59–006 

1The ‘‘safe harbor’’ provisions protect lenders against lawsuits by borrowers who claim they 

were extended a mortgage the lender had no reason to believe they could repay. 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 114–330 

PORTFOLIO LENDING AND MORTGAGE ACCESS ACT 

NOVEMBER 16, 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 

together with 

MINORITY VIEWS 

[To accompany H.R. 1210] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 1210) to amend the Truth in Lending Act to provide a 

safe harbor from certain requirements related to qualified mortgages for residential mortgage loans held on an originating depository institution’s portfolio, 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 Barr, H.R. 1210, the ‘‘Portfolio 

Lending and Mortgage Access Act,’’ amends Section 129C of the 

Truth in Lending Act (TILA) (15 U.S.C. 1639c) to create a legal 

safe harbor 1 for creditors that are depository institutions for any 

failure to comply with ability-to-repay requirements under TILA 

with respect to a residential mortgage loan if the depository institution has, since originating the loan, held it on its balance sheet 

and all prepayment penalties with respect to the loan comply with 

specified limitations. 

A safe harbor from lawsuit is also created for mortgage originators for steering a consumer to a residential mortgage loan if: 


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2http://www.federalreserve.gov/boarddocs/snloansurvey/201408/fullreport.pdf. 

3 CFPB, ‘‘Ability-to-Repay and Qualified Mortgage Standards Under the Truth in Lending 

Act,’’ 78 Federal Register 6569, January 30, 2013. 

• the creditor is a depository institution and has informed 

the mortgage originator that it intends to hold the loan on its 

balance sheet for the life of the loan, and 

• the mortgage originator informs the consumer that the 

creditor intends to do so. 

Finally, the bill clarifies that it may not be construed as preventing a balloon loan from qualifying for the safe harbor provided 

for balloon loans originated and held in portfolio by small creditors 

operating in predominantly rural or underserved areas under section 129C(j) of TILA. 

BACKGROUND AND NEED FOR LEGISLATION

The Dodd-Frank Wall Street Reform and Consumer Protection 

Act (P.L. 111–203) (Dodd-Frank Act) made significant changes to 

the mortgage lending market place. Section 1411 of the DoddFrank Act amends TILA to require that mortgage lenders determine at the time a loan is made that the borrower has a reasonable 

ability to repay it. The ability-to-repay requirements are designed 

to ensure that a lender takes into account the borrower’s capacity 

to pay back the mortgage prior to consummation of the loan. Section 1412 of the Dodd-Frank Act creates a statutory category of 

mortgages known as ‘‘qualified mortgages’’ (QM) that are deemed 

to comply with Section 1411’s ability-to-repay requirements and are 

therefore subject to a safe harbor from lawsuit, provided that the 

loans meet certain characteristics and underwriting criteria. The 

CFPB has authority to prescribe regulations implementing the 

Dodd-Frank Act’s qualified mortgage requirements. 

Under the CFPB’s qualified mortgage regulations, there are concerns that mortgages have been made ‘‘safer’’ by effectively making 

them unavailable to a substantial number of would-be homeowners. According to the Federal Reserve Board, 22% of those who 

borrowed to buy a home in 2010—one out of every five borrowers— 

would not have met the 43 percent debt-to-income ratio (DTI) underwriting requirements for a Qualified Mortgage.2

The CFPB’s mortgage rules also include special ‘‘automatic QM’’ 

designations for certain types of mortgages. For instance, for a period of seven years, any loan that qualifies for purchase by Fannie 

Mae and Freddie Mac (provided they are not removed from conservatorship sooner) automatically qualifies for QM status even if 

a borrower’s DTI exceeds 43% DTI. Because of the exemptions, the 

roughly 95% of loans originated today that are backed or insured 

by the federal government are not affected by QM.3 Additionally, 

the CFPB gave special treatment to certain institutions that operate in predominantly rural or underserved areas, have less than $2 

billion in assets, and originate 500 or fewer mortgages per year. 

The CFPB extended QM status to loans made by these small creditors and held in their own portfolios, even if the debtor has a DTI 

in excess of 43%. Small creditors in rural or underserved areas can 

also originate mortgage loans with balloon payments, despite the 

QM rule’s general prohibition on balloon payment loans, and have 

those loans qualify for safe harbor treatment. 


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These special exemptions effectively, but only temporarily, minimize the impact of the CFPB’s QM rule. In order to ensure that 

community financial institutions are able to continue providing 

mortgage credit to consumers, a commonsense yet flexible approach 

needs to be taken with mortgage lending. Allowing residential 

mortgage loans held in portfolio to qualify for a safe harbor equivalent to that of QM will allow these institutions to meet the credit 

demands of consumers, while incentivizing such institutions to ensure the borrower can meet the monthly obligations of a mortgage. 

When a community financial institution keeps a loan in portfolio— 

rather than selling it off—it keeps the risk of a borrower’s default 

on its books. Therefore, the lender should benefit from the presumption that the borrower has the ability to repay, and be protected from liability so long as the loan appears on the institution’s 

balance sheet. 

