage; or

(2)

availability of remedies based upon fraud, misrepresentation, deceptive acts or practices, false advertising, or civil rights laws—

(A)

against any assignee, securitizer, or securitization vehicle for its own conduct relating to the making of a residential mortgage loan to a consumer; or

(B)

against any assignee, securitizer, or securitization vehicle in the sale or purchase of residential mortgage loans or securities.

(c)

For purposes of subsection (b)(2), acts or practices are deceptive if—

(1)

there is a representation, omission, or practice that misleads or is likely to mislead a consumer;

(2)

from the consumer’s perspective, the interpretation of the representation, omission, or practice is reasonable under the circumstances; and

(3)

the representation, omission or practice is material so that it is likely to affect the consumer’s conduct or decision with regard to a product or service.

209.

Regulations required or authorized to be prescribed under this title or the amendments made by this title—

(1)

shall be prescribed in final form before the end of the 12-month period beginning on the date of the enactment of this Act; and

(2)

shall take effect not later than 18 months after the date of the enactment of this Act.

210.

(a)

Section 130(a)(2) of the Truth in Lending Act (15 U.S.C. 1640(a)(2)) is amended—

(1)

by striking $100 and inserting $200;

(2)

by striking $1,000 and inserting $2,000;

(3)

by striking $200 and inserting $400;

(4)

by striking $2,000 and inserting $4,000; and

(5)

by striking $500,000 and inserting $1,000,000.

(b)

Section 130(e) of the Truth in Lending Act (15 U.S.C. 1640(e)) is amended—

(1)

in the first sentence, by striking Any action and inserting Except as provided in the subsequent sentence, any action; and

(2)

by inserting after the first sentence the following new sentence: Any action under this section with respect to any violation of section 129 may be brought in any United States district court, or in any other court of competent jurisdiction, before the end of the 3-year period beginning on the date of the occurrence of the violation..

211.

Section 130 of the Truth in Lending Act is amended by adding at the end the following new subsection:

(j)

In addition to any other remedy available by law or contract, no creditor, assignee, or securitizer shall be liable to an obligor under this section, nor shall it be subject to the right of rescission of any obligor under 129B, if such obligor, or co-obligor, knowingly, or willfully and with actual knowledge furnished material information known to be false for the purpose of obtaining such residential mortgage loan.

212.

(a)

Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by inserting after section 128 the following new section:

128A.

(a)

For purposes of this section, the term hybrid adjustable rate mortgage means a consumer credit transaction secured by the consumer's principal residence with a fixed interest rate for an introductory period that adjusts or resets to a variable interest rate after such period.

(b)

During the 1-month period that ends 6 months before the date on which the interest rate in effect during the introductory period of a hybrid adjustable rate mortgage adjusts or resets to a variable interest rate, the creditor or servicer of such loan shall provide a written notice, separate and distinct from all other correspondence to the consumer, that includes the following:

(1)

Any index or formula used in making adjustments to or resetting the interest rate and a source of information about the index or formula.

(2)

An explanation of how the new interest rate and payment would be determined, including an explanation of how the index was adjusted, such as by the addition of a margin.

(3)

A good faith estimate, based on accepted industry standards, of the creditor or servicer of the amount of the monthly payment that will apply after the date of the adjustment or reset, and the assumptions on which this estimate is based.

(4)

A list of alternatives consumers may pursue before the date of adjustment or reset, and descriptions of the actions consumers must take to pursue these alternatives, including—

(A)

refinancing;

(B)

renegotiation of loan terms;

(C)

payment forbearances; and

(D)

pre-foreclosure sales.

(5)

The names, addresses, telephone numbers, and Internet addresses 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 or a State housing finance authority (as defined in section 1301 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989).

(6)

The address, telephone number, and Internet address for the State housing finance authority (as so defined) for the State in which the consumer resides.

(b)

The table of sections for chapter 2 of the Truth in Lending Act is amended by inserting after the item relating to section 128 the following new item:

128A. Reset of hybrid adjustable rate mortgages.

213.

Section 129C of the Truth in Lending Act is amended by inserting after subsection (l) (as added by section 206) the following new subsection:

(m)

(1)

The Federal banking agencies shall prescribe regulations jointly to require any creditor that makes a residential mortgage loan that is not a qualified mortgage (as defined in section 129B(c)), to retain an economic interest in a material portion of the credit risk for any such loan that the creditor transfers, sells or conveys to a third party.

(2)

Regulations prescribed under paragraph (1) shall—

(A)

apply only to residential mortgage loans that are not qualified mortgages (as so defined);

(B)

prohibit creditors from directly or indirectly hedging or otherwise transferring the credit risk creditors are required to retain under the regulations with respect to any residential mortgage loan; and

(C)

require creditors to retain at least 5 percent of the credit risk on any non-qualified mortgage that is transferred, sold or conveyed.

214.

(a)

Section 128(a) of Truth in Lending Act (15 U.S.C. 1638(a)) is amended by adding at the end the following new paragraphs:

(16)

In the case of a variable rate residential mortgage loan for which an escrow or impound account will be established for the payment of all applicable taxes, insurance, and assessments—

(A)

the amount of initial monthly payment due under the loan for the payment of principal and interest, and the amount of such initial monthly payment including the monthly payment deposited in the account for the payment of all applicable taxes, insurance, and assessments; and

(B)

the amount of the fully indexed monthly payment due under the loan for the payment of principal and interest, and the amount of such fully indexed monthly payment including the monthly payment deposited in the account for the payment of all applicable taxes, insurance, and assessments.

(17)

In the case of a residential mortgage loan, the aggregate amount of settlement charges for all settlement services provided in connection with the loan, the amount of charges that are included in the loan and the amount of such charges the borrower must pay at closing, the approximate amount of the wholesale rate of funds in connection with the loan, and the aggregate amount of other fees or required payments in connection with the loan.

(18)

In the case of a residential mortgage loan, the aggregate amount of fees paid to the mortgage originator in connection with the loan, the amount of such fees paid directly by the consumer, and any additional amount received by the originator from the creditor based on the interest rate of the loan.

(b)

Section 128(b) of the Truth in Lending Act (15 U.S.C. 1638(b)) is amended by adding at the end the following new paragraph:

(4)

In the case of a residential mortgage loan, the information required to be disclosed under subsection (a) with respect to such loan shall be disclosed before the earlier of—

(A)

the time required under the first sentence of paragraph (1); or

(B)

the end of the 3-day period beginning on the date the application for the loan from a consumer is received by the creditor.

215.

Section 128 of the Truth in Lending Act (15 U.S.C. 1638) is amended by adding at the end the following new subsection:

(f)

(1)

The creditor, assignee, or servicer with respect to any residential mortgage loan shall transmit to the obligor, for each billing cycle, a statement setting forth each of the following items, to the extent applicable, in a conspicuous and prominent manner:

(A)

The amount of the principal obligation under the mortgage.

(B)

The current interest rate in effect for the loan.

(C)

The date on which the interest rate may next reset or adjust.

(D)

The amount of any prepayment fee to be charged, if any.

(E)

A description of any late payment fees.

(F)

A telephone number and electronic mail address that may be used by the obligor to obtain information regarding the mortgage.

(G)

Such other information as the Board may prescribe in regulations.

(2)

The Federal banking agencies shall jointly develop and prescribe a standard form for the disclosure required under this subsection, taking into account that the statements required may be transmitted in writing or electronically.

216.

(a)

The Secretary of Housing and Urban Development (hereafter in this section referred to as the Secretary shall establish a program for making grants for providing a full range of foreclosure legal assistance to low- and moderate-income homeowners and tenants related to home ownership preservation, home foreclosure prevention, and tenancy associated with home foreclosure.

(b)

The Secretary shall allocate amounts made available for grants under this section to State and local legal organizations on the basis of a competitive process.

