49–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 114–53 

PRESERVING ACCESS TO MANUFACTURED HOUSING ACT 

OF 2015 

APRIL 6, 2015.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

[To accompany H.R. 650] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 650) to amend the Truth in Lending Act to modify the 

definitions of a mortgage originator and a high-cost mortgage, having considered the same, report favorably thereon without amendment and recommend that the bill do pass. 

PURPOSE AND SUMMARY

H.R. 650, the ‘‘Preserving Access to Manufactured Housing Act 

of 2015,’’ provides technical clarifications to the definition of a 

‘‘mortgage originator’’ for purposes of the Truth in Lending Act. 

The bill also amends the definition of a ‘‘high cost’’ mortgage to ensure that consumers of small-balance residential loans have access 

to mortgage credit. 

BACKGROUND AND NEED FOR LEGISLATION

The Home Ownership and Equity Protection Act (HOEPA) was 

enacted in 1994 as an amendment to the Truth in Lending Act (15 

U.S.C. 1601 et seq.) to address abusive practices in refinancings 

and closed-end home equity loans with high interest rates or high 

fees. Since HOEPA’s enactment, refinancings or home equity mortgage loans meeting any of HOEPA’s high-cost coverage tests have 

been subject to special disclosure requirements and restrictions on 

loan terms, and consumers with high-cost mortgages have had enhanced remedies for violations of the law. HOEPA identifies a class 

of high-cost mortgage loans through rate and fee triggers, and it 


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provides consumers entering into these transactions with special 

protections. 

On January 10, 2013, the Consumer Financial Protection Bureau 

(CFPB) issued a final rule implementing the changes to HOEPA 

mandated by the Dodd-Frank Wall Street Reform and Consumer 

Protection Act (P.L. 111–203). The Dodd-Frank Act expanded the 

scope of HOEPA coverage to include purchase money mortgage 

loans and home equity lines of credit. Previously HOEPA only applied to refinancings and home equity installment loans. 

Additionally, the Dodd-Frank Act, and the implementing rule, 

amends the tests for determining whether a loan is ‘‘high cost’’ 

under HOEPA. Previously a loan was covered by HOEPA if the annual percentage rate (APR) exceeded the rate for Treasury securities with a comparable maturity by more than 10 percentage 

points, or if the points and fees paid by the consumer exceeded the 

greater of 8 percent of the loan amount or $400. The $400 figure, 

set in 1994, was adjusted annually based on the Consumer Price 

Index. The Dodd-Frank Act, and the implementing rule, lowered 

the rate threshold for HOEPA coverage. Under the new regime, a 

loan will be covered by HOEPA if the APR applicable to the transaction exceeds the average prime offer rate (APOR) for a comparable transaction by more than 6.5 percent for a first-lien mortgage, or by more than 8.5 percent for a first-lien mortgage if the 

transaction is for less than $50,000. Additionally, the Dodd-Frank 

Act, and the implementing rule, reduces the total amount of points 

and fees that would trigger HOEPA coverage. A loan will be covered by HOEPA if the points and fees associated with the transaction exceed 5 percent of the total loan amount for a loan greater 

than or equal to $20,000; or 8 percent of the total loan amount or 

$1,000 (whichever is less) for a loan less than $20,000. 

The Financial Services Committee heard testimony that the new 

tests for determining whether a loan is ‘‘high cost’’ are problematic 

and could reduce access to credit for consumers of manufactured 

housing. In a March 2015 letter, the Manufactured Housing Institute wrote in support of H.R. 650, stating that: 

Due to an unintended consequence of the Dodd-Frank 

Act, manufactured housing is less available as an affordable housing option. The CFPB rules are having a significant impact on credit availability for the purchase of affordable manufactured housing . . . 