HEARINGS

The Committee on Financial Services’ Subcommittee on Financial Institutions held a hearing examining matters relating to H.R. 

1210 on June 11, 2015. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

July 28, 2015 and July 29, 2015, and ordered H.R. 1210 to be reported favorably to the House without amendment by a recorded 

vote of 38 yeas to 18 nays (recorded vote no. FC–45), 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. There were two 

record votes in Committee. An amendment offered by Representative Waters was not agreed to by a recorded vote of 21 ayes to 34 

nays (FC–44). The second 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 38 

yeas to 18 nays (Record vote no. FC–45), 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. 1210 will ensure that mortgage loans remain available to creditworthy borrowers by providing that loans retained on the balance sheet of depository institutions are ‘‘qualified mortgages’’ subject to a 

safeharbor from lawsuit, and by extending certain other protections 

to mortgage originators. 

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, September 29, 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. 1210, the Portfolio Lending and Mortgage Access Act. 

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

to provide them. The CBO staff contact is Sarah Puro. 

Sincerely, 

KEITH HALL. 

Enclosure. 


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H.R. 1210—Portfolio Lending and Mortgage Access Act 

H.R. 1210 would provide additional legal protections to creditors 

that hold mortgages that do not meet the characteristics of qualified mortgages, such as: • Debt to income ratios of the borrower that exceed 43 percent, • Provisions that allow the total principal to grow each year, 

known as negative amortization, • Features that allow the borrower to pay only the interest 

on a mortgage, and • Limited documentation from the borrower. 

Enacting H.R. 1210 could affect direct spending; therefore, payas-you-go procedures apply. However, CBO estimates that the net 

effects on direct spending each year would be insignificant. Enacting H.R. 1210 would not affect revenues. 

Qualified mortgages are slightly less likely to default than mortgages without such characteristics. Providing protection for nonqualified mortgages would expose financial institutions that offer 

those mortgages to the risk of additional losses. Such losses to financial institutions, however, do not necessarily result in additional bank failures and related costs to the Deposit Insurance 

Fund. Mortgages offered legal protections under the bill would likely default at a rate of about 2 percent more than the qualified 

mortgages with current legal protection, CBO estimates. As a result, under the bill the increased probability of mortgage losses as 

a percent of total bank portfolios would be small, less than onetenth of one percent and the probability of a default stemming from 

the mortgage portfolio of a bank would increase by less than onehalf of one percent. Those small potential losses multiplied by the 

expected cost of bank failures projected in CBO’s baseline estimates 

would result in additional costs to the federal government of less 

than $500,000 over the 2016–2025 period. 

In addition, the Consumer Financial Protection Board (CFPB) 

would have to complete a rulemaking process to implement H.R. 

1210. Costs incurred by the CFPB are direct spending; however, 

CBO estimates that the annual costs to the CFPB would be insignificant. 

H.R. 1210 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act (UMRA) and would not affect 

the budgets of state, local, or tribal governments. 

H.R. 1210 would impose a private-sector mandate by eliminating 

an existing right of action against lenders that hold mortgages on 

their balance sheets and mortgage originators who direct consumers to such loans. Under current law, lenders of mortgages that 

meet the standards for qualified mortgages are granted legal protection from civil actions based on a claim that the lender failed to 

comply with ability-to-repay requirements. Mortgage originators 

who direct consumers to qualified mortgages are also granted such 

legal protections. By broadening the definition of qualified mortgages to include mortgages held on a lender’s balance sheet, the 

bill would limit the right of borrowers to file claims against holders 

of such loans and against mortgage originators who directed them 

to the loans, as long as the originator provided certain disclosures. 

The cost of the mandate would be the forgone value of the awards 

and settlements in such claims. Based on information from the 


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CFPB, CBO expects that the number of such claims and the 

awards in such cases would be small. Therefore, CBO estimates 

that the cost of the mandate would probably fall below the annual 

threshold established in UMRA for private-sector mandates ($154 

million in 2015, adjusted annually for inflation). 

The CBO staff contacts for this estimate are Sarah Puro (for deposit insurance losses), Susan Willie (for CFPB), and Logan Smith 

(for private-sector mandates). The estimate was approved by H. 

Samuel Papenfuss, Deputy 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. 1210 does not contain any congressional earmarks, limited 

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

XXI. 

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. 1210 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(k) of H. Res. 5, 114th Cong. (2015), the 

Committee states that H.R. 1210 contains no directed rulemaking. 

SECTION–BY–SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This Section cites H.R. 1210 as the ‘‘Portfolio Lending and Mortgage Access Act’’. 

