89–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 115–1024 

MORTGAGE FAIRNESS ACT OF 2017 

NOVEMBER 14, 2018.—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 

together with 

MINORITY VIEWS 

[To accompany H.R. 2570] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 2570) to amend the Truth in Lending Act to clarify that 

the points and fees in connection with a mortgage loan do not include certain compensation amounts already taken into account in 

setting the interest rate on such loan, and for other purposes, having considered the same, report favorably thereon without amendment and recommend that the bill do pass. 

PURPOSE AND SUMMARY

Introduced by Representative Bill Posey on May 19, 2017, H.R. 

2570, the ‘‘Mortgage Fairness Act’’ amends the Truth in Lending 

Act to revise the definition of ‘‘points and fees’’ under a high-cost 

mortgage. 

BACKGROUND AND NEED FOR LEGISLATION

On January 10, 2013, the Bureau of Consumer Financial Protection (BCFP) issued a final rule to implement sections 1411 and 

1412 as well as section 1414 of the Dodd-Frank Wall Street Reform 

and Consumer Financial Protection Act of 2010 [P.L. 111–203], 

which limits prepayment penalties. The final rule, also known as 

the ‘‘QM’’ Rule provides lenders with a safe harbor for loans that 

satisfy the definition of a ‘‘Qualified Mortgage’’ and are not ‘‘higherVerDate Sep 11 2014 02:22 Nov 18, 2018 Jkt 089006 PO 00000 Frm 00001 Fmt 6659 Sfmt 6602 E:\HR\OC\HR1024.XXX HR1024
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priced.’’ A mortgage will be considered a Qualified Mortgage if it: 

(1) has regular periodic payments that are substantially equal, except for the payment changes on an adjustable rate mortgage or a 

step-rate loan; (2) does not permit negative amortization; (3) does 

not have a balloon payment; (4) does not exceed 30 years; and (5) 

does not have total points and fees exceeding 3 percent of the total 

loan amount. 

Additionally, when underwriting a mortgage, a lender must: (1) 

take into account mortgage-related obligations using the maximum 

interest rate that may apply during the first five years and periodic 

payments of principal and interest that will be repaid; (2) consider 

and verify the consumer’s current or reasonably expected income or 

assets, other than the value of the dwelling, and the consumer’s 

current debt obligations, alimony and child support; and (3) determine that the consumer’s debt-to-income ratio does not exceed 43 

percent, as calculated using Federal Housing Administration (FHA) 

guidelines. The requirements in the ability-to-repay rule went into 

effect on January 10, 2014. 

The final QM Rule sets limits on points and fees for Qualified 

Mortgages. It provides that a loan cannot be treated as a Qualified 

Mortgage unless its total points and fees do not exceed the certain 

limits and all dollar and loan amounts are indexed for inflation. 

The QM Rule stipulates that the following costs, known at or before consummation, are included in the points and fees cap: • All items included in the finance charge, with the following exceptions: 

Æ Interest; 

Æ The time-price differential; 

Æ Federal or state government-sponsored mortgage insurance premiums; 

Æ Private mortgage insurance; 

Æ Bona fide third-party charges not retained by the lender, 

loan originator or an affiliate of either; and 

Æ Bona fide discount points. 

• Direct or indirect loan originator compensation, including compensation paid by the consumer to mortgage brokers and compensation paid by the lender to mortgage brokers and retail loan 

officers. Salaries are excluded. 

• Real estate-related fees, including fees for title examination, 

abstract of a title, title insurance, property survey, document preparation, notaries, credit reports, appraisals, inspections, flood hazard determinations, and non-tax related amounts paid into escrow. 

Any of these charges may be excluded from the points and fees calculation if they are reasonable, if the lender receives no direct or 

indirect compensation in connection with the charge, or if the 

charge is not paid to an affiliate of the lender. 

• Premiums for credit insurance; credit property insurance; other 

life, accident, health or loss-of-income insurance where the lender 

is beneficiary; or debt cancellation or suspension coverage payments. 

• Maximum prepayment penalty. 

