I 

108TH CONGRESS 

1ST SESSION H. R. 1663

To protect home buyers from predatory lending practices. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 8, 2003

Mrs. JONES of Ohio (for herself, Ms. NORTON, Mr. CUMMINGS, Mr. CLAY, 

Mr. PAYNE, Mrs. CHRISTENSEN, Ms. MILLENDER-MCDONALD, Mr. 

DAVIS of Illinois, Mr. TOWNS, Mr. JACKSON of Illinois, Mr. FATTAH, Mr. 

CLYBURN, Ms. LEE, Ms. KILPATRICK, Mr. GUTIERREZ, Ms. KAPTUR, 

Ms. SCHAKOWSKY, Mr. SANDERS, Ms. BERKLEY, Mr. RYAN of Ohio, Mr. 

JEFFERSON, Mr. LEWIS of Georgia, Mr. CONYERS, and Ms. JACKSONLEE of Texas) introduced the following bill; which was referred to the 

Committee on Financial Services 

A BILL

To protect home buyers from predatory lending practices.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Predatory Mortgage 

5 Lending Practices Reduction Act’’. 
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1 SEC. 2. CERTIFICATION REQUIREMENTS FOR MORTGAGE 

2 LENDERS AND BROKERS. 

3 (a) IN GENERAL.—The Real Estate Settlement Pro4 cedures Act of 1974 is amended by inserting after section 

5 12 (12 U.S.C. 2610) the following new section: 

6 ‘‘SEC. 13. CERTIFICATION REQUIREMENTS FOR MORTGAGE 

7 LENDERS AND BROKERS. 

8 ‘‘(a) REQUIREMENT.—No individual may, in connec9 tion with a subprime federally mortgage related loan, pro10 vide mortgage lending services or mortgage brokerage 

11 services unless such person is, at the time of the provision 

12 of such services, certified by the Secretary pursuant to this 

13 section as having been adequately trained with regard to 

14 subprime lending. 

15 ‘‘(b) STANDARDS AND EXAMINATION.—

16 ‘‘(1) IN GENERAL.—The Secretary shall, by 

17 regulation, establish requirements, standards, and 

18 procedures for testing and certifying persons pro19 viding mortgage lending services or mortgage bro20 kerage services in connection with a subprime, feder21 ally related mortgage loans. 

22 ‘‘(2) EXAMINATION.—Such standards and pro23 cedures shall require, for certification under this sec24 tion, that the individual shall demonstrate, by writ25 ten examination, knowledge regarding the following 

26 areas: 
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1 ‘‘(A) FEDERAL LAW.—The requirements 

2 and limitations under Federal laws regarding 

3 mortgage lending, including the Truth in Lend4 ing Act, the Fair Credit Reporting Act, the 

5 Equal Credit Opportunity Act, the Real Estate 

6 Settlement Procedures Act of 1974, the Home 

7 Ownership and Equity Protection Act of 1994, 

8 the Home Mortgage Disclosure Act of 1975, 

9 and the Fair Housing Act. 

10 ‘‘(B) SUBPRIME LENDING.—Legal and ap11 propriate practices, methods, conventions, and 

12 terms of subprime lending in all lending func13 tions, including advertising and marketing, con14 sumer education and counseling, origination, 

15 underwriting, closing, servicing, information 

16 technology, and internal control policies and 

17 procedures. 

18 ‘‘(C) PREDATORY LENDING.—Illegal and 

19 inappropriate practices, methods, practices, and 

20 terms of predatory lending. 

21 ‘‘(D) LAW REGARDING COMPETENCY TO

22 CONTRACT.—Basic contract law regarding com23 petency and incapacity to contract. 
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1 ‘‘(c) DECERTIFICATION.—The Secretary shall estab2 lish standards and procedures for suspension and revoca3 tion of the certification under this section, which shall—

4 ‘‘(1) provide the individual subject to suspen5 sion or revocation an opportunity to be heard; and 

6 ‘‘(2) provide for suspension or revocation in 

7 such instances as the Secretary determines appro8 priate, which shall include an agency determination 

9 or a judgment by a court of competent jurisdiction 

10 that a certified individual has engaged in an act or 

11 practice that is unfair or deceptive under section 5 

12 of the Predatory Mortgage Lending Practices Re13 duction Act. 

14 ‘‘(d) RENEWAL OF CERTIFICATION.—The Secretary 

15 shall provide that certification under this section shall be 

16 effective for a specified period of time, as determined by 

17 the Secretary. The Secretary shall establish standards and 

18 procedures for recertification of individuals whose certifi19 cations are expiring. The Secretary shall establish a proce20 dure for notifying certified individuals of the expiration 

21 of their certifications. 