(c)

In allocating amounts in accordance with subsection (b), the Secretary shall give priority consideration to State and local legal organizations that are operating in the 100 metropolitan statistical areas (as that term is defined by the Director of the Office of Management and Budget) with the highest home foreclosure rates.

(d)

(1)

Any State or local legal organization that receives financial assistance pursuant to this section may use such amounts only to assist—

(A)

homeowners of owner-occupied homes with mortgages in default, in danger of default, or subject to or at risk of foreclosure; and

(B)

tenants at risk of or subject to eviction as a result of foreclosure of the property in which such tenant resides.

(2)

Any State or local legal organization that receives financial assistance pursuant to this section shall begin using any financial assistance received under this section within 90 days after receipt of the assistance.

(3)

No funds provided to a State or local legal organization under this section may be used to support any class action litigation.

(4)

Legal assistance funded with amounts provided under this section shall be limited to mortgage-related default, eviction, or foreclosure proceedings, without regard to whether such foreclosure is judicial or nonjudicial.

(e)

There are authorized to be appropriated to the Secretary $35,000,000 for each of fiscal years 2009 through 2012 for grants under this section.

217.

The amendments made by this title shall apply to transactions consummated on or after the effective date of the regulations specified in section 209.

218.

(a)

The Comptroller General shall conduct a study to determine the effects the enactment of this Act will have on the availability and affordability of credit for homebuyers and mortgage lending, including the effect—

(1)

on the mortgage market for mortgages that are not within the safe harbor provided in the amendments made by this title;

(2)

on the ability of prospective homebuyers to obtain financing;

(3)

on the ability of homeowners facing resets or adjustments to refinance—for example, do they have fewer refinancing options due to the unavailability of certain loan products that were available before the enactment of this Act;

(4)

on minorities’ ability to access affordable credit compared with other prospective borrowers;

(5)

on home sales and construction;

(6)

of extending the rescission right, if any, on adjustable rate loans and its impact on litigation;

(7)

of State foreclosure laws and, if any, an investor’s ability to transfer a property after foreclosure;

(8)

of expanding the existing provisions of the Home Ownership and Equity Protection Act of 1994;

(9)

of prohibiting prepayment penalties on high-cost mortgages; and

(10)

of establishing counseling services under the Department of Housing and Urban Development and offered through the Office of Housing Counseling.

(b)

Before the end of the 1-year period beginning on the date of the enactment of this Act, the Comptroller General shall submit a report to the Congress containing the findings and conclusions of the Comptroller General with respect to the study conducted pursuant to subsection (a).

III

301.

(a)

Section 103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)) is amended by striking all that precedes paragraph (2) and inserting the following:

(aa)

(1)

(A)

The term high-cost mortgage, and a mortgage referred to in this subsection, means a consumer credit transaction that is secured by the consumer's principal dwelling, other than a reverse mortgage transaction, if—

(i)

in the case of a credit transaction secured—

(I)

by a first mortgage on the consumer's principal dwelling, the annual percentage rate at consummation of the transaction will exceed by more than 8 percentage (10 percentage points, if the dwelling is personal property and the transaction is for less than $50,000) points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor; or

(II)

by a subordinate or junior mortgage on the consumer's principal dwelling, the annual percentage rate at consummation of the transaction will exceed by more than 10 percentage points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor;

(ii)

the total points and fees payable in connection with the transaction exceed—

(I)

in the case of a transaction for $20,000 or more, 5 percent of the total transaction amount; or

(II)

in the case of a transaction for less than $20,000, the lesser of 8 percent of the total transaction amount or $1,000; or

(iii)

the credit transaction documents permit the creditor to charge or collect prepayment fees or penalties more than 36 months after the transaction closing or such fees or penalties exceed, in the aggregate, more than 2 percent of the amount prepaid.

(B)

For purposes of subparagraph (A)(i), the annual percentage rate of interest shall be determined based on the following interest rate:

(i)

In the case of a fixed-rate transaction in which the annual percentage rate will not vary during the term of the loan, the interest rate in effect on the date of consummation of the transaction.

(ii)

In the case of a transaction in which the rate of interest varies solely in accordance with an index, the interest rate determined by adding the index rate in effect on the date of consummation of the transaction to the maximum margin permitted at any time during the transaction agreement.

(iii)

In the case of any other transaction in which the rate may vary at any time during the term of the loan for any reason, the interest charged on the transaction at the maximum rate that may be charged during the term of the transaction.

(b)

Section 103(aa)(2) of the Truth in Lending Act (15 U.S.C. 1602(aa)(2)) is amended by striking subparagraph (B) and inserting the following new subparagraph:

(B)

An increase or decrease under subparagraph (A)—

(i)

may not result in the number of percentage points referred to in paragraph (1)(A)(i)(I) being less than 6 percentage points or greater than 10 percentage points; and

(ii)

may not result in the number of percentage points referred to in paragraph (1)(A)(i)(II) being less than 8 percentage points or greater than 12 percentage points.

(c)

(1)

Section 103(aa)(4) of the Truth in Lending Act (15 U.S.C. 1602(aa)(4)) is amended—

(A)

by striking subparagraph (B) and inserting the following:

(B)

all compensation paid directly or indirectly by a consumer or creditor to a mortgage broker from any source, including a mortgage originator that originates a loan in the name of the originator in a table-funded transaction;

;

(B)

in subparagraph (C)(ii), by inserting except where applied to the charges set forth in section 106(e)(1) where a creditor may receive indirect compensation solely as a result of obtaining distributions of profits from an affiliated entity based on its ownership interest in compliance with section 8(c)(4) of the Real Estate Settlement Procedures Act of 1974 before the semicolon at the end;

(C)

in subparagraph (C)(iii), by striking ; and and inserting , except as provided for in clause (ii);;

(D)

by redesignating subparagraph (D) as subparagraph (G); and

(E)

by inserting after subparagraph (C) the following new subparagraphs:

(D)

premiums or other charges payable at or before closing for any credit life, credit disability, credit unemployment, or credit property insurance, or any other accident, loss-of-income, life or health insurance, or any payments directly or indirectly for any debt cancellation or suspension agreement or contract, except that insurance premiums or debt cancellation or suspension fees calculated and paid in full on a monthly basis shall not be considered financed by the creditor;

(E)

except as provided in subsection (cc), the maximum prepayment fees and penalties which may be charged or collected under the terms of the credit transaction;

(F)

all prepayment fees or penalties that are incurred by the consumer if the loan refinances a previous loan made or currently held by the same creditor or an affiliate of the creditor; and

(2)

Section 103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)) is amended—

(A)

by redesignating paragraph (5) as paragraph (6); and

(B)

by inserting after paragraph (4) the following new paragraph:

(5)

In the case of open-end consumer credit plans, points and fees shall be calculated, for purposes of this section and section 129, by adding the total points and fees known at or before closing, including the maximum prepayment penalties which may be charged or collected under the terms of the credit transaction, plus the minimum additional fees the consumer would be required to pay to draw down an amount equal to the total credit line.

(d)

Section 103(f) of the Truth in Lending Act (15 U.S.C. 1602(f)) is amended by striking the last sentence and inserting the following new sentence: Any person who originates or brokers 2 or more mortgages referred to in subsection (aa) in any 12-month period, any person who originates 1 or more such mortgages through a mortgage broker in any 12 month period, or, in connection with a table funding transaction of such a mortgage, any person to whom the obligation is initially assigned at or after settlement shall be considered to be a creditor for purposes of this title..

(e)

Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is amended by inserting after subsection (cc) (as added by section 101) the following new subsection:

(dd)

For the purposes of determining the amount of points and fees for purposes of subsection (aa), either the amounts described in paragraph (1) or (4) of the following paragraphs, but not both, may be excluded:

(1)

The discount points described in 1 of the following subparagraphs shall be excluded from determining the amounts of points and fees with respect to a high-cost mortgage for purposes of subsection (aa):

(A)

Up to and including 2 bona fide discount points payable by the consumer in connection with the mortgage, but only if the interest rate from which the mortgage's interest rate will be discounted does not exceed by more than 1 percentage point the required net yield for a 90-day standard mandatory delivery commitment for a reasonably comparable loan from either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, whichever is greater.