H.R. 650, the Preserving Access to Affordable Housing 

Act would clarify the Dodd-Frank provisions that have impeded the ability of consumers to access affordable manufactured housing financing, without undermining key 

Dodd-Frank mortgage protections . . . H.R. 650 revises 

the triggers by which small-sized manufactured home 

loans are considered ‘‘High-Cost’’ under the Home Ownership and Equity Protection Act (HOEPA). The fixed costs 

of originating and servicing loans causes smaller-sized 

manufactured housing loans to violate caps in Dodd-Frank 

and be categorized as ‘‘High-Cost’’ or predatory. The discrepancy exists because while the cost of originating and 

servicing a $200,000 loan and a $20,000 loan are nearly 

[the] same in terms of real dollars, the cost as a percentage of each loan’s size is very different. Many manufacVerDate Sep 11 2014 01:13 Apr 08, 2015 Jkt 049006 PO 00000 Frm 00002 Fmt 6659 Sfmt 6602 E:\HR\OC\HR053.XXX HR053

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tured home owners will not be able to purchase, refinance 

or sell a home because small-balance manufactured home 

loans will not exist due to their stigma as High-Cost Mortgage loans under HOEPA. 

H.R. 650 clarifies that manufactured home retailers and 

their employees are not considered Loan Originators (LOs) 

under Consumer Financial Protection Bureau (CFPB) 

guidelines, provided they receive no compensation for performing LO activities. Similar to real estate agents, manufactured housing retailers and salespeople are fundamentally in the business of selling homes, not originating 

loans. Their compensation is solely derived from the sale 

of a home. The sales compensation paid to retailers and 

their employees is not tied to LO activities, as defined by 

CFPB, because: (1) the sales compensation is not paid by 

lenders; (2) the amount and type of sales compensation is 

not dependent on whether a home is purchased with cash 

or financing, lender incentives, or loan terms; and (3) the 

compensation is clearly for sales services that are NOT 

loan origination activities. Just as a real estate agent’s 

sales commission does not make them an LO under CFPB 

rules, a similar distinction is needed for those selling manufactured homes. 

In a March 23, 2015 letter to the Committee, the Mortgage 

Bankers Association stated its support for the bill: 

H.R. 650 would allow more low-balance loans to fit within the cap on points and fees under the Home Ownership 

and Equity Protection Act (HOEPA) by revising those triggers. This will allow more consumers, particularly on the 

lower end of the economic spectrum, to gain access to safe 

and affordable mortgage credit. The legislation also contains an important technical change that will clarify that 

manufactured home salespersons are not considered mortgage originators, provided they receive no compensation 

from a creditor, lender or mortgage broker. 

In a March 23, 2015 letter to the Committee, the National Association of Federal Credit Unions explained that H.R. 650: 

would modify the definitions of a mortgage originator and 

a high-cost mortgage to ensure that consumers of smallbalance mortgage loans, including manufactured housing 

loans, will have access to credit. Working families across 

the country, particularly in rural America, depend on access to financing for affordable manufactured homes and 

this bill addresses an important barrier to entry in the 

marketplace. 

In a March 6, 2015 letter to the Committee, the California Association of Mortgage professionals explained 

[Manufactured] homes are often a more accessible and affordable way for many people to buy their own home. Manufactured housing has come a long way with respect to the 

features and benefits it provides homeowners. Today, manufactured homes can blend seamlessly into any market or 

neighborhood. In many areas of the country, particularly 


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rural communities, manufactured homes are the only type 

of quality affordable housing available. 

The Dodd/Frank regulations mistakenly result in manufactured homes becoming less available as an affordable 

housing option. H.R. 650 clarifies the difference between 

manufactured housing manufacturers and loan originators, 

and insures that low-dollar manufactured housing loans 

are exempt from HOEPA standards. 

In a September 2014 white paper entitled ‘‘Manufactured-housing consumer finance in the United States,’’ the CFPB stated that: 

The Dodd-Frank changes likely increased the share of 

manufactured-home loans that are classified as HOEPA 

loans substantially . . . In their comments during the 

HOEPA rulemaking process, some industry commenters 

stated that . . . they would not make HOEPA loans and 

therefore consumers would experience reduced access to 

credit for manufactured-home loans . . . Notwithstanding 

these arguments, the Bureau decided to implement the 

statute as Congress had written it, rather than use its authority to make adjustments beyond those that Congress 

deemed appropriate . . . The extension of HOEPA to 

home-purchase loans increased the share of all loans (i.e., 

home-purchase, refinance or home improvement loans) 

that are classified as HOEPA loans, but the resulting increase in the share of high-cost mortgages was much larger for manufactured-housing loans than for loans on sitebuilt homes. 

