IB 

Union Calendar No. 42 

111TH CONGRESS 

1ST SESSION H. R. 1728 

[Report No. 111–94] 

To amend the Truth in Lending Act to reform consumer mortgage practices 

and provide accountability for such practices, to provide certain minimum 

standards for consumer mortgage loans, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 26, 2009 

Mr. MILLER of North Carolina (for himself, Mr. WATT, Mr. FRANK of Massachusetts, Mr. KANJORSKI, Mr. GUTIERREZ, Ms. BEAN, and Mr. 

MINNICK) introduced the following bill; which was referred to the Committee on Financial Services 

MAY 4, 2009 

Additional sponsors: Ms. SUTTON, Mr. MEEK of Florida, Mr. BACA, Mr. 

MEEKS of New York, and Ms. JACKSON-LEE of Texas 

MAY 4, 2009 

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on March 26, 2009] 

A BILL 

To amend the Truth in Lending Act to reform consumer 

mortgage practices and provide accountability for such 

practices, to provide certain minimum standards for consumer mortgage loans, and for other purposes. 


bajohnson on PROD1PC77 with BILLS
2 

•HR 1728 RH

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; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Mortgage Reform and Anti-Predatory Lending Act’’. 

6 (b) TABLE OF CONTENTS.—The table of contents for 

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—RESIDENTIAL MORTGAGE LOAN ORIGINATION STANDARDS 

Sec. 101. Definitions. 

Sec. 102. Residential mortgage loan origination. 

Sec. 103. Prohibition on steering incentives. 

Sec. 104. Liability. 

Sec. 105. Regulations. 

Sec. 106. RESPA and TILA disclosure improvement. 

TITLE II—MINIMUM STANDARDS FOR MORTGAGES 

Sec. 201. Ability to repay. 

Sec. 202. Net tangible benefit for refinancing of residential mortgage loans. 

Sec. 203. Safe harbor and rebuttable presumption. 

Sec. 204. Liability. 

Sec. 205. Defense to foreclosure. 

Sec. 206. Additional standards and requirements. 

Sec. 207. Rule of construction. 

Sec. 208. Effect on State laws. 

Sec. 209. Regulations. 

Sec. 210. Amendments to civil liability provisions. 

Sec. 211. Lender rights in the context of borrower deception. 

Sec. 212. Six-month notice required before reset of hybrid adjustable rate mortgages. 

Sec. 213. Credit risk retention. 

Sec. 214. Required disclosures. 

Sec. 215. Disclosures required in monthly statements for residential mortgage 

loans. 

Sec. 216. Legal assistance for foreclosure-related issues. 

Sec. 217. Effective date. 

Sec. 218. Report by the GAO. 

Sec. 219. State Attorney General enforcement authority. 

Sec. 220. Tenant protection. 

TITLE III—HIGH-COST MORTGAGES 

Sec. 301. Definitions relating to high-cost mortgages. 

Sec. 302. Amendments to existing requirements for certain mortgages. 

Sec. 303. Additional requirements for certain mortgages. 


bajohnson on PROD1PC77 with BILLS
3 

•HR 1728 RH

Sec. 304. Regulations. 

Sec. 305. Effective date. 

TITLE IV—OFFICE OF HOUSING COUNSELING 

Sec. 401. Short title. 

Sec. 402. Establishment of Office of Housing Counseling. 

Sec. 403. Counseling procedures. 

Sec. 404. Grants for housing counseling assistance. 

Sec. 405. Requirements to use HUD-certified counselors under HUD programs. 

Sec. 406. Study of defaults and foreclosures. 

Sec. 407. Definitions for counseling-related programs. 

Sec. 408. Updating and simplification of mortgage information booklet. 

Sec. 409. Home inspection counseling. 

TITLE V—MORTGAGE SERVICING 

Sec. 501. Escrow and impound accounts relating to certain consumer credit 

transactions. 

Sec. 502. Disclosure notice required for consumers who waive escrow services. 

Sec. 503. Real Estate Settlement Procedures Act of 1974 amendments. 

Sec. 504. Truth in Lending Act amendments. 

Sec. 505. Escrows included in repayment analysis. 

TITLE VI—APPRAISAL ACTIVITIES 

Sec. 601. Property appraisal requirements. 

Sec. 602. Unfair and deceptive practices and acts relating to certain consumer 

credit transactions. 

Sec. 603. Amendments relating to appraisal subcommittee of FIEC, appraiser 

independence, and approved appraiser education. 

Sec. 604. Study required on improvements in appraisal process and compliance 

programs. 

Sec. 605. Equal Credit Opportunity Act amendment. 

Sec. 606. Real Estate Settlement Procedures Act of 1974 amendment relating to 

certain appraisal fees. 

TITLE VII—SENSE OF CONGRESS REGARDING THE IMPORTANCE OF 

GOVERNMENT SPONSORED ENTERPRISES REFORM 

Sec. 701. Sense of Congress regarding the importance of Government-sponsored 

enterprises reform to enhance the protection, limitation, and regulation of the terms of residential mortgage credit. 


bajohnson on PROD1PC77 with BILLS
4 

•HR 1728 RH

1 TITLE I—RESIDENTIAL MORT2 GAGE LOAN ORIGINATION 

3 STANDARDS 

4 SEC. 101. DEFINITIONS. 

5 Section 103 of the Truth in Lending Act (15 U.S.C. 

6 1602) is amended by adding at the end the following new 

7 subsection: 

8 ‘‘(cc) DEFINITIONS RELATING TO MORTGAGE ORIGINA9 TION AND RESIDENTIAL MORTGAGE LOANS.— 

10 ‘‘(1) COMMISSION.—Unless otherwise specified, 

11 the term ‘Commission’ means the Federal Trade Com12 mission. 

13 ‘‘(2) FEDERAL BANKING AGENCIES.—The term 

14 ‘Federal banking agencies’ means the Board of Gov15 ernors of the Federal Reserve System, the Comptroller 

16 of the Currency, the Director of the Office of Thrift 

17 Supervision, the Federal Deposit Insurance Corpora18 tion, and the National Credit Union Administration 

19 Board. 

20 ‘‘(3) MORTGAGE ORIGINATOR.—The term ‘mort21 gage originator’— 

22 ‘‘(A) means any person who, for direct or 

23 indirect compensation or gain, or in the expecta24 tion of direct or indirect compensation or gain— 


bajohnson on PROD1PC77 with BILLS
5 

•HR 1728 RH

1 ‘‘(i) takes a residential mortgage loan 

2 application; 

3 ‘‘(ii) assists a consumer in obtaining 

4 or applying to obtain a residential mort5 gage loan; or 

6 ‘‘(iii) offers or negotiates terms of a 

7 residential mortgage loan; 

8 ‘‘(B) includes any person who represents to 

9 the public, through advertising or other means of 

10 communicating or providing information (in11 cluding the use of business cards, stationery, bro12 chures, signs, rate lists, or other promotional 

13 items), that such person can or will provide any 

14 of the services or perform any of the activities 

15 described in subparagraph (A); 

16 ‘‘(C) does not include any person who is (i) 

17 not otherwise described in subparagraph (A) or 

18 (B) and who performs purely administrative or 

19 clerical tasks on behalf of a person who is de20 scribed in any such subparagraph, or (ii) an em21 ployee of a retailer of manufactured homes who 

22 is not described in clause (i) or (iii) of subpara23 graph (A); 

24 ‘‘(D) does not include a person or entity 

25 that only performs real estate brokerage activities 


bajohnson on PROD1PC77 with BILLS
6 

•HR 1728 RH

1 and is licensed or registered in accordance with 

2 applicable State law, unless such person or enti3 ty is compensated for performing such brokerage 

4 activities by a lender, a mortgage broker, or 

5 other mortgage originator or by any agent of 

6 such lender, mortgage broker, or other mortgage 

7 originator; and 

8 ‘‘(E) does not include, with respect to a res9 idential mortgage loan, a person, estate, or trust 

10 that provides mortgage financing for the sale of 

11 1 property in any 36-month period, provided 

12 that such loan— 

13 ‘‘(i) is fully amortizing; 

14 ‘‘(ii) is with respect to a sale for which 

15 the seller determines in good faith and docu16 ments that the buyer has a reasonable abil17 ity to repay the loan; 

18 ‘‘(iii) has a fixed rate or an adjustable 

19 rate that is adjustable after 5 or more years, 

20 subject to reasonable annual and lifetime 

21 limitations on interest rate increases; and 

22 ‘‘(iv) meets any other criteria the Fed23 eral banking agencies may prescribe. 

24 ‘‘(4) NATIONWIDE MORTGAGE LICENSING SYSTEM

25 AND REGISTRY.—The term ‘Nationwide Mortgage LiVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
7 

•HR 1728 RH

1 censing System and Registry’ has the same meaning 

2 as in the Secure and Fair Enforcement for Mortgage 

3 Licensing Act of 2008. 

4 ‘‘(5) OTHER DEFINITIONS RELATING TO MORT5 GAGE ORIGINATOR.—For purposes of this subsection, 

6 a person ‘assists a consumer in obtaining or applying 

7 to obtain a residential mortgage loan’ by, among 

8 other things, advising on residential mortgage loan 

9 terms (including rates, fees, and other costs), pre10 paring residential mortgage loan packages, or col11 lecting information on behalf of the consumer with re12 gard to a residential mortgage loan. 

13 ‘‘(6) RESIDENTIAL MORTGAGE LOAN.—The term 

14 ‘residential mortgage loan’ means any consumer cred15 it transaction that is secured by a mortgage, deed of 

16 trust, or other equivalent consensual security interest 

17 on a dwelling or on residential real property that in18 cludes a dwelling, other than a consumer credit trans19 action under an open end credit plan or a reverse 

20 mortgage or, for purposes of sections 129B and 129C 

21 and section 128(a) (16), (17), and (18), 128(a)(f) and 

22 128(b)(4) and any regulations promulgated there23 under, an extension of credit relating to a plan de24 scribed in section 101(53D) of title 11, United States 

25 Code. 


bajohnson on PROD1PC77 with BILLS
8 

•HR 1728 RH

1 ‘‘(7) SECRETARY.—The term ‘Secretary’, when 

2 used in connection with any transaction or person in3 volved with a residential mortgage loan, means the 

4 Secretary of Housing and Urban Development. 

5 ‘‘(8) SECURITIZATION VEHICLE.—The term 

6 ‘securitization vehicle’ means a trust, corporation, 

7 partnership, limited liability entity, special purpose 

8 entity, or other structure that— 

9 ‘‘(A) is the issuer, or is created by the 

10 issuer, of mortgage pass-through certificates, par11 ticipation certificates, mortgage-backed securi12 ties, or other similar securities backed by a pool 

13 of assets that includes residential mortgage loans; 

14 and 

15 ‘‘(B) holds such loans. 

16 ‘‘(9) SECURITIZER.—The term ‘securitizer’ 

17 means the person that transfers, conveys, or assigns, 

18 or causes the transfer, conveyance, or assignment of, 

19 residential mortgage loans, including through a spe20 cial purpose vehicle, to any securitization vehicle, ex21 cluding any trustee that holds such loans solely for 

22 the benefit of the securitization vehicle. 

23 ‘‘(10) SERVICER.—The term ‘servicer’ has the 

24 same meaning as in section 6(i)(2) of the Real Estate 

25 Settlement Procedures Act of 1974.’’. 


bajohnson on PROD1PC77 with BILLS
9 

•HR 1728 RH

1 SEC. 102. RESIDENTIAL MORTGAGE LOAN ORIGINATION. 

2 (a) IN GENERAL.—Chapter 2 of the Truth in Lending 

3 Act (15 U.S.C. 1631 et seq.) is amended by inserting after 

4 section 129A the following new section: 

5 ‘‘§ 129B. Residential mortgage loan origination 

6 ‘‘(a) FINDING AND PURPOSE.— 

7 ‘‘(1) FINDING.—The Congress finds that eco8 nomic stabilization would be enhanced by the protec9 tion, limitation, and regulation of the terms of resi10 dential mortgage credit and the practices related to 

11 such credit, while ensuring that responsible, affordable 

12 mortgage credit remains available to consumers. 

13 ‘‘(2) PURPOSE.—It is the purpose of this section 

14 and section 129C to assure that consumers are offered 

15 and receive residential mortgage loans on terms that 

16 reasonably reflect their ability to repay the loans and 

17 that are understandable and not unfair, deceptive or 

18 abusive. 

19 ‘‘(b) DUTY OF CARE.— 

20 ‘‘(1) STANDARD.—Subject to regulations pre21 scribed under this subsection, each mortgage origi22 nator shall, in addition to the duties imposed by oth23 erwise applicable provisions of State or Federal 

24 law— 

25 ‘‘(A) be qualified and, when required, reg26 istered and licensed as a mortgage originator in 


bajohnson on PROD1PC77 with BILLS
10 

•HR 1728 RH

1 accordance with applicable State or Federal law, 

2 including the Secure and Fair Enforcement for 

3 Mortgage Licensing Act of 2008; 

4 ‘‘(B) with respect to each consumer seeking 

5 or inquiring about a residential mortgage loan, 

6 diligently work to present the consumer with a 

7 range of residential mortgage loan products for 

8 which the consumer likely qualifies and which 

9 are appropriate to the consumer’s existing cir10 cumstances, based on information known by, or 

11 obtained in good faith by, the originator; 

12 ‘‘(C) make full, complete, and timely disclo13 sure to each such consumer of— 

14 ‘‘(i) the comparative costs and benefits 

15 of each residential mortgage loan product 

16 offered, discussed, or referred to by the origi17 nator; 

18 ‘‘(ii) the nature of the originator’s rela19 tionship to the consumer (including the cost 

20 of the services to be provided by the origi21 nator and a statement that the mortgage 

22 originator is or is not acting as an agent 

23 for the consumer, as the case may be); and 

24 ‘‘(iii) any relevant conflicts of interest 

25 between the originator and the consumer; 


bajohnson on PROD1PC77 with BILLS
11 

•HR 1728 RH

1 ‘‘(D) certify to the creditor, with respect to 

2 any transaction involving a residential mortgage 

3 loan, that the mortgage originator has fulfilled 

4 all requirements applicable to the originator 

5 under this section with respect to the trans6 action; and 

7 ‘‘(E) include on all loan documents any 

8 unique identifier of the mortgage originator pro9 vided by the Nationwide Mortgage Licensing 

10 System and Registry. 

11 ‘‘(2) CLARIFICATION OF EXTENT OF DUTY TO

12 PRESENT RANGE OF PRODUCTS AND APPROPRIATE

13 PRODUCTS.— 

14 ‘‘(A) NO DUTY TO OFFER PRODUCTS FOR

15 WHICH ORIGINATOR IS NOT AUTHORIZED TO

16 TAKE AN APPLICATION.—Paragraph (1)(B) shall 

17 not be construed as requiring— 

18 ‘‘(i) a mortgage originator to present 

19 to any consumer any specific residential 

20 mortgage loan product that is offered by a 

21 creditor which does not accept consumer re22 ferrals from, or consumer applications sub23 mitted by or through, such originator; or 


bajohnson on PROD1PC77 with BILLS
12 

•HR 1728 RH

1 ‘‘(ii) a creditor to offer products that 

2 the creditor does not offer to the general 

3 public. 

4 ‘‘(B) APPROPRIATE LOAN PRODUCT.—For 

5 purposes of paragraph (1)(B), a residential 

6 mortgage loan shall be presumed to be appro7 priate for a consumer if— 

8 ‘‘(i) the mortgage originator deter9 mines in good faith, based on then existing 

10 information and without undergoing a full 

11 underwriting process, that the consumer has 

12 a reasonable ability to repay and, in the 

13 case of a refinancing of an existing residen14 tial mortgage loan, receives a net tangible 

15 benefit, as determined in accordance with 

16 regulations prescribed under subsections (a) 

17 and (b) of section 129C; and 

18 ‘‘(ii) the loan does not have predatory 

19 characteristics or effects (such as equity 

20 stripping and excessive fees and abusive 

21 terms) as determined in accordance with 

22 regulations prescribed under paragraph (4). 

23 ‘‘(3) RULES OF CONSTRUCTION.—No provision of 

24 this subsection shall be construed as— 


bajohnson on PROD1PC77 with BILLS
13 

•HR 1728 RH

1 ‘‘(A) creating an agency or fiduciary rela2 tionship between a mortgage originator and a 

3 consumer if the originator does not hold himself 

4 or herself out as such an agent or fiduciary; or 

5 ‘‘(B) restricting a mortgage originator from 

6 holding himself or herself out as an agent or fi7 duciary of a consumer subject to any additional 

8 duty, requirement, or limitation applicable to 

9 agents or fiduciaries under any Federal or State 

10 law. 

11 ‘‘(4) REGULATIONS.— 

12 ‘‘(A) IN GENERAL.—The Federal banking 

13 agencies, in consultation with the Secretary, the 

14 Chairman of the State Liaison Committee to the 

15 Financial Institutions Examination Council, 

16 and the Commission, shall jointly prescribe regu17 lations to— 

18 ‘‘(i) further define the duty established 

19 under paragraph (1); 

20 ‘‘(ii) implement the requirements of 

21 this subsection; 

22 ‘‘(iii) establish the time period within 

23 which any disclosure required under para24 graph (1) shall be made to the consumer; 

25 and 


bajohnson on PROD1PC77 with BILLS
14 

•HR 1728 RH

1 ‘‘(iv) establish such other requirements 

2 for any mortgage originator as such regu3 latory agencies may determine to be appro4 priate to meet the purposes of this sub5 section. 

6 ‘‘(B) COMPLEMENTARY AND NONDUPLICA7 TIVE DISCLOSURES.—The agencies referred to in 

8 subparagraph (A) shall endeavor to make the re9 quired disclosures to consumers under this sub10 section complementary and nonduplicative with 

11 other disclosures for mortgage consumers to the 

12 extent such efforts— 

13 ‘‘(i) are practicable; and 

14 ‘‘(ii) do not reduce the value of any 

15 such disclosure to recipients of such disclo16 sures. 

17 ‘‘(5) COMPLIANCE PROCEDURES REQUIRED.— 

18 The Federal banking agencies shall prescribe regula19 tions requiring depository institutions to establish 

20 and maintain procedures reasonably designed to as21 sure and monitor the compliance of such depository 

22 institutions, the subsidiaries of such institutions, and 

23 the employees of such institutions or subsidiaries with 

24 the requirements of this section and the registration 

25 procedures established under section 1507 of the SeVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
15 

•HR 1728 RH

1 cure and Fair Enforcement for Mortgage Licensing 

2 Act of 2008.’’. 

3 (b) CLERICAL AMENDMENT.—The table of sections for 

4 chapter 2 of the Truth in Lending Act is amended by insert5 ing after the item relating to section 129 the following new 

6 items: 

‘‘129A. Fiduciary duty of servicers of pooled residential mortgages. 

‘‘129B. Residential mortgage loan origination.’’. 

7 SEC. 103. PROHIBITION ON STEERING INCENTIVES. 

8 Section 129B of the Truth in Lending Act (as added 

9 by section 102(a)) is amended by inserting after subsection 

10 (b) the following new subsection: 

11 ‘‘(c) PROHIBITION ON STEERING INCENTIVES.— 

12 ‘‘(1) IN GENERAL.—For any mortgage loan, the 

13 total amount of direct and indirect compensation 

14 from all sources permitted to a mortgage originator 

15 may not vary based on the terms of the loan (other 

16 than the amount of the principal). 

17 ‘‘(2) REGULATIONS.—The Federal banking agen18 cies, in consultation with the Secretary and the Com19 mission, shall jointly prescribe regulations to pro20 hibit— 

21 ‘‘(A) mortgage originators from steering 

22 any consumer to a residential mortgage loan 

23 that— 


bajohnson on PROD1PC77 with BILLS
16 

•HR 1728 RH

1 ‘‘(i) the consumer lacks a reasonable 

2 ability to repay (in accordance with regula3 tions prescribed under section 129C(a)); 

4 ‘‘(ii) in the case of a refinancing of a 

5 residential mortgage loan, does not provide 

6 the consumer with a net tangible benefit (in 

7 accordance with regulations prescribed 

8 under section 129C(b)); or 

9 ‘‘(iii) has predatory characteristics or 

10 effects (such as equity stripping, excessive 

11 fees, or abusive terms); 

12 ‘‘(B) mortgage originators from steering 

13 any consumer from a residential mortgage loan 

14 for which the consumer is qualified that is a 

15 qualified mortgage (as defined in section 

16 129C(c)(3)) to a residential mortgage loan that 

17 is not a qualified mortgage; 

18 ‘‘(C) abusive or unfair lending practices 

19 that promote disparities among consumers of 

20 equal credit worthiness but of different race, eth21 nicity, gender, or age; and 

22 ‘‘(D) mortgage originators from assessing 

23 excessive points and fees (as such term is de24 scribed under section 103(aa)(4) of the Truth in 

25 Lending Act (15 U.S.C. 1602(aa)(4))) to a conVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
17 

•HR 1728 RH

1 sumer for the origination of a residential mort2 gage loan based on such consumer’s decision to 

3 finance all or part of the payment through the 

4 rate for such points and fees. 

5 ‘‘(3) RULES OF CONSTRUCTION.—No provision of 

6 this subsection shall be construed as— 

7 ‘‘(A) permitting yield spread premiums or 

8 other similar incentive compensation; 

9 ‘‘(B) affecting the mechanism for providing 

10 the total amount of direct and indirect com11 pensation permitted to a mortgage originator; 

12 ‘‘(C) limiting or affecting the amount of 

13 compensation received by a creditor upon the 

14 sale of a consummated loan to a subsequent pur15 chaser; 

16 ‘‘(D) restricting a consumer’s ability to fi17 nance, including through rate or principal, any 

18 origination fees or costs permitted under this 

19 subsection, or the mortgage originator’s ability to 

20 receive such fees or costs (including compensa21 tion) from any person, so long as such fees or 

22 costs were fully and clearly disclosed to the con23 sumer earlier in the application process as re24 quired by 129B(b)(1)(C)(i) and do not vary 

25 based on the terms of the loan (other than the 


bajohnson on PROD1PC77 with BILLS
18 

•HR 1728 RH

1 amount of the principal) or the consumer’s deci2 sion about whether to finance such fees or costs; 

3 or 

4 ‘‘(E) prohibiting incentive payments to a 

5 mortgage originator based on the number of resi6 dential mortgage loans originated within a spec7 ified period of time.’’. 