(B)

Unless 2 bona fide discount points have been excluded under subparagraph (A), up to and including 1 bona fide discount point payable by the consumer in connection with the mortgage, but only if the interest rate from which the mortgage's interest rate will be discounted does not exceed by more than 2 percentage points the required net yield for a 90-day standard mandatory delivery commitment for a reasonably comparable loan from either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, whichever is greater.

(2)

For purposes of paragraph (1), the term bona fide discount points means loan discount points which are knowingly paid by the consumer for the purpose of reducing, and which in fact result in a bona fide reduction of, the interest rate or time-price differential applicable to the mortgage.

(3)

Paragraph (1) shall not apply to discount points used to purchase an interest rate reduction unless the amount of the interest rate reduction purchased is reasonably consistent with established industry norms and practices for secondary mortgage market transactions.

(4)

Subsection (aa)(1)(4)(E) shall not apply so as to include a prepayment penalty or fee that is authorized by law other than this title and may be imposed pursuant to the terms of a high-cost mortgage (or other consumer credit transaction secured by the consumer's principal dwelling) if—

(A)

the annual percentage rate applicable with respect to such mortgage or transaction (as determined for purposes of subsection (aa)(1)(A)(i))—

(i)

in the case of a first mortgage on the consumer's principal dwelling, does not exceed by more than 2 percentage points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor; or

(ii)

in the case of a subordinate or junior mortgage on the consumer's principal dwelling, does not exceed by more than 4 percentage points the yield on such Treasury securities; and

(B)

the total amount of any prepayment fees or penalties permitted under the terms of the high-cost mortgage or transaction does not exceed 2 percent of the amount prepaid.

302.

(a)

Section 129(c)(2) of the Truth in Lending Act (15 U.S.C. 1639(c)(2)) is amended—

(1)

by striking and after the semicolon at the end of subparagraph (C);

(2)

by redesignating subparagraph (D) as subparagraph (E); and

(3)

by inserting after subparagraph (C) the following new subparagraph:

(D)

the amount of the principal obligation of the mortgage exceeds the maximum principal obligation limitation (for the applicable size residence) under section 203(b)(2) of the National Housing Act for the area in which the residence subject to the mortgage is located; and

(b)

Section 129(e) of the Truth in Lending Act (15 U.S.C. 1639(e)) is amended to read as follows:

(e)

No high-cost mortgage may contain a scheduled payment that is more than twice as large as the average of earlier scheduled payments. This subsection shall not apply when the payment schedule is adjusted to the seasonal or irregular income of the consumer.

(c)

Section 129(h) of the Truth in Lending Act (15 U.S.C. 1639(h)) is amended—

(1)

by striking Payment Ability of Consumer.—A creditor shall not and inserting

Payment Ability of Consumer.—

(1)

(A)

A creditor shall not

;

(2)

by inserting after subparagraph (A) (as so designated by paragraph (1) of this subsection) the following new subparagraph:

(B)

There shall be a presumption that a creditor has violated this subsection if the creditor engages in a pattern or practice of making high-cost mortgages without verifying or documenting the repayment ability of consumers with respect to such mortgages.

; and

(3)

by adding at the end the following new paragraph:

(2)

(A)

A creditor may not extend credit to a consumer under a high-cost mortgage unless a reasonable creditor would believe at the time the mortgage is closed that the consumer or consumers that are residing or will reside in the residence subject to the mortgage will be able to make the scheduled payments associated with the mortgage, based upon a consideration of current and expected income, current obligations, employment status, and other financial resources, other than equity in the residence.

(B)

For purposes of this subsection, there shall be a rebuttable presumption that a consumer is able to make the scheduled payments to repay the obligation if, at the time the high-cost mortgage is consummated, the consumer's total monthly debts, including amounts under the mortgage, do not exceed 50 percent of his or her monthly gross income as verified by tax returns, payroll receipts, or other third-party income verification.

303.

(a)

Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended—

(1)

by redesignating subsections (j), (k) and (l) as subsections (n), (o) and (p) respectively; and

(2)

by inserting after subsection (i) the following new subsections:

(j)

No creditor shall recommend or encourage default on an existing loan or other debt prior to and in connection with the closing or planned closing of a high-cost mortgage that refinances all or any portion of such existing loan or debt.

(k)

(1)

No creditor may impose a late payment charge or fee in connection with a high-cost mortgage—

(A)

in an amount in excess of 4 percent of the amount of the payment past due;

(B)

unless the loan documents specifically authorize the charge or fee;

(C)

before the end of the 15-day period beginning on the date the payment is due, or in the case of a loan on which interest on each installment is paid in advance, before the end of the 30-day period beginning on the date the payment is due; or

(D)

more than once with respect to a single late payment.

(2)

If a payment is otherwise a full payment for the applicable period and is paid on its due date or within an applicable grace period, and the only delinquency or insufficiency of payment is attributable to any late fee or delinquency charge assessed on any earlier payment, no late fee or delinquency charge may be imposed on such payment.

(3)

If, in the case of a loan agreement the terms of which provide that any payment shall first be applied to any past due principal balance, the consumer fails to make an installment payment and the consumer subsequently resumes making installment payments but has not paid all past due installments, the creditor may impose a separate late payment charge or fee for any principal due (without deduction due to late fees or related fees) until the default is cured.

(l)

No high-cost mortgage may contain a provision which permits the creditor, in its sole discretion, to accelerate the indebtedness. This provision shall not apply when repayment of the loan has been accelerated by default, pursuant to a due-on-sale provision, or pursuant to a material violation of some other provision of the loan documents unrelated to the payment schedule.

(m)

No creditor may directly or indirectly finance, in connection with any high-cost mortgage, any of the following:

(1)

Any prepayment fee or penalty payable by the consumer in a refinancing transaction if the creditor or an affiliate of the creditor is the noteholder of the note being refinanced.

(2)

Any points or fees.

(b)

Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (p) (as so redesignated by subsection (a)(1)) the following new subsection:

(q)

A creditor may not take any action in connection with a high-cost mortgage—

(1)

to structure a loan transaction as an open-end credit plan or another form of loan for the purpose and with the intent of evading the provisions of this title; or

(2)

to divide any loan transaction into separate parts for the purpose and with the intent of evading provisions of this title.

(c)

Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (q) (as added by subsection (b) of this section) the following new subsection:

(r)

A creditor may not charge a consumer any fee to modify, renew, extend, or amend a high-cost mortgage, or to defer any payment due under the terms of such mortgage, unless the modification, renewal, extension or amendment results in a lower annual percentage rate on the mortgage for the consumer and then only if the amount of the fee is comparable to fees imposed for similar transactions in connection with consumer credit transactions that are secured by a consumer's principal dwelling and are not high-cost mortgages.

(d)

Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (r) (as added by subsection (c) of this section) the following new subsection:

(s)

(1)

(A)

Except as provided in subparagraph (B), no creditor or servicer may charge a fee for informing or transmitting to any person the balance due to pay off the outstanding balance on a high-cost mortgage.

(B)

When payoff information referred to in subparagraph (A) is provided by facsimile transmission or by a courier service, a creditor or servicer may charge a processing fee to cover the cost of such transmission or service in an amount not to exceed an amount that is comparable to fees imposed for similar services provided in connection with consumer credit transactions that are secured by the consumer's principal dwelling and are not high-cost mortgages.

(C)

Prior to charging a transaction fee as provided in subparagraph (B), a creditor or servicer shall disclose that payoff balances are available for free pursuant to subparagraph (A).