By improving the definition of ‘‘high cost’’ mortgages for purposes 

of the application of HOEPA, H.R. 650 preserves the ability of lenders to make smaller mortgage loans to low and moderate income 

borrowers. Without this critical change, American consumers seeking to purchase manufactured or modular housing will face reduced 

choice and fewer financing opportunities. 

HEARINGS

The Committee held no hearings on H.R. 650 in the 114th Congress. However, while the Committee did not hold a specific legislative hearing on this measure, it held a hearing entitled ‘‘Preserving 

Consumer Choice and Financial Independence’’ on March 18, 2015, 

at which matters relating to this measure were discussed. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

March 25, 2015 and March 26, 2015, and ordered H.R. 650 to be 

reported favorably to the House without amendment by a recorded 

vote of 43 yeas to 15 nays (Record vote no. FC–22), a quorum being 

present. 


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COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. The sole vote in committee was a motion by Chairman Hensarling to report the bill favorably to the House without amendment. The motion was agreed 

to by a recorded vote of 43 yeas to 15 nays (Record vote no. FC– 

22), a quorum being present. 


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COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the Committee, based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee states that H.R. 650 will alter 

certain definitions contained within the Truth in Lending Act to 

ensure that consumers of small-balance residential loans have access to mortgage credit. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of Rule XIII of the rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, April 3, 2015. 

Hon. JEB HENSARLING, Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 650, the Preserving Access to Manufactured Housing Act of 2015. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Susan Willie. 

Sincerely, 

KEITH HALL, 

Director. 

Enclosure. 


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H.R. 650—Preserving Access to Manufactured Housing Act of 2015 

H.R. 650 would amend the Truth in Lending Act (TILA) by adjusting the definitions of a mortgage originator and a high-cost 

mortgage. Under current law, employees of retailers of manufactured homes who do not accept residential mortgage loan applications, offer or negotiate terms of loans, or advise consumers on loan 

terms are excluded from the definition of mortgage originator. H.R. 

650 would broaden the exception to include retailers of manufactured homes as well as their employees, as long as they do not receive more compensation for selling a home with a mortgage than 

they would for selling the same home for cash. 

The TILA also provides special protections for consumers who 

are offered high-cost mortgages. H.R. 650 would amend the definition of a high-cost mortgage by increasing the maximum rates and 

fees that an originator or creditor could charge on loans for manufactured housing without a mortgage being considered a high-cost 

mortgage. 

Based on information from the Consumer Financial Protection 

Bureau (CFPB), CBO estimates that enacting H.R. 650 would increase direct spending by less than $500,000 for that agency to implement changes to the TILA. Because H.R. 650 would affect direct 

spending, pay-as-you-go procedures apply. CBO estimates that the 

bill would not affect revenues. Implementing H.R. 650 would not 

affect spending subject to appropriation because the CFPB is permanently authorized to spend amounts transferred from the Federal Reserve System. 

H.R. 650 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act. 

The CBO staff contact for this estimate is Susan Willie. The estimate was approved by Theresa Gullo, Assistant Director for Budget 

Analysis. 

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

H.R. 650 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9 of rule 

XXI. 


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DUPLICATION OF FEDERAL PROGRAMS

Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), the 

Committee states that no provision of H.R. 650 establishes or reauthorizes a program of the Federal Government known to be duplicative of another Federal program, a program that was included in 

any report from the Government Accountability Office to Congress 

pursuant to section 21 of Public Law 111–139, or a program related 

to a program identified in the most recent Catalog of Federal Domestic Assistance. 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), the 

Committee states that H.R. 650 does not require any directed 

rulemakings. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section cites H.R. 650 as the ‘‘Preserving Access to Manufactured Housing Act of 2015.’’ 