22 ‘‘(e) INFORMATION AND TRAINING.—

23 ‘‘(1) IN GENERAL.—The Secretary shall make 

24 available, for persons engaged in providing mortgage 

25 lending services and mortgage brokerage services, in-
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1 formation and training in the areas described in sub2 section (b)(2). Such information and training shall 

3 be made available through classes, written materials, 

4 and the World Wide Web. 

5 ‘‘(2) CONTRACTS.—The Secretary may enter 

6 into such agreements and contracts as the Secretary 

7 considers necessary to make information and train8 ing under this subsection available. 

9 ‘‘(3) AUTHORIZATION OF APPROPRIATIONS.—

10 For providing information and training under this 

11 subsection, there are authorized to be appropriated 

12 to the Secretary $1,000,000 for each of fiscal years 

13 2004 and 2005. 

14 ‘‘(f) DEFINITIONS.—For purposes of this section, the 

15 following definitions shall apply: 

16 ‘‘(1) MORTGAGE BROKERAGE SERVICES.—The 

17 term ‘mortgage brokerage services’ means the bring18 ing together of a borrower and lender to obtain a 

19 federally related mortgage loan and the rendering of 

20 settlement services, by an individual who is not an 

21 employee or exclusive agent of a lender. 

22 ‘‘(2) MORTGAGE LENDING SERVICES.—The 

23 term ‘mortgage lending services’ means services re24 lating to the origination of a federally related mort25 gage loan, including the taking of loan applications,
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1 loan processing, and the underwriting and funding 

2 of a loan. 

3 ‘‘(3) PRIME LENDING RATE.—The term ‘prime 

4 lending rate’ means, in connection with a federally 

5 related mortgage loan, an annual percentage rate 

6 that does not exceed by more than 8 percentage 

7 points the yield on Treasury securities having com8 parable periods of maturity on the fifteenth day of 

9 the month immediately preceding the month in 

10 which the loan is made. 

11 ‘‘(4) SUBPRIME.—

12 ‘‘(A) IN GENERAL.—The term ‘subprime’ 

13 means, with respect to a federally related mort14 gage loan, that the borrower under the loan, or 

15 the loan terms, exhibit characteristics that indi16 cate that the loan is subject to a significantly 

17 higher risk of default than federally related 

18 mortgage loans made to borrowers at prime 

19 lending rates. 

20 ‘‘(B) REGULATIONS.—The Secretary shall 

21 prescribe regulations to carry out this para22 graph, which shall specify characteristics re23 ferred to in subparagraph (A) that indicate a 

24 higher risk of default and shall establish cri25 teria based on such characteristics for deter-
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1 mining whether a federally related mortgage 

2 loan is a subprime loan. Such characteristics 

3 shall include—

4 ‘‘(i) higher loan fees or penalties; 

5 ‘‘(ii) higher interest rates; 

6 ‘‘(iii) higher debt-to-income ratios; 

7 ‘‘(iv) a history of loan delinquency; 

8 ‘‘(v) higher loan-to-value ratios; 

9 ‘‘(vi) lower credit scores or other cred10 it ratings; 

11 ‘‘(vii) more recent declaration of 

12 bankruptcy; 

13 ‘‘(viii) lack of a credit history; and 

14 ‘‘(ix) any other factors that the Sec15 retary considers appropriate.’’. 

16 (b) REGULATIONS.—Not later than 6 months after 

17 the date of the enactment of this Act, the Secretary of 

18 Housing and Urban Development shall issue regulations 

19 pursuant to section 19(a) of the Real Estate Settlement 

20 Procedures Act of 1974 (12 U.S.C. 2617(a)) as may be 

21 necessary to carry out the amendment made by subsection 

22 (a) of this section. 
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1 SEC. 3. LENDER REQUIREMENTS FOR HIGH COST MORT2 GAGES. 

3 Section 129 of the Truth in Lending Act (15 U.S.C. 

4 1639) is amended by adding at the end the following new 

5 subsections: 

6 ‘‘(m) BEST PRACTICES PLAN.—

7 ‘‘(1) IN GENERAL.—Any creditor who extends 

8 credit in connection with a mortgage referred to in 

9 section 103(aa) shall establish and maintain a best 

10 practices plan, in accordance with regulations which 

11 the Board shall prescribe, to ensure compliance with 

12 the requirements of this title. 

13 ‘‘(2) REQUIREMENTS.—The best practices plan 

14 established under paragraph (1) by any creditor 

15 shall require the creditor, and any subcontractor or 

16 agent of the creditor to—

17 ‘‘(A) provide all employees of the creditor, 

18 subcontractor, or agent who are involved in any 

19 aspect of an extension of credit in connection 

20 with a mortgage referred to in section 103(aa), 

21 and any subcontractor or agent of such creditor 

22 so involved, with such training in the best prac23 tices plan of the creditor as the Board deter24 mines by regulation to be appropriate; and 
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1 ‘‘(B) periodically review and evaluate the 

2 performance of such employees, contractors, 

3 and agents under the best practices plan. 