Section 2. Safe harbor for certain loans held on portfolio 

This section provides that depository institution creditors shall 

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fied limitations that, since origination, have been held on the institution’s balance sheet. The section further provides that banking 

regulators must treat such loans as qualified mortgages; that the 

loans may be transferred to another depository institution in certain circumstances; and that mortgage originators shall be subject 

to a safe harbor in connection with steering consumers toward residential mortgage loans in certain circumstances. Finally, this section establishes a rule of construction with respect to the application of the safe harbor provided under section 129C(j) of the Truth 

in Lending Act to balloon loans. 

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 (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 2—CREDIT TRANSACTIONS 

* * * * * * * 

§ 129C. Minimum standards for residential mortgage loans 

(a) ABILITY TO REPAY.— (1) IN GENERAL.—In accordance with regulations prescribed 

by the Board, no creditor may make a residential mortgage 

loan unless the creditor makes a reasonable and good faith determination based on verified and documented information 

that, at the time the loan is consummated, the consumer has 

a reasonable ability to repay the loan, according to its terms, 

and all applicable taxes, insurance (including mortgage guarantee insurance), and assessments. 

(2) MULTIPLE LOANS.—If the creditor knows, or has reason to 

know, that 1 or more residential mortgage loans secured by the 

same dwelling will be made to the same consumer, the creditor 

shall make a reasonable and good faith determination, based 

on verified and documented information, that the consumer 

has a reasonable ability to repay the combined payments of all 

loans on the same dwelling according to the terms of those 

loans and all applicable taxes, insurance (including mortgage 

guarantee insurance), and assessments. 

(3) BASIS FOR DETERMINATION.—A determination under this 

subsection of a consumer’s ability to repay a residential mortgage loan shall include consideration of the consumer’s credit 

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come ratio or the residual income the consumer will have after 

paying non-mortgage debt and mortgage-related obligations, 

employment status, and other financial resources other than 

the consumer’s equity in the dwelling or real property that secures repayment of the loan. A creditor shall determine the 

ability of the consumer to repay using a payment schedule that 

fully amortizes the loan over the term of the loan. 

(4) INCOME VERIFICATION.—A creditor making a residential 

mortgage loan shall verify amounts of income or assets that 

such creditor relies on to determine repayment ability, including expected income or assets, by reviewing the consumer’s Internal Revenue Service Form W–2, tax returns, payroll receipts, financial institution records, or other third-party documents that provide reasonably reliable evidence of the consumer’s income or assets. In order to safeguard against fraudulent reporting, any consideration of a consumer’s income history in making a determination under this subsection shall include the verification of such income by the use of— 

(A) Internal Revenue Service transcripts of tax returns; 

or 

(B) a method that quickly and effectively verifies income 

documentation by a third party subject to rules prescribed 

by the Board. 

(5) EXEMPTION.—With respect to loans made, guaranteed, or 

insured by Federal departments or agencies identified in subsection (b)(3)(B)(ii), such departments or agencies may exempt 

refinancings under a streamlined refinancing from this income 

verification requirement as long as the following conditions are 

met: 

(A) The consumer is not 30 days or more past due on the 

prior existing residential mortgage loan. 

(B) The refinancing does not increase the principal balance outstanding on the prior existing residential mortgage loan, except to the extent of fees and charges allowed 

by the department or agency making, guaranteeing, or insuring the refinancing. 

(C) Total points and fees (as defined in section 

103(aa)(4), other than bona fide third party charges not retained by the mortgage originator, creditor, or an affiliate 

of the creditor or mortgage originator) payable in connection with the refinancing do not exceed 3 percent of the 

total new loan amount. 

(D) The interest rate on the refinanced loan is lower 

than the interest rate of the original loan, unless the borrower is refinancing from an adjustable rate to a fixed-rate 

loan, under guidelines that the department or agency shall 

establish for loans they make, guarantee, or issue. 

(E) The refinancing is subject to a payment schedule 

that will fully amortize the refinancing in accordance with 

the regulations prescribed by the department or agency 

making, guaranteeing, or insuring the refinancing. 

(F) The terms of the refinancing do not result in a balloon payment, as defined in subsection (b)(2)(A)(ii). 

(G) Both the residential mortgage loan being refinanced 

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ment or agency making, guaranteeing, or insuring the refinancing. 

(6) NONSTANDARD LOANS.— (A) VARIABLE RATE LOANS THAT DEFER REPAYMENT OF

ANY PRINCIPAL OR INTEREST.—For purposes of determining, 

under this subsection, a consumer’s ability to repay a variable rate residential mortgage loan that allows or requires 

the consumer to defer the repayment of any principal or 

interest, the creditor shall use a fully amortizing repayment schedule. 

(B) INTEREST-ONLY LOANS.—For purposes of determining, under this subsection, a consumer’s ability to 

repay a residential mortgage loan that permits or requires 

the payment of interest only, the creditor shall use the 

payment amount required to amortize the loan by its final 

maturity. 

(C) CALCULATION FOR NEGATIVE AMORTIZATION.—In making any determination under this subsection, a creditor 

shall also take into consideration any balance increase 

that may accrue from any negative amortization provision. 