Section 2. Mortgage originator definition 

This section amends section 103 of the Truth in Lending Act 

(P.L. 90–321) to specify that the definition of ‘‘mortgage originator’’ 

does not include any person who is a retailer of manufactured or 

modular homes unless the retailer or its employees receive compensation for taking a residential mortgage loan application, assisting a consumer in obtaining or applying to obtain a residential 

mortgage loan, or offering or negotiating terms of a residential 

mortgage loan that is in excess of any compensation or gain received in a comparable cash transaction. 

Section 3. High-cost mortgage definition 

This section amends section 103 of the Truth in Lending Act 

(P.L. 90–321), as added by the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (P.L. 111–203), to clarify that a first 

mortgage on a consumer’s principal dwelling that is considered personal property will be considered a ‘‘high-cost mortgage’’ if the annual percentage rate at consummation of the transaction will exceed the average prime offer rate for a comparable transaction by 

more than 10 percentage points, in the case of a transaction in an 

amount of $75,000 or less. This section would also amend the definition of ‘‘high-cost mortgage’’ to include a transaction for less than 

$75,000 in which the dwelling is personal property and the total 

points and fees payable in connection with the transaction, other 

than bona fide third party charges not retained by the mortgage 

originator, creditor, or an affiliate of the creditor or mortgage originator, exceed the greater of 5 percent of the total transaction 

amount or $3,000. This section authorizes the CFPB to adjust such 

amounts to reflect the change in the Consumer Price Index. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 


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as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

and existing law in which no change is proposed is shown in 

roman): 

TRUTH IN LENDING ACT 

* * * * * * * 

TITLE I—CONSUMER CREDIT COST 

DISCLOSURE 

CHAPTER 1—GENERAL PROVISIONS 

* * * * * * * 

§ 103. Definitions and rules of construction 

(a) The definitions and rules of construction set forth in this section are applicable for the purposes of this title. 

(b) BUREAU.—The term ‘‘Bureau’’ means the Bureau of Consumer 

Financial Protection. 

(c) The term ‘‘Bureau’’ refers to the Bureau of Governors of the 

Federal Reserve System. 

(d) The term ‘‘organization’’ means a corporation, government or 

governmental subdivision or agency, trust, estate, partnership, cooperative, or association. 

(e) The term ‘‘person’’ means a natural person or an organization. 

(f) The term ‘‘credit’’ means the right granted by a creditor to a 

debtor to defer payment of debt or to incur debt and defer its payment. 

(g) The term ‘‘creditor’’ refers only to a person who both (1) regularly extends, whether in connection with loans, sales of property 

or services, or otherwise, consumer credit which is payable by 

agreement in more than four installments or for which the payment of a finance charge is or may be required, and (2) is the person to whom the debt arising from the consumer credit transaction 

is initially payable on the face of the evidence of indebtedness or, 

if there is no such evidence of indebtedness, by agreement. Notwithstanding the preceding sentence, in the case of an open-end 

credit plan involving a credit card, the card issuer and any person 

who honors the credit card and offers a discount which is a finance 

charge are creditors. For the purpose of the requirements imposed 

under chapter 4 and sections 127(a)(5), 127(a)(6), 127(a)(7), 

127(b)(1), 127(b)(2), 127(b)(3), 127(b)(8), and 127(b)(10) of chapter 2 

of this title, the term ‘‘creditor’’ shall also include card issuers 

whether or not the amount due is payable by agreement in more 

than four installments or the payment of a finance charge is or 

may be required, and the Bureau shall, by regulation, apply these 

requirements to such card issuers, to the extent appropriate, even 

though the requirements are by their terms applicable only to 

creditors offering open-end credit plans. Any person who originates 

2 or more mortgages referred to in subsection (aa) in any 12-month 

period or any person who originates 1 or more such mortgages 

through a mortgage broker shall be considered to be a creditor for 

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cational lender (as that term is defined in section 140) for purposes 

of this title. 

(h) The term ‘‘credit sale’’ refers to any sale in which the seller 

is a creditor. The term includes any contract in the form of a bailment or lease if the bailee or lessee contracts to pay as compensation for use a sum substantially equivalent to or in excess of the 

aggregate value of the property and services involved and it is 

agreed that the bailee or lessee will become, or for no other or a 

nominal consideration has the option to become, the owner of the 

property upon full compliance with his obligations under the contract. 