8 SEC. 104. LIABILITY. 

9 Section 129B of the Truth in Lending Act is amended 

10 by inserting after subsection (c) (as added by section 103) 

11 the following new subsection: 

12 ‘‘(d) LIABILITY FOR VIOLATIONS.— 

13 ‘‘(1) IN GENERAL.—For purposes of providing a 

14 cause of action for any failure by a mortgage origi15 nator to comply with any requirement imposed under 

16 this section and any regulation prescribed under this 

17 section, subsections (a) and (b) of section 130 shall be 

18 applied with respect to any such failure by sub19 stituting ‘mortgage originator’ for ‘creditor’ each 

20 place such term appears in each such subsection. 

21 ‘‘(2) MAXIMUM.—The maximum amount of any 

22 liability of a mortgage originator under paragraph 

23 (1) to a consumer for any violation of this section 

24 shall not exceed the greater of actual damages or an 

25 amount equal to 3 times the total amount of direct 


bajohnson on PROD1PC77 with BILLS
19 

•HR 1728 RH

1 and indirect compensation or gain accruing to the 

2 mortgage originator in connection with the residen3 tial mortgage loan involved in the violation, plus the 

4 costs to the consumer of the action, including a rea5 sonable attorney’s fee.’’. 

6 SEC. 105. REGULATIONS. 

7 (a) DISCRETIONARY REGULATORY AUTHORITY.—Sec8 tion 129B of the Truth in Lending Act is amended by in9 serting after subsection (d) (as added by section 104) the 

10 following new subsection: 

11 ‘‘(e) DISCRETIONARY REGULATORY AUTHORITY.— 

12 ‘‘(1) IN GENERAL.—The Federal banking agen13 cies shall, by regulations issued jointly, prohibit or 

14 condition terms, acts or practices relating to residen15 tial mortgage loans that the agencies find to be abu16 sive, unfair, deceptive, predatory, inconsistent with 

17 reasonable underwriting standards, necessary or 

18 proper to effectuate the purposes of this section and 

19 section 129C, to prevent circumvention or evasion 

20 thereof, or to facilitate compliance with such sections, 

21 or are not in the interest of the borrower. 

22 ‘‘(2) APPLICATION.—The regulations prescribed 

23 under paragraph (1) shall be applicable to all resi24 dential mortgage loans and shall be applied in the 


bajohnson on PROD1PC77 with BILLS
20 

•HR 1728 RH

1 same manner as regulations prescribed under section 

2 105. 

3 ‘‘(f) Section 129B and any regulations promulgated 

4 thereunder do not apply to an extension of credit relating 

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

6 States Code.’’. 

7 (b) EFFECTIVE DATE.—The regulations required or 

8 authorized to be prescribed under this title or the amend9 ments made by this title— 

10 (1) shall be prescribed in final form before the 

11 end of the 12-month period beginning on the date of 

12 the enactment of this Act; and 

13 (2) shall take effect not later than 18 months 

14 after the date of the enactment of this Act. 

15 (c) TRUTH IN LENDING FINAL RULE.—Notwith16 standing any other provision of this Act, the regulations 

17 adopted by the Board concerning Truth in Lending, 73 Fed. 

18 Reg. 44522 (July 30, 2008), shall take effect as decided by 

19 the Board with such exceptions or revisions as the Board 

20 determines necessary. 

21 (d) TECHNICAL AND CONFORMING AMENDMENTS.— 

22 Section 129(l)(2) of the Truth in Lending Act (15 U.S.C. 

23 1639(l)(2)) is amended by inserting ‘‘referred to in section 

24 103(aa)’’ after ‘‘loans’’ each place such term appears. 


bajohnson on PROD1PC77 with BILLS
21 

•HR 1728 RH

1 SEC. 106. RESPA AND TILA DISCLOSURE IMPROVEMENT. 

2 (a) COMPATIBLE DISCLOSURES.—The Secretary of 

3 Housing and Urban Development and the Board of Gov4 ernors of the Federal Reserve shall, not later than the expi5 ration of the 6-month period beginning upon the date of 

6 the enactment of this Act, jointly issue for public comment 

7 proposed regulations providing for compatible disclosures 

8 for borrowers to receive at the time of mortgage application 

9 and at the time of closing. 

10 (b) REQUIREMENTS.—Such disclosures shall— 

11 (1) provide clear and concise information to bor12 rowers on the terms and costs of residential mortgage 

13 transactions and mortgage transactions covered by the 

14 Truth in Lending Act (12 U.S.C. 1601 et seq.) and 

15 the Real Estate Settlement Procedures Act of 1974 (12 

16 U.S.C. 2601 et seq.); 

17 (2) satisfy the requirements of section 128 of the 

18 Truth in Lending Act (12 U.S.C. 1638) and section 

19 4 and 5 of the Real Estate Settlement Procedures Act 

20 of 1974; and 

21 (3) comprise early disclosures under the Truth in 

22 Lending Act and the good faith estimate disclosures 

23 under the Real Estate Settlement Procedures Act of 

24 1974 and final Truth in Lending Act disclosures and 

25 the uniform settlement statement disclosures under 

26 Real Estate Settlement Procedures Act of 1974 and 


bajohnson on PROD1PC77 with BILLS
22 

•HR 1728 RH

1 provide for standardization to the greatest extent pos2 sible among such disclosures from mortgage origina3 tion through the mortgage settlement. 

4 (4) shall include, with respect to a residential 

5 home mortgage loan, a written statement of— 

6 (A) the principal amount of the loan; 

7 (B) the term of the loan; 

8 (C) whether the loan has a fixed rate of in9 terest or an adjustable rate of interest; 

10 (D) the annual percentage rate of interest 

11 under the loan as of the time of the disclosure; 

12 (E) if the rate of interest under the loan can 

13 adjust after the disclosure, for each such possible 

14 adjustment— 

15 (i) when such adjustment will or may 

16 occur; and 

17 (ii) the maximum annual percentage 

18 rate of interest to which it can be adjusted; 

19 (F) the total monthly payment under the 

20 loan (including loan principal and interest, 

21 property taxes, and insurance) at the time of the 

22 disclosure; 

23 (G) the maximum total estimated monthly 

24 maximum payment pursuant to each such pos25 sible adjustment; 


bajohnson on PROD1PC77 with BILLS
23 

•HR 1728 RH

1 (H) the total settlement charges in connec2 tion with the loan and the amount of any down3 payment and cash required at settlement; and 

4 (I) whether or not the loan has a prepay5 ment penalty or balloon payment and the terms, 

6 timing, and amount of any such penalty or pay7 ment. 

8 (c) SUSPENSION OF 2008 RESPA RULE.— 

9 (1) REQUIREMENT.—The Secretary of Housing 

10 and Urban Development shall, during the period be11 ginning on the date of the enactment of this Act and 

12 ending upon issuance of proposed regulations pursu13 ant to subsection (a), suspend implementation of any 

14 provisions of the final rule referred to in paragraph 

15 (2) that would establish and implement a new stand16 ardized good faith estimate and a new standardized 

17 uniform settlement statement. Any such provisions 

18 shall be replaced by the regulations issued pursuant 

19 to subsections (a) and (b). 

20 (2) 2008 RULE.—The final rule referred to in 

21 this paragraph is the rule of the Department of Hous22 ing and Urban Development published on November 

23 17, 2008, on pages 68204–68288 of Volume 73 of the 

24 Federal Register (Docket No. FR–5180–F–03; relating 

25 to ‘‘Real Estate Settlement Procedures Act (RESPA): 


bajohnson on PROD1PC77 with BILLS
24 

•HR 1728 RH

1 Rule to Simplify and Improve the Process of Obtain2 ing Mortgages and Reduce Consumer Settlement 

3 Costs’’). 

4 (d) IMPLEMENTATION.—The regulations required 

5 under subsection (a) shall take effect, and shall provide an 

6 implementation date for the new disclosures required under 

7 such regulations, not later than the expiration of the 12- 

8 month period beginning upon the date of the enactment of 

9 this Act. 

10 (e) FAILURE TO ISSUE COMPATIBLE DISCLOSURES.— 

11 If the Secretary of Housing and Urban Development and 

12 the Board of Governors of the Federal Reserve System can13 not agree on compatible disclosures pursuant to subsections 

14 (a) and (b), the Secretary and the Board shall submit a 

15 report to the Congress, after the 6-month period referred to 

16 in subsection (a), explaining the reasons for such disagree17 ment. After the 15-day period beginning upon submission 

18 of such report, the Secretary and the Board may separately 

19 issue for public comment regulations providing for disclo20 sures under the Real Estate Settlement Procedures Act of 

21 1974 and the Truth in Lending Act, respectively. Any final 

22 disclosures as a result of such regulations issued by the Sec23 retary and the Board shall take effect on the same date, 

24 and not later than the expiration of the 12-month period 

25 beginning on the date of the enactment of this Act. If either 


bajohnson on PROD1PC77 with BILLS
25 

•HR 1728 RH

1 the Secretary or the Board fails to act during such 12- 

2 month period, either such agency may act independently 

3 and implement final regulations. 

4 TITLE II—MINIMUM STANDARDS 

5 FOR MORTGAGES 

6 SEC. 201. ABILITY TO REPAY. 

7 (a) IN GENERAL.—Chapter 2 of the Truth in Lending 

8 Act (15 U.S.C. 1631 et seq.) is amended by inserting after 

9 section 129B (as added by section 102(a)) the following new 

10 section: 

11 ‘‘§ 129C. Minimum standards for residential mortgage 

12 loans 

13 ‘‘(a) ABILITY TO REPAY.— 

14 ‘‘(1) IN GENERAL.—In accordance with regula15 tions prescribed jointly by the Federal banking agen16 cies, in consultation with the Commission, no creditor 

17 may make a residential mortgage loan unless the 

18 creditor makes a reasonable and good faith deter19 mination based on verified and documented informa20 tion that, at the time the loan is consummated, the 

21 consumer has a reasonable ability to repay the loan, 

22 according to its terms, and all applicable taxes, in23 surance, and assessments. 

24 ‘‘(2) MULTIPLE LOANS.—If the creditor knows, 

25 or has reason to know, that 1 or more residential 


bajohnson on PROD1PC77 with BILLS
26 

•HR 1728 RH

1 mortgage loans secured by the same dwelling will be 

2 made to the same consumer, the creditor shall make 

3 a reasonable and good faith determination, based on 

4 verified and documented information, that the con5 sumer has a reasonable ability to repay the combined 

6 payments of all loans on the same dwelling according 

7 to the terms of those loans and all applicable taxes, 

8 insurance, and assessments. 

9 ‘‘(3) BASIS FOR DETERMINATION.—A determina10 tion under this subsection of a consumer’s ability to 

11 repay a residential mortgage loan shall include con12 sideration of the consumer’s credit history, current in13 come, expected income the consumer is reasonably as14 sured of receiving, current obligations, debt-to-income 

15 ratio, employment status, and other financial re16 sources other than the consumer’s equity in the dwell17 ing or real property that secures repayment of the 

18 loan. 

19 ‘‘(4) NONSTANDARD LOANS.— 

20 ‘‘(A) VARIABLE RATE LOANS THAT DEFER

21 REPAYMENT OF ANY PRINCIPAL OR INTEREST.— 

22 For purposes of determining, under this sub23 section, a consumer’s ability to repay a variable 

24 rate residential mortgage loan that allows or re25 quires the consumer to defer the repayment of 


bajohnson on PROD1PC77 with BILLS
27 

•HR 1728 RH

1 any principal or interest, the creditor shall use 

2 a fully amortizing repayment schedule. 

3 ‘‘(B) INTEREST-ONLY LOANS.—For purposes 

4 of determining, under this subsection, a con5 sumer’s ability to repay a residential mortgage 

6 loan that permits or requires the payment of in7 terest only, the creditor shall use the payment 

8 amount required to amortize the loan by its final 

9 maturity. 

10 ‘‘(C) CALCULATION FOR NEGATIVE AMORTI11 ZATION.—In making any determination under 

12 this subsection, a creditor shall also take into 

13 consideration any balance increase that may ac14 crue from any negative amortization provision. 

15 ‘‘(D) CALCULATION PROCESS.—For pur16 poses of making any determination under this 

17 subsection, a creditor shall calculate the monthly 

18 payment amount for principal and interest on 

19 any residential mortgage loan by assuming— 

20 ‘‘(i) the loan proceeds are fully dis21 bursed on the date of the consummation of 

22 the loan; 

23 ‘‘(ii) the loan is to be repaid in sub24 stantially equal monthly amortizing pay25 ments for principal and interest over the 


bajohnson on PROD1PC77 with BILLS
28 

•HR 1728 RH

1 entire term of the loan with no balloon pay2 ment, unless the loan contract requires more 

3 rapid repayment (including balloon pay4 ment), in which case the contract’s repay5 ment schedule shall be used in this calcula6 tion; and 

7 ‘‘(iii) the interest rate over the entire 

8 term of the loan is a fixed rate equal to the 

9 fully indexed rate at the time of the loan 

10 closing, without considering the introduc11 tory rate. 

12 ‘‘(5) FULLY-INDEXED RATE DEFINED.—For pur13 poses of this subsection, the term ‘fully indexed rate’ 

14 means the index rate prevailing on a residential 

15 mortgage loan at the time the loan is made plus the 

16 margin that will apply after the expiration of any in17 troductory interest rates.’’. 

18 (b) CLERICAL AMENDMENT.—The table of sections for 

19 chapter 2 of the Truth in Lending Act is amended by insert20 ing after the item relating to section 129B (as added by 

21 section 102(b)) the following new item: 

‘‘129C. Minimum standards for residential mortgage loans.’’. 


bajohnson on PROD1PC77 with BILLS
29 

•HR 1728 RH

1 SEC. 202. NET TANGIBLE BENEFIT FOR REFINANCING OF 

2 RESIDENTIAL MORTGAGE LOANS. 

3 Section 129C of the Truth in Lending Act (as added 

4 by section 201(a)) is amended by inserting after subsection 

5 (a) the following new subsection: 

6 ‘‘(b) NET TANGIBLE BENEFIT FOR REFINANCING OF

7 RESIDENTIAL MORTGAGE LOANS.— 

8 ‘‘(1) IN GENERAL.—In accordance with regula9 tions prescribed under paragraph (3), no creditor 

10 may extend credit in connection with any residential 

11 mortgage loan that involves a refinancing of a prior 

12 existing residential mortgage loan unless the creditor 

13 reasonably and in good faith determines, at the time 

14 the loan is consummated and on the basis of informa15 tion known by or obtained in good faith by the cred16 itor, that the refinanced loan will provide a net tan17 gible benefit to the consumer. 

18 ‘‘(2) CERTAIN LOANS PROVIDING NO NET TAN19 GIBLE BENEFIT.—A residential mortgage loan that 

20 involves a refinancing of a prior existing residential 

21 mortgage loan shall not be considered to provide a net 

22 tangible benefit to the consumer if the costs of the refi23 nanced loan, including points, fees and other charges, 

24 exceed the amount of any newly advanced principal 

25 without any corresponding changes in the terms of the 


bajohnson on PROD1PC77 with BILLS
30 

•HR 1728 RH

1 refinanced loan that are advantageous to the con2 sumer. 

3 ‘‘(3) NET TANGIBLE BENEFIT.—The Federal 

4 banking agencies shall jointly prescribe regulations 

5 defining the term ‘net tangible benefit’ for purposes of 

6 this subsection.’’. 

7 SEC. 203. SAFE HARBOR AND REBUTTABLE PRESUMPTION. 

8 Section 129C of the Truth in Lending Act is amended 

9 by inserting after subsection (b) (as added by section 202) 

10 the following new subsection: 

11 ‘‘(c) PRESUMPTION OF ABILITY TO REPAY AND NET

12 TANGIBLE BENEFIT.— 

13 ‘‘(1) IN GENERAL.—Any creditor with respect to 

14 any residential mortgage loan, and any assignee or 

15 securitizer of such loan, may presume that the loan 

16 has met the requirements of subsections (a) and (b), 

17 if the loan is a qualified mortgage. 

18 ‘‘(2) DEFINITIONS.—For purposes of this sub19 section, the following definitions shall apply: 

20 ‘‘(A) QUALIFIED MORTGAGE.—The term 

21 ‘qualified mortgage’ means any residential mort22 gage loan— 

23 ‘‘(i) that does not allow a consumer to 

24 defer repayment of principal or interest, or 

25 is not otherwise deemed a ‘non-traditional 


bajohnson on PROD1PC77 with BILLS
31 

•HR 1728 RH

1 mortgage’ under guidance, advisories, or 

2 regulations prescribed by the Federal Bank3 ing Agencies; 

4 ‘‘(ii) that does not provide for a repay5 ment schedule that results in negative amor6 tization at any time; 

7 ‘‘(iii) for which the terms are fully am8 ortizing and which does not result in a bal9 loon payment, where a ‘balloon payment’ is 

10 a scheduled payment that is more than 

11 twice as large as the average of earlier 

12 scheduled payments; 

13 ‘‘(iv) which has an annual percentage 

14 rate that does not exceed the average prime 

15 offer rate for a comparable transaction, as 

16 of the date the interest rate is set— 

17 ‘‘(I) by 1.5 or more percentage 

18 points, in the case of a first lien resi19 dential mortgage loan having a origi20 nal principal obligation amount that 

21 does not exceed the amount of the max22 imum limitation on the original prin23 cipal obligation of mortgage in effect 

24 for a residence of the applicable size, as 

25 of the date of such interest rate set, 


bajohnson on PROD1PC77 with BILLS
32 

•HR 1728 RH

1 pursuant to the sixth sentence of sec2 tion 305(a)(2) the Federal Home Loan 

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

4 1454(a)(2)); and 

5 ‘‘(II) by 2.5 or more percentage 

6 points, in the case of a first lien resi7 dential mortgage loan having a origi8 nal principal obligation amount that 

9 exceeds the amount of the maximum 

10 limitation on the original principal 

11 obligation of mortgage in effect for a 

12 residence of the applicable size, as of 

13 the date of such interest rate set, pur14 suant to the sixth sentence of section 

15 305(a)(2) the Federal Home Loan 

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

17 1454(a)(2)); 

18 ‘‘(v) for which the income and finan19 cial resources relied upon to qualify the ob20 ligors on the loan are verified and docu21 mented; 

22 ‘‘(vi) in the case of a fixed rate loan, 

23 for which the underwriting process is based 

24 on a payment schedule that fully amortizes 

25 the loan over the loan term and takes into 


bajohnson on PROD1PC77 with BILLS
33 

•HR 1728 RH

1 account all applicable taxes, insurance, and 

2 assessments; 

3 ‘‘(vii) in the case of an adjustable rate 

4 loan, for which the underwriting is based on 

5 the maximum rate permitted under the loan 

6 during the first seven years, and a payment 

7 schedule that fully amortizes the loan over 

8 the loan term and takes into account all ap9 plicable taxes, insurance, and assessments; 

10 ‘‘(viii) that does not cause the con11 sumer’s total monthly debts, including 

12 amounts under the loan, to exceed a per13 centage established by regulation of the con14 sumer’s monthly gross income or such other 

15 maximum percentage of such income as 

16 may be prescribed by regulation under 

17 paragraph (4), and such rules shall also 

18 take into consideration the consumer’s in19 come available to pay regular expenses after 

20 payment of all installment and revolving 

21 debt; 

22 ‘‘(ix) for which the total points and 

23 fees payable in connection with the loan do 

24 not exceed 2 percent of the total loan 

25 amount, where ‘points and fees’ means 


bajohnson on PROD1PC77 with BILLS
34 

•HR 1728 RH

1 points and fees as defined by Section 

2 103(aa)(4) of the Truth in Lending Act (15 

3 U.S.C. 1602(aa)(4)); and 

4 ‘‘(x) for which the term of the loan does 

5 not exceed 30 years, except as such term 

6 may be extended under paragraph (4). 

7 ‘‘(B) AVERAGE PRIME OFFER RATE.—The 

8 term ‘average prime offer rate’ means an annual 

9 percentage rate that is derived from average in10 terest rates, points, and other loan pricing terms 

11 currently offered to consumers by a representa12 tive sample of creditors for mortgage trans13 actions that have low risk pricing characteris14 tics. 

15 ‘‘(3) PUBLICATION OF AVERAGE PRIME OFFER

16 RATE.—The Board— 

17 ‘‘(A) shall publish, and update at least 

18 weekly, average prime offer rates; and 

19 ‘‘(B) may publish multiple rates based on 

20 varying types of mortgage transactions. 

21 ‘‘(4) REGULATIONS.— 

22 ‘‘(A) IN GENERAL.—The Federal banking 

23 agencies shall jointly prescribe regulations to 

24 carry out the purposes of this subsection. 


bajohnson on PROD1PC77 with BILLS
35 

•HR 1728 RH

1 ‘‘(B) REVISION OF SAFE HARBOR CRI2 TERIA.— 

3 ‘‘(i) IN GENERAL.—The Federal bank4 ing agencies may jointly prescribe regula5 tions that revise, add to, or subtract from 

6 the criteria that define a qualified mortgage 

7 upon a finding that such regulations are 

8 necessary and appropriate to effectuate the 

9 purposes of this section and section 129B, to 

10 prevent circumvention or evasion thereof, or 

11 to facilitate compliance with such sections. 

12 ‘‘(ii) LOAN DEFINITION.—The following 

13 agencies shall prescribe rules defining the 

14 types of loans they insure, guarantee or ad15 minister, as the case may be, that are 

16 Qualified Mortgages for purposes of sub17 section (c)(1)(A) upon a finding that such 

18 rules are consistent with the purposes of this 

19 section and section 129B, to prevent cir20 cumvention or evasion thereof, or to facili21 tate compliance with such sections— 

22 ‘‘(I) The Department of Housing 

23 and Urban Development, with regard 

24 to mortgages insured under title II of 


bajohnson on PROD1PC77 with BILLS
36 

•HR 1728 RH

1 the National Housing Act (12 U.S.C. 

