I

104TH CONGRESS

1ST SESSION H. R. 1313

To establish community support requirements for mortgage banks, and for

other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 23, 1995

Ms. WATERS introduced the following bill; which was referred to the

Committee on Banking and Financial Services

A BILL

To establish community support requirements for mortgage

banks, and for other purposes.

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

3 SECTION 1. SHORT TITLE.

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

5 Act’’.

6 SEC. 2. COMMUNITY SUPPORT OBLIGATIONS OF MORT7 GAGE BANKS.

8 (a) IN GENERAL.—Each mortgage bank shall have

9 an ongoing responsibility to meet the credit needs of all

10 the communities in which such bank makes a significant
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1 number of extensions of credit or extends a significant

2 amount of credit, including extensions of credit in low- and

3 moderate-income neighborhoods of such communities.

4 (b) DEFINITIONS.—For purposes of this Act, the fol5 lowing definitions shall apply:

6 (1) MORTGAGE BANK.—The term ‘‘mortgage

7 bank’’ means any lender who does not accept depos8 its and originates housing related loans.

9 (2) OFFICE.—The term ‘‘Office’’ means the Of10 fice of Mortgage Bank and Insurance Supervision

11 established by the Secretary of Housing and Urban

12 Development pursuant to section 3.

13 (3) SECRETARY.—The term ‘‘Secretary’’ means

14 the Secretary of Housing and Urban Development.

15 SEC. 3. ESTABLISHMENT OF OFFICE OF MORTGAGE BANK

16 AND INSURANCE SUPERVISION.

17 The Secretary of Housing and Urban Development

18 shall establish within the Department of Housing and

19 Urban Development an office to be known as the Office

20 of Mortgage Bank and Insurance Supervision to evaluate

21 the community support performance of mortgage banks

22 and mortgage insurance companies.
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1 SEC. 4. MORTGAGE BANK COMMUNITY SUPPORT STATE2 MENTS.

3 (a) IN GENERAL.—The Office shall, on a biennial

4 basis, require each mortgage bank to submit to the Office

5 a community support statement, detailing the efforts of

6 such bank at meeting the housing credit needs of each

7 community in which the bank makes a significant number

8 of extensions of credit or extends a significant amount of

9 credit, including extensions of credit in low- and moderate10 income neighborhoods of such communities.

11 (b) CONTENTS.—The statement submitted by each

12 mortgage bank under subsection (a) shall include—

13 (1) the data required to be maintained and dis14 closed by the lender under the Home Mortgage Dis15 closure Act of 1975 for the previous 2 years, in a

16 format which the Office shall establish;

17 (2) underwriting criteria employed by the bank

18 for all of the bank’s housing loan products;

19 (3) descriptions of any activity the bank has

20 undertaken over the period under review to ascertain

21 and meet identified credit needs in low- and mod22 erate-income neighborhoods within communities in

23 which the bank makes a significant number of exten24 sions of credit or extends a significant amount of

25 credit, including any partnerships formed with com26 munity-based organizations, nonprofit developers of
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1 affordable housing, or agencies of State or local

2 government;

3 (4) details of any findings of technical or sub4 stantive violations of the Equal Credit Opportunity

5 Act or the Fair Housing Act, and any settlements

6 or judgments arising from any such findings; and

7 (5) any other information the Office may

8 require.

9 SEC. 5. MORTGAGE BANK COMMUNITY SUPPORT EVALUA10 TION.

11 The Office shall determine whether a mortgage bank

12 is maintaining an adequate community support perform13 ance, based on—

14 (1) community support performance statements

15 received from mortgage banks;

16 (2) an analysis of the data required to be main17 tained and disclosed by the lender under the Home

18 Mortgage Disclosure Act of 1975 for the previous 2

19 years with respect to metropolitan statistical areas

20 in which the bank originates a significant number of

21 home loans, which shall emphasize—

22 (A) the institution’s market share in neigh23 borhoods of different racial and income charac24 teristics;
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1 (B) the number of applications received

2 from minorities and low- and moderate-income

3 persons; and

4 (C) the rate at which the institutions re5 jects applications from minority and white ap6 plicants;

7 (3) any evidence of illegal discriminatory credit

8 practices, including prescreening, or offering less fa9 vorable loan products to applicants of different ra10 cial backgrounds; and

11 (4) public comment, which shall be received by

12 the agency for not less than 90 days after the Office

13 actively solicits comment solicitations of comment

14 through notice in the Federal Register and regular

15 communications with community based organiza16 tions.