(i) The adjective ‘‘consumer’’, used with reference to a credit 

transaction, characterizes the transaction as one in which the party 

to whom credit is offered or extended is a natural person, and the 

money, property, or services which are the subject of the transaction are primarily for personal, family, or household purposes. 

(j) The terms ‘‘open end credit plan’’ and ‘‘open end consumer 

credit plan’’ mean a plan under which the creditor reasonably contemplates repeated transactions, which prescribes the terms of 

such transactions, and which provides for a finance charge which 

may be computed from time to time on the outstanding unpaid balance. A credit plan or open end consumer credit plan which is an 

open end credit plan or open end consumer credit plan within the 

meaning of the preceding sentence is an open end credit plan or 

open end consumer credit plan even if credit information is verified 

from time to time. 

(k) The term ‘‘adequate notice’’, as used in section 133, means a 

printed notice to a cardholder which sets forth the pertinent facts 

clearly and conspicuously so that a person against whom it is to 

operate could reasonably be expected to have noticed it and understood its meaning. Such notice may be given to a cardholder by 

printing the notice on any credit card, or on each periodic statement of account, issued to the cardholder, or by any other means 

reasonably assuring the receipt thereof by the cardholder. 

(l) The term ‘‘credit card’’ means any card, plate, coupon book or 

other credit device existing for the purpose of obtaining money, 

property, labor, or services on credit. 

(m) The term ‘‘accepted credit card’’ means any credit card which 

the cardholder has requested and received or has signed or has 

used, or authorized another to use, for the purpose of obtaining 

money, property, labor, or services on credit. 

(n) The term ‘‘cardholder’’ means any person to whom a credit 

card is issued or any person who has agreed with the card issuer 

to pay obligations arising from the issuance of a credit card to another person. 

(o) The term ‘‘card issuer’’ means any person who issues a credit 

card, or the agent of such person with respect to such card. 

(p) The term ‘‘unauthorized use’’, as used in section 133, means 

a use of a credit card by a person other than the cardholder who 

does not have actual, implied, or apparent authority for such use 

and from which the cardholder receives no benefit. 

(q) The term ‘‘discount’’ as used in section 167 means a reduction 

made from the regular price. The term ‘‘discount’’ as used in section 167 shall not mean a surcharge. 


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(r) The term ‘‘surcharge’’ as used in section 103 and section 167 

means any means of increasing the regular price to a cardholder 

which is not imposed upon customers paying by cash, check, or 

similar means. 

(s) The term ‘‘State’’ refers to any State, the Commonwealth of 

Puerto Rico, the District of Columbia, and any territory or possession of the United States. 

(t) The term ‘‘agricultural purposes’’ includes the production, harvest, exhibition, marketing, transportation, processing, or manufacture of agricultural products by a natural person who cultivates, 

plants, propagates, or nurtures those agricultural products, including but not limited to the acquisition of farmland, real property 

with a farm residence, and personal property and services used primarily in farming. 

(u) The term ‘‘agricultural products’’ includes agricultural, horticultural, viticultural, and dairy products, livestock, wildlife, poultry, bees, forest products, fish and shellfish, and any products 

thereof, including processed and manufactured products, and any 

and all products raised or produced on farms and any processed or 

manufactured products thereof. 

(v) The term ‘‘material disclosures’’ means the disclosure, as required by this title, of the annual percentage rate, the method of 

determining the finance charge and the balance upon which a finance charge will be imposed, the amount of the finance charge, 

the amount to be financed, the total of payments, the number and 

amount of payments, the due dates or periods of payments scheduled to repay the indebtedness, and the disclosures required by section 129(a). 

(w) The term ‘‘dwelling’’ means a residential structure or mobile 

home which contains one to four family housing units, or individual 

units of condominiums or cooperatives. 