2 1707 et seq.); 

3 ‘‘(II) The Secretary of Veterans 

4 Affairs, with regard to a loan made or 

5 guaranteed by the Secretary of Vet6 erans Affairs; 

7 ‘‘(III) The Secretary of Agri8 culture, with regard loans guaranteed 

9 by the Secretary of Agriculture pursu10 ant to 42 U.S.C. 1472(h); 

11 ‘‘(IV) The Federal Housing Fi12 nance Agency, with regard to loans 

13 meeting the conforming loan standards 

14 of the Federal National Mortgage Cor15 poration or the Federal Home Loan 

16 Mortgage Corporation; and 

17 ‘‘(V) The Rural Housing Service, 

18 with regard to loans insured by the 

19 Rural Housing Service.’’. 

20 SEC. 204. LIABILITY. 

21 Section 129C of the Truth in Lending Act is amended 

22 by inserting after subsection (c) (as added by section 203) 

23 the following new subsection: 

24 ‘‘(d) LIABILITY FOR VIOLATIONS.— 

25 ‘‘(1) IN GENERAL.— 


bajohnson on PROD1PC77 with BILLS
37 

•HR 1728 RH

1 ‘‘(A) RESCISSION.—In addition to any 

2 other liability under this title for a violation by 

3 a creditor of subsection (a) or (b) (for example 

4 under section 130) and subject to the statute of 

5 limitations in paragraph (9), a civil action may 

6 be maintained against a creditor for a violation 

7 of subsection (a) or (b) with respect to a residen8 tial mortgage loan for the rescission of the loan, 

9 and such additional costs as the obligor may 

10 have incurred as a result of the violation and in 

11 connection with obtaining a rescission of the 

12 loan, including a reasonable attorney’s fee. 

13 ‘‘(B) CURE.—A creditor shall not be liable 

14 for rescission under subparagraph (A) with re15 spect to a residential mortgage loan if, no later 

16 than 90 days after the receipt of notification 

17 from the consumer that the loan violates sub18 section (a) or (b), the creditor provides a cure. 

19 ‘‘(2) LIMITED ASSIGNEE AND SECURITIZER LI20 ABILITY.—Notwithstanding sections 125(e) and 131 

21 and except as provided in paragraph (3), a civil ac22 tion which may be maintained against a creditor 

23 with respect to a residential mortgage loan for a vio24 lation of subsection (a) or (b) may be maintained 

25 against any assignee or securitizer of such residential 


bajohnson on PROD1PC77 with BILLS
38 

•HR 1728 RH

1 mortgage loan, who has acted in good faith, for the 

2 following liabilities only: 

3 ‘‘(A) Rescission of the loan. 

4 ‘‘(B) Such additional costs as the obligor 

5 may have incurred as a result of the violation 

6 and in connection with obtaining a rescission of 

7 the loan, including a reasonable attorney’s fee. 

8 ‘‘(3) ASSIGNEE AND SECURITIZER EXEMPTION.— 

9 No assignee or securitizer of a residential mortgage 

10 loan that has exercised reasonable due diligence in 

11 complying with the requirements of subsections (a) 

12 and (b) shall be liable under paragraph (2) with re13 spect to such loan if, no later than 90 days after the 

14 receipt of notification from the consumer that the loan 

15 violates subsection (a) or (b), the assignee or 

16 securitizer provides a cure so that the loan satisfies 

17 the requirements of subsections (a) and (b). 

18 ‘‘(4) ABSENT PARTIES.— 

19 ‘‘(A) ABSENT CREDITOR.—Notwithstanding 

20 the exemption provided in paragraph (3), if the 

21 creditor with respect to a residential mortgage 

22 loan made in violation of subsection (a) or (b) 

23 has ceased to exist as a matter of law or has filed 

24 for bankruptcy protection under title 11, United 

25 States Code, or has had a receiver, conservator, 


bajohnson on PROD1PC77 with BILLS
39 

•HR 1728 RH

1 or liquidating agent appointed, a consumer may 

2 maintain a civil action against an assignee to 

3 cure the residential mortgage loan, plus the costs 

4 and reasonable attorney’s fees incurred in ob5 taining such remedy. 

6 ‘‘(B) ABSENT CREDITOR AND ASSIGNEE.— 

7 Notwithstanding the exemption provided in 

8 paragraph (3), if the creditor with respect to a 

9 residential mortgage loan made in violation of 

10 subsection (a) or (b) and each assignee of such 

11 loan have ceased to exist as a matter of law or 

12 have filed for bankruptcy protection under title 

13 11, United States Code, or have had receivers, 

14 conservators, or liquidating agents appointed, 

15 the consumer may maintain the civil action re16 ferred to in subparagraph (A) against the 

17 securitizer. 

18 ‘‘(5) CURE DEFINED.—For purposes of this sub19 section, the term ‘cure’ means, with respect to a resi20 dential mortgage loan that violates subsection (a) or 

21 (b), the modification or refinancing, at no cost to the 

22 consumer, of the loan to provide terms that satisfy the 

23 requirements of subsections (a) and (b) and the pay24 ment of such additional costs as the obligor may have 


bajohnson on PROD1PC77 with BILLS
40 

•HR 1728 RH

1 incurred in connection with obtaining a cure of the 

2 loan, including a reasonable attorney’s fee. 

3 ‘‘(6) DISAGREEMENT OVER CURE.—If any cred4 itor, assignee, or securitizer and a consumer fail to 

5 reach agreement on a cure with respect to a residen6 tial mortgage loan that violates subsection (a) or (b), 

7 or the consumer fails to accept a cure proffered by a 

8 creditor, assignee, or securitizer— 

9 ‘‘(A) the creditor, assignee, or securitizer 

10 may provide the cure; and 

11 ‘‘(B) the consumer may challenge the ade12 quacy of the cure during the 6-month period be13 ginning when the cure is provided. 

14 If the consumer’s challenge, under this paragraph, of 

15 a cure is successful, the creditor, assignee, or 

16 securitizer shall be liable to the consumer for rescis17 sion of the loan and such additional costs under 

18 paragraph (2). 

19 ‘‘(7) INABILITY TO PROVIDE OR OBTAIN RESCIS20 SION.—If a creditor, assignee, or securitizer cannot 

21 provide, or a consumer cannot obtain, rescission 

22 under paragraph (1) or (2), the liability of such cred23 itor, assignee, or securitizer shall be met by providing 

24 the financial equivalent of a rescission, together with 

25 such additional costs as the obligor may have inVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00040 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
41 

•HR 1728 RH

1 curred as a result of the violation and in connection 

2 with obtaining a rescission of the loan, including a 

3 reasonable attorney’s fee. 

4 ‘‘(8) NO CLASS ACTIONS AGAINST ASSIGNEE OR

5 SECURITIZER UNDER PARAGRAPH (2).—Only indi6 vidual actions may be brought against an assignee or 

7 securitizer of a residential mortgage loan for a viola8 tion of subsection (a) or (b). 

9 ‘‘(9) STATUTE OF LIMITATIONS.—The liability of 

10 a creditor, assignee, or securitizer under this sub11 section shall apply in any original action against a 

12 creditor under paragraph (1) or an assignee or 

13 securitizer under paragraph (2) which is brought be14 fore— 

15 ‘‘(A) in the case of any residential mortgage 

16 loan other than a loan to which subparagraph 

17 (B) applies, the end of the 3-year period begin18 ning on the date the loan is consummated; or 

19 ‘‘(B) in the case of a residential mortgage 

20 loan that provides for a fixed interest rate for an 

21 introductory period and then resets or adjusts to 

22 a variable rate or that provides for a nonamor23 tizing payment schedule and then converts to an 

24 amortizing payment schedule, the earlier of— 


bajohnson on PROD1PC77 with BILLS
42 

•HR 1728 RH

1 ‘‘(i) the end of the 1-year period begin2 ning on the date of such reset, adjustment, 

3 or conversion; or 

4 ‘‘(ii) the end of the 6-year period be5 ginning on the date the loan is con6 summated. 

7 ‘‘(10) POOLS AND INVESTORS IN POOLS EX8 CLUDED.—In the case of residential mortgage loans 

9 acquired or aggregated for the purpose of including 

10 such loans in a pool of assets held for the purpose of 

11 issuing or selling instruments representing interests 

12 in such pools including through a securitization vehi13 cle, the terms ‘assignee’ and ‘securitizer’, as used in 

14 this section, do not include the securitization vehicle, 

15 the pools of such loans or any original or subsequent 

16 purchaser of any interest in the securitization vehicle 

17 or any instrument representing a direct or indirect 

18 interest in such pool. 

19 ‘‘(e) OBLIGATION OF SECURITIZERS, AND PRESERVA20 TION OF BORROWER REMEDIES.— 

21 ‘‘(1) OBLIGATION TO RETAIN ACCESS.—Any 

22 securitizer of a residential mortgage loan sold or to 

23 be sold as part of a securitization vehicle shall, in 

24 any document or contract providing for the transfer, 


bajohnson on PROD1PC77 with BILLS
43 

•HR 1728 RH

1 conveyance, or the establishment of such securitization 

2 vehicle, reserve the right and preserve the ability— 

3 ‘‘(A) to identify and obtain access to any 

4 such loan; 

5 ‘‘(B) to acquire any such loan in the event 

6 of a violation of subsections (a) or (b) of this sec7 tion; and 

8 ‘‘(C) to provide to the consumer any and all 

9 remedies provided for under this title for any 

10 violation of this title. 

11 ‘‘(2) ADDITIONAL DAMAGES.—Any creditor, as12 signee, or securitizer of a residential mortgage loan 

13 that is subject to a remedy under subsection (d) and 

14 has failed to comply with paragraph (1) shall be sub15 ject to additional exemplary or punitive damages not 

16 to exceed the original principal balance of such loan. 

17 ‘‘(3) CONTACT INFORMATION NOTICE.—The 

18 servicer with respect to a residential mortgage loan 

19 shall provide a written notice to a consumer identi20 fying the name and contact information of the cred21 itor or any assignee or securitizer who should be con22 tacted by the consumer for any reason concerning the 

23 consumer’s rights with respect to the loan. Such notice 

24 shall be provided— 

25 ‘‘(A) upon request of the consumer; 


bajohnson on PROD1PC77 with BILLS
44 

•HR 1728 RH

1 ‘‘(B) whenever there is a change in owner2 ship of a residential mortgage loan; or 

3 ‘‘(C) on a regular basis, not less than annu4 ally. 

5 ‘‘(f) RULES TO ESTABLISH PROCESS.—The Board 

6 shall promulgate rules to govern the rescission process estab7 lished for violations of subsections (a) and (b) of this sec8 tion. Such rules shall provide that notice given to a servicer 

9 or holder is sufficient notice regardless of the identity of 

10 the party or the parties liable under this title.’’. 

11 SEC. 205. DEFENSE TO FORECLOSURE. 

12 Section 129C of the Truth in Lending Act is amended 

13 by inserting after subsection (f) (as added by section 204) 

14 the following new subsections: 

15 ‘‘(g) DEFENSE TO FORECLOSURE.—Notwithstanding 

16 any other provision of law— 

17 ‘‘(1) when the holder of a residential mortgage 

18 loan or anyone acting for such holder initiates a judi19 cial or nonjudicial foreclosure— 

20 ‘‘(A) a consumer who has the right to re21 scind under this section with respect to such loan 

22 against the creditor or any assignee or 

23 securitizer may assert such right as a defense to 

24 foreclosure or counterclaim to such foreclosure 

25 against the holder, or 


bajohnson on PROD1PC77 with BILLS
45 

•HR 1728 RH

1 ‘‘(B) if the foreclosure proceeding begins 

2 after the end of the period during which a con3 sumer may bring an action for rescission under 

4 subsection (d) and the consumer would have had 

5 a valid basis for such an action if it had been 

6 brought before the end of such period, the con7 sumer may seek actual damages incurred by rea8 son of the violation which gave rise to the right 

9 of rescission, together with costs of the action, in10 cluding a reasonable attorney’s fee against the 

11 creditor or any assignee or securitizer; and 

12 ‘‘(2) such holder or anyone acting for such holder 

13 or any other applicable third party may sell, transfer, 

14 convey, or assign a residential mortgage loan to a 

15 creditor, any assignee, or any securitizer, or their des16 ignees, to effect a rescission or cure.’’. 

17 SEC. 206. ADDITIONAL STANDARDS AND REQUIREMENTS. 

18 (a) IN GENERAL.—Section 129C of the Truth in Lend19 ing Act is amended by inserting after subsection (g) (as 

20 added by section 205) the following new subsections: 

21 ‘‘(h) PROHIBITION ON CERTAIN PREPAYMENT PEN22 ALTIES.— 

23 ‘‘(1) PROHIBITED ON CERTAIN LOANS.—A resi24 dential mortgage loan that is not a ‘qualified mort25 gage’ may not contain terms under which a consumer 


bajohnson on PROD1PC77 with BILLS
46 

•HR 1728 RH

1 must pay a prepayment penalty for paying all or 

2 part of the principal after the loan is consummated. 

3 For purposes of this subsection, a ‘qualified mortgage’ 

4 may not include a residential mortgage loan that has 

5 an adjustable rate. 

6 ‘‘(2) PHASED-OUT PENALTIES ON QUALIFIED

7 MORTGAGES.—A qualified mortgage (as defined in 

8 subsection (c)) may not contain terms under which a 

9 consumer must pay a prepayment penalty for paying 

10 all or part of the principal after the loan is con11 summated in excess of the following limitations: 

12 ‘‘(A) During the 1-year period beginning on 

13 the date the loan is consummated, the prepay14 ment penalty shall not exceed an amount equal 

15 to 3 percent of the outstanding balance on the 

16 loan. 

17 ‘‘(B) During the 1-year period beginning 

18 after the period described in subparagraph (A), 

19 the prepayment penalty shall not exceed an 

20 amount equal to 2 percent of the outstanding 

21 balance on the loan. 

22 ‘‘(C) During the 1-year period beginning 

23 after the 1-year period described in subpara24 graph (B), the prepayment penalty shall not exVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00046 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
47 

•HR 1728 RH

1 ceed an amount equal to 1 percent of the out2 standing balance on the loan. 

3 ‘‘(D) After the end of the 3-year period be4 ginning on the date the loan is consummated, no 

5 prepayment penalty may be imposed on a quali6 fied mortgage. 

7 ‘‘(3) PROHIBITED AFTER INITIAL PERIOD ON

8 LOANS WITH A RESET.—A qualified mortgage with a 

9 fixed interest rate for an introductory period that ad10 justs or resets after such period may not contain 

11 terms under which a consumer must pay a prepay12 ment penalty for paying all or part of the principal 

13 after the beginning of the 3-month period ending on 

14 the date of the adjustment or reset. 

15 ‘‘(4) OPTION FOR NO PREPAYMENT PENALTY RE16 QUIRED.—A creditor may not offer a consumer a resi17 dential mortgage loan product that has a prepayment 

18 penalty for paying all or part of the principal after 

19 the loan is consummated as a term of the loan with20 out offering the consumer a residential mortgage loan 

21 product that does not have a prepayment penalty as 

22 a term of the loan. 

23 ‘‘(i) SINGLE PREMIUM CREDIT INSURANCE PROHIB24 ITED.—No creditor may finance, directly or indirectly, in 

25 connection with any residential mortgage loan or with any 


bajohnson on PROD1PC77 with BILLS
48 

•HR 1728 RH

1 extension of credit under an open end consumer credit plan 

2 secured by the principal dwelling of the consumer (other 

3 than a reverse mortgage), any credit life, credit disability, 

4 credit unemployment or credit property insurance, or any 

5 other accident, loss-of-income, life or health insurance, or 

6 any payments directly or indirectly for any debt cancella7 tion or suspension agreement or contract, except that— 

8 ‘‘(1) insurance premiums or debt cancellation or 

9 suspension fees calculated and paid in full on a 

10 monthly basis shall not be considered financed by the 

11 creditor; and 

12 ‘‘(2) this subsection shall not apply to credit un13 employment insurance for which the unemployment 

14 insurance premiums are reasonable, the creditor re15 ceives no direct or indirect compensation in connec16 tion with the unemployment insurance premiums, 

17 and the unemployment insurance premiums are paid 

18 pursuant to another insurance contract and not paid 

19 to an affiliate of the creditor. 

20 ‘‘(j) ARBITRATION.— 

21 ‘‘(1) IN GENERAL.—No residential mortgage loan 

22 and no extension of credit under an open end con23 sumer credit plan secured by the principal dwelling 

24 of the consumer, other than a reverse mortgage, may 

25 include terms which require arbitration or any other 


bajohnson on PROD1PC77 with BILLS
49 

•HR 1728 RH

1 nonjudicial procedure as the method for resolving any 

2 controversy or settling any claims arising out of the 

3 transaction. 

4 ‘‘(2) POST-CONTROVERSY AGREEMENTS.—Subject 

5 to paragraph (3), paragraph (1) shall not be con6 strued as limiting the right of the consumer and the 

7 creditor, any assignee, or any securitizer to agree to 

8 arbitration or any other nonjudicial procedure as the 

9 method for resolving any controversy at any time 

10 after a dispute or claim under the transaction arises. 

11 ‘‘(3) NO WAIVER OF STATUTORY CAUSE OF AC12 TION.—No provision of any residential mortgage loan 

13 or of any extension of credit under an open end con14 sumer credit plan secured by the principal dwelling 

15 of the consumer (other than a reverse mortgage), and 

16 no other agreement between the consumer and the 

17 creditor relating to the residential mortgage loan or 

18 extension of credit referred to in paragraph (1), shall 

19 be applied or interpreted so as to bar a consumer 

20 from bringing an action in an appropriate district 

21 court of the United States, or any other court of com22 petent jurisdiction, pursuant to section 130 or any 

23 other provision of law, for damages or other relief in 

24 connection with any alleged violation of this section, 


bajohnson on PROD1PC77 with BILLS
50 

•HR 1728 RH

1 any other provision of this title, or any other Federal 

2 law. 

3 ‘‘(k) MORTGAGES WITH NEGATIVE AMORTIZATION.— 

4 No creditor may extend credit to a borrower in connection 

5 with a consumer credit transaction under an open or closed 

6 end consumer credit plan secured by a dwelling or residen7 tial real property that includes a dwelling, other than a 

8 reverse mortgage, that provides or permits a payment plan 

9 that may, at any time over the term of the extension of 

10 credit, result in negative amortization unless, before such 

11 transaction is consummated— 

12 ‘‘(1) the creditor provides the consumer with a 

13 statement that— 

14 ‘‘(A) the pending transaction will or may, 

15 as the case may be, result in negative amortiza16 tion; 

17 ‘‘(B) describes negative amortization in 

18 such manner as the Federal banking agencies 

19 shall prescribe; 

20 ‘‘(C) negative amortization increases the 

21 outstanding principal balance of the account; 

22 and 

23 ‘‘(D) negative amortization reduces the con24 sumer’s equity in the dwelling or real property; 

25 and 


bajohnson on PROD1PC77 with BILLS
51 

•HR 1728 RH

1 ‘‘(2) in the case of a first-time borrower with re2 spect to a residential mortgage loan that is not a 

3 qualified mortgage, the first-time borrower provides 

4 the creditor with sufficient documentation to dem5 onstrate that the consumer received homeownership 

6 counseling from organizations or counselors certified 

7 by the Secretary of Housing and Urban Development 

8 as competent to provide such counseling.’’. 

9 (b) CONFORMING AMENDMENT RELATING TO EN10 FORCEMENT.—Section 108(a) of the Truth in Lending Act 

11 (15 U.S.C. 1607(a)) is amended by inserting after para12 graph (6) the following new paragraph: 

13 ‘‘(7) sections 21B and 21C of the Securities Ex14 change Act of 1934, in the case of a broker or dealer, 

15 other than a depository institution, by the Securities 

16 and Exchange Commission.’’. 

17 SEC. 207. RULE OF CONSTRUCTION. 

18 Except as otherwise expressly provided in section 129B 

19 or 129C of the Truth in Lending Act (as added by this Act), 

20 no provision of such section 129B or 129C shall be con21 strued as superseding, repealing, or affecting any duty, 

22 right, obligation, privilege, or remedy of any person under 

23 any other provision of the Truth in Lending Act or any 

24 other provision of Federal or State law. 


bajohnson on PROD1PC77 with BILLS
52 

•HR 1728 RH

1 SEC. 208. EFFECT ON STATE LAWS. 

2 (a) IN GENERAL.—Except as provided in subsection 

3 (b), section 129C(d) of the Truth in Lending Act (as added 

4 by section 204) shall supersede any State law to the extent 

5 that it provides additional remedies against any assignee, 

6 securitizer, or securitization vehicle for a violation of sub7 section (a) or (b) of section 129C of such Act or any other 

8 State law the terms of which address the specific subject 

9 matter of subsection (a) (determination of ability to repay) 

10 or (b) (requirement of a net tangible benefit) of section 129C 

11 of such Act, and the remedies described in section 129C(d) 

12 shall constitute the sole remedies against any assignee, 

13 securitizer, or securitization vehicle for such violations. 

14 (b) RULES OF CONSTRUCTION.—No provision of this 

15 section shall be construed as limiting— 

16 (1) the application of any State law, or the 

17 availability of remedies under such law, against a 

18 creditor for a particular residential mortgage loan re19 gardless of whether such creditor also acts as an as20 signee, securitizer, or securitization vehicle for such 

21 loan; 

22 (2) the application of any State law, or the 

23 availability of remedies under such law, against an 

24 assignee, securitizer, or securitization vehicle under 

25 State law, other than a provision of such law the 

26 terms of which address the specific subject matter of 


bajohnson on PROD1PC77 with BILLS
53 

•HR 1728 RH

1 subsection (a) (determination of ability to repay) or 

2 (b) (requirement of a net tangible benefit) of section 

3 129C of such Act; 

4 (3)(A) the application of any State law, or the 

5 availability of remedies under such law, against an 

6 assignee, securitizer or securitization vehicle for its 

7 participation in or direction of the credit or under8 writing decisions of a creditor relating to the making 

9 of a residential mortgage loan; or 

10 (B) the ability of a consumer to assert any rights 

11 against or obtain any remedies from an assignee, 

12 securitizer or securitization vehicle with respect to a 

13 residential mortgage loan as a defense to foreclosure 

14 under section 129C(g); or 

15 (4) the availability of any equitable remedies, in16 cluding injunctive relief, under State law. 

17 SEC. 209. REGULATIONS. 

18 Regulations required or authorized to be prescribed 

19 under this title or the amendments made by this title— 

20 (1) shall be prescribed in final form before the 

21 end of the 12-month period beginning on the date of 

22 the enactment of this Act; and 

23 (2) shall take effect not later than 18 months 

24 after the date of the enactment of this Act. 


bajohnson on PROD1PC77 with BILLS
54 

•HR 1728 RH

1 SEC. 210. AMENDMENTS TO CIVIL LIABILITY PROVISIONS. 

2 (a) INCREASE IN AMOUNT OF CIVIL MONEY PEN3 ALTIES FOR CERTAIN VIOLATIONS.—Section 130(a)(2) of 

4 the Truth in Lending Act (15 U.S.C. 1640(a)(2)) is amend5 ed— 

6 (1) by striking ‘‘$100’’ and inserting ‘‘$200’’; 

7 (2) by striking ‘‘$1,000’’ and inserting ‘‘$2,000’’; 

8 and 

9 (3) by striking ‘‘$500,000’’ and inserting 

10 ‘‘$1,000,000’’. 