(D)

If a creditor or servicer has provided payoff information referred to in subparagraph (A) without charge, other than the transaction fee allowed by subparagraph (B), on 4 occasions during a calendar year, the creditor or servicer may thereafter charge a reasonable fee for providing such information during the remainder of the calendar year.

(2)

Payoff balances shall be provided within 5 business days after receiving a request by a consumer or a person authorized by the consumer to obtain such information.

(e)

Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (s) (as added by subsection (d) of this section) the following new subsection:

(t)

(1)

A creditor may not extend credit to a consumer under a high-cost mortgage without first receiving certification from a counselor that is approved by the Secretary of Housing and Urban Development, or at the discretion of the Secretary, a State housing finance authority, that the consumer has received counseling on the advisability of the mortgage. Such counselor shall not be employed by the creditor or an affiliate of the creditor or be affiliated with the creditor.

(2)

No counselor may certify that a consumer has received counseling on the advisability of the high-cost mortgage unless the counselor can verify that the consumer has received each statement required (in connection with such loan) by this section or the Real Estate Settlement Procedures Act of 1974 with respect to the transaction.

(3)

The Secretary of Housing and Urban Development may prescribe such regulations as the Secretary determines to be appropriate to carry out the requirements of paragraph (1).

(f)

Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (t) (as added by subsection (e)) the following new subsection:

(u)

(1)

No creditor may knowingly or intentionally engage in the unfair act or practice of flipping in connection with a high-cost mortgage.

(2)

For purposes of this subsection, the term flipping means the making of a loan or extension of credit in the form a high-cost mortgage to a consumer which refinances an existing mortgage when the new loan or extension of credit does not have reasonable, net tangible benefit (as determined in accordance with regulations prescribed under section 129B(b)) to the consumer considering all of the circumstances, including the terms of both the new and the refinanced loans or credit, the cost of the new loan or credit, and the consumer's circumstances.

304.

Section 130(b) of the Truth in Lending Act (15 U.S.C. 1640(b)) is amended to read as follows:

(b)

A creditor has no liability under this section or section 108 or 112 for any failure to comply with any requirement imposed under this chapter or chapter 5, if—

(1)

within 30 days of the loan closing and prior to the institution of any action, the consumer is notified of or discovers the violation, appropriate restitution is made, and whatever adjustments are necessary are made to the loan to either, at the choice of the consumer—

(A)

make the loan satisfy the requirements of this chapter; or

(B)

in the case of a high-cost mortgage, change the terms of the loan in a manner beneficial to the consumer so that the loan will no longer be a high-cost mortgage; or

(2)

within 60 days of the creditor's discovery or receipt of notification of an unintentional violation or bona fide error as described in subsection (c) and prior to the institution of any action, the consumer is notified of the compliance failure, appropriate restitution is made, and whatever adjustments are necessary are made to the loan to either, at the choice of the consumer—

(A)

make the loan satisfy the requirements of this chapter; or

(B)

in the case of a high-cost mortgage, change the terms of the loan in a manner beneficial so that the loan will no longer be a high-cost mortgage.

305.

(a)

The Board of Governors of the Federal Reserve System shall publish regulations implementing this title and the amendments made by this title in final form before the end of the 6-month period beginning on the date of the enactment of this Act.

(b)

(1)

The Board of Governors of the Federal Reserve System may prescribe regulations requiring or encouraging creditors to provide consumer mortgage education to prospective customers or direct such customers to qualified consumer mortgage education or counseling programs in the vicinity of the residence of the consumer.

(2)

No requirement established by the Board of Governors of the Federal Reserve System pursuant to paragraph (1) shall be construed as affecting or superseding any requirement under the law of any State with respect to consumer mortgage counseling or education.

306.

The amendments made by this title shall take effect at the end of the 6-month period beginning on the date of the enactment of this Act and shall apply to mortgages referred to in section 103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)) consummated after the end of such period.

401.

This title may be cited as the Expand and Preserve Home Ownership Through Counseling Act.

402.

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)

(1)

There is established, in the Office of the Secretary, the Office of Housing Counseling.

(2)

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)

(A)

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)

The Director shall carry out the functions assigned to the Director and the Office under this section and any other provisions of law. Such functions shall include establishing rules necessary for—

(i)

the counseling procedures under section 106(g)(1) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(h)(1));

(ii)

carrying out all other functions of the Secretary under section 106(g) of the Housing and Urban Development Act of 1968, including the establishment, operation, and publication of the availability of the toll-free telephone number under paragraph (2) of such section;

(iii)

carrying out section 5 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2604) for home buying information booklets prepared pursuant to such section;

(iv)

carrying out the certification program under section 106(e) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(e));

(v)

carrying out the assistance program under section 106(a)(4) of the Housing and Urban Development Act of 1968, including criteria for selection of applications to receive assistance;

(vi)

carrying out any functions regarding abusive, deceptive, or unscrupulous lending practices relating to residential mortgage loans that the Secretary considers appropriate, which shall include conducting the study under section 6 of the Expand and Preserve Home Ownership Through Counseling Act;

(vii)

providing for operation of the advisory committee established under paragraph (4) of this subsection;

(viii)

collaborating with community-based organizations with expertise in the field of housing counseling; and

(ix)

providing for the building of capacity to provide housing counseling services in areas that lack sufficient services.

(4)

(A)

The Secretary shall appoint an advisory committee to provide advice regarding the carrying out of the functions of the Director.

(B)

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)

Except as provided in subparagraph (D), each member of the advisory committee shall be appointed for a term of 3 years. Members may be reappointed at the discretion of the Secretary.

(D)

As designated by the Secretary at the time of appointment, of the members first appointed to the advisory committee, 4 shall be appointed for a term of 1 year and 4 shall be appointed for a term of 2 years.

(E)

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)

The advisory committee shall have no role in reviewing or awarding housing counseling grants.

(5)

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.

403.

(a)

Section 106 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x) is amended by adding at the end the following new subsection:

(g)

(1)

(A)

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)

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)

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)

The Secretary, in conjunction with the advisory committee established under subsection (g)(4) of the Department of Housing and Urban Development Act, shall establish standards for materials and forms to be used, as appropriate, by organizations providing homeownership counseling services, including any recipients of assistance pursuant to subsection (a)(4).

(3)

(A)

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)

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)

After a period of initial availability under subparagraph (B) as the Secretary considers appropriate, the Secretary shall take reasonable steps to make mortgage software systems certified pursuant to this paragraph widely available through the Internet and at public locations, including public libraries, senior-citizen centers, public housing sites, offices of public housing agencies that administer rental housing assistance vouchers, and housing counseling centers.

(4)

(A)

The Director of Housing Counseling shall develop, implement, and conduct national public service multimedia campaigns designed to make persons facing mortgage foreclosure, persons considering a subprime mortgage loan to purchase a home, elderly persons, persons who face language barriers, low-income persons, and other potentially vulnerable consumers aware that it is advisable, before seeking or maintaining a residential mortgage loan, to obtain homeownership counseling from an unbiased and reliable sources and that such homeownership counseling is available, including through programs sponsored by the Secretary of Housing and Urban Development.

(B)

Each segment of the multimedia campaign under subparagraph (A) shall publicize the toll-free telephone number and website of the Department of Housing and Urban Development through which persons seeking housing counseling can locate a housing counseling agency in their State that is certified by the Secretary of Housing and Urban Development and can provide advice on buying a home, renting, defaults, foreclosures, credit issues, and reverse mortgages.

(C)

There are authorized to be appropriated to the Secretary, not to exceed $3,000,000 for fiscal years 2009, 2010, and 2011, for the development, implementation, and conduct of national public service multimedia campaigns under this paragraph.

