I

104TH CONGRESS

2D SESSION H. R. 3556

To amend the Truth in Lending Act to require notice of cancellation rights

with respect to private mortgage insurance which is required by a creditor

as a condition for entering into a residential mortgage transaction, and

for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MAY 30, 1996

Mr. HANSEN introduced the following bill; which was referred to the

Committee on Banking and Financial Services

A BILL

To amend the Truth in Lending Act to require notice of

cancellation rights with respect to private mortgage insurance which is required by a creditor as a condition

for entering into a residential mortgage transaction, 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 ‘‘Private Mortgage In5 surance Consumer Protection Act’’.
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1 SEC. 2. NOTIFICATION OF CANCELLATION RIGHTS FOR PRI2 VATE MORTGAGE INSURANCE.

3 (a) IN GENERAL.—Chapter 2 of the Truth in Lend4 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting

5 after section 125 the following new section:

6 ‘‘SEC. 126. NOTIFICATION OF CANCELLATION RIGHTS FOR

7 PRIVATE MORTGAGE INSURANCE.

8 ‘‘(a) NOTICE OF RIGHT OR LACK OF RIGHT TO CAN9 CEL.—If a consumer is required to obtain and maintain

10 private mortgage insurance as a condition for entering

11 into a residential mortgage transaction, the creditor shall

12 disclose, in writing at the time the transaction is entered

13 into, whether or not the private mortgage insurance may

14 be canceled by the consumer at any time while the mort15 gage is outstanding.

16 ‘‘(b) INFORMATION REQUIRED TO BE DISCLOSED IF

17 INSURANCE IS CANCELABLE.—If private mortgage insur18 ance is required for a residential mortgage transaction and

19 may be canceled by the consumer at any time while the

20 mortgage is outstanding, the creditor shall disclose in

21 writing the following information at the time the trans22 action is entered into:

23 ‘‘(1) IDENTIFYING INFORMATION.—Such infor24 mation as may be necessary to permit the consumer

25 to communicate with the creditor, any subsequent
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1 servicer of the mortgage, or the issuer of the private

2 mortgage insurance concerning the insurance.

3 ‘‘(2) CONDITIONS ON CANCELLATION.—Any

4 condition required to be met before the private mort5 gage insurance may be canceled by the consumer, in6 cluding the following:

7 ‘‘(A) If a condition for canceling the pri8 vate mortgage insurance is based on a mini9 mum ratio between the principal on the loan re10 maining outstanding and either the original or

11 the current value of the property securing the

12 loan, such ratio.

13 ‘‘(B) Information relating to any require14 ment for an appraisal of the property as a con15 dition for the cancellation of the insurance.

16 ‘‘(C) Information relating to the time re17 quired for canceling the insurance.

18 ‘‘(3) CANCELLATION PROCEDURES.—The proce19 dures required to be followed by the consumer in

20 canceling the private mortgage insurance.

21 ‘‘(c) INFORMATION REQUIRED TO BE DISCLOSED

22 WITH EACH PERIODIC STATEMENT.—If a consumer is re23 quired to obtain and maintain private mortgage insurance

24 as a condition for entering into a residential mortgage

25 transaction, the person servicing the mortgage shall in-
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1 clude in or with each written statement of account pro2 vided to the consumer after December 31, 1995, while

3 such insurance is in effect, but not less than annually—

4 ‘‘(1) the information required to be disclosed

5 under subsection (b); or

6 ‘‘(2) a clear and conspicuous written statement

7 containing—

8 ‘‘(A) a statement that the consumer may

9 be able to cancel the private mortgage insur10 ance (if such is the case); and

11 ‘‘(B) an address and telephone number

12 which the consumer may use to contact the

13 creditor or the person servicing the mortgage to

14 determine whether the consumer has the right

15 to cancel the private mortgage insurance and, if

16 so, the conditions and procedures for canceling

17 such insurance.

18 ‘‘(d) NOTICES FURNISHED WITHOUT COST TO THE

19 CONSUMER.—No fee or other cost may be imposed on any

20 consumer with respect to the provision of any notice or

21 information to the consumer pursuant to this section.

22 ‘‘(e) DEFINITIONS.—For purposes of this section, the

23 following definitions shall apply:

24 ‘‘(1) MORTGAGE INSURANCE.—The term ‘mort25 gage insurance’ means insurance, including any
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1 mortgage guaranty insurance, against the nonpay2 ment of, or default on, a mortgage or loan involved

3 in a residential mortgage transaction.

4 ‘‘(2) PRIVATE MORTGAGE INSURANCE.—The

5 term ‘private mortgage insurance’ means mortgage

6 insurance other than mortgage insurance made

7 available under the National Housing Act, title 38 of

8 the United States Code, or title V of the National

9 Housing Act of 1949.’’.

10 (b) AMENDMENT RELATING TO LIABILITY FOR VIO11 LATIONS.—Section 130(a) of the Truth in Lending Act

12 (15 U.S.C. 1640(a)) is amended by adding at the end the

13 following new sentence: ‘‘In the case of any failure make

14 any disclosure required under section 126, paragraph (1)

15 shall be applied by substituting ‘3 times the amount of

16 any actual damage’ for ‘any actual damage’.

17 (c) SCOPE OF APPLICABILITY.—The amendments

18 made by subsections (a) and (b) shall apply with respect

19 to residential mortgage transactions entered into after the

20 date of the enactment of this Act.

21 (d) CLERICAL AMENDMENT.—The table of sections

22 for chapter 2 of the Truth in Lending Act (15 U.S.C.

23 1631 et seq.) is amended by striking the item relating to

24 section 126 and inserting the following new item:

‘‘126. Notification of cancellation rights for private mortgage insurance.’’.

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