11 (b) STATUTE OF LIMITATIONS EXTENDED FOR SEC12 TION 129 VIOLATIONS.—Section 130(e) of the Truth in 

13 Lending Act (15 U.S.C. 1640(e)) is amended— 

14 (1) in the first sentence, by striking ‘‘Any ac15 tion’’ and inserting ‘‘Except as provided in the subse16 quent sentence, any action’’; and 

17 (2) by inserting after the first sentence the fol18 lowing new sentence: ‘‘Any action under this section 

19 with respect to any violation of section 129 may be 

20 brought in any United States district court, or in any 

21 other court of competent jurisdiction, before the end of 

22 the 3-year period beginning on the date of the occur23 rence of the violation.’’. 


bajohnson on PROD1PC77 with BILLS
55 

•HR 1728 RH

1 SEC. 211. LENDER RIGHTS IN THE CONTEXT OF BORROWER 

2 DECEPTION. 

3 Section 130 of the Truth in Lending Act is amended 

4 by adding at the end the following new subsection: 

5 ‘‘(k) EXEMPTION FROM LIABILITY AND RESCISSION IN

6 CASE OF BORROWER FRAUD OR DECEPTION.—In addition 

7 to any other remedy available by law or contract, no cred8 itor, assignee, or securitizer shall be liable to an obligor 

9 under this section, nor shall it be subject to the right of 

10 rescission of any obligor under 129B, if such obligor, or co11 obligor, knowingly, or willfully and with actual knowledge 

12 furnished material information known to be false for the 

13 purpose of obtaining such residential mortgage loan.’’. 

14 SEC. 212. SIX-MONTH NOTICE REQUIRED BEFORE RESET OF 

15 HYBRID ADJUSTABLE RATE MORTGAGES. 

16 (a) IN GENERAL.—Chapter 2 of the Truth in Lending 

17 Act (15 U.S.C. 1631 et seq.) is amended by inserting after 

18 section 128 the following new section: 

19 ‘‘§ 128A. Reset of hybrid adjustable rate mortgages 

20 ‘‘(a) HYBRID ADJUSTABLE RATE MORTGAGES DE21 FINED.—For purposes of this section, the term ‘hybrid ad22 justable rate mortgage’ means a consumer credit trans23 action secured by the consumer’s principal residence with 

24 a fixed interest rate for an introductory period that adjusts 

25 or resets to a variable interest rate after such period. 


bajohnson on PROD1PC77 with BILLS
56 

•HR 1728 RH

1 ‘‘(b) NOTICE OF RESET AND ALTERNATIVES.—During 

2 the 1-month period that ends 6 months before the date on 

3 which the interest rate in effect during the introductory pe4 riod of a hybrid adjustable rate mortgage adjusts or resets 

5 to a variable interest rate or, in the case of such an adjust6 ment or resetting that occurs within the first 6 months after 

7 consummation of such loan, at consummation, the creditor 

8 or servicer of such loan shall provide a written notice, sepa9 rate and distinct from all other correspondence to the con10 sumer, that includes the following: 

11 ‘‘(1) Any index or formula used in making ad12 justments to or resetting the interest rate and a source 

13 of information about the index or formula. 

14 ‘‘(2) An explanation of how the new interest rate 

15 and payment would be determined, including an ex16 planation of how the index was adjusted, such as by 

17 the addition of a margin. 

18 ‘‘(3) A good faith estimate, based on accepted in19 dustry standards, of the creditor or servicer of the 

20 amount of the monthly payment that will apply after 

21 the date of the adjustment or reset, and the assump22 tions on which this estimate is based. 

23 ‘‘(4) A list of alternatives consumers may pursue 

24 before the date of adjustment or reset, and descripVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00056 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
57 

•HR 1728 RH

1 tions of the actions consumers must take to pursue 

2 these alternatives, including— 

3 ‘‘(A) refinancing; 

4 ‘‘(B) renegotiation of loan terms; 

5 ‘‘(C) payment forbearances; and 

6 ‘‘(D) pre-foreclosure sales. 

7 ‘‘(5) The names, addresses, telephone numbers, 

8 and Internet addresses of counseling agencies or pro9 grams reasonably available to the consumer that have 

10 been certified or approved and made publicly avail11 able by the Secretary of Housing and Urban Develop12 ment or a State housing finance authority (as defined 

13 in section 1301 of the Financial Institutions Reform, 

14 Recovery, and Enforcement Act of 1989). 

15 ‘‘(6) The address, telephone number, and Internet 

16 address for the State housing finance authority (as so 

17 defined) for the State in which the consumer resides.’’. 

18 (b) CLERICAL AMENDMENT.—The table of sections for 

19 chapter 2 of the Truth in Lending Act is amended by insert20 ing after the item relating to section 128 the following new 

21 item: 

‘‘128A. Reset of hybrid adjustable rate mortgages.’’. 

22 SEC. 213. CREDIT RISK RETENTION. 

23 Section 129C of the Truth in Lending Act is amended 

24 by inserting after subsection (k) (as added by section 206) 

25 the following new subsection: 


bajohnson on PROD1PC77 with BILLS
58 

•HR 1728 RH

1 ‘‘(l) CREDIT RISK RETENTION.— 

2 ‘‘(1) IN GENERAL.—The Federal banking agen3 cies shall prescribe regulations jointly to require any 

4 creditor that makes a residential mortgage loan that 

5 is not a qualified mortgage (as defined in section 

6 129C(c)(2)(A)), to retain an economic interest in a 

7 material portion of the credit risk for any such loan 

8 that the creditor transfers, sells or conveys to a third 

9 party. 

10 ‘‘(2) STANDARDS FOR REGULATIONS.—Regula11 tions prescribed under paragraph (1) shall— 

12 ‘‘(A) apply only to residential mortgage 

13 loans that are not qualified mortgages (as so de14 fined); 

15 ‘‘(B) prohibit creditors from directly or in16 directly hedging or otherwise transferring the 

17 credit risk creditors are required to retain under 

18 the regulations with respect to any residential 

19 mortgage loan; 

20 ‘‘(C) require creditors to retain at least 5 

21 percent of the credit risk on any non-qualified 

22 mortgage that is transferred, sold or conveyed; 

23 and 

24 ‘‘(D) specify the permissible forms of the re25 quired risk retention (for example, first loss posiVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00058 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
59 

•HR 1728 RH

1 tion or pro rata vertical slice) and the minimum 

2 duration of the required risk retention. 

3 ‘‘(3) EXCEPTIONS AND ADJUSTMENTS.— 

4 ‘‘(A) IN GENERAL.—The Federal banking 

5 agencies shall have authority to provide excep6 tions or adjustments to the requirements of this 

7 subsection, including exceptions or adjustments 

8 relating to the 5 percent risk retention threshold 

9 and the hedging prohibition. 

10 ‘‘(B) APPLICABLE STANDARDS.—Any excep11 tions or adjustments granted by the Federal 

12 banking agencies shall— 

13 ‘‘(i) be consistent with the purpose of 

14 this subsection to help ensure high quality 

15 underwriting standards for mortgage lend16 ers; and 

17 ‘‘(ii) facilitate appropriate risk man18 agement practices by mortgage lenders, im19 prove access of consumers to mortgage credit 

20 on reasonable terms, or otherwise serve the 

21 public interest. 

22 ‘‘(4) ALTERNATIVE RISK RETENTION FOR

23 SECURITIZATION SPONSORS.—The Federal banking 

24 agencies shall have discretion to apply the risk reten25 tion requirements of this subsection to securitizers of 


bajohnson on PROD1PC77 with BILLS
60 

•HR 1728 RH

1 non-qualified mortgages in addition to or in place of 

2 creditors that make non-qualified mortgages if the 

3 agencies determine that applying the requirements to 

4 securitization sponsors rather than originators 

5 would— 

6 ‘‘(A) be consistent with the purpose of this 

7 subsection to help ensure high quality under8 writing standards for mortgage lenders; and 

9 ‘‘(B) facilitate appropriate risk manage10 ment practices by mortgage lenders, or improve 

11 access of consumers to mortgage credit on reason12 able terms. 

13 ‘‘(m) Section 129C and any regulations promulgated 

14 thereunder do not apply to an extension of credit relating 

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

16 States Code.’’. 

17 SEC. 214. REQUIRED DISCLOSURES. 

18 (a) ADDITIONAL INFORMATION.—Section 128(a) of 

19 Truth in Lending Act (15 U.S.C. 1638(a)) is amended by 

20 adding at the end the following new paragraphs: 

21 ‘‘(16) In the case of a variable rate residential 

22 mortgage loan for which an escrow or impound ac23 count will be established for the payment of all appli24 cable taxes, insurance, and assessments— 


bajohnson on PROD1PC77 with BILLS
61 

•HR 1728 RH

1 ‘‘(A) the amount of initial monthly pay2 ment due under the loan for the payment of 

3 principal and interest, and the amount of such 

4 initial monthly payment including the monthly 

5 payment deposited in the account for the pay6 ment of all applicable taxes, insurance, and as7 sessments; and 

8 ‘‘(B) the amount of the fully indexed month9 ly payment due under the loan for the payment 

10 of principal and interest, and the amount of 

11 such fully indexed monthly payment including 

12 the monthly payment deposited in the account 

13 for the payment of all applicable taxes, insur14 ance, and assessments. 

15 ‘‘(17) In the case of a residential mortgage loan, 

16 the aggregate amount of settlement charges for all set17 tlement services provided in connection with the loan, 

18 the amount of charges that are included in the loan 

19 and the amount of such charges the borrower must 

20 pay at closing, the approximate amount of the whole21 sale rate of funds in connection with the loan, and the 

22 aggregate amount of other fees or required payments 

23 in connection with the loan. 

24 ‘‘(18) In the case of a residential mortgage loan, 

25 the aggregate amount of fees paid to the mortgage 


bajohnson on PROD1PC77 with BILLS
62 

•HR 1728 RH

1 originator in connection with the loan, the amount of 

2 such fees paid directly by the consumer, and any ad3 ditional amount received by the originator from the 

4 creditor.’’. 

5 (b) TIMING.—Section 128(b) of the Truth in Lending 

6 Act (15 U.S.C. 1638(b)) is amended by adding at the end 

7 the following new paragraph: 

8 ‘‘(4) RESIDENTIAL MORTGAGE LOAN DISCLO9 SURES.—In the case of a residential mortgage loan, 

10 the information required to be disclosed under sub11 section (a) with respect to such loan shall be disclosed 

12 before the earlier of— 

13 ‘‘(A) the time required under the first sen14 tence of paragraph (1); or 

15 ‘‘(B) the end of the 3-business-day period 

16 beginning on the date the application for the 

17 loan from a consumer is received by the cred18 itor.’’. 

19 SEC. 215. DISCLOSURES REQUIRED IN MONTHLY STATE20 MENTS FOR RESIDENTIAL MORTGAGE LOANS. 

21 Section 128 of the Truth in Lending Act (15 U.S.C. 

22 1638) is amended by adding at the end the following new 

23 subsection: 

24 ‘‘(f) PERIODIC STATEMENTS FOR RESIDENTIAL MORT25 GAGE LOANS.— 


bajohnson on PROD1PC77 with BILLS
63 

•HR 1728 RH

1 ‘‘(1) IN GENERAL.—The creditor, assignee, or 

2 servicer with respect to any residential mortgage loan 

3 shall transmit to the obligor, for each billing cycle, a 

4 statement setting forth each of the following items, to 

5 the extent applicable, in a conspicuous and promi6 nent manner: 

7 ‘‘(A) The amount of the principal obligation 

8 under the mortgage. 

9 ‘‘(B) The current interest rate in effect for 

10 the loan. 

11 ‘‘(C) The date on which the interest rate 

12 may next reset or adjust. 

13 ‘‘(D) The amount of any prepayment fee to 

14 be charged, if any. 

15 ‘‘(E) A description of any late payment 

16 fees. 

17 ‘‘(F) A telephone number and electronic 

18 mail address that may be used by the obligor to 

19 obtain information regarding the mortgage. 

20 ‘‘(G) Such other information as the Board 

21 may prescribe in regulations. 

22 ‘‘(2) DEVELOPMENT AND USE OF STANDARD

23 FORM.—The Federal banking agencies shall jointly 

24 develop and prescribe a standard form for the disclo25 sure required under this subsection, taking into acVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00063 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
64 

•HR 1728 RH

1 count that the statements required may be trans2 mitted in writing or electronically.’’. 

3 SEC. 216. LEGAL ASSISTANCE FOR FORECLOSURE-RELATED 

4 ISSUES. 

5 (a) ESTABLISHMENT.—The Secretary of Housing and 

6 Urban Development (hereafter in this section referred to as 

7 the ‘‘Secretary’’ shall establish a program for making grants 

8 for providing a full range of foreclosure legal assistance to 

9 low- and moderate-income homeowners and tenants related 

10 to home ownership preservation, home foreclosure preven11 tion, and tenancy associated with home foreclosure. 

12 (b) COMPETITIVE ALLOCATION.—The Secretary shall 

13 allocate amounts made available for grants under this sec14 tion to State and local legal organizations on the basis of 

15 a competitive process. For purposes of this subsection ‘‘State 

16 and local legal organizations’’ are those State and local or17 ganizations whose primary business or mission is to pro18 vide legal assistance. 

19 (c) PRIORITY TO CERTAIN AREAS.—In allocating 

20 amounts in accordance with subsection (b), the Secretary 

21 shall give priority consideration to State and local legal 

22 organizations that are operating in the 100 metropolitan 

23 statistical areas (as that term is defined by the Director 

24 of the Office of Management and Budget) with the highest 

25 home foreclosure rates. 


bajohnson on PROD1PC77 with BILLS
65 

•HR 1728 RH

1 (d) LEGAL ASSISTANCE.— 

2 (1) IN GENERAL.—Any State or local legal orga3 nization that receives financial assistance pursuant to 

4 this section may use such amounts only to assist— 

5 (A) homeowners of owner-occupied homes 

6 with mortgages in default, in danger of default, 

7 or subject to or at risk of foreclosure; and 

8 (B) tenants at risk of or subject to eviction 

9 as a result of foreclosure of the property in which 

10 such tenant resides. 

11 (2) COMMENCE USE WITHIN 90 DAYS.—Any 

12 State or local legal organization that receives finan13 cial assistance pursuant to this section shall begin 

14 using any financial assistance received under this sec15 tion within 90 days after receipt of the assistance. 

16 (3) PROHIBITION ON CLASS ACTIONS.—No funds 

17 provided to a State or local legal organization under 

18 this section may be used to support any class action 

19 litigation. 

20 (4) LIMITATION ON LEGAL ASSISTANCE.—Legal 

21 assistance funded with amounts provided under this 

22 section shall be limited to mortgage-related default, 

23 eviction, or foreclosure proceedings, without regard to 

24 whether such foreclosure is judicial or nonjudicial. 


bajohnson on PROD1PC77 with BILLS
66 

•HR 1728 RH

1 (5) EFFECTIVE DATE.—Notwithstanding section 

2 217, this subsection shall take effect on the date of the 

3 enactment of this Act. 

4 (e) LIMITATION ON DISTRIBUTION OF ASSISTANCE.— 

5 (1) IN GENERAL.—None of the amounts made 

6 available under this section shall be distributed to— 

7 (A) any organization which has been in8 dicted for a violation under Federal law relating 

9 to an election for Federal office; or 

10 (B) any organization which employs appli11 cable individuals. 

12 (2) DEFINITION OF APPLICABLE INDIVIDUAL.— 

13 In this subparagraph, the term ‘‘applicable indi14 vidual’’ means an individual who— 

15 (A) is— 

16 (i) employed by the organization in a 

17 permanent or temporary capacity; 

18 (ii) contracted or retained by the orga19 nization; or 

20 (iii) acting on behalf of, or with the ex21 press or apparent authority of, the organi22 zation; and 

23 (B) has been indicted for a violation under 

24 Federal law relating to an election for Federal 

25 office. 


bajohnson on PROD1PC77 with BILLS
67 

•HR 1728 RH

1 (f) AUTHORIZATION OF APPROPRIATIONS.—There are 

2 authorized to be appropriated to the Secretary $35,000,000 

3 for each of fiscal years 2009 through 2012 for grants under 

4 this section. 

5 SEC. 217. EFFECTIVE DATE. 

6 The amendments made by this title shall apply to 

7 transactions consummated on or after the effective date of 

8 the regulations specified in section 209. 

9 SEC. 218. REPORT BY THE GAO. 

10 (a) REPORT REQUIRED.—The Comptroller General 

11 shall conduct a study to determine the effects the enactment 

12 of this Act will have on the availability and affordability 

13 of credit for homebuyers and mortgage lending, including 

14 the effect— 

15 (1) on the mortgage market for mortgages that 

16 are not within the safe harbor provided in the amend17 ments made by this title; 

18 (2) on the ability of prospective homebuyers to 

19 obtain financing; 

20 (3) on the ability of homeowners facing resets or 

21 adjustments to refinance—for example, do they have 

22 fewer refinancing options due to the unavailability of 

23 certain loan products that were available before the 

24 enactment of this Act; 


bajohnson on PROD1PC77 with BILLS
68 

•HR 1728 RH

1 (4) on minorities’ ability to access affordable 

2 credit compared with other prospective borrowers; 

3 (5) on home sales and construction; 

4 (6) of extending the rescission right, if any, on 

5 adjustable rate loans and its impact on litigation; 

6 (7) of State foreclosure laws and, if any, an in7 vestor’s ability to transfer a property after foreclosure; 

8 (8) of expanding the existing provisions of the 

9 Home Ownership and Equity Protection Act of 1994; 

10 (9) of prohibiting prepayment penalties on high11 cost mortgages; and 

12 (10) of establishing counseling services under the 

13 Department of Housing and Urban Development and 

14 offered through the Office of Housing Counseling. 

15 (b) REPORT.—Before the end of the 1-year period be16 ginning on the date of the enactment of this Act, the Comp17 troller General shall submit a report to the Congress con18 taining the findings and conclusions of the Comptroller 

19 General with respect to the study conducted pursuant to 

20 subsection (a). 

21 (c) EXAMINATION RELATED TO CERTAIN CREDIT RISK

22 RETENTION PROVISIONS.—The report required by sub23 section (b) shall also include an analysis by the Comptroller 

24 General of the effect on the capital reserves and funding 


bajohnson on PROD1PC77 with BILLS
69 

•HR 1728 RH

1 of lenders of credit risk retention provisions for non-quali2 fied mortgages. 

3 SEC. 219. STATE ATTORNEY GENERAL ENFORCEMENT AU4 THORITY. 

5 Section 130(e) of the Truth in Lending Act (15 U.S.C. 

6 1640(e)) is amended by striking ‘‘section 129 may also’’ 

7 and inserting ‘‘section 129, 129B, or 129C of this Act, sec8 tion 219 of the Mortgage Reform and Anti-Predatory Lend9 ing Act, or any amendment made by section 219 of the 

10 Mortgage Reform and Anti-Predatory Lending Act may 

11 also’’. 

12 SEC. 220. TENANT PROTECTION. 

13 (a) TENANT PROTECTION GENERALLY.— 

14 (1) IN GENERAL.—In the case of any foreclosure 

15 on any dwelling or residential real property, after the 

16 date of the enactment of the Mortgage Reform and 

17 Anti-Predatory Lending Act, the immediate successor 

18 in interest in such property pursuant to the fore19 closure shall assume such interest subject to— 

20 (A) except as provided in paragraph (2), 

21 the rights of any bona fide tenant, as of the date 

22 of foreclosure under any bona fide lease entered 

23 into before the date of foreclosure, to occupy the 

24 premises until the end of the remaining term of 

25 the lease; and 


bajohnson on PROD1PC77 with BILLS
70 

•HR 1728 RH

1 (B) the rights of any bona fide tenant, as 

2 of the date of foreclosure, without a lease or with 

3 a lease terminable at will under State law, sub4 ject to the provision by the immediate successor 

5 in interest and the receipt by the tenant in the 

6 unit, of a notice to vacate at least 90 days before 

7 the effective date of such notice. 

8 (2) EXCEPTION FOR SUBSEQUENT OWNER-OCCU9 PANT.—Notwithstanding paragraph (1), if the imme10 diate successor in interest of any dwelling or residen11 tial real property that is otherwise subject to para12 graph (1) is a purchaser who will occupy a unit of 

13 the dwelling or residential real property as a primary 

14 residence, or such successor in interest sells the dwell15 ing or residential real property to a purchaser who 

16 will occupy a unit of the dwelling or residential real 

17 property, as a primary residence— 

18 (A) such purchaser may terminate a lease 

19 relating to such unit on the effective date of a 

20 notice to vacate; and 

21 (B) such notice to vacate shall be provided 

22 by the purchaser to the tenant in such unit at 

23 least 90 days before the effective date of such no24 tice. 


bajohnson on PROD1PC77 with BILLS
71 

•HR 1728 RH

1 (3) BONA FIDE LEASE OR TENANCY.—For pur2 poses of this subsection, a lease or tenancy shall be 

3 considered bona fide only if— 

4 (A) the mortgagor under the contract is not 

5 the tenant; 

6 (B) the lease or tenancy was the result of an 

7 arms-length transaction; and 

8 (C) the lease or tenancy requires the receipt 

9 of rent that is not substantially less than fair 

10 market rent for the property or the unit’s rent is 

11 reduced or subsidized due to a Federal, State, or 

12 local subsidy. 

13 (4) RULE OF CONSTRUCTION.—Except for the 

14 specific provisions of this subsection, no provision of 

15 this subsection shall be construed as affecting the re16 quirements for termination of any Federal- or State17 subsidized tenancy. The provisions of this subsection 

18 shall not be construed to limit any State or local law 

19 that provides longer time periods or other additional 

20 protections for tenants. 

21 (b) CORRESPONDING PROVISION RELATING TO EFFECT

22 OF FORECLOSURES ON SECTION 8 TENANCIES.—Paragraph 

23 (7) of section 8(o) of the United States Housing Act of 1937 

24 (42 U.S.C. 1437f(o)(7)) is amended— 


bajohnson on PROD1PC77 with BILLS
72 

•HR 1728 RH

1 (1) in subparagraph (C), by inserting before the 

2 semicolon at the end the following: ‘‘, and in the case 

3 of an owner who is an immediate successor in interest 

4 pursuant to foreclosure— 

5 ‘‘(i) during the initial term of the ten6 ant’s lease, having the property vacant 

7 prior to sale shall not constitute good cause; 

8 and 

9 ‘‘(ii) in subsequent lease terms of the 

10 tenant’s lease, who will occupy the unit as 

11 a primary residence, who sells the property 

12 to a purchaser who will occupy a unit of 

13 the property as a primary residence, or if 

14 the unit is unmarketable while occupied, 

15 such owner may terminate a lease relating 

16 to such unit for good cause on the effective 

17 date of the notice to vacate, where such no18 tice is provided by the owner to the tenant 

19 in such unit at least 90 days before the ef20 fective date of such notice;’’. 