• Prepayment penalty paid in a refinance. 

• Fees charged to consumers to recover the costs of loan-level 

price adjustments (LLPAs) imposed by secondary market purchasers of loans, including the GSEs. 

3 

1Lisa Prevost, Choosing Between Mortgage Broker and Bank, N.Y. Times, November 29, 

2013, http://www.nytimes.com/2013/12/01/realestate/choosing-between-mortgage-broker-andbank.html. 2 78 Fed. Reg,. 35430, June 12, 2013. https://www.federalregister.gov/d/2013-13173/p-9. 3 Id. 

Unfortunately, these methods double-count the brokerage fee and 

generate a distorted picture of the overall cost of the loan. The brokerage fee may be ‘‘set as a percentage of the loan amount (1 to 

2.5 percent is customary), and is paid either by the borrower or the 

lender. Brokers are required to disclose their fees upfront, and they 

are not permitted to earn any more than the disclosed amount 

. . . . If due from the borrower, it could either be rolled into the 

loan amount or paid upfront by check.’’ 1 In other words, mortgage 

brokers may be compensated in a lump sum or in the form of a 

higher interest rate on the loan. In the latter case, the broker’s 

origination fees are reflected in the higher interest rate on the 

loan. However, the points-and-fees calculation includes a line item 

for indirect loan origination compensation, even if it is already 

priced into the interest rate. In effect, the QM rule double-counts 

the mortgage brokerage fee. 

The BCFP acknowledged this issue when it promulgated a rule 

amending Regulation Z, which implements the Truth in Lending 

Act (TILA). In its official interpretation of the rule, the BCFP noted 

that it was: 

‘‘particularly concerned about situations in which the 

creditor pays compensation to a mortgage broker or its own 

loan originator employees because there is no simple way 

to determine whether the compensation is paid from 

money the creditor collected from up-front charges to the 

consumer (which would already be counted against the 

points and fees thresholds) or from the interest rate on the 

loan (which would not be counted toward the thresholds).’’ 2

However, the BCFP ultimately decided not to address the problem in full. Instead, the ‘‘final rule retains an ‘additive’ approach 

for calculating loan originator compensation paid by a creditor to 

a loan originator other than an employee of creditor.’’ 3

As a result, many loans that would not otherwise be considered 

‘‘high cost’’ exceed the 3 percent cap. The consequences are significant. Lenders are less likely to offer ‘‘high cost’’ mortgages, or may 

make them available at higher rates due to heightened liability 

risks. 

While QM loans are given safe harbor against legal liability 

under the Ability to Repay rules, ‘‘high cost’’ mortgages receive only 

a rebuttable presumption of compliance. As the Congressional Research Service (CRS) has written: 

‘‘[w]hen a lender originates a mortgage that receives QM 

status, it is presumed to have complied with the ATR requirement, which consequently reduces the lender’s potential legal liability of its residential mortgage lending activities. . . .The definition of a QM, therefore, is important to 

a lender seeking to minimize its legal risk of its residential 

4 

4Sean M. Hoskins, An Analysis of Portfolio Lending and Qualified Mortgages, CRS, January 

21, 2016, https://fas.org/sgp/crs/misc/R44350.pdf (emphasis in original). 

mortgage lending activities, specifically its compliance 

with the statutory ATR requirement.’’ 4

This legislation would resolve the issues related to double-counting as points and fees, any compensation already priced into the interest rate, while also codify the BCFP’s current practice of avoiding double-counting mortgage lender compensation to their own 

mortgage origination employees. Correcting the definitional error, 

H.R. 2570, will help to better serve consumers and serve as another step to restore healthy market competition that has been absent following the enactment of the Dodd-Frank Act. 

HEARINGS

The Subcommittee on Financial Institutions, held a hearing examining matters relating to H.R. 2570 on December 7, 2017. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

July 24, 2018 and ordered H.R. 2570 to be reported favorably to the 

House without amendment by a recorded vote of 34 yeas to 22 nays 

(recorded vote no. FC–199), a quorum being present. 