4 ‘‘(n) GOOD FAITH RESOLUTION OF COMPLAINTS.—

5 A creditor, and any agent or assignee of the creditor, shall 

6 make a good faith effort to resolve any consumer com7 plaint concerning improper or questionable lending prac8 tices with respect to a mortgage referred to in section 

9 103(aa) before the end of the 60-day period beginning on 

10 the date the complaint is received by the creditor, agent 

11 or assignee. 

12 ‘‘(o) PROHIBITION ON CHARGES NOT PREVIOUSLY

13 DISCLOSED.—A creditor, or an agent or assignee of a 

14 creditor, may not impose any charge or fee, or attempt 

15 to collect any charge or fee, in connection with a mortgage 

16 referred to in section 103(aa) that was not disclosed be17 fore the mortgage was executed, or impose or attempt to 

18 collect any charge or fee that was so disclosed in an 

19 amount in excess of the amount disclosed, unless the cred20 itor or assignee establishes, in accordance with regulations 

21 which the Board shall prescribe, that the charge or fee 

22 is reasonable and could not have reasonably been foreseen 

23 at the time the mortgage was executed. 

24 ‘‘(p) PLAIN DESCRIPTION AND DISCLOSURE RE25 QUIREMENT.—
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1 ‘‘(1) CHARGES AND FEES.—Notwithstanding 

2 any other provision of this title, all disclosures of 

3 charges and fees required under this title with re4 gard to a mortgage referred to in section 103(aa), 

5 shall be separately enumerated and clearly labeled, 

6 stated, and described, including charges described in 

7 clause (ii) or (iii) of section 128(a)(2)(A). 

8 ‘‘(2) RESCISSION AND OTHER RIGHTS.—The 

9 disclosure required under the penultimate sentence 

10 of section 125(a) in connection with a mortgage re11 ferred to in section 103(aa), together with a sum12 mary of the consumer’s rights, shall be provided to 

13 the consumer in clear and plain language before the 

14 mortgage is executed.’’. 

15 SEC. 4. UNFAIR AND DECEPTIVE ACTS AND PRACTICES. 

16 (a) PROHIBITION.—It shall be unlawful, in providing 

17 any mortgage lending services for a subprime federally re18 lated mortgage loan or any mortgage brokerage services 

19 for such a loan, to engage in any unfair or deceptive act 

20 or practice. 

21 (b) RULEMAKING PROCEEDINGS.—The Secretary of 

22 Housing and Urban Development, the Board of Governors 

23 of the Federal Reserve System, and the Federal Trade 

24 Commission may jointly issue—
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1 (1) interpretive rules and general statements of 

2 policy with respect to unfair or deceptive acts or 

3 practices in the provision of mortgage lending serv4 ices for a subprime federally related mortgage loan 

5 and mortgage brokerage services for such a loan, 

6 within the meaning of subsection (a); and 

7 (2) regulations defining with specificity acts or 

8 practices which are unfair or deceptive in the provi9 sion of mortgage lending services for a subprime fed10 erally related mortgage loan or mortgage brokerage 

11 services for such a loan, within the meaning of sub12 section (a). 

13 (c) COMPLIANCE ENFORCEMENT.—Any violation of 

14 a regulation issued under subsection (b)(2) shall be treat15 ed as a violation of a requirement imposed under the 

16 Truth in Lending Act and compliance with such regulation 

17 shall be enforceable under sections 108 and 130 of such 

18 Act. 

19 (d) DEFINITIONS.—For purposes of this section, the 

20 terms ‘‘mortgage brokerage services’’, ‘‘mortgage lending 

21 services’’, and ‘‘subprime’’ have the meanings given such 

22 terms in section 13(f) of the Real Estate Settlement Pro23 cedures Act of 1974 (12 U.S.C. 2611(f)). 

24 (e) PENALTIES.—
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1 (1) FIRST VIOLATION.—In addition to the en2 forcement provisions referred to in subsection (c), 

3 each person who violates this section shall forfeit 

4 and pay a civil penalty of not more than $10,000 for 

5 each day any such violation continues. 

6 (2) SUBSEQUENT VIOLATIONS.—In the case of 

7 any person on whom a civil penalty has been im8 posed under paragraph (1), paragraph (1) shall be 

9 applied by substituting ‘‘$20,000’’ for ‘‘$10,000’’ 

10 with respect to all subsequent violations. 

11 (3) ASSESSMENT.—The agency referred to in 

12 subsection (a) or (c) of section 108 of the Truth in 

13 Lending Act with respect to any person described in 

14 paragraph (1) shall assess any penalty under this 

15 subsection to which such person is subject. 