(D) CALCULATION PROCESS.—For purposes of making any 

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

(i) the loan proceeds are fully disbursed on the date 

of the consummation of the loan; 

(ii) the loan is to be repaid in substantially equal 

monthly amortizing payments for principal and interest over the entire term of the loan with no balloon 

payment, unless the loan contract requires more rapid 

repayment (including balloon payment), in which case 

the calculation shall be made (I) in accordance with 

regulations prescribed by the Board, with respect to 

any loan which has an annual percentage rate that 

does not exceed the average prime offer rate for a comparable transaction, as of the date the interest rate is 

set, by 1.5 or more percentage points for a first lien 

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

loan; or (II) using the contract’s repayment schedule, 

with respect to a loan which has an annual percentage 

rate, as of the date the interest rate is set, that is at 

least 1.5 percentage points above the average prime 

offer rate for a first lien residential mortgage loan; 

and 3.5 percentage points above the average prime 

offer rate for a subordinate lien residential mortgage 

loan; and 

(iii) the interest rate over the entire term of the loan 

is a fixed rate equal to the fully indexed rate at the 

time of the loan closing, without considering the introductory rate. 

(E) REFINANCE OF HYBRID LOANS WITH CURRENT LEND- ER.—In considering any application for refinancing an existing hybrid loan by the creditor into a standard loan to 

be made by the same creditor in any case in which there 


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would be a reduction in monthly payment and the mortgagor has not been delinquent on any payment on the existing hybrid loan, the creditor may— 

(i) consider the mortgagor’s good standing on the existing mortgage; 

(ii) consider if the extension of new credit would prevent a likely default should the original mortgage 

reset and give such concerns a higher priority as an 

acceptable underwriting practice; and 

(iii) offer rate discounts and other favorable terms to 

such mortgagor that would be available to new customers with high credit ratings based on such underwriting practice. 

(7) FULLY-INDEXED RATE DEFINED.—For purposes of this subsection, the term ‘‘fully indexed rate’’ means the index rate prevailing on a residential mortgage loan at the time the loan is 

made plus the margin that will apply after the expiration of 

any introductory interest rates. 

(8) REVERSE MORTGAGES AND BRIDGE LOANS.—This subsection shall not apply with respect to any reverse mortgage or 

temporary or bridge loan with a term of 12 months or less, including to any loan to purchase a new dwelling where the consumer plans to sell a different dwelling within 12 months. 

(9) SEASONAL INCOME.—If documented income, including income from a small business, is a repayment source for a residential mortgage loan, a creditor may consider the seasonality 

and irregularity of such income in the underwriting of and 

scheduling of payments for such credit. 

(b) PRESUMPTION OF ABILITY TO REPAY.— 

(1) IN GENERAL.—Any creditor with respect to any residential 

mortgage loan, and any assignee of such loan subject to liability under this title, may presume that the loan has met the requirements of subsection (a), if the loan is a qualified mortgage. 

(2) DEFINITIONS.—For purposes of this subsection, the following definitions shall apply: 

(A) QUALIFIED MORTGAGE.—The term ‘‘qualified mortgage’’ means any residential mortgage loan— 

(i) for which the regular periodic payments for the 

loan may not— 

(I) result in an increase of the principal balance; 

or 

(II) except as provided in subparagraph (E), 

allow the consumer to defer repayment of principal; 

(ii) except as provided in subparagraph (E), the 

terms of which do not result in a balloon payment, 

where a ‘‘balloon payment’’ is a scheduled payment 

that is more than twice as large as the average of earlier scheduled payments; 

(iii) for which the income and financial resources relied upon to qualify the obligors on the loan are 

verified and documented; 

(iv) in the case of a fixed rate loan, for which the underwriting process is based on a payment schedule 


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that fully amortizes the loan over the loan term and 

takes into account all applicable taxes, insurance, and 

assessments; 

(v) in the case of an adjustable rate loan, for which 

the underwriting is based on the maximum rate permitted under the loan during the first 5 years, and a 

payment schedule that fully amortizes the loan over 

the loan term and takes into account all applicable 

taxes, insurance, and assessments; 

(vi) that complies with any guidelines or regulations 

established by the Board relating to ratios of total 

monthly debt to monthly income or alternative measures of ability to pay regular expenses after payment 

of total monthly debt, taking into account the income 

levels of the borrower and such other factors as the 

Board may determine relevant and consistent with the 

purposes described in paragraph (3)(B)(i); 

(vii) for which the total points and fees (as defined 

in subparagraph (C)) payable in connection with the 

loan do not exceed 3 percent of the total loan amount; 

(viii) for which the term of the loan does not exceed 

30 years, except as such term may be extended under 

paragraph (3), such as in high-cost areas; and 

(ix) in the case of a reverse mortgage (except for the 

purposes of subsection (a) of section 129C, to the extent that such mortgages are exempt altogether from 

those requirements), a reverse mortgage which meets 

the standards for a qualified mortgage, as set by the 

Board in rules that are consistent with the purposes 

of this subsection. 