(x) The term ‘‘residential mortgage transaction’’ means a transaction in which a mortgage, deed of trust, purchase money security 

interest arising under an installment sales contract, or equivalent 

consensual security interest is created or retained against the consumer’s dwelling to finance the acquisition or initial construction of 

such dwelling. 

(y) As used in this section and section 167, the term ‘‘regular 

price’’ means the tag or posted price charged for the property or 

service if a single price is tagged or posted, or the price charged 

for the property or service when payment is made by use of an 

open-end credit plan or a credit card if either (1) no price is tagged 

or posted, or (2) two prices are tagged or posted, one of which is 

charged when payment is made by use of an open-end credit plan 

or a credit card and the other when payment is made by use of 

cash, check, or similar means. For purposes of this definition, payment by check, draft, or other negotiable instrument which may result in the debiting of an open-end credit plan or a credit cardholder’s open-end account shall not be considered payment made by 

use of the plan or the account. 

(z) Any reference to any requirement imposed under this title or 

any provision thereof includes reference to the regulations of the 

Bureau under this title or the provision thereof in question. 

ø(bb)¿ (aa) HIGH-COST MORTGAGE.— 

(1) DEFINITION.— 


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(A) IN GENERAL.— The term ‘‘high-cost mortgage’’, and a 

mortgage referred to in this subsection, means a consumer 

credit transaction that is secured by the consumer’s principal dwelling, other than a reverse mortgage transaction, 

if— 

(i) in the case of a credit transaction secured— 

(I) by a first mortgage on the consumer’s principal dwelling, the annual percentage rate at consummation of the transaction will exceed by more 

than 6.5 percentage points ø(8.5 percentage 

points, if the dwelling is personal property and 

the transaction is for less than $50,000)¿ (10 percentage points if the dwelling is personal property 

or is a transaction that does not include the purchase of real property on which a dwelling is to be 

placed, and the transaction is for less than 

$75,000 (as such amount is adjusted by the Bureau to reflect the change in the Consumer Price 

Index)) the average prime offer rate, as defined in 

section 129C(b)(2)(B), for a comparable transaction; 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 8.5 percentage points the average prime offer rate, as defined in section 

129C(b)(2)(B), for a comparable transaction; 

(ii) the total points and fees payable in connection 

with the transaction, other than bona fide third party 

charges not retained by the mortgage originator, creditor, or an affiliate of the creditor or mortgage originator, exceed— 

(I) in the case of a transaction for $20,000 or 

more, 5 percent of the total transaction amount; 

øor¿ 

(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 such other dollar 

amount as the Bureau shall prescribe by regulation); or 

(III) in the case of a transaction for less than 

$75,000 (as such amount is adjusted by the Bureau to reflect the change in the Consumer Price 

Index) in which the dwelling is personal property 

(or is a consumer credit transaction that does not 

include the purchase of real property on which a 

dwelling is to be placed) the greater of 5 percent of 

the total transaction amount or $3,000 (as such 

amount is adjusted by the Bureau to reflect the 

change in the Consumer Price Index); 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. 


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(B) INTRODUCTORY RATES TAKEN INTO ACCOUNT.— For 

purposes of subparagraph (A)(i), the annual percentage 

rate of interest shall be determined based on the following 

interest rate: 

(i) In the case of a fixed-rate transaction in which 

the annual percentage rate will not vary during the 

term of the loan, the interest rate in effect on the date 

of consummation of the transaction. 

(ii) In the case of a transaction in which the rate of 

interest varies solely in accordance with an index, the 

interest rate determined by adding the index rate in 

effect on the date of consummation of the transaction 

to the maximum margin permitted at any time during 

the loan 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 loan. 

(C) MORTGAGE INSURANCE.— For the purposes of computing the total points and fees under paragraph (4), the 

total points and fees shall exclude— 

(i) any premium provided by an agency of the Federal Government or an agency of a State; 

(ii) any amount that is not in excess of the amount 

payable under policies in effect at the time of origination under section 203(c)(2)(A) of the National Housing 

Act (12 U.S.C. 1709(c)(2)(A)), provided that the premium, charge, or fee is required to be refundable on 

a pro-rated basis and the refund is automatically 

issued upon notification of the satisfaction of the underlying mortgage loan; and 

(iii) any premium paid by the consumer after closing. 