17 SEC. 6. PENALTIES FOR FINDING OF INADEQUATE COMMU18 NITY SUPPORT PERFORMANCE BY MORT19 GAGE BANKS.

20 (a) REMEDIAL ACTION.—If the Secretary finds that

21 a mortgage bank is maintaining an inadequate level of

22 community support, the Secretary may issue an order—

23 (1) requiring the bank to file a community sup24 port action plan with the Office not more than 90

25 days after the finding, which shall include concrete
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1 goals and timetables for correcting identified defi2 ciencies; and

3 (2) prohibiting the bank from using any pro4 gram or product administered by the Secretary until

5 all identified deficiencies are met.

6 (b) CEASE AND DESIST ORDERS.—

7 (1) ISSUANCE OF ORDER.—

8 (A) IN GENERAL.—If the Secretary deter9 mines that there is reasonable cause to believe

10 that a mortgage bank is violating, has violated,

11 or is about to violate an order under subsection

12 (a) or a community support action plan filed

13 pursuant to such an order, the Secretary may

14 issue an order requiring the mortgage bank

15 to—

16 (i) cease and desist from any such vio17 lation; and

18 (ii) take such affirmative action to

19 prevent the occurrence or the continuance

20 of such violation as the Secretary deter21 mines to be appropriate.

22 (B) NOTICE OF CHARGES.—An order is23 sued under this paragraph shall include a notice

24 of the charges on which the order is based and
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1 a statement of the facts constituting the alleged

2 violation.

3 (C) EFFECTIVE PERIOD.—An order issued

4 under this paragraph shall—

5 (i) become effective upon service to

6 the mortgagee; and

7 (ii) remain effective and enforceable

8 pursuant to the terms of the order unless

9 modified or rescinded by the Secretary or

10 pursuant to an order of a court under

11 paragraph (3) or in connection with the

12 court’s review of any administrative pro13 ceedings with respect to the order issued

14 under this subsection.

15 (2) HEARING.—Any mortgage bank which re16 ceives an order under paragraph (1) shall be af17 forded an opportunity for a hearing on the record by

18 the Secretary as soon as practicable but not later

19 than 20 days after the order has been served.

20 (3) JUDICIAL HEARING.—Within 10 days after

21 a mortgage bank has been served with a cease-and22 desist order under this subsection, the bank may

23 apply to the United States district court for the ju24 dicial district in which the home office of the bank

25 is located, or the United States District Court for
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1 the District of Columbia, for an injunction setting

2 aside, limiting, or suspending the enforcement, oper3 ation, or effectiveness of such order pending the

4 completion of the administrative proceedings pursu5 ant to the notice of charges served upon the bank,

6 and such court shall have jurisdiction to issue such

7 injunction.

8 (4) JUDICIAL ENFORCEMENT.—The Secretary

9 may apply to the United States district court, or the

10 United States court of any territory, within the ju11 risdiction of which the home office of the mortgagee

12 is located, for an injunction to enforce any effective

13 and outstanding order issued under this subsection

14 and, if the court determines that there has been a

15 violation or threatened violation of such order, the

16 court shall issue such injunction.

17 (c) CIVIL MONEY PENALTY.—

18 (1) IMPOSITION OF PENALTY.—

19 (A) IN GENERAL.—The Secretary may im20 pose a civil money penalty on any mortgage

21 bank, and any director, officer or employee of

22 a mortgage bank, who violates any order issued

23 under subsection (a) or (b).
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1 (B) AMOUNT OF PENALTY.—The amount

2 of the penalty, as determined by the Secretary,

3 may not exceed—

4 (i) in the case of a violation of an

5 order issued under subsection (a), $10,000

6 for each month during which such violation

7 occurs; and

8 (ii) in the case of a violation of an

9 order issued under subsection (b), $10,000

10 for each day during which such violation

11 continues.

12 (C) NOTIFICATION TO ATTORNEY GEN13 ERAL.—Before taking action to impose a civil

14 money penalty for a violation under subpara15 graph (A), the Secretary shall inform the Attor16 ney General of the United States.

17 (2) ASSESSMENT.—

18 (A) WRITTEN NOTICE.—Any penalty im19 posed under paragraph (1) may be assessed and

20 collected by the Secretary by written notice.

21 (B) FINALITY OF ASSESSMENT.—If, with

22 respect to any assessment under subparagraph

23 (A), a hearing is not requested pursuant to

24 paragraph (5) within the period of time allowed
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1 under such paragraph, the assessment shall

2 constitute a final and unappealable order.

3 (3) AUTHORITY TO MODIFY OR REMIT PEN4 ALTY.—The Secretary may compromise, modify, or

5 remit any penalty which the Secretary may assess or

6 already has assessed under paragraph (1).