21 (2) in subparagraph (E), by striking ‘‘and’’ at 

22 the end; 

23 (3) by redesignating subparagraph (F) as sub24 paragraph (G); and 


bajohnson on PROD1PC77 with BILLS
73 

•HR 1728 RH

1 (4) by inserting after subparagraph (E) the fol2 lowing: 

3 ‘‘(F) shall provide that in the case of any 

4 foreclosure on any residential real property in 

5 which a recipient of assistance under this sub6 section resides, the immediate successor in inter7 est in such property pursuant to the foreclosure 

8 shall assume such interest subject to the lease be9 tween the prior owner and the tenant and to the 

10 housing assistance payments contract between 

11 the prior owner and the public housing agency 

12 for the occupied unit; if a public housing agency 

13 is unable to make payments under the contract 

14 to the immediate successor in interest after fore15 closure, due to action or inaction by the suc16 cessor in interest, including the rejection of pay17 ments or the failure of the successor to maintain 

18 the unit in compliance with paragraph (8) or an 

19 inability to identify the successor, the agency 

20 may use funds that would have been used to pay 

21 the rental amount on behalf of the family— 

22 ‘‘(i) to pay for utilities that are the re23 sponsibility of the owner under the lease or 

24 applicable law, after taking reasonable steps 

25 to notify the owner that it intends to make 


bajohnson on PROD1PC77 with BILLS
74 

•HR 1728 RH

1 payments to a utility provider in lieu of 

2 payments to the owner, except prior notifi3 cation shall not be required in any case in 

4 which the unit will be or has been rendered 

5 uninhabitable due to the termination or 

6 threat of termination of service, in which 

7 case the public housing agency shall notify 

8 the owner within a reasonable time after 

9 making such payment; or 

10 ‘‘(ii) for the family’s reasonable mov11 ing costs, including security deposit costs; 

12 except that this subparagraph and the provisions 

13 related to foreclosure in subparagraph (C) shall 

14 not affect any State or local law that provides 

15 longer time periods or other additional protec16 tions for tenants.’’. 

17 (c) EFFECTIVE DATE.—Notwithstanding section 217, 

18 this section and the amendments made by this section shall 

19 take effect on the date of the enactment of this Act. 

20 TITLE III—HIGH-COST 

21 MORTGAGES 

22 SEC. 301. DEFINITIONS RELATING TO HIGH-COST MORT23 GAGES. 

24 (a) HIGH-COST MORTGAGE DEFINED.—Section 

25 103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)) 


bajohnson on PROD1PC77 with BILLS
75 

•HR 1728 RH

1 is amended by striking all that precedes paragraph (2) and 

2 inserting the following: 

3 ‘‘(aa) HIGH-COST MORTGAGE.— 

4 ‘‘(1) DEFINITION.— 

5 ‘‘(A) IN GENERAL.—The term ‘high-cost 

6 mortgage’, and a mortgage referred to in this 

7 subsection, means a consumer credit transaction 

8 that is secured by the consumer’s principal 

9 dwelling, other than a reverse mortgage trans10 action, if— 

11 ‘‘(i) in the case of a credit transaction 

12 secured— 

13 ‘‘(I) by a first mortgage on the 

14 consumer’s principal dwelling, the an15 nual percentage rate at consummation 

16 of the transaction will exceed by more 

17 than 6.5 percentage points (8.5 per18 centage points, if the dwelling is per19 sonal property and the transaction is 

20 for less than $50,000) the average 

21 prime offer rate, as defined in section 

22 129C(c)(2)(B), for a comparable trans23 action; or 

24 ‘‘(II) by a subordinate or junior 

25 mortgage on the consumer’s principal 


bajohnson on PROD1PC77 with BILLS
76 

•HR 1728 RH

1 dwelling, the annual percentage rate at 

2 consummation of the transaction will 

3 exceed by more than 8.5 percentage 

4 points the average prime offer rate, as 

5 defined in section 129C(c)(2)(B), for a 

6 comparable transaction; 

7 ‘‘(ii) the total points and fees payable 

8 in connection with the transaction exceed— 

9 ‘‘(I) in the case of a transaction 

10 for $20,000 or more, 5 percent of the 

11 total transaction amount; or 

12 ‘‘(II) in the case of a transaction 

13 for less than $20,000, the lesser of 8 

14 percent of the total transaction amount 

15 or $1,000 (or such other dollar amount 

16 as the Board shall prescribe by regula17 tion); or 

18 ‘‘(iii) the credit transaction documents 

19 permit the creditor to charge or collect pre20 payment fees or penalties more than 36 

21 months after the transaction closing or such 

22 fees or penalties exceed, in the aggregate, 

23 more than 2 percent of the amount prepaid. 

24 ‘‘(B) INTRODUCTORY RATES TAKEN INTO

25 ACCOUNT.—For purposes of subparagraph (A)(i), 


bajohnson on PROD1PC77 with BILLS
77 

•HR 1728 RH

1 the annual percentage rate of interest shall be de2 termined based on the following interest rate: 

3 ‘‘(i) In the case of a fixed-rate trans4 action in which the annual percentage rate 

5 will not vary during the term of the loan, 

6 the interest rate in effect on the date of con7 summation of the transaction. 

8 ‘‘(ii) In the case of a transaction in 

9 which the rate of interest varies solely in 

10 accordance with an index, the interest rate 

11 determined by adding the index rate in ef12 fect on the date of consummation of the 

13 transaction to the maximum margin per14 mitted at any time during the transaction 

15 agreement. 

16 ‘‘(iii) In the case of any other trans17 action in which the rate may vary at any 

18 time during the term of the loan for any 

19 reason, the interest charged on the trans20 action at the maximum rate that may be 

21 charged during the term of the trans22 action.’’. 

23 (b) ADJUSTMENT OF PERCENTAGE POINTS.—Section 

24 103(aa)(2) of the Truth in Lending Act (15 U.S.C. 


bajohnson on PROD1PC77 with BILLS
78 

•HR 1728 RH

1 1602(aa)(2)) is amended by striking subparagraph (B) and 

2 inserting the following new subparagraph: 

3 ‘‘(B) An increase or decrease under sub4 paragraph (A)— 

5 ‘‘(i) may not result in the number of 

6 percentage points referred to in paragraph 

7 (1)(A)(i)(I) being less than 6 percentage 

8 points or greater than 10 percentage points; 

9 and 

10 ‘‘(ii) may not result in the number of 

11 percentage points referred to in paragraph 

12 (1)(A)(i)(II) being less than 8 percentage 

13 points or greater than 12 percentage 

14 points.’’. 

15 (c) POINTS AND FEES DEFINED.— 

16 (1) IN GENERAL.—Section 103(aa)(4) of the 

17 Truth in Lending Act (15 U.S.C. 1602(aa)(4)) is 

18 amended— 

19 (A) by striking subparagraph (B) and in20 serting the following: 

21 ‘‘(B) all compensation paid directly or in22 directly by a consumer or creditor to a mortgage 

23 broker from any source, including a mortgage 

24 originator that originates a loan in the name of 

25 the originator in a table-funded transaction;’’; 


bajohnson on PROD1PC77 with BILLS
79 

•HR 1728 RH

1 (B) in subparagraph (C)(ii), by inserting 

2 ‘‘except where applied to the charges set forth in 

3 section 106(e)(1) where a creditor may receive 

4 indirect compensation solely as a result of ob5 taining distributions of profits from an affiliated 

6 entity based on its ownership interest in compli7 ance with section 8(c)(4) of the Real Estate Set8 tlement Procedures Act of 1974’’ before the semi9 colon at the end; 

10 (C) in subparagraph (C)(iii), by striking ‘‘; 

11 and’’ and inserting ‘‘, except as provided for in 

12 clause (ii);’’; 

13 (D) by redesignating subparagraph (D) as 

14 subparagraph (G); and 

15 (E) by inserting after subparagraph (C) the 

16 following new subparagraphs: 

17 ‘‘(D) premiums or other charges payable at 

18 or before closing for any credit life, credit dis19 ability, credit unemployment, or credit property 

20 insurance, or any other accident, loss-of-income, 

21 life or health insurance, or any payments di22 rectly or indirectly for any debt cancellation or 

23 suspension agreement or contract, except that in24 surance premiums or debt cancellation or sus25 pension fees calculated and paid in full on a 


bajohnson on PROD1PC77 with BILLS
80 

•HR 1728 RH

1 monthly basis shall not be considered financed 

2 by the creditor; 

3 ‘‘(E) except as provided in subsection (cc), 

4 the maximum prepayment fees and penalties 

5 which may be charged or collected under the 

6 terms of the credit transaction; 

7 ‘‘(F) all prepayment fees or penalties that 

8 are incurred by the consumer if the loan refi9 nances a previous loan made or currently held 

10 by the same creditor or an affiliate of the cred11 itor; and’’. 

12 (2) CALCULATION OF POINTS AND FEES FOR

13 OPEN-END CONSUMER CREDIT PLANS.—Section 

14 103(aa) of the Truth in Lending Act (15 U.S.C. 

15 1602(aa)) is amended— 

16 (A) by redesignating paragraph (5) as 

17 paragraph (6); and 

18 (B) by inserting after paragraph (4) the fol19 lowing new paragraph: 

20 ‘‘(5) CALCULATION OF POINTS AND FEES FOR

21 OPEN-END CONSUMER CREDIT PLANS.—In the case of 

22 open-end consumer credit plans, points and fees shall 

23 be calculated, for purposes of this section and section 

24 129, by adding the total points and fees known at or 

25 before closing, including the maximum prepayment 


bajohnson on PROD1PC77 with BILLS
81 

•HR 1728 RH

1 penalties which may be charged or collected under the 

2 terms of the credit transaction, plus the minimum ad3 ditional fees the consumer would be required to pay 

4 to draw down an amount equal to the total credit 

5 line.’’. 

6 (d) BONA FIDE DISCOUNT LOAN DISCOUNT POINTS

7 AND PREPAYMENT PENALTIES.—Section 103 of the Truth 

8 in Lending Act (15 U.S.C. 1602) is amended by inserting 

9 after subsection (cc) (as added by section 101) the following 

10 new subsection: 

11 ‘‘(dd) BONA FIDE DISCOUNT POINTS AND PREPAY12 MENT PENALTIES.—For the purposes of determining the 

13 amount of points and fees for purposes of subsection (aa), 

14 either the amounts described in paragraph (1) or (4) of the 

15 following paragraphs, but not both, may be excluded: 

16 ‘‘(1) EXCLUSION OF BONA FIDE DISCOUNT

17 POINTS.—The discount points described in 1 of the 

18 following subparagraphs shall be excluded from deter19 mining the amounts of points and fees with respect 

20 to a high-cost mortgage for purposes of subsection 

21 (aa): 

22 ‘‘(A) Up to and including 2 bona fide dis23 count points payable by the consumer in connec24 tion with the mortgage, but only if the interest 

25 rate from which the mortgage’s interest rate will 


bajohnson on PROD1PC77 with BILLS
82 

•HR 1728 RH

1 be discounted does not exceed by more than 1 

2 percentage point (i) the required net yield for a 

3 90-day standard mandatory delivery commit4 ment for a reasonably comparable loan from ei5 ther the Federal National Mortgage Association 

6 or the Federal Home Loan Mortgage Corpora7 tion, whichever is greater, or (ii) if secured by a 

8 personal property loan, the average rate on a 

9 loan in connection with which insurance is pro10 vided under title I of the National Housing Act 

11 (12 U.S.C. 1702 et seq.). 

12 ‘‘(B) Unless 2 bona fide discount points 

13 have been excluded under subparagraph (A), up 

14 to and including 1 bona fide discount point pay15 able by the consumer in connection with the 

16 mortgage, but only if the interest rate from 

17 which the mortgage’s interest rate will be dis18 counted does not exceed by more than 2 percent19 age points (i) the required net yield for a 90-day 

20 standard mandatory delivery commitment for a 

21 reasonably comparable loan from either the Fed22 eral National Mortgage Association or the Fed23 eral Home Loan Mortgage Corporation, which24 ever is greater, or (ii) if secured by a personal 

25 property loan, the average rate on a loan in conVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00082 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
83 

•HR 1728 RH

1 nection with which insurance is provided under 

2 title I of the National Housing Act (12 U.S.C. 

3 1702 et seq.). 

4 ‘‘(2) DEFINITION.—For purposes of paragraph 

5 (1), the term ‘bona fide discount points’ means loan 

6 discount points which are knowingly paid by the con7 sumer for the purpose of reducing, and which in fact 

8 result in a bona fide reduction of, the interest rate or 

9 time-price differential applicable to the mortgage. 

10 ‘‘(3) EXCEPTION FOR INTEREST RATE REDUC11 TIONS INCONSISTENT WITH INDUSTRY NORMS.—Para12 graph (1) shall not apply to discount points used to 

13 purchase an interest rate reduction unless the amount 

14 of the interest rate reduction purchased is reasonably 

15 consistent with established industry norms and prac16 tices for secondary mortgage market transactions.’’. 

17 SEC. 302. AMENDMENTS TO EXISTING REQUIREMENTS FOR 

18 CERTAIN MORTGAGES. 

19 (a) PREPAYMENT PENALTY PROVISIONS.—Section 

20 129(c)(2) of the Truth in Lending Act (15 U.S.C. 

21 1639(c)(2)) is hereby repealed. 

22 (b) NO BALLOON PAYMENTS.—Section 129(e) of the 

23 Truth in Lending Act (15 U.S.C. 1639(e)) is amended to 

24 read as follows: 


bajohnson on PROD1PC77 with BILLS
84 

•HR 1728 RH

1 ‘‘(e) NO BALLOON PAYMENTS.—No high-cost mortgage 

2 may contain a scheduled payment that is more than twice 

3 as large as the average of earlier scheduled payments. This 

4 subsection shall not apply when the payment schedule is 

5 adjusted to the seasonal or irregular income of the con6 sumer.’’. 

7 SEC. 303. ADDITIONAL REQUIREMENTS FOR CERTAIN 

8 MORTGAGES. 

9 (a) ADDITIONAL REQUIREMENTS FOR CERTAIN MORT10 GAGES.—Section 129 of the Truth in Lending Act (15 

11 U.S.C. 1639) is amended— 

12 (1) by redesignating subsections (j), (k) and (l) 

13 as subsections (n), (o) and (p) respectively; and 

14 (2) by inserting after subsection (i) the following 

15 new subsections: 

16 ‘‘(j) RECOMMENDED DEFAULT.—No creditor shall rec17 ommend or encourage default on an existing loan or other 

18 debt prior to and in connection with the closing or planned 

19 closing of a high-cost mortgage that refinances all or any 

20 portion of such existing loan or debt. 

21 ‘‘(k) LATE FEES.— 

22 ‘‘(1) IN GENERAL.—No creditor may impose a 

23 late payment charge or fee in connection with a high24 cost mortgage— 


bajohnson on PROD1PC77 with BILLS
85 

•HR 1728 RH

1 ‘‘(A) in an amount in excess of 4 percent of 

2 the amount of the payment past due; 

3 ‘‘(B) unless the loan documents specifically 

4 authorize the charge or fee; 

5 ‘‘(C) before the end of the 15-day period be6 ginning on the date the payment is due, or in 

7 the case of a loan on which interest on each in8 stallment is paid in advance, before the end of 

9 the 30-day period beginning on the date the pay10 ment is due; or 

11 ‘‘(D) more than once with respect to a sin12 gle late payment. 

13 ‘‘(2) COORDINATION WITH SUBSEQUENT LATE

14 FEES.—If a payment is otherwise a full payment for 

15 the applicable period and is paid on its due date or 

16 within an applicable grace period, and the only de17 linquency or insufficiency of payment is attributable 

18 to any late fee or delinquency charge assessed on any 

19 earlier payment, no late fee or delinquency charge 

20 may be imposed on such payment. 

21 ‘‘(3) FAILURE TO MAKE INSTALLMENT PAY22 MENT.—If, in the case of a loan agreement the terms 

23 of which provide that any payment shall first be ap24 plied to any past due principal balance, the consumer 

25 fails to make an installment payment and the conVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00085 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
86 

•HR 1728 RH

1 sumer subsequently resumes making installment pay2 ments but has not paid all past due installments, the 

3 creditor may impose a separate late payment charge 

4 or fee for any principal due (without deduction due 

5 to late fees or related fees) until the default is cured. 

6 ‘‘(l) ACCELERATION OF DEBT.—No high-cost mortgage 

7 may contain a provision which permits the creditor, in its 

8 sole discretion, to accelerate the indebtedness. This provision 

9 shall not apply when repayment of the loan has been accel10 erated by default, pursuant to a due-on-sale provision, or 

11 pursuant to a material violation of some other provision 

12 of the loan documents unrelated to the payment schedule. 

13 ‘‘(m) RESTRICTION ON FINANCING POINTS AND

14 FEES.—No creditor may directly or indirectly finance, in 

15 connection with any high-cost mortgage, any of the fol16 lowing: 

17 ‘‘(1) Any prepayment fee or penalty payable by 

18 the consumer in a refinancing transaction if the cred19 itor or an affiliate of the creditor is the noteholder of 

20 the note being refinanced. 

21 ‘‘(2) Any points or fees.’’. 

22 (b) PROHIBITIONS ON EVASIONS.—Section 129 of the 

23 Truth in Lending Act (15 U.S.C. 1639) is amended by in24 serting after subsection (p) (as so redesignated by subsection 

25 (a)(1)) the following new subsection: 


bajohnson on PROD1PC77 with BILLS
87 

•HR 1728 RH

1 ‘‘(q) PROHIBITIONS ON EVASIONS, STRUCTURING OF

2 TRANSACTIONS, AND RECIPROCAL ARRANGEMENTS.—A 

3 creditor may not take any action in connection with a high4 cost mortgage— 

5 ‘‘(1) to structure a loan transaction as an open6 end credit plan or another form of loan for the pur7 pose and with the intent of evading the provisions of 

8 this title; or 

9 ‘‘(2) to divide any loan transaction into separate 

10 parts for the purpose and with the intent of evading 

11 provisions of this title.’’. 

12 (c) MODIFICATION OR DEFERRAL FEES.—Section 129 

13 of the Truth in Lending Act (15 U.S.C. 1639) is amended 

14 by inserting after subsection (q) (as added by subsection (b) 

15 of this section) the following new subsection: 

16 ‘‘(r) MODIFICATION AND DEFERRAL FEES PROHIB17 ITED.—A creditor may not charge a consumer any fee to 

18 modify, renew, extend, or amend a high-cost mortgage, or 

19 to defer any payment due under the terms of such mortgage, 

20 unless the modification, renewal, extension or amendment 

21 results in a lower annual percentage rate on the mortgage 

22 for the consumer and then only if the amount of the fee 

23 is comparable to fees imposed for similar transactions in 

24 connection with consumer credit transactions that are seVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00087 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
88 

•HR 1728 RH

1 cured by a consumer’s principal dwelling and are not high2 cost mortgages.’’. 

3 (d) PAYOFF STATEMENT.—Section 129 of the Truth in 

4 Lending Act (15 U.S.C. 1639) is amended by inserting after 

5 subsection (r) (as added by subsection (c) of this section) 

6 the following new subsection: 

7 ‘‘(s) PAYOFF STATEMENT.— 

8 ‘‘(1) FEES.— 

9 ‘‘(A) IN GENERAL.—Except as provided in 

10 subparagraph (B), no creditor or servicer may 

11 charge a fee for informing or transmitting to 

12 any person the balance due to pay off the out13 standing balance on a high-cost mortgage. 

14 ‘‘(B) TRANSACTION FEE.—When payoff in15 formation referred to in subparagraph (A) is 

16 provided by facsimile transmission or by a cou17 rier service, a creditor or servicer may charge a 

18 processing fee to cover the cost of such trans19 mission or service in an amount not to exceed an 

20 amount that is comparable to fees imposed for 

21 similar services provided in connection with con22 sumer credit transactions that are secured by the 

23 consumer’s principal dwelling and are not high24 cost mortgages. 


bajohnson on PROD1PC77 with BILLS
89 

•HR 1728 RH

1 ‘‘(C) FEE DISCLOSURE.—Prior to charging 

2 a transaction fee as provided in subparagraph 

3 (B), a creditor or servicer shall disclose that pay4 off balances are available for free pursuant to 

5 subparagraph (A). 

6 ‘‘(D) MULTIPLE REQUESTS.—If a creditor 

7 or servicer has provided payoff information re8 ferred to in subparagraph (A) without charge, 

9 other than the transaction fee allowed by sub10 paragraph (B), on 4 occasions during a calendar 

11 year, the creditor or servicer may thereafter 

12 charge a reasonable fee for providing such infor13 mation during the remainder of the calendar 

14 year. 

15 ‘‘(2) PROMPT DELIVERY.—Payoff balances shall 

16 be provided within 5 business days after receiving a 

17 request by a consumer or a person authorized by the 

18 consumer to obtain such information. 

19 ‘‘(3) SERVICES CONSIDERED ASSIGNEE.—For the 

20 purposes of this subsection, a servicer shall be consid21 ered an assignee under the Truth in Lending Act.’’. 

22 (e) PRE-LOAN COUNSELING REQUIRED.—Section 129 

23 of the Truth in Lending Act (15 U.S.C. 1639) is amended 

24 by inserting after subsection (s) (as added by subsection (d) 

25 of this section) the following new subsection: 


bajohnson on PROD1PC77 with BILLS
90 

•HR 1728 RH

1 ‘‘(t) PRE-LOAN COUNSELING.— 

2 ‘‘(1) IN GENERAL.—A creditor may not extend 

3 credit to a consumer under a high-cost mortgage with4 out first receiving certification from a counselor that 

5 is approved by the Secretary of Housing and Urban 

6 Development, or at the discretion of the Secretary, a 

7 State housing finance authority, that the consumer 

8 has received counseling on the advisability of the 

9 mortgage. Such counselor shall not be employed by the 

10 creditor or an affiliate of the creditor or be affiliated 

11 with the creditor. 