(B) AVERAGE PRIME OFFER RATE.—The term ‘‘average 

prime offer rate’’ means the average prime offer rate for a 

comparable transaction as of the date on which the interest rate for the transaction is set, as published by the 

Board. 

(C) POINTS AND FEES.— (i) IN GENERAL.—For purposes of subparagraph (A), 

the term ‘‘points and fees’’ means points and fees as 

defined by section 103(aa)(4) (other than bona fide 

third party charges not retained by the mortgage originator, creditor, or an affiliate of the creditor or mortgage originator). 

(ii) COMPUTATION.—For purposes of computing the 

total points and fees under this subparagraph, the 

total points and fees shall exclude either of the 

amounts described in the following subclauses, but not 

both: 

(I) Up to and including 2 bona fide discount 

points payable by the consumer in connection with 

the mortgage, but only if the interest rate from 

which the mortgage’s interest rate will be discounted does not exceed by more than 1 percentage point the average prime offer rate. 

(II) Unless 2 bona fide discount points have 

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cluding 1 bona fide discount point payable by the 

consumer in connection with the mortgage, but 

only if the interest rate from which the mortgage’s 

interest rate will be discounted does not exceed by 

more than 2 percentage points the average prime 

offer rate. 

(iii) BONA FIDE DISCOUNT POINTS DEFINED.—For purposes of clause (ii), 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. 

(iv) INTEREST RATE REDUCTION.—Subclauses (I) and 

(II) of clause (ii) 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. 

(D) SMALLER LOANS.—The Board shall prescribe rules 

adjusting the criteria under subparagraph (A)(vii) in order 

to permit lenders that extend smaller loans to meet the requirements of the presumption of compliance under paragraph (1). In prescribing such rules, the Board shall consider the potential impact of such rules on rural areas and 

other areas where home values are lower. 

(E) BALLOON LOANS.—The Board may, by regulation, 

provide that the term ‘‘qualified mortgage’’ includes a balloon loan— 

(i) that meets all of the criteria for a qualified mortgage under subparagraph (A) (except clauses (i)(II), 

(ii), (iv), and (v) of such subparagraph); 

(ii) for which the creditor makes a determination 

that the consumer is able to make all scheduled payments, except the balloon payment, out of income or 

assets other than the collateral; 

(iii) for which the underwriting is based on a payment schedule that fully amortizes the loan over a period of not more than 30 years and takes into account 

all applicable taxes, insurance, and assessments; and 

(iv) that is extended by a creditor that— 

(I) operates predominantly in rural or underserved areas; 

(II) together with all affiliates, has total annual 

residential mortgage loan originations that do not 

exceed a limit set by the Board; 

(III) retains the balloon loans in portfolio; and 

(IV) meets any asset size threshold and any 

other criteria as the Board may establish, consistent with the purposes of this subtitle. 

(3) REGULATIONS.— (A) IN GENERAL.—The Board shall prescribe regulations 

to carry out the purposes of this subsection. 

(B) REVISION OF SAFE HARBOR CRITERIA.— 


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(i) IN GENERAL.—The Board may prescribe regulations that revise, add to, or subtract from the criteria 

that define a qualified mortgage upon a finding that 

such regulations are necessary or proper to ensure 

that responsible, affordable mortgage credit remains 

available to consumers in a manner consistent with 

the purposes of this section, necessary and appropriate 

to effectuate the purposes of this section and section 

129B, to prevent circumvention or evasion thereof, or 

to facilitate compliance with such sections. 

(ii) LOAN DEFINITION.—The following agencies shall, 

in consultation with the Board, prescribe rules defining the types of loans they insure, guarantee, or administer, as the case may be, that are qualified mortgages for purposes of paragraph (2)(A), and such rules 

may revise, add to, or subtract from the criteria used 

to define a qualified mortgage under paragraph (2)(A), 

upon a finding that such rules are consistent with the 

purposes of this section and section 129B, to prevent 

circumvention or evasion thereof, or to facilitate compliance with such sections: 

(I) The Department of Housing and Urban Development, with regard to mortgages insured 

under the National Housing Act (12 U.S.C. 1707 

et seq.). 

(II) The Department of Veterans Affairs, with 

regard to a loan made or guaranteed by the Secretary of Veterans Affairs. 

(III) The Department of Agriculture, with regard loans guaranteed by the Secretary of Agriculture pursuant to 42 U.S.C. 1472(h). 

(IV) The Rural Housing Service, with regard to 

loans insured by the Rural Housing Service. 

(c) PROHIBITION ON CERTAIN PREPAYMENT PENALTIES.— 

(1) PROHIBITED ON CERTAIN LOANS.— (A) IN GENERAL.—A residential mortgage loan that is not 

a ‘‘qualified mortgage’’, as defined under subsection (b)(2), 

may not contain terms under which a consumer must pay 

a prepayment penalty for paying all or part of the principal after the loan is consummated. 