(5)

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)

Section 106(c)(5)(A)(ii) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(c)(5)(A)(ii)) is amended—

(1)

in subclause (III), by striking and at the end;

(2)

in subclause (IV) by striking the period at the end and inserting ; and; and

(3)

by inserting after subclause (IV) the following new subclause:

(V)

notify the housing or mortgage applicant of the availability of mortgage software systems provided pursuant to subsection (g)(3).

404.

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)

(A)

The Secretary shall make financial assistance available under this paragraph to States, units of general local governments, and nonprofit organizations providing homeownership or rental counseling (as such terms are defined in subsection (g)(1)).

(B)

The Secretary shall establish standards and guidelines for eligibility of organizations (including governmental and nonprofit organizations) to receive assistance under this paragraph.

(C)

Assistance made available under this paragraph shall be distributed in a manner that encourages efficient and successful counseling programs.

(D)

There are authorized to be appropriated $45,000,000 for each of fiscal years 2009 through 2012 for—

(i)

the operations of the Office of Housing Counseling of the Department of Housing and Urban Development;

(ii)

the responsibilities of the Secretary under paragraphs (2) through (5) of subsection (g); and

(iii)

assistance pursuant to this paragraph for entities providing homeownership and rental counseling.

405.

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)

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)

Any homeownership counseling or rental housing counseling (as such terms are defined in subsection (g)(1)) required under, or provided in connection with, any program administered by the Department of Housing and Urban Development shall be provided only by organizations or counselors certified by the Secretary under this subsection as competent to provide such counseling.

(4)

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).

406.

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.

407.

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)

For purposes of this section:

(1)

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)

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)

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.

408.

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)

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)

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 inserting at the end the following new sentence: Each lender shall also include with the booklet a reasonably complete or updated list of homeownership counselors who are certified pursuant to section 106(e) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(e)) and located in the area of the lender.; and

(4)

in subsection (d), by inserting after the period at the end of the first sentence the following: The lender shall provide the HUD-issued booklet in the version that is most appropriate for the person receiving it..

501.

(a)

Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by inserting after section 129C (as added by section 201) the following new section:

129D.

(a)

Except as provided in subsection (b) or (c), a creditor, in connection with the formation or consummation of a consumer credit transaction secured by a first lien on the principal dwelling of the consumer, other than a consumer credit transaction under an open end credit plan or a reverse mortgage, shall establish, at the time of the consummation of such transaction, an escrow or impound account for the payment of taxes and hazard insurance, and, if applicable, flood insurance, mortgage insurance, ground rents, and any other required periodic payments or premiums with respect to the property or the loan terms, as provided in, and in accordance with, this section.

(b)

No impound, trust, or other type of account for the payment of property taxes, insurance premiums, or other purposes relating to the property may be required as a condition of a real property sale contract or a loan secured by a first deed of trust or mortgage on the principal dwelling of the consumer, other than a consumer credit transaction under an open end credit plan or a reverse mortgage, except when—

(1)

any such impound, trust, or other type of escrow or impound account for such purposes is required by Federal or State law;

(2)

a loan is made, guaranteed, or insured by a State or Federal governmental lending or insuring agency;

(3)

the consumer’s debt-to-income ratio at the time the home mortgage is established taking into account income from all sources including the consumer’s employment exceeds 50 percent;

(4)

the transaction is secured by a first mortgage or lien on the consumer’s principal dwelling and the annual percentage rate on the credit, at the time of consummation of the transaction, will exceed by more than 3.0 percentage points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceding the month in which the application of the extension of credit is received by the creditor;

(5)

a consumer obtains a mortgage referred to in section 103(aa);

(6)

the original principal amount of such loan at the time of consummation of the transaction is—

(A)

90 percent or more of the sale price, if the property involved is purchased with the proceeds of the loan; or

(B)

90 percent or more of the appraised value of the property securing the loan;

(7)

the combined principal amount of all loans secured by the real property exceeds 95 percent of the appraised value of the property securing the loans at the time of consummation of the last mortgage transaction;

(8)

the consumer was the subject of a proceeding under title 11, United States Code, at any time during the 7-year period preceding the date of the transaction (as determined on the basis of the date of entry of the order for relief or the date of adjudication, as the case may be, with respect to such proceeding and included in a consumer report on the consumer under the Fair Credit Reporting Act); or

(9)

so required by the Board pursuant to regulation.

(c)

An escrow or impound account established pursuant to subsection (b), shall remain in existence for a minimum period of 5 years and until such borrower has sufficient equity in the dwelling securing the consumer credit transaction so as to no longer be required to maintain private mortgage insurance, or such other period as may be provided in regulations to address situations such as borrower delinquency, unless the underlying mortgage establishing the account is terminated.

(d)

For mortgages not covered by the requirements of subsection (b), no provision of this section shall be construed as precluding the establishment of an impound, trust, or other type of account for the payment of property taxes, insurance premiums, or other purposes relating to the property—

(1)

on terms mutually agreeable to the parties to the loan;

(2)

at the discretion of the lender or servicer, as provided by the contract between the lender or servicer and the borrower; or

(3)

pursuant to the requirements for the escrowing of flood insurance payments for regulated lending institutions in section 102(d) of the Flood Disaster Protection Act of 1973.

(e)

(1)

Except as may otherwise be provided for in this title or in regulations prescribed by the Board, escrow or impound accounts established pursuant to subsection (b) shall be established in a federally insured depository institution.

(2)

Except as provided in this section or regulations prescribed under this section, an escrow or impound account subject to this section shall be administered in accordance with—

(A)

the Real Estate Settlement Procedures Act of 1974 and regulations prescribed under such Act;

(B)

the Flood Disaster Protection Act of 1973 and regulations prescribed under such Act; and

(C)

the law of the State, if applicable, where the real property securing the consumer credit transaction is located.

(3)

If prescribed by applicable State or Federal law, each creditor shall pay interest to the consumer on the amount held in any impound, trust, or escrow account that is subject to this section in the manner as prescribed by that applicable State or Federal law.

(4)

Any action or omission on the part of any person which constitutes a violation of the Real Estate Settlement Procedures Act of 1974 or any regulation prescribed under such Act for which the person has paid any fine, civil money penalty, or other damages shall not give rise to any additional fine, civil money penalty, or other damages under this section, unless the action or omission also constitutes a direct violation of this section.

(f)

In the case of any impound, trust, or escrow account that is subject to this section, the creditor shall disclose by written notice to the consumer at least 3 business days before the consummation of the consumer credit transaction giving rise to such account or in accordance with timeframes established in prescribed regulations the following information:

(1)

The fact that an escrow or impound account will be established at consummation of the transaction.

(2)

The amount required at closing to initially fund the escrow or impound account.

(3)

The amount, in the initial year after the consummation of the transaction, of the estimated taxes and hazard insurance, including flood insurance, if applicable, and any other required periodic payments or premiums that reflects, as appropriate, either the taxable assessed value of the real property securing the transaction, including the value of any improvements on the property or to be constructed on the property (whether or not such construction will be financed from the proceeds of the transaction) or the replacement costs of the property.

(4)

The estimated monthly amount payable to be escrowed for taxes, hazard insurance (including flood insurance, if applicable) and any other required periodic payments or premiums.

(5)

The fact that, if the consumer chooses to terminate the account at the appropriate time in the future, the consumer will become responsible for the payment of all taxes, hazard insurance, and flood insurance, if applicable, as well as any other required periodic payments or premiums on the property unless a new escrow or impound account is established.

(g)

For purposes of this section, the following definitions shall apply:

(1)

The term flood insurance means flood insurance coverage provided under the national flood insurance program pursuant to the National Flood Insurance Act of 1968.

(2)

The term hazard insurance shall have the same meaning as provided for hazard insurance, casualty insurance, homeowner’s insurance, or other similar term under the law of the State where the real property securing the consumer credit transaction is located.