12 ‘‘(2) DISCLOSURES REQUIRED PRIOR TO COUN13 SELING.—No counselor may certify that a consumer 

14 has received counseling on the advisability of the 

15 high-cost mortgage unless the counselor can verify 

16 that the consumer has received each statement re17 quired (in connection with such loan) by this section 

18 or the Real Estate Settlement Procedures Act of 1974 

19 with respect to the transaction. 

20 ‘‘(3) REGULATIONS.—The Board may prescribe 

21 such regulations as the Board determines to be appro22 priate to carry out the requirements of paragraph 

23 (1).’’. 

24 (f) FLIPPING PROHIBITED.—Section 129 of the Truth 

25 in Lending Act (15 U.S.C. 1639) is amended by inserting 


bajohnson on PROD1PC77 with BILLS
91 

•HR 1728 RH

1 after subsection (t) (as added by subsection (e)) the fol2 lowing new subsection: 

3 ‘‘(u) FLIPPING.— 

4 ‘‘(1) IN GENERAL.—No creditor may knowingly 

5 or intentionally engage in the unfair act or practice 

6 of flipping in connection with a high-cost mortgage. 

7 ‘‘(2) FLIPPING DEFINED.—For purposes of this 

8 subsection, the term ‘flipping’ means the making of a 

9 loan or extension of credit in the form a high-cost 

10 mortgage to a consumer which refinances an existing 

11 mortgage when the new loan or extension of credit 

12 does not have reasonable, net tangible benefit (as de13 termined in accordance with regulations prescribed 

14 under section 129C(b)) to the consumer considering 

15 all of the circumstances, including the terms of both 

16 the new and the refinanced loans or credit, the cost 

17 of the new loan or credit, and the consumer’s cir18 cumstances. 

19 ‘‘(v) CORRECTIONS AND UNINTENTIONAL VIOLA20 TIONS.—A creditor or assignee in a high cost loan who, 

21 when acting in good faith, fails to comply with any require22 ment under this section will not be deemed to have violated 

23 such requirement if the creditor or assignee establishes that 

24 either— 


bajohnson on PROD1PC77 with BILLS
92 

•HR 1728 RH

1 ‘‘(1) within 30 days of the loan closing and prior 

2 to the institution of any action, the consumer is noti3 fied of or discovers the violation, appropriate restitu4 tion is made, and whatever adjustments are necessary 

5 are made to the loan to either, at the choice of the 

6 consumer— 

7 ‘‘(A) make the loan satisfy the requirements 

8 of this chapter; or 

9 ‘‘(B) in the case of a high-cost mortgage, 

10 change the terms of the loan in a manner bene11 ficial to the consumer so that the loan will no 

12 longer be a high-cost mortgage; or 

13 ‘‘(2) within 60 days of the creditor’s discovery or 

14 receipt of notification of an unintentional violation 

15 or bona fide error as described in subsection (c) and 

16 prior to the institution of any action, the consumer 

17 is notified of the compliance failure, appropriate res18 titution is made, and whatever adjustments are nec19 essary are made to the loan to either, at the choice 

20 of the consumer— 

21 ‘‘(A) make the loan satisfy the requirements 

22 of this chapter; or 

23 ‘‘(B) in the case of a high-cost mortgage, 

24 change the terms of the loan in a manner beneVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00092 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
93 

•HR 1728 RH

1 ficial so that the loan will no longer be a high2 cost mortgage.’’. 

3 SEC. 304. REGULATIONS. 

4 (a) IN GENERAL.—The Board of Governors of the Fed5 eral Reserve System shall publish regulations implementing 

6 this title and the amendments made by this title in final 

7 form before the end of the 6-month period beginning on the 

8 date of the enactment of this Act. 

9 (b) CONSUMER MORTGAGE EDUCATION.— 

10 (1) REGULATIONS.—The Board of Governors of 

11 the Federal Reserve System may prescribe regulations 

12 requiring or encouraging creditors to provide con13 sumer mortgage education to prospective customers or 

14 direct such customers to qualified consumer mortgage 

15 education or counseling programs in the vicinity of 

16 the residence of the consumer. 

17 (2) COORDINATION WITH STATE LAW.—No re18 quirement established by the Board of Governors of 

19 the Federal Reserve System pursuant to paragraph 

20 (1) shall be construed as affecting or superseding any 

21 requirement under the law of any State with respect 

22 to consumer mortgage counseling or education. 

23 SEC. 305. EFFECTIVE DATE. 

24 The amendments made by this title shall take effect 

25 at the end of the 6-month period beginning on the date of 


bajohnson on PROD1PC77 with BILLS
94 

•HR 1728 RH

1 the enactment of this Act and shall apply to mortgages re2 ferred to in section 103(aa) of the Truth in Lending Act 

3 (15 U.S.C. 1602(aa)) for which an application is received 

4 by the creditor after the end of such period. 

5 TITLE IV—OFFICE OF HOUSING 

6 COUNSELING 

7 SEC. 401. SHORT TITLE. 

8 This title may be cited as the ‘‘Expand and Preserve 

9 Home Ownership Through Counseling Act’’. 

10 SEC. 402. ESTABLISHMENT OF OFFICE OF HOUSING COUN11 SELING. 

12 Section 4 of the Department of Housing and Urban 

13 Development Act (42 U.S.C. 3533) is amended by adding 

14 at the end the following new subsection: 

15 ‘‘(g) OFFICE OF HOUSING COUNSELING.— 

16 ‘‘(1) ESTABLISHMENT.—There is established, in 

17 the Department, the Office of Housing Counseling. 

18 ‘‘(2) DIRECTOR.—There is established the posi19 tion of Director of Housing Counseling. The Director 

20 shall be the head of the Office of Housing Counseling 

21 and shall be appointed by, and shall report to, the 

22 Secretary. Such position shall be a career-reserved po23 sition in the Senior Executive Service. 

24 ‘‘(3) FUNCTIONS.— 


bajohnson on PROD1PC77 with BILLS
95 

•HR 1728 RH

1 ‘‘(A) IN GENERAL.—The Director shall have 

2 primary responsibility within the Department 

3 for all activities and matters relating to home4 ownership counseling and rental housing coun5 seling, including— 

6 ‘‘(i) research, grant administration, 

7 public outreach, and policy development re8 lating to such counseling; and 

9 ‘‘(ii) establishment, coordination, and 

10 administration of all regulations, require11 ments, standards, and performance meas12 ures under programs and laws administered 

13 by the Department that relate to housing 

14 counseling, homeownership counseling (in15 cluding maintenance of homes), mortgage16 related counseling (including home equity 

17 conversion mortgages and credit protection 

18 options to avoid foreclosure), and rental 

19 housing counseling, including the require20 ments, standards, and performance meas21 ures relating to housing counseling. 

22 ‘‘(B) SPECIFIC FUNCTIONS.—The Director 

23 shall carry out the functions assigned to the Di24 rector and the Office under this section and any 


bajohnson on PROD1PC77 with BILLS
96 

•HR 1728 RH

1 other provisions of law. Such functions shall in2 clude establishing rules necessary for— 

3 ‘‘(i) the counseling procedures under 

4 section 106(g)(1) of the Housing and Urban 

5 Development Act of 1968 (12 U.S.C. 

6 1701x(h)(1)); 

7 ‘‘(ii) carrying out all other functions of 

8 the Secretary under section 106(g) of the 

9 Housing and Urban Development Act of 

10 1968, including the establishment, oper11 ation, and publication of the availability of 

12 the toll-free telephone number under para13 graph (2) of such section; 

14 ‘‘(iii) contributing to the preparation 

15 and distribution of home buying informa16 tion booklets pursuant to section 5 of the 

17 Real Estate Settlement Procedures Act of 

18 1974 (12 U.S.C. 2604); 

19 ‘‘(iv) carrying out the certification 

20 program under section 106(e) of the Hous21 ing and Urban Development Act of 1968 

22 (12 U.S.C. 1701x(e)); 

23 ‘‘(v) carrying out the assistance pro24 gram under section 106(a)(4) of the Hous25 ing and Urban Development Act of 1968, 


bajohnson on PROD1PC77 with BILLS
97 

•HR 1728 RH

1 including criteria for selection of applica2 tions to receive assistance; 

3 ‘‘(vi) carrying out any functions re4 garding abusive, deceptive, or unscrupulous 

5 lending practices relating to residential 

6 mortgage loans that the Secretary considers 

7 appropriate, which shall include conducting 

8 the study under section 6 of the Expand 

9 and Preserve Home Ownership Through 

10 Counseling Act; 

11 ‘‘(vii) providing for operation of the 

12 advisory committee established under para13 graph (4) of this subsection; 

14 ‘‘(viii) collaborating with community15 based organizations with expertise in the 

16 field of housing counseling; and 

17 ‘‘(ix) providing for the building of ca18 pacity to provide housing counseling serv19 ices in areas that lack sufficient services. 

20 ‘‘(4) ADVISORY COMMITTEE.— 

21 ‘‘(A) IN GENERAL.—The Secretary shall ap22 point an advisory committee to provide advice 

23 regarding the carrying out of the functions of the 

24 Director. 


bajohnson on PROD1PC77 with BILLS
98 

•HR 1728 RH

1 ‘‘(B) MEMBERS.—Such advisory committee 

2 shall consist of not more than 12 individuals, 

3 and the membership of the committee shall equal4 ly represent the mortgage and real estate indus5 try, including consumers and housing counseling 

6 agencies certified by the Secretary. 

7 ‘‘(C) TERMS.—Except as provided in sub8 paragraph (D), each member of the advisory 

9 committee shall be appointed for a term of 3 

10 years. Members may be reappointed at the dis11 cretion of the Secretary. 

12 ‘‘(D) TERMS OF INITIAL APPOINTEES.—As 

13 designated by the Secretary at the time of ap14 pointment, of the members first appointed to the 

15 advisory committee, 4 shall be appointed for a 

16 term of 1 year and 4 shall be appointed for a 

17 term of 2 years. 

18 ‘‘(E) PROHIBITION OF PAY; TRAVEL EX19 PENSES.—Members of the advisory committee 

20 shall serve without pay, but shall receive travel 

21 expenses, including per diem in lieu of subsist22 ence, in accordance with applicable provisions 

23 under subchapter I of chapter 57 of title 5, 

24 United States Code. 


bajohnson on PROD1PC77 with BILLS
99 

•HR 1728 RH

1 ‘‘(F) ADVISORY ROLE ONLY.—The advisory 

2 committee shall have no role in reviewing or 

3 awarding housing counseling grants. 

4 ‘‘(5) SCOPE OF HOMEOWNERSHIP COUN5 SELING.—In carrying out the responsibilities of the 

6 Director, the Director shall ensure that homeowner7 ship counseling provided by, in connection with, or 

8 pursuant to any function, activity, or program of the 

9 Department addresses the entire process of homeown10 ership, including the decision to purchase a home, the 

11 selection and purchase of a home, issues arising dur12 ing or affecting the period of ownership of a home 

13 (including refinancing, default and foreclosure, and 

14 other financial decisions), and the sale or other dis15 position of a home.’’. 

16 SEC. 403. COUNSELING PROCEDURES. 

17 (a) IN GENERAL.—Section 106 of the Housing and 

18 Urban Development Act of 1968 (12 U.S.C. 1701x) is 

19 amended by adding at the end the following new subsection: 

20 ‘‘(g) PROCEDURES AND ACTIVITIES.— 

21 ‘‘(1) COUNSELING PROCEDURES.— 

22 ‘‘(A) IN GENERAL.—The Secretary shall es23 tablish, coordinate, and monitor the administra24 tion by the Department of Housing and Urban 

25 Development of the counseling procedures for 


bajohnson on PROD1PC77 with BILLS
100 

•HR 1728 RH

1 homeownership counseling and rental housing 

2 counseling provided in connection with any pro3 gram of the Department, including all require4 ments, standards, and performance measures 

5 that relate to homeownership and rental housing 

6 counseling. 

7 ‘‘(B) HOMEOWNERSHIP COUNSELING.—For 

8 purposes of this subsection and as used in the 

9 provisions referred to in this subparagraph, the 

10 term ‘homeownership counseling’ means coun11 seling related to homeownership and residential 

12 mortgage loans. Such term includes counseling 

13 related to homeownership and residential mort14 gage loans that is provided pursuant to— 

15 ‘‘(i) section 105(a)(20) of the Housing 

16 and Community Development Act of 1974 

17 (42 U.S.C. 5305(a)(20)); 

18 ‘‘(ii) in the United States Housing Act 

19 of 1937— 

20 ‘‘(I) section 9(e) (42 U.S.C. 

21 1437g(e)); 

22 ‘‘(II) section 8(y)(1)(D) (42 

23 U.S.C. 1437f(y)(1)(D)); 

24 ‘‘(III) section 18(a)(4)(D) (42 

25 U.S.C. 1437p(a)(4)(D)); 


bajohnson on PROD1PC77 with BILLS
101 

•HR 1728 RH

1 ‘‘(IV) section 23(c)(4) (42 U.S.C. 

2 1437u(c)(4)); 

3 ‘‘(V) section 32(e)(4) (42 U.S.C. 

4 1437z–4(e)(4)); 

5 ‘‘(VI) section 33(d)(2)(B) (42 

6 U.S.C. 1437z–5(d)(2)(B)); 

7 ‘‘(VII) sections 302(b)(6) and 

8 303(b)(7) (42 U.S.C. 1437aaa–1(b)(6), 

9 1437aaa–2(b)(7)); and 

10 ‘‘(VIII) section 304(c)(4) (42 

11 U.S.C. 1437aaa–3(c)(4)); 

12 ‘‘(iii) section 302(a)(4) of the Amer13 ican Homeownership and Economic Oppor14 tunity Act of 2000 (42 U.S.C. 1437f note); 

15 ‘‘(iv) sections 233(b)(2) and 258(b) of 

16 the Cranston-Gonzalez National Affordable 

17 Housing Act (42 U.S.C. 12773(b)(2), 

18 12808(b)); 

19 ‘‘(v) this section and section 101(e) of 

20 the Housing and Urban Development Act of 

21 1968 (12 U.S.C. 1701x, 1701w(e)); 

22 ‘‘(vi) section 220(d)(2)(G) of the Low23 Income Housing Preservation and Resident 

24 Homeownership Act of 1990 (12 U.S.C. 

25 4110(d)(2)(G)); 


bajohnson on PROD1PC77 with BILLS
102 

•HR 1728 RH

1 ‘‘(vii) sections 422(b)(6), 423(b)(7), 

2 424(c)(4), 442(b)(6), and 443(b)(6) of the 

3 Cranston-Gonzalez National Affordable 

4 Housing Act (42 U.S.C. 12872(b)(6), 

5 12873(b)(7), 12874(c)(4), 12892(b)(6), and 

6 12893(b)(6)); 

7 ‘‘(viii) section 491(b)(1)(F)(iii) of the 

8 McKinney-Vento Homeless Assistance Act 

9 (42 U.S.C. 11408(b)(1)(F)(iii)); 

10 ‘‘(ix) sections 202(3) and 810(b)(2)(A) 

11 of the Native American Housing and Self12 Determination Act of 1996 (25 U.S.C. 

13 4132(3), 4229(b)(2)(A)); 

14 ‘‘(x) in the National Housing Act— 

15 ‘‘(I) in section 203 (12 U.S.C. 

16 1709), the penultimate undesignated 

17 paragraph of paragraph (2) of sub18 section (b), subsection (c)(2)(A), and 

19 subsection (r)(4); 

20 ‘‘(II) subsections (a) and (c)(3) of 

21 section 237 (12 U.S.C. 1715z–2); and 

22 ‘‘(III) subsections (d)(2)(B) and 

23 (m)(1) of section 255 (12 U.S.C. 

24 1715z–20); 


bajohnson on PROD1PC77 with BILLS
103 

•HR 1728 RH

1 ‘‘(xi) section 502(h)(4)(B) of the Hous2 ing Act of 1949 (42 U.S.C. 1472(h)(4)(B)); 

3 and 

4 ‘‘(xii) section 508 of the Housing and 

5 Urban Development Act of 1970 (12 U.S.C. 

6 1701z–7). 

7 ‘‘(C) RENTAL HOUSING COUNSELING.—For 

8 purposes of this subsection, the term ‘rental hous9 ing counseling’ means counseling related to rent10 al of residential property, which may include 

11 counseling regarding future homeownership op12 portunities and providing referrals for renters 

13 and prospective renters to entities providing 

14 counseling and shall include counseling related 

15 to such topics that is provided pursuant to— 

16 ‘‘(i) section 105(a)(20) of the Housing 

17 and Community Development Act of 1974 

18 (42 U.S.C. 5305(a)(20)); 

19 ‘‘(ii) in the United States Housing Act 

20 of 1937— 

21 ‘‘(I) section 9(e) (42 U.S.C. 

22 1437g(e)); 

23 ‘‘(II) section 18(a)(4)(D) (42 

24 U.S.C. 1437p(a)(4)(D)); 


bajohnson on PROD1PC77 with BILLS
104 

•HR 1728 RH

1 ‘‘(III) section 23(c)(4) (42 U.S.C. 

2 1437u(c)(4)); 

3 ‘‘(IV) section 32(e)(4) (42 U.S.C. 

4 1437z–4(e)(4)); 

5 ‘‘(V) section 33(d)(2)(B) (42 

6 U.S.C. 1437z–5(d)(2)(B)); and 

7 ‘‘(VI) section 302(b)(6) (42 U.S.C. 

8 1437aaa–1(b)(6)); 

9 ‘‘(iii) section 233(b)(2) of the Cran10 ston-Gonzalez National Affordable Housing 

11 Act (42 U.S.C. 12773(b)(2)); 

12 ‘‘(iv) section 106 of the Housing and 

13 Urban Development Act of 1968 (12 U.S.C. 

14 1701x); 

15 ‘‘(v) section 422(b)(6) of the Cranston16 Gonzalez National Affordable Housing Act 

17 (42 U.S.C. 12872(b)(6)); 

18 ‘‘(vi) section 491(b)(1)(F)(iii) of the 

19 McKinney-Vento Homeless Assistance Act 

20 (42 U.S.C. 11408(b)(1)(F)(iii)); 

21 ‘‘(vii) sections 202(3) and 810(b)(2)(A) 

22 of the Native American Housing and Self23 Determination Act of 1996 (25 U.S.C. 

24 4132(3), 4229(b)(2)(A)); and 


bajohnson on PROD1PC77 with BILLS
105 

•HR 1728 RH

1 ‘‘(viii) the rental assistance program 

2 under section 8 of the United States Hous3 ing Act of 1937 (42 U.S.C. 1437f). 

4 ‘‘(2) STANDARDS FOR MATERIALS.—The Sec5 retary, in consultation with the advisory committee 

6 established under subsection (g)(4) of the Department 

7 of Housing and Urban Development Act, shall estab8 lish standards for materials and forms to be used, as 

9 appropriate, by organizations providing homeowner10 ship counseling services, including any recipients of 

11 assistance pursuant to subsection (a)(4). 

12 ‘‘(3) MORTGAGE SOFTWARE SYSTEMS.— 

13 ‘‘(A) CERTIFICATION.—The Secretary shall 

14 provide for the certification of various computer 

15 software programs for consumers to use in evalu16 ating different residential mortgage loan pro17 posals. The Secretary shall require, for such cer18 tification, that the mortgage software systems 

19 take into account— 

20 ‘‘(i) the consumer’s financial situation 

21 and the cost of maintaining a home, includ22 ing insurance, taxes, and utilities; 

23 ‘‘(ii) the amount of time the consumer 

24 expects to remain in the home or expected 

25 time to maturity of the loan; and 


bajohnson on PROD1PC77 with BILLS
106 

•HR 1728 RH

1 ‘‘(iii) such other factors as the Sec2 retary considers appropriate to assist the 

3 consumer in evaluating whether to pay 

4 points, to lock in an interest rate, to select 

5 an adjustable or fixed rate loan, to select a 

6 conventional or government-insured or 

7 guaranteed loan and to make other choices 

8 during the loan application process. 

9 If the Secretary determines that available exist10 ing software is inadequate to assist consumers 

11 during the residential mortgage loan application 

12 process, the Secretary shall arrange for the devel13 opment by private sector software companies of 

14 new mortgage software systems that meet the 

15 Secretary’s specifications. 

16 ‘‘(B) USE AND INITIAL AVAILABILITY.— 

17 Such certified computer software programs shall 

18 be used to supplement, not replace, housing coun19 seling. The Secretary shall provide that such pro20 grams are initially used only in connection with 

21 the assistance of housing counselors certified pur22 suant to subsection (e). 

23 ‘‘(C) AVAILABILITY.—After a period of ini24 tial availability under subparagraph (B) as the 

25 Secretary considers appropriate, the Secretary 


bajohnson on PROD1PC77 with BILLS
107 

•HR 1728 RH

1 shall take reasonable steps to make mortgage 

2 software systems certified pursuant to this para3 graph widely available through the Internet and 

4 at public locations, including public libraries, 

5 senior-citizen centers, public housing sites, offices 

6 of public housing agencies that administer rental 

7 housing assistance vouchers, and housing coun8 seling centers. 

9 ‘‘(D) BUDGET COMPLIANCE.—This para10 graph shall be effective only to the extent that 

11 amounts to carry out this paragraph are made 

12 available in advance in appropriations Acts. 

13 ‘‘(4) NATIONAL PUBLIC SERVICE MULTIMEDIA

14 CAMPAIGNS TO PROMOTE HOUSING COUNSELING.— 

15 ‘‘(A) IN GENERAL.—The Director of Hous16 ing Counseling shall develop, implement, and 

17 conduct national public service multimedia cam18 paigns designed to make persons facing mortgage 

19 foreclosure, persons considering a subprime 

20 mortgage loan to purchase a home, elderly per21 sons, persons who face language barriers, low-in22 come persons, minorities, and other potentially 

23 vulnerable consumers aware that it is advisable, 

24 before seeking or maintaining a residential mort25 gage loan, to obtain homeownership counseling 


bajohnson on PROD1PC77 with BILLS
108 

•HR 1728 RH

1 from an unbiased and reliable sources and that 

2 such homeownership counseling is available, in3 cluding through programs sponsored by the Sec4 retary of Housing and Urban Development. 

5 ‘‘(B) CONTACT INFORMATION.—Each seg6 ment of the multimedia campaign under sub7 paragraph (A) shall publicize the toll-free tele8 phone number and website of the Department of 

9 Housing and Urban Development through which 

10 persons seeking housing counseling can locate a 

11 housing counseling agency in their State that is 

12 certified by the Secretary of Housing and Urban 

13 Development and can provide advice on buying 

14 a home, renting, defaults, foreclosures, credit 

15 issues, and reverse mortgages. 