(2)(A) After the 2-year period beginning on the effective date of 

the regulations promulgated under section 155 of the Riegle Community Development and Regulatory Improvement Act of 1994, 

and no more frequently than biennially after the first increase or 

decrease under this subparagraph, the Bureau may by regulation 

increase or decrease the number of percentage points specified in 

paragraph (1)(A), if the Bureau determines that the increase or decrease is— 

(i) consistent with the consumer protections against abusive 

lending provided by the amendments made by subtitle B of 

title I of the Riegle Community Development and Regulatory 

Improvement Act of 1994; and 

(ii) warranted by the need for credit. 

(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. 


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(C) In determining whether to increase or decrease the number 

of percentage points referred to in subparagraph (A), the Bureau 

shall consult with representatives of consumers, including low-income consumers, and lenders. 

(3) The amount specified in paragraph (1)(B)(ii) shall be adjusted 

annually on January 1 by the annual percentage change in the 

Consumer Price Index, as reported on June 1 of the year preceding 

such adjustment. 

(4) For purposes of paragraph (1)(B), points and fees shall include— 

(A) all items included in the finance charge, except interest 

or the time-price differential; 

(B) all compensation paid directly or indirectly by a consumer or creditor to a mortgage originator from any source, including a mortgage originator that is also the creditor in a 

table-funded transaction; 

(C) each of the charges listed in section 106(e) (except an escrow for future payment of taxes), unless— 

(i) the charge is reasonable; 

(ii) the creditor receives no direct or indirect compensation; and 

(iii) the charge is paid to a third party unaffiliated with 

the creditor; and 

(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) 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 

(G) such other charges as the Bureau determines to be appropriate. 

(5) CALCULATION OF POINTS AND FEES FOR OPEN-END CONSUMER

CREDIT PLANS.— In the case of open-end consumer credit plans, 

points and fees shall be calculated, for purposes of this section and 

section 129, by adding the total points and fees known at or before 

closing, including the maximum prepayment penalties which may 

be charged or collected under the terms of the credit transaction, 

plus the minimum additional fees the consumer would be required 

to pay to draw down an amount equal to the total credit line. 

(6) This subsection shall not be construed to limit the rate of interest or the finance charge that a person may charge a consumer 

for any extension of credit. 

ø(aa)¿ (bb) The disclosure of an amount or percentage which is 

greater than the amount or percentage required to be disclosed 

under this title does not in itself constitute a violation of this title. 


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(cc) The term ‘‘reverse mortgage transaction’’ means a nonrecourse transaction in which a mortgage, deed of trust, or equivalent consensual security interest is created against the consumer’s 

principal dwelling— 

(1) securing one or more advances; and 

(2) with respect to which the payment of any principal, interest, and shared appreciation or equity is due and payable 

(other than in the case of default) only after— 

(A) the transfer of the dwelling; 

(B) the consumer ceases to occupy the dwelling as a 

principal dwelling; or 

(C) the death of the consumer. 

ø(cc)¿ (dd) DEFINITIONS RELATING TO MORTGAGE ORIGINATION

AND RESIDENTIAL MORTGAGE LOANS.— 

(1) COMMISSION.— Unless otherwise specified, the term 

‘‘Commission’’ means the Federal Trade Commission. 

(2) MORTGAGE ORIGINATOR.— The term ‘‘mortgage originator’’— 

(A) means any person who, for direct or indirect compensation or gain, or in the expectation of direct or indirect 

compensation or gain— 

(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; 

(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); 

(C) does not include any person who is (i) 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, or (ii) øan 

employee of a retailer of manufactured homes who is not 

described in clause (i) or (iii) of subparagraph (A) and who 

does not advise a consumer on loan terms (including rates, 

fees, and other costs)¿ a retailer of manufactured or modular homes or its employees unless such retailer or its employees receive compensation or gain for engaging in activities described in subparagraph (A) that is in excess of any 

compensation or gain received in a comparable cash transaction; 