COMMITTEE VOTES

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

to report legislation and amendments thereto. The sole recorded 

vote was on 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 34 yeas to 22 nays (Record vote no. FC– 

199), a quorum being present. 

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Mr. Hensarling __ _ 

Mr. McHenry 

Mr. King··-·----- __ --····--- Mr. Royce (CA) ______ _ 

Mr. lucas 

Mr. Pearce --··--------- Mr. Posey _________ _ 

Mr Luetkemeyer ______ _ 

Mr. Huizenga ___ _ 

Mr. Dully-----------

Mr. Stivers_ 

Mr. Hultgren 

Mr. Ross. 

Mr. Pittenger······---

Mrs. Wagner 

Mr. Barr 

Mr. Rothlus 

Mr. Messer 

Mr Tipton 

Mr. Wrlliams ___________ _ 

Mr. Poliquin ______ _ 

Mrs.l.ove ____ ···---------

Mr Hill.··-- ________ _ 

Mr. Emmer·------------

Mr. Zeldin 

Mr. Trott 

Mr. Loudermilk ____________ _ 

Mr. Mooney (WVL 

Mr. MacArthur 

Mr. Davidson __ 

Mr. Budd 

Mr. Kustofl (TN) 

Ms. Tenney 

Mr. Hollingsworth._ 

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Mrs. Carolyn B. Maloney (NYL 

Ms. Velazquez __________ _ 

Mr. Sherman_ 

Mr. Meeks 

Mr. Capuano ___________ _ 

Mr. Clay __ 

Mr. Lynch _____ _ 

Mr. Davrd Scoti (GA) 

Mr. AI Green (TX) 

Mr. Cleaver 

Ms. Moore 

Mr. Ellison_ -------------

Mr. Perlmutter ___________ _ 

Mr. Himes ___________________ _ 

Mr. Foster ______________ _ 

Mr. Kildee ____________ _ 

Mr. Delaney·--------· 

Ms. Sinema 

Mrs. Beatty _____ ·-----------

Mr. Heck 

Mr. Vargas ___________ . ______ _ __ _ 

Mr. Gottheimer 

Mr. Gonzalez (TX)__ _ 

Mr. Crist _____________ --·--·- _____ _ 

Mr. Kilwen 

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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. 2570 will resolve the issues related to double-counting as points and fees, any 

compensation already priced into the interest rate, while also codify 

the BCFP’s current practice of avoiding double-counting mortgage 

lender compensation to their own mortgage origination employees, 

by correcting a definitional error. 

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. 

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, September 11, 2018. 

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. 2570, the Mortgage Fairness Act of 2017. 

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

to provide them. The CBO staff contact is Stephen Rabent. 

Sincerely, 

KEITH HALL, Director. 

Enclosure. 

H.R. 2570—Mortgage Fairness Act of 2017 

Under current law, a ‘‘qualified mortgage’’ is a type of loan that 

prohibits certain terms and features and offers additional legal protections to lenders who issue them. One of those features is that 

some costs that are incidental to the loan and that are paid by the 

borrower—for example, title insurance fees, guarantee fees, and 

7 

service charges—cannot exceed 3 percent of the total loan amount. 

Lenders offering ‘‘high-cost mortgages’’ (home mortgages with interest rates and fees that exceed certain thresholds) must make additional disclosures to borrowers and must comply with restrictions 

on the terms of those loans. 

H.R. 2570 would change what costs are included in the points 

and fees calculation used to determine if a loan is a qualified mortgage or a high-cost mortgage. The bill would exclude compensation 

paid by a consumer or creditor to an individual who is employed 

by or has a contract with the mortgage originator. The bill also 

would exclude compensation that was accounted for in setting the 

mortgage’s interest rate but for which the consumer was not separately charged. 

Using information from the Consumer Financial Protection Bureau, CBO estimates that enacting H.R. 2570 would increase direct 

spending by less than $500,000 for the agency to issue a rule to implement the changes to the points and fees calculation. 