16 SEC. 5. PROHIBITION ON ARBITRATION CLAUSES IMPOSED 

17 ON CONSUMERS WITHOUT THEIR CONSENT. 

18 (a) IN GENERAL.—The Consumer Credit Protection 

19 Act (15 U.S.C. 1601 et seq.) is amended by adding at 

20 the end the following new title: 

21 ‘‘TITLE X—DISPUTE 

22 RESOLUTION 

23 ‘‘SEC. 1001. SHORT TITLE. 

24 ‘‘This title may be cited as the ‘Consumer Fairness 

25 Act’. 
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1 ‘‘SEC. 1002. DEFINITIONS. 

2 ‘‘For purposes of this title, the following definitions 

3 shall apply: 

4 ‘‘(1) CONSUMER.—The term ‘consumer’ means 

5 any individual. 

6 ‘‘(2) CONSUMER TRANSACTION.—The term 

7 ‘consumer transaction’ means the sale or rental of 

8 goods or services, the extension of credit, or the pro9 vision of any other financial product or service, to an 

10 individual in a transaction entered into primarily for 

11 personal, family, or household purposes, including 

12 any consumer credit transaction that is secured by 

13 the consumer’s principal dwelling. 

14 ‘‘(3) CONSUMER CONTRACT.—The term ‘con15 sumer contract’ means any written, standardized 

16 form contract between the parties to a consumer 

17 transaction. 

18 ‘‘SEC. 1003. PROHIBITION ON ARBITRATION CLAUSES IM19 POSED ON CONSUMERS WITHOUT THEIR 

20 CONSENT. 

21 ‘‘(a) IN GENERAL.—A written provision in any con22 sumer transaction or consumer contract which requires 

23 binding arbitration to resolve any controversy arising out 

24 of such transaction or contract, or the refusal to perform 

25 the whole or any part of the transaction shall not be en26 forceable. 
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1 ‘‘(b) POST-CONTROVERSY AGREEMENTS.—Sub2 section (a) shall not apply with respect to a written agree3 ment to determine by binding arbitration an existing con4 troversy arising out of a consumer transaction or con5 sumer contract if the written agreement has been entered 

6 into by the parties to the consumer transaction or con7 sumer contract after the controversy has arisen. 

8 ‘‘(c) COORDINATION WITH OTHER LAW.—No provi9 sion of this section shall be construed as annulling, alter10 ing, affecting, or superseding any Federal law, or the laws 

11 of any State, relating to arbitration in connection with 

12 consumer transactions or consumer contracts, except to 

13 the extent that those laws are inconsistent with the provi14 sions of this section, and then only to the extent of the 

15 inconsistency.’’. 

16 (b) APPLICABILITY.—The amendments made by this 

17 section shall apply to all consumer transactions and con18 sumer contracts entered into on, or after the date of the 

19 enactment of this Act and to all controversies pending or 

20 filed on, or arising after, the date of the enactment of this 

21 Act. 
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1 SEC. 6. GRANTS TO COMMUNITY DEVELOPMENT CORPORA2 TIONS FOR PREDATORY LENDING EDU3 CATION. 

4 (a) IN GENERAL.—The Community Development 

5 Banking and Financial Institutions Act of 1994 (12 

6 U.S.C. 4701 et seq.) is amended by adding at the end 

7 the following new section: 

8 ‘‘SEC. 122. GRANTS TO COMMUNITY DEVELOPMENT COR9 PORATIONS FOR PREDATORY LENDING EDU10 CATION. 

11 ‘‘(a) IN GENERAL.—To the extent amounts are made 

12 available under subsection (d), the Fund may make grants 

13 to nonprofit community development corporations to pro14 vide education and training to borrowers, potential bor15 rowers, and community groups regarding illegal and inap16 propriate practices, methods, practices, and terms of pred17 atory lending. 

18 ‘‘(b) SELECTION.—The selection of community devel19 opment corporations to receive grants under this section 

20 shall be at the discretion of the Fund and in accordance 

21 with criteria established by the Fund. 

22 ‘‘(c) GRANT AMOUNTS.—The Fund may establish a 

23 limitation on the amount received by any single commu24 nity development corporation from grants under this sec25 tion for any single fiscal year. 
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1 ‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—There 

2 is authorized to be appropriated to the Fund for grants 

3 under this section $1,000,000 for each of fiscal years 2004 

4 and 2005.’’. 

5 (b) AMENDMENT TO TABLE OF CONTENTS.—The 

6 table of contents in section 1(b) of the Riegle Community 

7 Development and Regulatory Improvement Act of 1994 

8 (12 U.S.C. 4701 note) is amended by inserting after the 

9 item relating to section 121 the following new item:

‘‘Sec. 122. Grants to community development corporations for predatory lending education.’’.

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