16 ‘‘(C) AUTHORIZATION OF APPROPRIA17 TIONS.—There are authorized to be appropriated 

18 to the Secretary, not to exceed $3,000,000 for fis19 cal years 2009, 2010, and 2011, for the develop20 ment, implementation, and conduct of national 

21 public service multimedia campaigns under this 

22 paragraph. 

23 ‘‘(D) FORECLOSURE RESCUE EDUCATION

24 PROGRAMS.— 


bajohnson on PROD1PC77 with BILLS
109 

•HR 1728 RH

1 ‘‘(i) IN GENERAL.—Ten percent of any 

2 funds appropriated pursuant to the author3 ization under subparagraph (C) shall be 

4 used by the Director of Housing Counseling 

5 to conduct an education program in areas 

6 that have a high density of foreclosure. Such 

7 program shall involve direct mailings to 

8 persons living in such areas describing— 

9 ‘‘(I) tips on avoiding foreclosure 

10 rescue scams; 

11 ‘‘(II) tips on avoiding predatory 

12 lending mortgage agreements; 

13 ‘‘(III) tips on avoiding for-profit 

14 foreclosure counseling services; and 

15 ‘‘(IV) local counseling resources 

16 that are approved by the Department 

17 of Housing and Urban Development. 

18 ‘‘(ii) PROGRAM EMPHASIS.—In con19 ducting the education program described 

20 under clause (i), the Director of Housing 

21 Counseling shall also place an emphasis on 

22 serving communities that have a high per23 centage of retirement communities or a high 

24 percentage of low-income minority commu25 nities. 


bajohnson on PROD1PC77 with BILLS
110 

•HR 1728 RH

1 ‘‘(iii) TERMS DEFINED.—For purposes 

2 of this subparagraph: 

3 ‘‘(I) HIGH DENSITY OF FORE4 CLOSURES.—An area has a ‘high den5 sity of foreclosures’ if such area is one 

6 of the metropolitan statistical areas (as 

7 that term is defined by the Director of 

8 the Office of Management and Budget) 

9 with the highest home foreclosure rates. 

10 ‘‘(II) HIGH PERCENTAGE OF RE11 TIREMENT COMMUNITIES.—An area 

12 has a ‘high percentage of retirement 

13 communities’ if such area is one of the 

14 metropolitan statistical areas (as that 

15 term is defined by the Director of the 

16 Office of Management and Budget) 

17 with the highest percentage of residents 

18 aged 65 or older. 

19 ‘‘(III) HIGH PERCENTAGE OF

20 LOW-INCOME MINORITY COMMU21 NITIES.—An area has a ‘high percent22 age of low-income minority commu23 nities’ if such area contains a higher24 than-normal percentage of residents 

25 who are both minorities and low-inVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00110 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
111 

•HR 1728 RH

1 come, as defined by the Director of 

2 Housing Counseling. 

3 ‘‘(5) EDUCATION PROGRAMS.—The Secretary 

4 shall provide advice and technical assistance to 

5 States, units of general local government, and non6 profit organizations regarding the establishment and 

7 operation of, including assistance with the develop8 ment of content and materials for, educational pro9 grams to inform and educate consumers, particularly 

10 those most vulnerable with respect to residential mort11 gage loans (such as elderly persons, persons facing 

12 language barriers, low-income persons, minorities, 

13 and other potentially vulnerable consumers), regard14 ing home mortgages, mortgage refinancing, home eq15 uity loans, and home repair loans.’’. 

16 (b) CONFORMING AMENDMENTS TO GRANT PROGRAM

17 FOR HOMEOWNERSHIP COUNSELING ORGANIZATIONS.— 

18 Section 106(c)(5)(A)(ii) of the Housing and Urban Devel19 opment Act of 1968 (12 U.S.C. 1701x(c)(5)(A)(ii)) is 

20 amended— 

21 (1) in subclause (III), by striking ‘‘and’’ at the 

22 end; 

23 (2) in subclause (IV) by striking the period at 

24 the end and inserting ‘‘; and’’; and 


bajohnson on PROD1PC77 with BILLS
112 

•HR 1728 RH

1 (3) by inserting after subclause (IV) the fol2 lowing new subclause: 

3 ‘‘(V) notify the housing or mort4 gage applicant of the availability of 

5 mortgage software systems provided 

6 pursuant to subsection (g)(3).’’. 

7 SEC. 404. GRANTS FOR HOUSING COUNSELING ASSISTANCE. 

8 Section 106(a) of the Housing and Urban Development 

9 Act of 1968 (12 U.S.C. 1701x(a)(3)) is amended by adding 

10 at the end the following new paragraph: 

11 ‘‘(4) HOMEOWNERSHIP AND RENTAL COUNSELING AS12 SISTANCE.— 

13 ‘‘(A) IN GENERAL.—The Secretary shall make fi14 nancial assistance available under this paragraph to 

15 HUD-approved housing counseling agencies and State 

16 housing finance agencies. 

17 ‘‘(B) QUALIFIED ENTITIES.—The Secretary shall 

18 establish standards and guidelines for eligibility of or19 ganizations (including governmental and nonprofit 

20 organizations) to receive assistance under this para21 graph, in accordance with subparagraph (D). 

22 ‘‘(C) DISTRIBUTION.—Assistance made available 

23 under this paragraph shall be distributed in a man24 ner that encourages efficient and successful counseling 

25 programs. 


bajohnson on PROD1PC77 with BILLS
113 

•HR 1728 RH

1 ‘‘(D) LIMITATION ON DISTRIBUTION OF ASSIST2 ANCE.— 

3 ‘‘(i) IN GENERAL.—None of the assistance 

4 made available under this paragraph shall be 

5 distributed to— 

6 ‘‘(I) any organization which has been 

7 indicted for a violation under Federal law 

8 relating to an election for Federal office; or 

9 ‘‘(II) any organization which employs 

10 applicable individuals. 

11 ‘‘(ii) DEFINITION OF APPLICABLE INDI12 VIDUAL.—In this subparagraph, the term ‘appli13 cable individual’ means an individual who— 

14 ‘‘(I) is— 

15 ‘‘(aa) employed by the organiza16 tion in a permanent or temporary ca17 pacity; 

18 ‘‘(bb) contracted or retained by 

19 the organization; or 

20 ‘‘(cc) acting on behalf of, or with 

21 the express or apparent authority of, 

22 the organization; and 

23 ‘‘(II) has been indicted for a violation 

24 under Federal law relating to an election 

25 for Federal office. 


bajohnson on PROD1PC77 with BILLS
114 

•HR 1728 RH

1 ‘‘(E) GRANTMAKING PROCESS.—In making as2 sistance available under this paragraph, the Secretary 

3 shall consider appropriate ways of streamlining and 

4 improving the processes for grant application, review, 

5 approval, and award. 

6 ‘‘(F) AUTHORIZATION OF APPROPRIATIONS.— 

7 There are authorized to be appropriated $45,000,000 

8 for each of fiscal years 2009 through 2012 for— 

9 ‘‘(i) the operations of the Office of Housing 

10 Counseling of the Department of Housing and 

11 Urban Development; 

12 ‘‘(ii) the responsibilities of the Director of 

13 Housing Counseling under paragraphs (2) 

14 through (5) of subsection (g); and 

15 ‘‘(iii) assistance pursuant to this paragraph 

16 for entities providing homeownership and rental 

17 counseling.’’. 

18 SEC. 405. REQUIREMENTS TO USE HUD-CERTIFIED COUN19 SELORS UNDER HUD PROGRAMS. 

20 Section 106(e) of the Housing and Urban Development 

21 Act of 1968 (12 U.S.C. 1701x(e)) is amended— 

22 (1) by striking paragraph (1) and inserting the 

23 following new paragraph: 

24 ‘‘(1) REQUIREMENT FOR ASSISTANCE.—An orga25 nization may not receive assistance for counseling acVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00114 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
115 

•HR 1728 RH

1 tivities under subsection (a)(1)(iii), (a)(2), (a)(4), (c), 

2 or (d) of this section, or under section 101(e), unless 

3 the organization, or the individuals through which the 

4 organization provides such counseling, has been cer5 tified by the Secretary under this subsection as com6 petent to provide such counseling.’’; 

7 (2) in paragraph (2)— 

8 (A) by inserting ‘‘and for certifying organi9 zations’’ before the period at the end of the first 

10 sentence; and 

11 (B) in the second sentence by striking ‘‘for 

12 certification’’ and inserting ‘‘, for certification of 

13 an organization, that each individual through 

14 which the organization provides counseling shall 

15 demonstrate, and, for certification of an indi16 vidual,’’; 

17 (3) in paragraph (3), by inserting ‘‘organiza18 tions and’’ before ‘‘individuals’’; 

19 (4) by redesignating paragraph (3) as para20 graph (5); and 

21 (5) by inserting after paragraph (2) the fol22 lowing new paragraphs: 

23 ‘‘(3) REQUIREMENT UNDER HUD PROGRAMS.— 

24 Any homeownership counseling or rental housing 

25 counseling (as such terms are defined in subsection 


bajohnson on PROD1PC77 with BILLS
116 

•HR 1728 RH

1 (g)(1)) required under, or provided in connection 

2 with, any program administered by the Department 

3 of Housing and Urban Development shall be provided 

4 only by organizations or counselors certified by the 

5 Secretary under this subsection as competent to pro6 vide such counseling. 

7 ‘‘(4) OUTREACH.—The Secretary shall take such 

8 actions as the Secretary considers appropriate to en9 sure that individuals and organizations providing 

10 homeownership or rental housing counseling are 

11 aware of the certification requirements and standards 

12 of this subsection and of the training and certification 

13 programs under subsection (f).’’. 

14 SEC. 406. STUDY OF DEFAULTS AND FORECLOSURES. 

15 The Secretary of Housing and Urban Development 

16 shall conduct an extensive study of the root causes of default 

17 and foreclosure of home loans, using as much empirical 

18 data as are available. The study shall also examine the role 

19 of escrow accounts in helping prime and nonprime bor20 rowers to avoid defaults and foreclosures. Not later than 12 

21 months after the date of the enactment of this Act, the Sec22 retary shall submit to the Congress a preliminary report 

23 regarding the study. Not later than 24 months after such 

24 date of enactment, the Secretary shall submit a final report 

25 regarding the results of the study, which shall include any 


bajohnson on PROD1PC77 with BILLS
117 

•HR 1728 RH

1 recommended legislation relating to the study, and rec2 ommendations for best practices and for a process to iden3 tify populations that need counseling the most. 

4 SEC. 407. DEFINITIONS FOR COUNSELING-RELATED PRO5 GRAMS. 

6 Section 106 of the Housing and Urban Development 

7 Act of 1968 (12 U.S.C. 1701x), as amended by the preceding 

8 provisions of this title, is further amended by adding at 

9 the end the following new subsection: 

10 ‘‘(h) DEFINITIONS.—For purposes of this section: 

11 ‘‘(1) NONPROFIT ORGANIZATION.—The term 

12 ‘nonprofit organization’ has the meaning given such 

13 term in section 104(5) of the Cranston-Gonzalez Na14 tional Affordable Housing Act (42 U.S.C. 12704(5)), 

15 except that subparagraph (D) of such section shall not 

16 apply for purposes of this section. 

17 ‘‘(2) STATE.—The term ‘State’ means each of the 

18 several States, the Commonwealth of Puerto Rico, the 

19 District of Columbia, the Commonwealth of the North20 ern Mariana Islands, Guam, the Virgin Islands, 

21 American Samoa, the Trust Territories of the Pacific, 

22 or any other possession of the United States. 

23 ‘‘(3) UNIT OF GENERAL LOCAL GOVERNMENT.— 

24 The term ‘unit of general local government’ means 

25 any city, county, parish, town, township, borough, 


bajohnson on PROD1PC77 with BILLS
118 

•HR 1728 RH

1 village, or other general purpose political subdivision 

2 of a State. 

3 ‘‘(4) HUD-APPROVED COUNSELING AGENCY.— 

4 The term ‘HUD-approved counseling agency’ means a 

5 private or public nonprofit organization that is— 

6 ‘‘(A) exempt from taxation under section 

7 501(c) of the Internal Revenue Code of 1986; and 

8 ‘‘(B) certified by the Secretary to provide 

9 housing counseling services. 

10 ‘‘(5) STATE HOUSING FINANCE AGENCY.—The 

11 term ‘State housing finance agency’ means any public 

12 body, agency, or instrumentality specifically created 

13 under State statute that is authorised to finance ac14 tivities designed to provide housing and related facili15 ties throughout an entire State through land acquisi16 tion, construction, or rehabilitation.’’. 

17 SEC. 408. UPDATING AND SIMPLIFICATION OF MORTGAGE 

18 INFORMATION BOOKLET. 

19 Section 5 of the Real Estate Settlement Procedures Act 

20 of 1974 (12 U.S.C. 2604) is amended— 

21 (1) in the section heading, by striking ‘‘SPECIAL’’ 

22 and inserting ‘‘HOME BUYING’’; 

23 (2) by striking subsections (a) and (b) and in24 serting the following new subsections: 


bajohnson on PROD1PC77 with BILLS
119 

•HR 1728 RH

1 ‘‘(a) PREPARATION AND DISTRIBUTION.—The Sec2 retary shall prepare, at least once every 5 years, a booklet 

3 to help consumers applying for federally related mortgage 

4 loans to understand the nature and costs of real estate settle5 ment services. The Secretary shall prepare the booklet in 

6 various languages and cultural styles, as the Secretary de7 termines to be appropriate, so that the booklet is under8 standable and accessible to homebuyers of different ethnic 

9 and cultural backgrounds. The Secretary shall distribute 

10 such booklets to all lenders that make federally related mort11 gage loans. The Secretary shall also distribute to such lend12 ers lists, organized by location, of homeownership counselors 

13 certified under section 106(e) of the Housing and Urban 

14 Development Act of 1968 (12 U.S.C. 1701x(e)) for use in 

15 complying with the requirement under subsection (c) of this 

16 section. 

17 ‘‘(b) CONTENTS.—Each booklet shall be in such form 

18 and detail as the Secretary shall prescribe and, in addition 

19 to such other information as the Secretary may provide, 

20 shall include in plain and understandable language the fol21 lowing information: 

22 ‘‘(1) A description and explanation of the nature 

23 and purpose of the costs incident to a real estate set24 tlement or a federally related mortgage loan. The de25 scription and explanation shall provide general inforVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00119 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
120 

•HR 1728 RH

1 mation about the mortgage process as well as specific 

2 information concerning, at a minimum— 

3 ‘‘(A) balloon payments; 

4 ‘‘(B) prepayment penalties; and 

5 ‘‘(C) the trade-off between closing costs and 

6 the interest rate over the life of the loan. 

7 ‘‘(2) An explanation and sample of the uniform 

8 settlement statement required by section 4. 

9 ‘‘(3) A list and explanation of lending practices, 

10 including those prohibited by the Truth in Lending 

11 Act or other applicable Federal law, and of other un12 fair practices and unreasonable or unnecessary 

13 charges to be avoided by the prospective buyer with 

14 respect to a real estate settlement. 

15 ‘‘(4) A list and explanation of questions a con16 sumer obtaining a federally related mortgage loan 

17 should ask regarding the loan, including whether the 

18 consumer will have the ability to repay the loan, 

19 whether the consumer sufficiently shopped for the 

20 loan, whether the loan terms include prepayment pen21 alties or balloon payments, and whether the loan will 

22 benefit the borrower. 

23 ‘‘(5) An explanation of the right of rescission as 

24 to certain transactions provided by sections 125 and 

25 129 of the Truth in Lending Act. 


bajohnson on PROD1PC77 with BILLS
121 

•HR 1728 RH

1 ‘‘(6) A brief explanation of the nature of a vari2 able rate mortgage and a reference to the booklet enti3 tled ‘Consumer Handbook on Adjustable Rate Mort4 gages’, published by the Board of Governors of the 

5 Federal Reserve System pursuant to section 

6 226.19(b)(1) of title 12, Code of Federal Regulations, 

7 or to any suitable substitute of such booklet that such 

8 Board of Governors may subsequently adopt pursuant 

9 to such section. 

10 ‘‘(7) A brief explanation of the nature of a home 

11 equity line of credit and a reference to the pamphlet 

12 required to be provided under section 127A of the 

13 Truth in Lending Act. 

14 ‘‘(8) Information about homeownership coun15 seling services made available pursuant to section 

16 106(a)(4) of the Housing and Urban Development Act 

17 of 1968 (12 U.S.C. 1701x(a)(4)), a recommendation 

18 that the consumer use such services, and notification 

19 that a list of certified providers of homeownership 

20 counseling in the area, and their contact information, 

21 is available. 

22 ‘‘(9) An explanation of the nature and purpose 

23 of escrow accounts when used in connection with 

24 loans secured by residential real estate and the reVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00121 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
122 

•HR 1728 RH

1 quirements under section 10 of this Act regarding 

2 such accounts. 

3 ‘‘(10) An explanation of the choices available to 

4 buyers of residential real estate in selecting persons to 

5 provide necessary services incidental to a real estate 

6 settlement. 

7 ‘‘(11) An explanation of a consumer’s respon8 sibilities, liabilities, and obligations in a mortgage 

9 transaction. 

10 ‘‘(12) An explanation of the nature and purpose 

11 of real estate appraisals, including the difference be12 tween an appraisal and a home inspection. 

13 ‘‘(13) Notice that the Office of Housing of the 

14 Department of Housing and Urban Development has 

15 made publicly available a brochure regarding loan 

16 fraud and a World Wide Web address and toll-free 

17 telephone number for obtaining the brochure. 

18 The booklet prepared pursuant to this section shall take into 

19 consideration differences in real estate settlement procedures 

20 that may exist among the several States and territories of 

21 the United States and among separate political subdivi22 sions within the same State and territory.’’; 

23 (3) in subsection (c), by inserting at the end the 

24 following new sentence: ‘‘Each lender shall also in25 clude with the booklet a reasonably complete or upVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00122 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
123 

•HR 1728 RH

1 dated list of homeownership counselors who are cer2 tified pursuant to section 106(e) of the Housing and 

3 Urban Development Act of 1968 (12 U.S.C. 1701x(e)) 

4 and located in the area of the lender.’’; and 

5 (4) in subsection (d), by inserting after the pe6 riod at the end of the first sentence the following: 

7 ‘‘The lender shall provide the HUD-issued booklet in 

8 the version that is most appropriate for the person re9 ceiving it.’’. 

10 SEC. 409. HOME INSPECTION COUNSELING. 

11 (a) PUBLIC OUTREACH.— 

12 (1) IN GENERAL.—The Secretary of Housing and 

13 Urban Development (in this section referred to as the 

14 ‘‘Secretary’’) shall take such actions as may be nec15 essary to inform potential homebuyers of the avail16 ability and importance of obtaining an independent 

17 home inspection. Such actions shall include— 

18 (A) publication of the HUD/FHA form 

19 HUD 92564–CN entitled ‘‘For Your Protection: 

20 Get a Home Inspection’’, in both English and 

21 Spanish languages; 

22 (B) publication of the HUD/FHA booklet 

23 entitled ‘‘For Your Protection: Get a Home In24 spection’’, in both English and Spanish lan25 guages; 


bajohnson on PROD1PC77 with BILLS
124 

•HR 1728 RH

1 (C) development and publication of a HUD 

2 booklet entitled ‘‘For Your Protection—Get a 

3 Home Inspection’’ that does not reference FHA4 insured homes, in both English and Spanish lan5 guages; and 

6 (D) publication of the HUD document enti7 tled ‘‘Ten Important Questions To Ask Your 

8 Home Inspector’’, in both English and Spanish 

9 languages. 

10 (2) AVAILABILITY.—The Secretary shall make the 

11 materials specified in paragraph (1) available for 

12 electronic access and, where appropriate, inform po13 tential homebuyers of such availability through home 

14 purchase counseling public service announcements 

15 and toll-free telephone hotlines of the Department of 

16 Housing and Urban Development. The Secretary shall 

17 give special emphasis to reaching first-time and low18 income homebuyers with these materials and efforts. 

19 (3) UPDATING.—The Secretary may periodically 

20 update and revise such materials, as the Secretary de21 termines to be appropriate. 

22 (b) REQUIREMENT FOR FHA-APPROVED LENDERS.— 

23 Each mortgagee approved for participation in the mortgage 

24 insurance programs under title II of the National Housing 

25 Act shall provide prospective homebuyers, at first contact, 


bajohnson on PROD1PC77 with BILLS
125 

•HR 1728 RH

1 whether upon pre-qualification, pre-approval, or initial ap2 plication, the materials specified in subparagraphs (A), 

3 (B), and (D) of subsection (a)(1). 

4 (c) REQUIREMENTS FOR HUD-APPROVED COUN5 SELING AGENCIES.—Each counseling agency certified pur6 suant by the Secretary to provide housing counseling serv7 ices shall provide each of their clients, as part of the home 

8 purchase counseling process, the materials specified in sub9 paragraphs (C) and (D) of subsection (a)(1). 

10 (d) TRAINING.—Training provided the Department of 

11 Housing and Urban Development for housing counseling 

12 agencies, whether such training is provided directly by the 

13 Department or otherwise, shall include— 

14 (1) providing information on counseling poten15 tial homebuyers of the availability and importance of 

16 getting an independent home inspection; 

17 (2) providing information about the home in18 spection process, including the reasons for specific in19 spections such as radon and lead-based paint testing; 

20 (3) providing information about advising poten21 tial homebuyers on how to locate and select a quali22 fied home inspector; and 

23 (4) review of home inspection public outreach 

24 materials of the Department. 


bajohnson on PROD1PC77 with BILLS
126 

•HR 1728 RH

1 TITLE V—MORTGAGE SERVICING 

2 SEC. 501. ESCROW AND IMPOUND ACCOUNTS RELATING TO 

3 CERTAIN CONSUMER CREDIT TRANSACTIONS. 

4 (a) IN GENERAL.—Chapter 2 of the Truth in Lending 

5 Act (15 U.S.C. 1631 et seq.) is amended by inserting after 

6 section 129C (as added by section 201) the following new 

7 section: 

8 ‘‘SEC. 129D. ESCROW OR IMPOUND ACCOUNTS RELATING TO 

9 CERTAIN CONSUMER CREDIT TRANSACTIONS. 

10 ‘‘(a) IN GENERAL.—Except as provided in subsection 

11 (b), (c), or (d) , a creditor, in connection with the formation 

12 or consummation of a consumer credit transaction secured 

13 by a first lien on the principal dwelling of the consumer, 

14 other than a consumer credit transaction under an open 

15 end credit plan or a reverse mortgage, shall establish, before 

16 the consummation of such transaction, an escrow or im17 pound account for the payment of taxes and hazard insur18 ance, and, if applicable, flood insurance, mortgage insur19 ance, ground rents, and any other required periodic pay20 ments or premiums with respect to the property or the loan 

21 terms, as provided in, and in accordance with, this section. 