Because enacting H.R. 2570 would affect direct spending, pay-asyou-go procedures apply. Enacting the bill would not affect revenues. 

CBO estimates that enacting H.R. 2570 would not increase net 

direct spending or on-budget deficits in any of the four consecutive 

10-year periods beginning in 2029. 

H.R. 2570 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act. 

The CBO staff contact for this estimate is Stephen Rabent. The 

estimate was reviewed by H. Samuel Papenfuss, Deputy Assistant 

Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995. 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

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

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

8 

DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that no provision 

of the bill establishes or reauthorizes: (1) a program of the Federal 

Government known to be duplicative of another Federal program; 

(2) a program included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public 

Law 111–139; or (3) a program related to a program identified in 

the most recent Catalog of Federal Domestic Assistance, published 

pursuant to the Federal Program Information Act (Pub. L. No. 95– 

220, as amended by Pub. L. No. 98–169). 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, (115th Congress), the following statement is made concerning directed rule makings: The 

Committee estimates that the bill requires no directed rule makings within the meaning of such section. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section cites H.R. 2570 as the ‘‘Mortgage Fairness Act of 

2017’’. 

Section 2. Points and fees 

This section amends Section 103 of the Truth in Lending Act (15 

U.S.C. 1602) by correcting existing definitional errors of what constitutes ‘‘points and fees’’ for a high cost mortgage. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

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

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

as reported, are shown as follows (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): 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

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

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

as reported, are shown as follows (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): 

SECTION 103 OF THE TRUTH IN LENDING ACT 

* * * * * * * 

§ 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. 

9 

(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 

purposes of this title. The term ‘‘creditor’’ includes a private educational 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 balVerDate Sep 11 2014 02:22 Nov 18, 2018 Jkt 089006 PO 00000 Frm 00009 Fmt 6659 Sfmt 6601 E:\HR\OC\HR1024.XXX HR1024
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ance. 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. 

(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 

11 

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.— (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 (8.5 percentage points, 

if the dwelling is personal property and the transaction is for less than $50,000) 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 

12 

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; 

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 such other dollar 

amount as the Bureau shall prescribe by regulation); 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) 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 

13 

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. 

(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; 

ø(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;¿ 

(B) all compensation from any source (other than compensation taken into account in setting the interest rate and for 

which there is no separate charge to the consumer) paid directly 

or indirectly by a consumer or creditor to— 

(i) a mortgage originator, including a mortgage originator that is also the creditor in a table-funded transaction; 

or 

(ii) an individual employed by or contracting with the 

originator or a mortgage originator; 

(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; 

14 

(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 CON- SUMER 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. 

(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. 

(dd) DEFINITIONS RELATING TO MORTGAGE ORIGINATION AND RES- IDENTIAL 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 

15 

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) a retailer of manufactured or modular homes or 

an employee of the retailer if the retailer or employee, 

as applicable— 

(I) does not 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; 

(II) discloses to the consumer— 

(aa) in writing any corporate affiliation with 

any creditor; and 

(bb) if the retailer has a corporate affiliation 

with any creditor, at least 1 unaffiliated creditor; and 

(III) does not directly negotiate with the consumer or lender on loan terms (including rates, 

fees, and other costs). 

(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 mortgage 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 

16 

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. 

(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)). 

(ee) BONA FIDE DISCOUNT POINTS AND PREPAYMENT PENALTIES.— 

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 

17 

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. 

(18) 

1For example, high cost mortgage protections are triggered for a first mortgage loan if the 

APR is more than 6.5 percentage points higher than the average prime offer rate, which is an 

estimate of the rate people with good credit typically pay for a similar first mortgage. In addition, a transaction will be a high-cost mortgage if the total loan amount is $21,032 or more and 

the points and fees exceed 5 percent of the total loan amount, of if the total loan amount is 

less than $21,032 and the points and fees exceed the lesser of $1,052 or 8 percent of the total 

loan amount. See https;//files.consumerfinance.gov/f/201301_cfpb_high-cost-mortgage-rule_whatit-means-for-consumers.pdf and https://www.gpo.gov/fdsys/pkg/FR-2017-08-30/pdf/2017- 