(B) EXCLUSIONS.—For purposes of this subsection, a 

‘‘qualified mortgage’’ may not include a residential mortgage loan that— 

(i) has an adjustable rate; or 

(ii) has an annual percentage rate that exceeds the 

average prime offer rate for a comparable transaction, 

as of the date the interest rate is set— 

(I) by 1.5 or more percentage points, in the case 

of a first lien residential mortgage loan having a 

original principal obligation amount that is equal 

to or less than the amount of the maximum limitation on the original principal obligation of mortgage in effect for a residence of the applicable size, 

as of the date of such interest rate set, pursuant 

to the 6th sentence of section 305(a)(2) the FedVerDate Sep 11 2014 00:01 Nov 18, 2015 Jkt 059006 PO 00000 Frm 00015 Fmt 6659 Sfmt 6602 E:\HR\OC\HR330.XXX HR330

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eral Home Loan Mortgage Corporation Act (12 

U.S.C. 1454(a)(2)); 

(II) by 2.5 or more percentage points, in the case 

of a first lien residential mortgage loan having a 

original principal obligation amount that is more 

than the amount of the maximum limitation on 

the original principal obligation of mortgage in effect for a residence of the applicable size, as of the 

date of such interest rate set, pursuant to the 6th 

sentence of section 305(a)(2) the Federal Home 

Loan Mortgage Corporation Act (12 U.S.C. 

1454(a)(2)); and 

(III) by 3.5 or more percentage points, in the 

case of a subordinate lien residential mortgage 

loan. 

(2) PUBLICATION OF AVERAGE PRIME OFFER RATE AND APR

THRESHOLDS.—The Board— 

(A) shall publish, and update at least weekly, average 

prime offer rates; 

(B) may publish multiple rates based on varying types of 

mortgage transactions; and 

(C) shall adjust the thresholds established under subclause (I), (II), and (III) of paragraph (1)(B)(ii) as necessary 

to reflect significant changes in market conditions and to 

effectuate the purposes of the Mortgage Reform and AntiPredatory Lending Act. 

(3) PHASED-OUT PENALTIES ON QUALIFIED MORTGAGES.—A 

qualified mortgage (as defined in subsection (b)(2)) may not 

contain terms under which a consumer must pay a prepayment 

penalty for paying all or part of the principal after the loan is 

consummated in excess of the following limitations: 

(A) During the 1-year period beginning on the date the 

loan is consummated, the prepayment penalty shall not exceed an amount equal to 3 percent of the outstanding balance on the loan. 

(B) During the 1-year period beginning after the period 

described in subparagraph (A), the prepayment penalty 

shall not exceed an amount equal to 2 percent of the outstanding balance on the loan. 

(C) During the 1-year period beginning after the 1-year 

period described in subparagraph (B), the prepayment penalty shall not exceed an amount equal to 1 percent of the 

outstanding balance on the loan. 

(D) After the end of the 3-year period beginning on the 

date the loan is consummated, no prepayment penalty may 

be imposed on a qualified mortgage. 

(4) OPTION FOR NO PREPAYMENT PENALTY REQUIRED.—A creditor may not offer a consumer a residential mortgage loan 

product that has a prepayment penalty for paying all or part 

of the principal after the loan is consummated as a term of the 

loan without offering the consumer a residential mortgage loan 

product that does not have a prepayment penalty as a term of 

the loan. 

(d) SINGLE PREMIUM CREDIT INSURANCE PROHIBITED.—No creditor may finance, directly or indirectly, in connection with any resiVerDate Sep 11 2014 00:01 Nov 18, 2015 Jkt 059006 PO 00000 Frm 00016 Fmt 6659 Sfmt 6602 E:\HR\OC\HR330.XXX HR330

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dential mortgage loan or with any extension of credit under an 

open end consumer credit plan secured by the principal dwelling of 

the consumer, any credit life, credit disability, credit unemployment, or credit property insurance, or any other accident, loss-ofincome, life, or health insurance, or any payments directly or indirectly for any debt cancellation or suspension agreement or contract, except that— 

(1) insurance premiums or debt cancellation or suspension 

fees calculated and paid in full on a monthly basis shall not 

be considered financed by the creditor; and 

(2) this subsection shall not apply to credit unemployment 

insurance for which the unemployment insurance premiums 

are reasonable, the creditor receives no direct or indirect compensation in connection with the unemployment insurance premiums, and the unemployment insurance premiums are paid 

pursuant to another insurance contract and not paid to an affiliate of the creditor. 

(e) ARBITRATION.— (1) IN GENERAL.—No residential mortgage loan and no extension of credit under an open end consumer credit plan secured 

by the principal dwelling of the consumer may include terms 

which require arbitration or any other nonjudicial procedure as 

the method for resolving any controversy or settling any claims 

arising out of the transaction. 