7 (4) MITIGATING FACTORS.—In determining the

8 amount of a penalty under paragraph (1) with re9 spect to any person, the Secretary shall take into ac10 count the appropriateness of the penalty with re11 spect to—

12 (A) the gravity of the offense;

13 (B) any history of previous violations by

14 the person;

15 (C) the ability of the person to pay the

16 penalty;

17 (D) injury to the public;

18 (E) benefits received by the person as a re19 sult of the violation;

20 (F) the deterrent effect of the penalty on

21 future violations by such person and other per22 sons; and

23 (G) such other factors as the Secretary

24 may determine in regulations to be appropriate.
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1 (5) HEARING.—The person against whom a

2 civil money penalty is assessed under paragraph (1)

3 shall be afforded an opportunity for a hearing on the

4 record, if such person submits a request for such

5 hearing within 20 days after the issuance of the no6 tice of the assessment.

7 (6) COLLECTION.—

8 (A) REFERRAL.—If any person fails to pay

9 an assessment after any penalty assessed under

10 this subsection has become final, the Secretary

11 shall notify the Attorney General who shall re12 cover the amount assessed in the appropriate

13 United States district court.

14 (B) APPROPRIATENESS OF PENALTY NOT

15 REVIEWABLE.—In any civil action under sub16 paragraph (A), the validity and appropriateness

17 of the penalty shall not be subject to review.

18 (7) DISBURSEMENT.—All penalties collected

19 pursuant to this subsection shall be deposited into

20 the Treasury of the United States.

21 (8) AGENCY PROCEDURES—The Secretary

22 shall, by regulation, establish standards and proce23 dures for carrying out this subsection.
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1 SEC. 7. COMMUNITY SUPPORT REQUIREMENTS FOR MORT2 GAGE INSURANCE COMPANIES.

3 (a) IN GENERAL.—Each mortgage insurance com4 pany shall—

5 (1) report to the Office the number and total

6 dollar amount of each mortgage insurance policy

7 written by the company, by census tract, the race,

8 gender, and income of applicants for mortgage in9 surance, and the disposition of each application for

10 mortgage insurance;

11 (2) demonstrate to the Secretary adequate sup12 port for community credit needs; and

13 (3) make public to any person the underwriting

14 criteria for any mortgage insurance the company

15 offers.

16 (b) 2-YEAR REPORTING REQUIREMENT.—At least

17 once during each 2-year period beginning after the date

18 of enactment of this Act, each mortgage insurance com19 pany shall submit a report to the Office containing the

20 following information:

21 (1) ADEQUACY OF AVAILABILITY OF MORTGAGE

22 INSURANCE.—The extent to which adequate mort23 gage insurance is available in low- and moderate-in24 come and minority neighborhoods within areas in

25 which the company writes a significant number of

26 mortgage insurance policies.
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1 (2) UNDERWRITING GUIDELINES.—The extent

2 to which underwriting guidelines used by the com3 pany do not unreasonably restrict access to low- and

4 moderate-income families within areas in which the

5 company writes a significant number of mortgage in6 surance policies.

7 (c) DUTIES OF THE OFFICE.—The Office shall con8 duct biennial community support reviews of mortgage in9 surance companies including analysis of the following:

10 (1) The data collected by the Agency on the

11 distribution of the mortgage insurance company’s

12 policies by census tract and data on the disparate

13 treatment of applicants for mortgage insurance

14 based on the applicants’ race, gender, and income.

15 (2) The underwriting criteria employed by the

16 company and the extent to which such criteria do

17 not unreasonably restrict access to credit for low18 and moderate-income and minority persons or neigh19 borhoods.

20 (3) Community support statements received

21 from the mortgage insurance company.

22 (4) Any other information the Secretary may

23 require mortgage insurance companies to submit.

24 (5) Any comments received from the public on

25 the community support performance of the mortgage
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1 insurance company during the period covered by the

2 review under this paragraph.

3 (d) DUTIES OF THE SECRETARY.—The Secretary

4 shall—

5 (1) solicit and accept public comment for no

6 fewer than 90 days before issuing a finding in con7 nection with the review of a mortgage insurance

8 company under subsection (c)(2); and

9 (2) review the community support performance

10 of each mortgage insurance company and determine

11 whether the company is providing an adequate level

12 of community support in the areas in which such

13 company writes a significant number of mortgage in14 surance policies.

15 (e) PERFORMANCE STATEMENT.—If, after reviewing

16 any evidence, the Secretary concludes that a mortgage in17 surance company is not meeting the requirements of this

18 section, the Secretary may require such company to sub19 mit a statement indicating how the company expects to

20 improve its record of providing community support.

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