(D) does not include a person or entity that only performs real estate brokerage activities and is licensed or 

registered in accordance with applicable State law, unless 

such person or entity is compensated by a lender, a mortgage broker, or other mortgage originator or by any agent 

of such lender, mortgage broker, or other mortgage originator; 

(E) does not include, with respect to a residential mortgage loan, a person, estate, or trust that provides mortVerDate Sep 11 2014 01:13 Apr 08, 2015 Jkt 049006 PO 00000 Frm 00016 Fmt 6659 Sfmt 6601 E:\HR\OC\HR053.XXX HR053

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gage financing for the sale of 3 properties in any 12-month 

period to purchasers of such properties, each of which is 

owned by such person, estate, or trust and serves as security for the loan, provided that such loan— 

(i) is not made by a person, estate, or trust that has 

constructed, or acted as a contractor for the construction of, a residence on the property in the ordinary 

course of business of such person, estate, or trust; 

(ii) is fully amortizing; 

(iii) is with respect to a sale for which the seller determines in good faith and documents that the buyer 

has a reasonable ability to repay the loan; 

(iv) has a fixed rate or an adjustable rate that is adjustable after 5 or more years, subject to reasonable 

annual and lifetime limitations on interest rate increases; and 

(v) meets any other criteria the Bureau may prescribe; 

(F) does not include the creditor (except the creditor in 

a table-funded transaction) under paragraph (1), (2), or (4) 

of section 129B(c); and 

(G) does not include a servicer or servicer employees, 

agents and contractors, including but not limited to those 

who offer or negotiate terms of a residential mortgage loan 

for purposes of renegotiating, modifying, replacing and 

subordinating principal of existing mortgages where borrowers are behind in their payments, in default or have a 

reasonable likelihood of being in default or falling behind. 

(3) NATIONWIDE MORTGAGE LICENSING SYSTEM AND REGISTRY.— 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. 

(4) OTHER DEFINITIONS RELATING TO MORTGAGE ORIGINATOR.— For purposes of this subsection, a person ‘‘assists a 

consumer in obtaining or applying to obtain a residential mortgage loan’’ by, among other things, advising on residential 

mortgage loan terms (including rates, fees, and other costs), 

preparing residential mortgage loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan. 

(5) RESIDENTIAL MORTGAGE LOAN.— The term ‘‘residential 

mortgage loan’’ means any consumer credit transaction that is 

secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or on residential real 

property that includes a dwelling, other than a consumer credit 

transaction under an open end credit plan or, for purposes of 

sections 129B and 129C and section 128(a) (16), (17), (18), and 

(19), and sections 128(f) and 130(k), and any regulations promulgated thereunder, an extension of credit relating to a plan 

described in section 101(53D) of title 11, United States Code. 

(6) SECRETARY.— The term ‘‘Secretary’’, when used in connection with any transaction or person involved with a residential mortgage loan, means the Secretary of Housing and Urban 

Development. 


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(7) SERVICER.— The term ‘‘servicer’’ has the same meaning 

as in section 6(i)(2) of the Real Estate Settlement Procedures 

Act of 1974 (12 U.S.C. 2605(i)(2)). 

ø(dd)¿ (ee) BONA FIDE DISCOUNT POINTS AND PREPAYMENT PEN- ALTIES.—For the purposes of determining the amount of points and 

fees for purposes of subsection (aa), either the amounts described 

in paragraph (1) or (2) of the following paragraphs, but not both, 

shall be excluded: 

(1) 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— 

(A) the average prime offer rate, as defined in section 

129C; or 

(B) if secured by a personal property loan, the average 

rate on a loan in connection with which insurance is provided under title I of the National Housing Act (12 U.S.C. 

1702 et seq.). 

(2) Unless 2 bona fide discount points have been excluded 

under paragraph (1), 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— 

(A) the average prime offer rate, as defined in section 

129C; or 

(B) if secured by a personal property loan, the average 

rate on a loan in connection with which insurance is provided under title I of the National Housing Act (12 U.S.C. 

1702 et seq.). 

(3) 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. 

(4) Paragraphs (1) and (2) 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. 

* * * * * * * 

Æ 


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