(2) POST-CONTROVERSY AGREEMENTS.—Subject to paragraph 

(3), paragraph (1) shall not be construed as limiting the right 

of the consumer and the creditor or any assignee to agree to 

arbitration or any other nonjudicial procedure as the method 

for resolving any controversy at any time after a dispute or 

claim under the transaction arises. 

(3) NO WAIVER OF STATUTORY CAUSE OF ACTION.—No provision of any residential mortgage loan or of any extension of 

credit under an open end consumer credit plan secured by the 

principal dwelling of the consumer, and no other agreement between the consumer and the creditor relating to the residential 

mortgage loan or extension of credit referred to in paragraph 

(1), shall be applied or interpreted so as to bar a consumer 

from bringing an action in an appropriate district court of the 

United States, or any other court of competent jurisdiction, 

pursuant to section 130 or any other provision of law, for damages or other relief in connection with any alleged violation of 

this section, any other provision of this title, or any other Federal law. 

(f) MORTGAGES WITH NEGATIVE AMORTIZATION.—No creditor may 

extend credit to a borrower in connection with a consumer credit 

transaction under an open or closed end consumer credit plan secured by a dwelling or residential real property that includes a 

dwelling, other than a reverse mortgage, that provides or permits 

a payment plan that may, at any time over the term of the extension of credit, result in negative amortization unless, before such 

transaction is consummated— 

(1) the creditor provides the consumer with a statement 

that— 

(A) the pending transaction will or may, as the case may 

be, result in negative amortization; 


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(B) describes negative amortization in such manner as 

the Board shall prescribe; 

(C) negative amortization increases the outstanding 

principal balance of the account; and 

(D) negative amortization reduces the consumer’s equity 

in the dwelling or real property; and 

(2) in the case of a first-time borrower with respect to a residential mortgage loan that is not a qualified mortgage, the 

first-time borrower provides the creditor with sufficient documentation to demonstrate that the consumer received homeownership counseling from organizations or counselors certified 

by the Secretary of Housing and Urban Development as competent to provide such counseling. 

(g) PROTECTION AGAINST LOSS OF ANTI-DEFICIENCY PROTECTION.— 

(1) DEFINITION.—For purposes of this subsection, the term 

‘‘anti-deficiency law’’ means the law of any State which provides that, in the event of foreclosure on the residential property of a consumer securing a mortgage, the consumer is not 

liable, in accordance with the terms and limitations of such 

State law, for any deficiency between the sale price obtained 

on such property through foreclosure and the outstanding balance of the mortgage. 

(2) NOTICE AT TIME OF CONSUMMATION.—In the case of any 

residential mortgage loan that is, or upon consummation will 

be, subject to protection under an anti-deficiency law, the creditor or mortgage originator shall provide a written notice to the 

consumer describing the protection provided by the anti-deficiency law and the significance for the consumer of the loss of 

such protection before such loan is consummated. 

(3) NOTICE BEFORE REFINANCING THAT WOULD CAUSE LOSS OF

PROTECTION.—In the case of any residential mortgage loan that 

is subject to protection under an anti-deficiency law, if a creditor or mortgage originator provides an application to a consumer, or receives an application from a consumer, for any 

type of refinancing for such loan that would cause the loan to 

lose the protection of such anti-deficiency law, the creditor or 

mortgage originator shall provide a written notice to the consumer describing the protection provided by the anti-deficiency 

law and the significance for the consumer of the loss of such 

protection before any agreement for any such refinancing is 

consummated. 

(h) POLICY REGARDING ACCEPTANCE OF PARTIAL PAYMENT.—In 

the case of any residential mortgage loan, a creditor shall disclose 

prior to settlement or, in the case of a person becoming a creditor 

with respect to an existing residential mortgage loan, at the time 

such person becomes a creditor— 

(1) the creditor’s policy regarding the acceptance of partial 

payments; and 

(2) if partial payments are accepted, how such payments will 

be applied to such mortgage and if such payments will be 

placed in escrow. 

(i) TIMESHARE PLANS.—This section and any regulations promulgated under this section do not apply to an extension of credit reVerDate Sep 11 2014 00:01 Nov 18, 2015 Jkt 059006 PO 00000 Frm 00018 Fmt 6659 Sfmt 6602 E:\HR\OC\HR330.XXX HR330

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lating to a plan described in section 101(53D) of title 11, United 

States Code. 

(j) SAFE HARBOR FOR CERTAIN LOANS HELD ON PORTFOLIO.— (1) SAFE HARBOR FOR CREDITORS THAT ARE DEPOSITORY IN- STITUTIONS.— (A) IN GENERAL.—A creditor that is a depository institution shall not be subject to suit for failure to comply with 

subsection (a), (c)(1), or (f)(2) of this section or section 129H 

with respect to a residential mortgage loan, and the banking regulators shall treat such loan as a qualified mortgage, if— 

(i) the creditor has, since the origination of the loan, 

held the loan on the balance sheet of the creditor; and 

(ii) all prepayment penalties with respect to the loan 

comply with the limitations described under subsection 

(c)(3). 