(b)

(1)

The Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, the National Credit Union Administration Board, (hereafter in this Act referred to as the Federal banking agencies) and the Federal Trade Commission shall prescribe, in final form, such regulations as determined to be necessary to implement the amendments made by subsection (a) before the end of the 180-day period beginning on the date of the enactment of this Act.

(2)

The amendments made by subsection (a) shall only apply to covered mortgage loans consummated after the end of the 1-year period beginning on the date of the publication of final regulations in the Federal Register.

(c)

The table of sections for chapter 2 of the Truth in Lending Act is amended by inserting after the item relating to section 129C (as added by section 201) the following new item:

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

502.

(a)

Section 129D of the Truth in Lending Act (as added by section 501) is amended by adding at the end the following new subsection:

(h)

(1)

If—

(A)

an impound, trust, or other type of account for the payment of property taxes, insurance premiums, or other purposes relating to real property securing a consumer credit transaction is not established in connection with the transaction; or

(B)

a consumer chooses, at any time after such an account is established in connection with any such transaction and in accordance with any statute, regulation, or contractual agreement, to close such account,

the creditor or servicer shall provide a timely and clearly written disclosure to the consumer that advises the consumer of the responsibilities of the consumer and implications for the consumer in the absence of any such account.

(2)

Any disclosure provided to a consumer under paragraph (1) shall include the following:

(A)

Information concerning any applicable fees or costs associated with either the non-establishment of any such account at the time of the transaction, or any subsequent closure of any such account.

(B)

A clear and prominent notice that the consumer is responsible for personally and directly paying the non-escrowed items, in addition to paying the mortgage loan payment, in the absence of any such account, and the fact that the costs for taxes, insurance, and related fees can be substantial.

(C)

A clear explanation of the consequences of any failure to pay non-escrowed items, including the possible requirement for the forced placement of insurance by the creditor or servicer and the potentially higher cost (including any potential commission payments to the servicer) or reduced coverage for the consumer in the event of any such creditor-placed insurance.

(b)

(1)

The Federal banking agencies and the Federal Trade Commission shall prescribe, in final form, such regulations as such agencies determine to be necessary to implement the amendments made by subsection (a) before the end of the 180-day period beginning on the date of the enactment of this Act.

(2)

The amendments made by subsection (a) shall only apply in accordance with the regulations established in paragraph (1) and beginning on the date occurring 180-days after the date of the publication of final regulations in the Federal Register.

503.

(a)

Section 6 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605) is amended by adding at the end the following new subsections:

(k)

(1)

A servicer of a federally related mortgage shall not—

(A)

obtain force-placed hazard insurance unless there is a reasonable basis to believe the borrower has failed to comply with the loan contract’s requirements to maintain property insurance;

(B)

charge fees for responding to valid qualified written requests (as defined in regulations which the Secretary shall prescribe) under this section;

(C)

fail to take timely action to respond to a borrower’s requests to correct errors relating to allocation of payments, final balances for purposes of paying off the loan, or avoiding foreclosure, or other standard servicer’s duties;

(D)

fail to respond within 10 business days to a request from a borrower to provide the identity, address, and other relevant contact information about the owner assignee of the loan; or

(E)

fail to comply with any other obligation found by the Secretary, by regulation, to be appropriate to carry out the consumer protection purposes of this Act.

(2)

For purposes of this subsection and subsections (l) and (m), the term force-placed insurance means hazard insurance coverage obtained by a servicer of a federally related mortgage when the borrower has failed to maintain or renew hazard insurance on such property as required of the borrower under the terms of the mortgage.

(l)

A servicer of a federally related mortgage shall not be construed as having a reasonable basis for obtaining force-placed insurance unless the requirements of this subsection have been met.

(1)

A servicer may not impose any charge on any borrower for force-placed insurance with respect to any property securing a federally related mortgage unless—

(A)

the servicer has sent, by first-class mail, a written notice to the borrower containing—

(i)

a reminder of the borrower’s obligation to maintain hazard insurance on the property securing the federally related mortgage;

(ii)

a statement that the servicer does not have evidence of insurance coverage of such property;

(iii)

a clear and conspicuous statement of the procedures by which the borrower may demonstrate that the borrower already has insurance coverage; and

(iv)

a statement that the servicer may obtain such coverage at the borrower’s expense if the borrower does not provide such demonstration of the borrower’s existing coverage in a timely manner;

(B)

the servicer has sent, by first-class mail, a second written notice, at least 30 days after the mailing of the notice under subparagraph (A) that contains all the information described in each clauses of such subparagraph; and

(C)

the servicer has not received from the borrower any demonstration of hazard insurance coverage for the property securing the mortgage by the end of the 15-day period beginning on the date the notice under subparagraph (B) was sent by the servicer.

(2)

A servicer of a federally related mortgage shall accept any reasonable form of written confirmation from a borrower of existing insurance coverage, which shall include the existing insurance policy number along with the identity of, and contact information for, the insurance company or agent.

(3)

Within 15 days of the receipt by a servicer of confirmation of a borrower’s existing insurance coverage, the servicer shall—

(A)

terminate the force-placed insurance; and

(B)

refund to the consumer all force-placed insurance premiums paid by the borrower during any period during which the borrower’s insurance coverage and the force-placed insurance coverage were each in effect, and any related fees charged to the consumer’s account with respect to the force-placed insurance during such period.

(4)

No provision of this section shall be construed as prohibiting a servicer from providing simultaneous or concurrent notice of a lack of flood insurance pursuant to section 102(e) of the Flood Disaster Protection Act of 1973.

(m)

All charges for force-placed insurance premiums shall be bona fide and reasonable in amount.

(n)

(1)

All amounts received by a lender or a servicer on a home loan at the address where the borrower has been instructed to make payments shall be accepted and credited, or treated as credited, on the business day received, to the extent that the borrower has made the full contractual payment and has provided sufficient information to credit the account.

(2)

If a servicer uses the scheduled method of accounting, any regularly scheduled payment made prior to the scheduled due date shall be credited no later than the due date.

(3)

If any payment is received by a lender or a servicer on a home loan and not credited, or treated as credited, the borrower shall be notified within 10 business days by mail at the borrower’s last known address of the disposition of the payment, the reason the payment was not credited, or treated as credited to the account, and any actions necessary by the borrower to make the loan current.

(b)

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)

Section 6(e) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605(e)) is amended—

(1)

in paragraph (1)(A), by striking 20 days and inserting 10 days;

(2)

in paragraph (2), by striking 60 days and inserting 30 days; and

(3)

by adding at the end the following new paragraph:

(4)

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)

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)

A creditor or servicer shall send a payoff balance within 7 business days of the receipt of a written request for such balance from or on behalf of the borrower.

(e)

Section 6(g) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605(g)) is amended by adding at the end the following new sentence: Any balance in any such account that is within the servicer’s control at the time the loan is paid off shall be promptly returned to the borrower within 20 business days or credited to a similar account for a new mortgage loan to the borrower with the same lender..

504.

(a)

(1)

The Secretary of Housing and Urban Development, in consultation with the Federal banking agencies, and the Federal Trade Commission, shall conduct a comprehensive study on mortgage servicing practices and their potential for fraud and abuse.

(2)

In addition to other issues the Secretary of Housing and Urban Development, the Federal banking agencies, and the Federal Trade Commission may determine to be appropriate and possibly pertinent to the study conducted under paragraph (1), the study shall include the following issues:

(A)

A survey of the industry in order to examine the issue of the timely or effective posting of payments by servicers.

(B)

The employment of daily interest when payments are made after a due date.

(C)

The charging of late fees on the entire outstanding principal.

(D)

The charging of interest on servicing fees.

(E)

The utilization of collection practices that failed to comply with the Fair Debt Collection Practices Act.

(F)

The charging of prepayment penalties when not authorized by either the note or law.

(G)

The employment of unconscionable forbearance agreements.

(H)

Foreclosure abuses.