18003.pdf. 2https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureauissues-rules-to-strenthen-protections-for-high-cost-mortgages/ 

MINORITY VIEWS 

H.R. 2570, the so called ‘‘Mortgage Fairness Act of 2017,’’ would 

erode important protections for would be homebuyers under the 

Dodd-Frank Wall Street Reform and Consumer Protection Act 

(‘‘Dodd-Frank Act’’), the Truth In Lending Act (‘‘TILA’’), and the 

Real Estate Settlement Procedures Act (‘‘RESPA’’), among other 

statutes. 

This bill would weaken borrower protections under the Consumer 

Financial Protection Bureau’s (‘‘Consumer Bureau’’) Ability to 

Repay rule by excluding certain types of mortgage loan originator 

compensation (or commission payments) from the points and fees 

cap for Qualified Mortgage, or ‘‘QM’’ loans. Qualified mortgages are 

important loans that ensure that borrowers have sufficient assets 

and income to repay their mortgage loan, inclusive to all fees. 

Generally, when a lender originates a QM loan, it must follow 

the Consumer Bureau’s Ability to Repay rule, including the rule’s 

three percent cap on points and fees for the borrower’s mortgage, 

to obtain a safe harbor under the rule. H.R. 2570 would change 

this calculation by excluding certain types of loan originator compensation from the three percent cap. By changing the points and 

fees calculation in this way, H.R. 2570 could incentivize originators 

to steer borrowers into mortgage products that may not be in the 

best interest of a homebuyer, and it would make it harder to trigger certain borrower protections for certain high-cost mortgages. 

Specifically, if a lender offers a borrower a high-cost mortgage 

with an annual percentage rate (‘‘APR’’) or total points and fees 

that exceed certain threshold amounts,1 the borrower receives additional protections under the Home Ownership and Equity Protection Act (‘‘HOEPA’’).2 For example before making such a loan, a 

lender must provide the borrower information in advance that explains that he or she is receiving a high-cost mortgage, and disclose 

the terms, costs and fees associated with the loan. The lender must 

also certify that the borrower received homeownership counseling 

about the high-cost mortgage being offered. These additional protections help ensure the borrower is well informed before receiving 

loan. 

19 

3https://www.nclc.org/images.pdf/legislation/opp-letter-hr-2570.pdf 

More than a dozen national consumer and civil rights groups, including the NAACP and the National Consumer Law Center, wrote 

a letter to Congress opposing H.R. 2570, explaining: 

The high-cost loan rules currently discourage kickbacks 

on loans where they are still allowed because these payments count toward the coverage threshold based on 

points and fees. H.R. 2570 would exclude kickbacks from 

this trigger, creating an incentive for loan originators to 

steer borrowers to overpriced loans without getting the 

benefit of the high-cost loan protections. . . . The supporters of the bill point out that these kickback payments 

are incorporated into the interest rate and claim that also 

including it in the points and fees test is redundant. Incorporation into the interest rate is the mechanism used to 

ensure that the borrower is the one who is actually funding the kickback that promotes steering. But this does not 

necessitate a carve-out from the points and fees threshold 

for high-cost loan protections. . . . Carving out these kickbacks from the high-cost coverage rules would disrupt the 

inclusive approach Congress adopted and promote abusive 

loan steering and price gouging. We urge you to oppose 

H.R. 2570. A vote to support this bill is a vote to promote 

predatory mortgage lending.3

Following the devastating financial crisis a decade ago, Congress 

intentionally included all types of loan originator compensation in 

the mortgage points and fees calculation to disincentivize the types 

of abusive loan steering that contributed to millions of foreclosures. 

congress should not reverse course by repealing these critical safeguards for families looking to buy a home. 

For these reasons we oppose H.R. 2570. 

MAXINE WATERS. 

CAROLYN B. MALONEY. 

WM. LACY CLAY. 

DANIEL T. KILDEE. 

MICHAEL E. CAPUANO. 

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