(B) EXCEPTION FOR CERTAIN TRANSFERS.—In the case of 

a depository institution that transfers a loan originated by 

that institution to another depository institution by reason 

of the bankruptcy or failure of the originating depository 

institution or the purchase of the originating depository institution, the depository institution transferring such loan 

shall be deemed to have complied with the requirement 

under subparagraph (A)(i). 

(2) SAFE HARBOR FOR MORTGAGE ORIGINATORS.—A mortgage 

originator shall not be subject to suit for a violation of section 

129B(c)(3)(B) for steering a consumer to a residential mortgage 

loan if— 

(A) the creditor of such loan is a depository institution 

and has informed the mortgage originator that the creditor 

intends to hold the loan on the balance sheet of the creditor 

for the life of the loan; and 

(B) the mortgage originator informs the consumer that 

the creditor intends to hold the loan on the balance sheet 

of the creditor for the life of the loan. 

(3) DEFINITIONS.—For purposes of this subsection: 

(A) BANKING REGULATORS.—The term ‘‘banking regulators’’ means the Federal banking agencies, the Bureau, 

and the National Credit Union Administration. 

(B) DEPOSITORY INSTITUTION.—The term ‘‘depository institution’’ has the meaning given that term under section 

19(b)(1) of the Federal Reserve Act (12 U.S.C. 505(b)(1)). 

(C) FEDERAL BANKING AGENCIES.—The term ‘‘Federal 

banking agencies’’ has the meaning given that term under 

section 3 of the Federal Deposit Insurance Act. 

* * * * * * * 


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MINORITY VIEWS 

In the run up to the financial crisis, underwriting standards for 

mortgages were all but abandoned by lenders of many stripes— 

leading to the failure of large lenders from CountryWide, Washington Mutual, and Wachovia, to hundreds of community banks 

and even to insurers such as AIG and AMBAC. When the economy 

was on the brink of collapse, the financial industry was bailed 

out—yet more than 11 million individuals were displaced from 

their homes as foreclosures swept the nation. 

Many Dodd-Frank reforms ensure that the financial industry will 

never again be allowed to take the kinds of risks that drove us to 

national crisis, but the Consumer Financial Protection Bureau 

(CFPB) and its Ability to Repay and Anti-Steering rules are designed specifically to protect families from financial crisis. 

Under the old system, predatory lenders were willing to make 

loans on terms a family could not afford because even if they 

couldn’t repay, the mortgage was secured by the value of the house, 

and lenders could still pad profits with hefty upfront fees. Worse, 

some lenders would pay their brokers incentives to steer families 

into more expensive loans, even when the family qualified for lower 

rates and a standard mortage product. As dangerous as this was 

for a family looking to purchase a home, it was even worse for a 

family who needed to borrow money against a home in which they 

had spent years building equity. In the end, predatory mortgage 

terms sapped the life savings of many families who used refinancing to pay for unexpected medical bills or the costs associated 

with extended employment. 

The Dodd-Frank Act instructed the CFPB to fix the mortgage 

market for families by requiring that mortgage products meet an 

Ability to Repay standard, and that lenders no longer steer families 

into exotic products in exchange for salary bonuses. Rather than 

relying on increasing home values instead of sound underwriting, 

or giving out mortgages that push families past their financial limits through high-fees and exotic terms, lenders must verify financial products are safe for families by limiting up-front fees, 

verifying incomes, and eliminating risky 2/28s, Alt-As and negatively amortizing products. 

H.R. 1210 would eliminate all of these important reforms, allowing banks of all sizes—from small lenders to the largest global 

banks—to steer families into the same risky mortgage products, 

using the same predatory practices that destroyed billions of dollars of savings and investments of hardworking Americans during 

the financial crisis. The families who were ensnared in subprime 

loans from still-existing portfolio lenders who were sued for lending 

practices during the crisis can attest that keeping a loan on portfolio may be sufficient protection for a bank, but it will not keep 

a borrower from ruin. 


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21 

Democrats will continue to work with our colleagues to provide 

targeted reforms for community banks. In Committee, the minority 

offered as an alternative to H.R. 1210 legislation that would provide targeted relief to community banks and credit unions, with appropriate guardrails to ensure continued consumer protection (the 

alternative is identical to section 101 in H.R. 2642, regulatory relief 

legislation supported by all Democrats on the Financial Services 

Committee and Senate Banking Committee). That amendment was 

rejected on a party-line vote. 

H.R. 1210 effectively repeals foundational consumer protections 

for mortgages, putting our constituents at risk. For these reasons, 

the Minority opposes H.R. 1210. 

MAXINE WATERS. 

GWEN MOORE. 

CAROLYN B. MALONEY. 

JOYCE BEATTY. 

GREGORY W. MEEKS. 

WM. LACY CLAY. 

Æ 


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