(3)

Before the end of the 12-month period beginning on the date of the enactment of this Act, the Secretary of Housing and Urban Development shall submit a report on the study conducted under this subsection to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate.

(b)

(1)

The Secretary of Housing and Urban Development, in consultation with the Federal banking agencies, and the Federal Trade Commission, shall conduct a comprehensive study on means to improve the best practices of the mortgage servicing industry, and Federal and State laws governing such industry.

(2)

Before the end of the 18-month period beginning on the date of the enactment of this Act, the Secretary of Housing and Urban Development shall submit a report on the study conducted under this subsection to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate, together with such recommendations for administrative or legislative action as the Secretary, in consultation with the Board and the Commission, may determine to be appropriate.

505.

(a)

Section 128(b) of the Truth in Lending Act (15 U.S.C. 1638(b)) is amended by adding at the end the following new paragraph:

(4)

(A)

In the case of any consumer credit transaction secured by a first mortgage or lien on the principal dwelling of the consumer, other than a consumer credit transaction under an open end credit plan or a reverse mortgage, for which an impound, trust, or other type of account has been or will be established in connection with the transaction for the payment of property taxes, hazard and flood (if any) insurance premiums, or other periodic payments or premiums with respect to the property, the information required to be provided under subsection (a) with respect to the number, amount, and due dates or period of payments scheduled to repay the total of payments shall take into account the amount of any monthly payment to such account for each such repayment in accordance with section 10(a)(2) of the Real Estate Settlement Procedures Act of 1974.

(B)

The amount taken into account under subparagraph (A) for the payment of property taxes, hazard and flood (if any) insurance premiums, or other periodic payments or premiums with respect to the property shall reflect the taxable assessed value of the real property securing the transaction after the consummation of the transaction, including the value of any improvements on the property or to be constructed on the property (whether or not such construction will be financed from the proceeds of the transaction), if known, and the replacement costs of the property for hazard insurance, in the initial year after the transaction.

601.

Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (u) (as added by section 303(f)) the following new subsection:

(v)

(1)

A creditor may not extend credit in the form of a mortgage referred to in section 103(aa) to any consumer without first obtaining a written appraisal of the property to be mortgaged prepared in accordance with the requirements of this subsection.

(2)

(A)

An appraisal of property to be secured by a mortgage referred to in section 103(aa) does not meet the requirement of this subsection unless it is performed by a qualified appraiser who conducts a physical property visit of the interior of the mortgaged property.

(B)

(i)

If the purpose of a mortgage referred to in section 103(aa) is to finance the purchase or acquisition of the mortgaged property from a person within 180 days of the purchase or acquisition of such property by that person at a price that was lower than the current sale price of the property, the creditor shall obtain a second appraisal from a different qualified appraiser. The second appraisal shall include an analysis of the difference in sale prices, changes in market conditions, and any improvements made to the property between the date of the previous sale and the current sale.

(ii)

The cost of any second appraisal required under clause (i) may not be charged to the consumer.

(C)

For purposes of this subsection, the term qualified appraiser means a person who—

(i)

is certified or licensed by the State in which the property to be appraised is located; and

(ii)

performs each appraisal in conformity with the Uniform Standards of Professional Appraisal Practice and title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, and the regulations prescribed under such title, as in effect on the date of the appraisal.

(3)

A creditor shall provide 1 copy of each appraisal conducted in accordance with this subsection in connection with a mortgage referred to in section 103(aa) to the consumer without charge, and at least 3 days prior to the transaction closing date.

(4)

At the time of the initial mortgage application, the consumer shall be provided with a statement by the creditor that any appraisal prepared for the mortgage is for the sole use of the creditor, and that the consumer may choose to have a separate appraisal conducted at their own expense.

(5)

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.

602.

(a)

Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by inserting after section 129D (as added by section 501(a)) the following new section:

129E.

(a)

It shall be unlawful, in providing any services for a consumer credit transaction secured by the principal dwelling of the consumer, to engage in any unfair or deceptive act or practice as described in or pursuant to regulations prescribed under this section.

(b)

For purposes of subsection (a), unfair and deceptive practices shall include—

(1)

any appraisal of a property offered as security for repayment of the consumer credit transaction that is conducted in connection with such transaction in which a person with an interest in the underlying transaction compensates, coerces, extorts, colludes, instructs, induces, bribes, or intimidates a person conducting or involved in an appraisal, or attempts, to compensate, coerce, extort, collude, instruct, induce, bribe, or intimidate such a person, for the purpose of causing the appraised value assigned, under the appraisal, to the property to be based on any factor other than the independent judgment of the appraiser;

(2)

mischaracterizing, or suborning any mischaracterization of, the appraised value of the property securing the extension of the credit;

(3)

seeking to influence an appraiser or otherwise to encourage a targeted value in order to facilitate the making or pricing of the transaction; and

(4)

failing to timely compensate an appraiser for a completed appraisal regardless of whether the transaction closes.

(c)

The requirements of subsection (b) shall not be construed as prohibiting a mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, or any other person with an interest in a real estate transaction from asking an appraiser to provide 1 or more of the following services:

(1)

Consider additional, appropriate property information, including the consideration of additional comparable properties to make or support an appraisal.

(2)

Provide further detail, substantiation, or explanation for the appraiser’s value conclusion.

(3)

Correct errors in the appraisal report.

(d)

The Board, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, the National Credit Union Administration Board, and the Federal Trade Commission—

(1)

shall, for purposes of this section, jointly prescribe regulations defining with specificity acts or practices which are unfair or deceptive in the provision of mortgage lending services for a consumer credit transaction secured by the principal dwelling of the consumer or mortgage brokerage services for such a transaction and defining any terms in this section or such regulations; and

(2)

may jointly issue interpretive guidelines and general statements of policy with respect to unfair or deceptive acts or practices in the provision of mortgage lending services for a consumer credit transaction secured by the principal dwelling of the consumer and mortgage brokerage services for such a transaction, within the meaning of subsections (a), (b), and (c).

(e)

(1)

In addition to the enforcement provisions referred to in section 130, each person who violates this section shall forfeit and pay a civil penalty of not more than $10,000 for each day any such violation continues.

(2)

In the case of any person on whom a civil penalty has been imposed under paragraph (1), paragraph (1) shall be applied by substituting $20,000 for $10,000 with respect to all subsequent violations.

(3)

The agency referred to in subsection (a) or (c) of section 108 with respect to any person described in paragraph (1) shall assess any penalty under this subsection to which such person is subject.

(b)

The table of sections for chapter 2 of the Truth in Lending Act is amended by inserting after the item relating to section 129D (as added by section 501(c)) the following new item:

129E. Unfair and deceptive practices and acts relating to certain consumer credit transactions.

603.

(a)

(1)

Section 1101 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3331) is amended by inserting and to provide the Appraisal Subcommittee with a consumer protection mandate before the period at the end.

(2)

Section 1103(a) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3332(a)) is amended—

(A)

by striking and at the end of paragraph (3);

(B)

by striking the period at the end of paragraph (4) and inserting ; and; and

(C)

by adding at the end the following new paragraph:

(5)

protect the consumer from improper appraisal practices and the predations of unlicensed appraisers.

(3)

Section 1112(b) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3341(b)) is amended by inserting before the period the following: , and that such threshold level provides reasonable protection for consumers who purchase 1–4 unit single-family residences.

(b)

Section 1103(a)(4) of Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3332(a)(4)) is amended at the end by inserting: The report shall also detail the activities of the Appraisal Subcommittee, including the results of all audits of State appraiser regulatory agencies, and provide an accounting of disapproved actions and warnings taken in the previous year, including a description of the conditions causing the disapproval..

(c)

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 in the Federal Register after shall meet.

(d)

Section 1106 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3335) is amended—

(1)

by inserting prescribe regulations after notice and opportunity for comment, after hold hearings; and

(2)

at the end by inserting Any regulations prescribed by the Appraisal Subcommittee shall (unless otherwise provided in this title) be limited to the following functions: temporary practice, national registry, information sharing, and enforcement. For purposes of prescribing regulations, the Appraisal Subcommittee shall establish an advisory committee of industry participants, including appraisers and government agencies, and hold regular meetings..

(e)

Section 1113 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3342) is amended—

(1)

by striking In determining and inserting (a) In general.—In determining; and

(2)

by adding at the end the following new subsection:

(b)

All field appraisals performed at a property within a State shall be prepared by appraisers licensed in the State where the property is located. All Uniform Standards of Professional Appraisal Practice-compliant appraisal reviews shall be performed by an appraiser who is duly licensed by a State appraisal board.

(f)

Section 1109(a) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3338(a)) is amended—

(1)

by striking and after the semicolon in paragraph (1);

(2)

by redesignating paragraph (2) as paragraph (3); and

(3)

by inserting after paragraph (1) the following new paragraph:

(2)

transmit reports on sanctions, disciplinary actions, license and certification revocations, and license and certification suspensions on a timely basis to the national registry of the Appraisal Subcommittee; and

(g)

Section 1109(a)(3) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3338(a)(3)) (as modified by section 203(e) of this Act) is amended by—

(1)

striking $25 and inserting $40;

(2)

striking $50 and inserting $80; and

(3)

inserting after the period at the end the following new sentences: The Appraisal Subcommittee shall consider at least once every 5 years whether to adjust the dollar amount of the registry fees to account for inflation. In implementing any change in registry fees, the Appraisal Subcommittee shall provide flexibility to the States for multi-year certifications and licenses already in place, as well as a transition period to implement the changes in registry fees.

(h)

Section 1109(b) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3348(b)) is amended—

(1)

by striking and after the semicolon in paragraph (3);

(2)

by striking the period at the end of paragraph (4) and inserting a semicolon; and

(3)

by adding at the end the following new paragraphs:

(5)

make grants to State appraiser regulatory agencies to help defray those costs relating to enforcement activities; and

(6)

to report to all State appraiser certifying and licensing agencies when a license or certification is surrendered, revoked, or suspended.

(i)

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 Appraisal Qualifications Board of The Appraisal Foundation for the licensing of real estate appraisers before the period at the end; and

(2)

by striking subsection (e) and inserting the following new subsection:

(e)

Any requirements established for individuals in the position of Trainee Appraiser and Supervisory Appraiser shall meet or exceed the minimum qualification requirements of the Appraiser Qualifications Board of The Appraisal Foundation. The Appraisal Subcommittee shall have the authority to enforce these requirements.

(j)

Section 1118(a) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3347(a)) is amended—

(1)

by inserting funding, staffing, after practices, each place such term appears;

(2)

by inserting before the period at the end of the first sentence the following: , whether a State agency processes complaints and completes exams in a reasonable time period, and whether a State agency reports claims and disciplinary actions on a timely basis to the national registry maintained by the Appraisal Subcommittee; and

(3)

by inserting at the end the following new sentence: The Appraisal Subcommittee shall have the authority to impose interim sanctions and suspensions..

(k)

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)

A State appraiser certifying or licensing agency shall issue a reciprocal certification or license for an individual from another State when—

(1)

the appraiser licensing and certification program of such other State is in compliance with the provisions of this title; and

(2)

the appraiser holds a valid certification from a State whose requirements for certification or licensing meet or exceed the licensure standards established by the State where an individual seeks appraisal licensure.

(l)

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: No provision of this subsection shall be construed as prohibiting consideration of designations conferred by recognized national professional appraisal organizations, such as sponsoring organizations of The Appraisal Foundation..

(m)

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)

(1)

No mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, or any other person with an interest in a real estate transaction involving an appraisal shall improperly influence, or attempt to improperly influence, through coercion, extortion, collusion, compensation, instruction, inducement, intimidation, non-payment for services rendered, or bribery, the development, reporting, result, or review of a real estate appraisal sought in connection with a mortgage loan.

(2)

The requirements of paragraph (1) shall not be construed as prohibiting a mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, or any other person with an interest in a real estate transaction from asking an appraiser to provide 1 or more of the following services:

(A)

Consider additional, appropriate property information, including the consideration of additional comparable properties to make or support an appraisal.

(B)

Provide further detail, substantiation, or explanation for the appraiser’s value conclusion.

(C)

Correct errors in the appraisal report.

(3)

No certified or licensed appraiser conducting an appraisal may have a direct or indirect interest, financial or otherwise, in the property or transaction involving the appraisal.

(4)

Any mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, or any other person with an interest in a real estate transaction involving an appraisal who has a reasonable basis to believe an appraiser is violating applicable laws, or is otherwise engaging in unethical or unprofessional conduct, shall refer the matter to the applicable State appraiser certifying and licensing agency.

(5)

The Federal financial institutions regulatory agencies (as defined in section 1003(1) of the Federal Financial Institutions Examination Council Act of 1978) shall prescribe such regulations as may be necessary to carry out the provisions of this subsection.

(6)

Any person who violates any provision of this section shall be subject to civil penalties under section 8(i)(2) of the Federal Deposit Insurance Act or section 206(k)(2) of the Federal Credit Union Act, as appropriate.

(7)

A proceeding with respect to a violation of this section shall be an administrative proceeding which may be conducted by a Federal financial institutions regulatory agency in accordance with the procedures set forth in subchapter II of chapter 5 of title 5, United States Code.

(n)

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 (l) of this section) the following new subsection:

(h)

The Appraisal Subcommittee shall encourage the States to accept courses approved by the Appraiser Qualification Board’s Course Approval Program.

(o)

(1)

Section 1119(a)(2) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3348(a)(2)) is amended by striking council, and inserting Council,.

(2)

Section 1121(6) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3350(6)) is amended by striking Corporations, and inserting Corporation,.

(3)

Section 1121(8) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3350(8)) is amended by striking council and inserting Council.

(4)

Section 1122 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3351) is amended—

(A)

in subsection (a)(1) by moving the left margin of subparagraphs (A), (B), and (C) 2 ems to the right; and

(B)

in subsection (c)—

(i)

by striking Federal Financial Institutions Examination Council and inserting Financial Institutions Examination Council; and

(ii)

by striking the council’s functions and inserting the Council’s functions.

604.

(a)

The Comptroller General shall conduct a comprehensive study on possible improvements in the appraisal process generally, and specifically on the consistency in and the effectiveness of, and possible improvements in, State compliance efforts and programs in accordance with title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. In addition, this study shall examine the existing de minimis loan levels established by Federal regulators for compliance under title XI and whether there is a need to revise them to reflect the addition of consumer protection to the purposes and functions of the Appraisal Subcommittee.

(b)

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.

605.

Subsection (e) of section 701 of the Equal Credit Opportunity Act ( U.S.C. 1691) is amended to read as follows:

(e)

(1)

Each creditor shall furnish to an applicant, a copy of all appraisal reports and valuations developed in connection with the applicant’s application for a loan that is or would have been secured by a lien on residential real property.

(2)

Appraisal reports shall be furnished under this subsection upon written request by the applicant, made within a reasonable period of time of the application and before any closing on the loan.

(3)

The creditor may require an applicant to pay a reasonable fee for the provision of copies of appraisal reports under this subsection.

(4)

The creditor shall notify (pursuant to regulations prescribed by the Board) an applicant in writing of the right to receive a copy of each appraisal report, under this subsection.

H.R. 1728 (111^th): Mortgage Reform and Anti-Predatory Lending Act

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H.R. 1728 (111th): Mortgage Reform and Anti-Predatory Lending Act

This bill has 4 versions. Select a version to view: Mar 26, 2009: Introduced May 4, 2009: Reported by House Committee May 7, 2009: Passed the House May 12, 2009: Referred to Senate Committee

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