22 ‘‘(b) WHEN REQUIRED.—No impound, trust, or other 

23 type of account for the payment of property taxes, insur24 ance premiums, or other purposes relating to the property 

25 may be required as a condition of a real property sale conVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00126 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
127 

•HR 1728 RH

1 tract or a loan secured by a first deed of trust or mortgage 

2 on the principal dwelling of the consumer, other than a con3 sumer credit transaction under an open end credit plan or 

4 a reverse mortgage, except when— 

5 ‘‘(1) any such impound, trust, or other type of 

6 escrow or impound account for such purposes is re7 quired by Federal or State law; 

8 ‘‘(2) a loan is made, guaranteed, or insured by 

9 a State or Federal governmental lending or insuring 

10 agency; 

11 ‘‘(3) the transaction is secured by a first mort12 gage or lien on the consumer’s principal dwelling and 

13 the annual percentage rate on the credit, at the date 

14 the interest rate is set, will exceed the average prime 

15 offer rate for a comparable transaction by 1.5 per16 centage points or more; or 

17 ‘‘(4) so required pursuant to regulation. 

18 ‘‘(c) DURATION OF MANDATORY ESCROW OR IMPOUND

19 ACCOUNT.—An escrow or impound account established pur20 suant to subsection (b), shall remain in existence for a min21 imum period of 5 years, beginning with the date of the con22 summation of the loan, and until such borrower has suffi23 cient equity in the dwelling securing the consumer credit 

24 transaction so as to no longer be required to maintain pri25 vate mortgage insurance, or such other period as may be 


bajohnson on PROD1PC77 with BILLS
128 

•HR 1728 RH

1 provided in regulations to address situations such as bor2 rower delinquency, unless the underlying mortgage estab3 lishing the account is terminated. 

4 ‘‘(d) LIMITED EXEMPTIONS FOR LOANS SECURED BY

5 SHARES IN A COOPERATIVE AND FOR CERTAIN CONDO6 MINIUM UNITS.—Escrow accounts need not be established 

7 for loans secured by shares in a cooperative. Insurance pre8 miums need not be included in escrow accounts for loans 

9 secured by condominium units, where the condominium as10 sociation has an obligation to the condominium unit owners 

11 to maintain a master policy insuring condominium units. 

12 ‘‘(e) CLARIFICATION ON ESCROW ACCOUNTS FOR

13 LOANS NOT MEETING STATUTORY TEST.—For mortgages 

14 not covered by the requirements of subsection (b), no provi15 sion of this section shall be construed as precluding the es16 tablishment of an impound, trust, or other type of account 

17 for the payment of property taxes, insurance premiums, or 

18 other purposes relating to the property— 

19 ‘‘(1) on terms mutually agreeable to the parties 

20 to the loan; 

21 ‘‘(2) at the discretion of the lender or servicer, as 

22 provided by the contract between the lender or servicer 

23 and the borrower; or 

24 ‘‘(3) pursuant to the requirements for the 

25 escrowing of flood insurance payments for regulated 


bajohnson on PROD1PC77 with BILLS
129 

•HR 1728 RH

1 lending institutions in section 102(d) of the Flood 

2 Disaster Protection Act of 1973. 

3 ‘‘(f) ADMINISTRATION OF MANDATORY ESCROW OR IM4 POUND ACCOUNTS.— 

5 ‘‘(1) IN GENERAL.—Except as may otherwise be 

6 provided for in this title or in regulations prescribed 

7 by the Board, escrow or impound accounts established 

8 pursuant to subsection (b) shall be established in a 

9 federally insured depository institution. 

10 ‘‘(2) ADMINISTRATION.—Except as provided in 

11 this section or regulations prescribed under this sec12 tion, an escrow or impound account subject to this 

13 section shall be administered in accordance with— 

14 ‘‘(A) the Real Estate Settlement Procedures 

15 Act of 1974 and regulations prescribed under 

16 such Act; 

17 ‘‘(B) the Flood Disaster Protection Act of 

18 1973 and regulations prescribed under such Act; 

19 and 

20 ‘‘(C) the law of the State, if applicable, 

21 where the real property securing the consumer 

22 credit transaction is located. 

23 ‘‘(3) APPLICABILITY OF PAYMENT OF INTER24 EST.—If prescribed by applicable State or Federal 

25 law, each creditor shall pay interest to the consumer 


bajohnson on PROD1PC77 with BILLS
130 

•HR 1728 RH

1 on the amount held in any impound, trust, or escrow 

2 account that is subject to this section in the manner 

3 as prescribed by that applicable State or Federal law. 

4 ‘‘(4) PENALTY COORDINATION WITH RESPA.— 

5 Any action or omission on the part of any person 

6 which constitutes a violation of the Real Estate Set7 tlement Procedures Act of 1974 or any regulation pre8 scribed under such Act for which the person has paid 

9 any fine, civil money penalty, or other damages shall 

10 not give rise to any additional fine, civil money pen11 alty, or other damages under this section, unless the 

12 action or omission also constitutes a direct violation 

13 of this section. 

14 ‘‘(g) DISCLOSURES RELATING TO MANDATORY ES15 CROW OR IMPOUND ACCOUNT.—In the case of any im16 pound, trust, or escrow account that is subject to this sec17 tion, the creditor shall disclose by written notice to the con18 sumer at least 3 business days before the consummation of 

19 the consumer credit transaction giving rise to such account 

20 or in accordance with timeframes established in prescribed 

21 regulations the following information: 

22 ‘‘(1) The fact that an escrow or impound account 

23 will be established at consummation of the trans24 action. 


bajohnson on PROD1PC77 with BILLS
131 

•HR 1728 RH

1 ‘‘(2) The amount required at closing to initially 

2 fund the escrow or impound account. 

3 ‘‘(3) The amount, in the initial year after the 

4 consummation of the transaction, of the estimated 

5 taxes and hazard insurance, including flood insur6 ance, if applicable, and any other required periodic 

7 payments or premiums that reflects, as appropriate, 

8 either the taxable assessed value of the real property 

9 securing the transaction, including the value of any 

10 improvements on the property or to be constructed on 

11 the property (whether or not such construction will be 

12 financed from the proceeds of the transaction) or the 

13 replacement costs of the property. 

14 ‘‘(4) The estimated monthly amount payable to 

15 be escrowed for taxes, hazard insurance (including 

16 flood insurance, if applicable) and any other required 

17 periodic payments or premiums. 

18 ‘‘(5) The fact that, if the consumer chooses to ter19 minate the account at the appropriate time in the fu20 ture, the consumer will become responsible for the 

21 payment of all taxes, hazard insurance, and flood in22 surance, if applicable, as well as any other required 

23 periodic payments or premiums on the property un24 less a new escrow or impound account is established. 


bajohnson on PROD1PC77 with BILLS
132 

•HR 1728 RH

1 ‘‘(6) Such other information as the Federal 

2 banking agencies jointly determine necessary for the 

3 protection of the consumer. 

4 ‘‘(h) DEFINITIONS.—For purposes of this section, the 

5 following definitions shall apply: 

6 ‘‘(1) FLOOD INSURANCE.—The term ‘flood insur7 ance’ means flood insurance coverage provided under 

8 the national flood insurance program pursuant to the 

9 National Flood Insurance Act of 1968. 

10 ‘‘(2) HAZARD INSURANCE.—The term ‘hazard in11 surance’ shall have the same meaning as provided for 

12 ‘hazard insurance’, ‘casualty insurance’, ‘homeowner’s 

13 insurance’, or other similar term under the law of the 

14 State where the real property securing the consumer 

15 credit transaction is located.’’. 

16 (b) IMPLEMENTATION.— 

17 (1) REGULATIONS.—The Board of Governors of 

18 the Federal Reserve System, the Comptroller of the 

19 Currency, the Director of the Office of Thrift Super20 vision, the Federal Deposit Insurance Corporation, 

21 the National Credit Union Administration Board, 

22 (hereafter in this Act referred to as the ‘‘Federal bank23 ing agencies’’) and the Federal Trade Commission 

24 shall prescribe, in final form, such regulations as de25 termined to be necessary to implement the amendVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00132 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
133 

•HR 1728 RH

1 ments made by subsection (a) before the end of the 

2 180-day period beginning on the date of the enact3 ment of this Act. 

4 (2) EFFECTIVE DATE.—The amendments made 

5 by subsection (a) shall only apply to covered mortgage 

6 loans consummated after the end of the 1-year period 

7 beginning on the date of the publication of final regu8 lations in the Federal Register. 

9 (c) CLERICAL AMENDMENT.—The table of sections for 

10 chapter 2 of the Truth in Lending Act is amended by insert11 ing after the item relating to section 129C (as added by 

12 section 201) the following new item: 

‘‘129D. Escrow or impound accounts relating to certain consumer credit transactions.’’. 

13 SEC. 502. DISCLOSURE NOTICE REQUIRED FOR CONSUMERS 

14 WHO WAIVE ESCROW SERVICES. 

15 (a) IN GENERAL.—Section 129D of the Truth in Lend16 ing Act (as added by section 501) is amended by adding 

17 at the end the following new subsection: 

18 ‘‘(i) DISCLOSURE NOTICE REQUIRED FOR CONSUMERS

19 WHO WAIVE ESCROW SERVICES.— 

20 ‘‘(1) IN GENERAL.—If— 

21 ‘‘(A) an impound, trust, or other type of ac22 count for the payment of property taxes, insur23 ance premiums, or other purposes relating to 

24 real property securing a consumer credit transVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00133 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
134 

•HR 1728 RH

1 action is not established in connection with the 

2 transaction; or 

3 ‘‘(B) a consumer chooses, and provides writ4 ten notice to the creditor or servicer of such 

5 choice, at any time after such an account is es6 tablished in connection with any such trans7 action and in accordance with any statute, regu8 lation, or contractual agreement, to close such 

9 account, 

10 the creditor or servicer shall provide a timely and 

11 clearly written disclosure to the consumer that advises 

12 the consumer of the responsibilities of the consumer 

13 and implications for the consumer in the absence of 

14 any such account. 

15 ‘‘(2) DISCLOSURE REQUIREMENTS.—Any disclo16 sure provided to a consumer under paragraph (1) 

17 shall include the following: 

18 ‘‘(A) Information concerning any applicable 

19 fees or costs associated with either the non-estab20 lishment of any such account at the time of the 

21 transaction, or any subsequent closure of any 

22 such account. 

23 ‘‘(B) A clear and prominent notice that the 

24 consumer is responsible for personally and di25 rectly paying the non-escrowed items, in addiVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00134 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
135 

•HR 1728 RH

1 tion to paying the mortgage loan payment, in 

2 the absence of any such account, and the fact 

3 that the costs for taxes, insurance, and related 

4 fees can be substantial. 

5 ‘‘(C) A clear explanation of the consequences 

6 of any failure to pay non-escrowed items, includ7 ing the possible requirement for the forced place8 ment of insurance by the creditor or servicer and 

9 the potentially higher cost (including any poten10 tial commission payments to the servicer) or re11 duced coverage for the consumer in the event of 

12 any such creditor-placed insurance. 

13 ‘‘(D) Such other information as the Federal 

14 banking agencies jointly determine necessary for 

15 the protection of the consumer.’’. 

16 (b) IMPLEMENTATION.— 

17 (1) REGULATIONS.—The Federal banking agen18 cies and the Federal Trade Commission shall pre19 scribe, in final form, such regulations as such agen20 cies determine to be necessary to implement the 

21 amendments made by subsection (a) before the end of 

22 the 180-day period beginning on the date of the enact23 ment of this Act. 

24 (2) EFFECTIVE DATE.—The amendments made 

25 by subsection (a) shall only apply in accordance with 


bajohnson on PROD1PC77 with BILLS
136 

•HR 1728 RH

1 the regulations established in paragraph (1) and be2 ginning on the date occurring 180-days after the date 

3 of the publication of final regulations in the Federal 

4 Register. 

5 SEC. 503. REAL ESTATE SETTLEMENT PROCEDURES ACT OF 

6 1974 AMENDMENTS. 

7 (a) SERVICER PROHIBITIONS.—Section 6 of the Real 

8 Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605) 

9 is amended by adding at the end the following new sub10 sections: 

11 ‘‘(k) SERVICER PROHIBITIONS.— 

12 ‘‘(1) IN GENERAL.—A servicer of a federally re13 lated mortgage shall not— 

14 ‘‘(A) obtain force-placed hazard insurance 

15 unless there is a reasonable basis to believe the 

16 borrower has failed to comply with the loan con17 tract’s requirements to maintain property insur18 ance; 

19 ‘‘(B) charge fees for responding to valid 

20 qualified written requests (as defined in regula21 tions which the Secretary shall prescribe) under 

22 this section; 

23 ‘‘(C) fail to take timely action to respond to 

24 a borrower’s requests to correct errors relating to 

25 allocation of payments, final balances for purVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00136 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
137 

•HR 1728 RH

1 poses of paying off the loan, or avoiding fore2 closure, or other standard servicer’s duties; 

3 ‘‘(D) fail to respond within 10 business 

4 days to a request from a borrower to provide the 

5 identity, address, and other relevant contact in6 formation about the owner assignee of the loan; 

7 or 

8 ‘‘(E) fail to comply with any other obliga9 tion found by the Secretary, by regulation, to be 

10 appropriate to carry out the consumer protection 

11 purposes of this Act. 

12 ‘‘(2) FORCE-PLACED INSURANCE DEFINED.—For 

13 purposes of this subsection and subsections (l) and 

14 (m), the term ‘force-placed insurance’ means hazard 

15 insurance coverage obtained by a servicer of a feder16 ally related mortgage when the borrower has failed to 

17 maintain or renew hazard insurance on such prop18 erty as required of the borrower under the terms of the 

19 mortgage. 

20 ‘‘(l) REQUIREMENTS FOR FORCE-PLACED INSUR21 ANCE.—A servicer of a federally related mortgage shall not 

22 be construed as having a reasonable basis for obtaining 

23 force-placed insurance unless the requirements of this sub24 section have been met. 


bajohnson on PROD1PC77 with BILLS
138 

•HR 1728 RH

1 ‘‘(1) WRITTEN NOTICES TO BORROWER.—A 

2 servicer may not impose any charge on any borrower 

3 for force-placed insurance with respect to any prop4 erty securing a federally related mortgage unless— 

5 ‘‘(A) the servicer has sent, by first-class 

6 mail, a written notice to the borrower con7 taining— 

8 ‘‘(i) a reminder of the borrower’s obli9 gation to maintain hazard insurance on the 

10 property securing the federally related mort11 gage; 

12 ‘‘(ii) a statement that the servicer does 

13 not have evidence of insurance coverage of 

14 such property; 

15 ‘‘(iii) a clear and conspicuous state16 ment of the procedures by which the bor17 rower may demonstrate that the borrower 

18 already has insurance coverage; and 

19 ‘‘(iv) a statement that the servicer may 

20 obtain such coverage at the borrower’s ex21 pense if the borrower does not provide such 

22 demonstration of the borrower’s existing 

23 coverage in a timely manner; 

24 ‘‘(B) the servicer has sent, by first-class 

25 mail, a second written notice, at least 30 days 


bajohnson on PROD1PC77 with BILLS
139 

•HR 1728 RH

1 after the mailing of the notice under subpara2 graph (A) that contains all the information de3 scribed in each clauses of such subparagraph; 

4 and 

5 ‘‘(C) the servicer has not received from the 

6 borrower any demonstration of hazard insurance 

7 coverage for the property securing the mortgage 

8 by the end of the 15-day period beginning on the 

9 date the notice under subparagraph (B) was sent 

10 by the servicer. 

11 ‘‘(2) SUFFICIENCY OF DEMONSTRATION.—A 

12 servicer of a federally related mortgage shall accept 

13 any reasonable form of written confirmation from a 

14 borrower of existing insurance coverage, which shall 

15 include the existing insurance policy number along 

16 with the identity of, and contact information for, the 

17 insurance company or agent. 

18 ‘‘(3) TERMINATION OF FORCE-PLACED INSUR19 ANCE.—Within 15 days of the receipt by a servicer of 

20 confirmation of a borrower’s existing insurance cov21 erage, the servicer shall— 

22 ‘‘(A) terminate the force-placed insurance; 

23 and 

24 ‘‘(B) refund to the consumer all force-placed 

25 insurance premiums paid by the borrower durVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00139 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
140 

•HR 1728 RH

1 ing any period during which the borrower’s in2 surance coverage and the force-placed insurance 

3 coverage were each in effect, and any related fees 

4 charged to the consumer’s account with respect to 

5 the force-placed insurance during such period. 

6 ‘‘(4) CLARIFICATION WITH RESPECT TO FLOOD

7 DISASTER PROTECTION ACT.—No provision of this 

8 section shall be construed as prohibiting a servicer 

9 from providing simultaneous or concurrent notice of 

10 a lack of flood insurance pursuant to section 102(e) 

11 of the Flood Disaster Protection Act of 1973. 

12 ‘‘(m) LIMITATIONS ON FORCE-PLACED INSURANCE

13 CHARGES.—All charges for force-placed insurance pre14 miums shall be bona fide and reasonable in amount.’’. 

15 (b) INCREASE IN PENALTY AMOUNTS.—Section 6(f) of 

16 the Real Estate Settlement Procedures Act of 1974 (12 

17 U.S.C. 2605(f)) is amended— 

18 (1) in paragraphs (1)(B) and (2)(B), by striking 

19 ‘‘$1,000’’ each place such term appears and inserting 

20 ‘‘$2,000’’; and 

21 (2) in paragraph (2)(B)(i), by striking 

22 ‘‘$500,000’’ and inserting ‘‘$1,000,000’’. 

23 (c) DECREASE IN RESPONSE TIMES.—Section 6(e) of 

24 the Real Estate Settlement Procedures Act of 1974 (12 

25 U.S.C. 2605(e)) is amended— 


bajohnson on PROD1PC77 with BILLS
141 

•HR 1728 RH

1 (1) in paragraph (1)(A), by striking ‘‘20 days’’ 

2 and inserting ‘‘5 days’’; 

3 (2) in paragraph (2), by striking ‘‘60 days’’ and 

4 inserting ‘‘30 days’’; and 

5 (3) by adding at the end the following new para6 graph: 

7 ‘‘(4) LIMITED EXTENSION OF RESPONSE TIME.— 

8 The 30-day period described in paragraph (2) may be 

9 extended for not more than 15 days if, before the end 

10 of such 30-day period, the servicer notifies the bor11 rower of the extension and the reasons for the delay 

12 in responding.’’. 

13 (d) PROMPT REFUND OF ESCROW ACCOUNTS UPON

14 PAYOFF.—Section 6(g) of the Real Estate Settlement Proce15 dures Act of 1974 (12 U.S.C. 2605(g)) is amended by add16 ing at the end the following new sentence: ‘‘Any balance 

17 in any such account that is within the servicer’s control 

18 at the time the loan is paid off shall be promptly returned 

19 to the borrower within 20 business days or credited to a 

20 similar account for a new mortgage loan to the borrower 

21 with the same lender.’’. 

22 SEC. 504. TRUTH IN LENDING ACT AMENDMENTS. 

23 (a) REQUIREMENTS FOR PROMPT CREDITING OF

24 HOME LOAN PAYMENTS.—Chapter 2 of the Truth in Lend25 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 


bajohnson on PROD1PC77 with BILLS
142 

•HR 1728 RH

1 after section 129E (as added by section 602) the following 

2 new section (and by amending the table of contents accord3 ingly): 

4 ‘‘SEC. 129F. REQUIREMENTS FOR PROMPT CREDITING OF 

5 HOME LOAN PAYMENTS. 

6 ‘‘(a) IN GENERAL.—In connection with a consumer 

7 credit transaction secured by a consumer’s principal dwell8 ing, no servicer shall fail to credit a payment to the con9 sumer’s loan account as of the date of receipt, except when 

10 a delay in crediting does not result in any charge to the 

11 consumer or in the reporting of negative information to a 

12 consumer reporting agency, except as required in subsection 

13 (b). 

14 ‘‘(b) EXCEPTION.—If a servicer specifies in writing re15 quirements for the consumer to follow in making payments, 

16 but accepts a payment that does not conform to the require17 ments, the servicer shall credit the payment as of 5 days 

18 after receipt.’’. 

19 (b) REQUESTS FOR PAYOFF AMOUNTS.—Chapter 2 of 

20 such Act is further amended by inserting after section 129F 

21 (as added by subsection (a)) the following new section (and 

22 by amending the table of contents accordingly): 


bajohnson on PROD1PC77 with BILLS
143 

•HR 1728 RH

1 ‘‘SEC. 129G. REQUESTS FOR PAYOFF AMOUNTS OF HOME 

2 LOAN. 

3 ‘‘A creditor or servicer of a home loan shall send an 

4 accurate payoff balance within a reasonable time, but in 

5 no case more than 7 business days, after the receipt of a 

6 written request for such balance from or on behalf of the 

7 borrower.’’. 

8 SEC. 505. ESCROWS INCLUDED IN REPAYMENT ANALYSIS. 

9 (a) IN GENERAL.—Section 128(b) of the Truth in 

10 Lending Act (15 U.S.C. 1638(b)) is amended by adding at 

11 the end the following new paragraph: 

12 ‘‘(5) REPAYMENT ANALYSIS REQUIRED TO IN13 CLUDE ESCROW PAYMENTS.— 

14 ‘‘(A) IN GENERAL.—In the case of any con15 sumer credit transaction secured by a first mort16 gage or lien on the principal dwelling of the con17 sumer, other than a consumer credit transaction 

18 under an open end credit plan or a reverse mort19 gage, for which an impound, trust, or other type 

20 of account has been or will be established in con21 nection with the transaction for the payment of 

22 property taxes, hazard and flood (if any) insur23 ance premiums, or other periodic payments or 

24 premiums with respect to the property, the infor25 mation required to be provided under subsection 

26 (a) with respect to the number, amount, and due 


bajohnson on PROD1PC77 with BILLS
144 

•HR 1728 RH

1 dates or period of payments scheduled to repay 

2 the total of payments shall take into account the 

3 amount of any monthly payment to such account 

4 for each such repayment in accordance with sec5 tion 10(a)(2) of the Real Estate Settlement Pro6 cedures Act of 1974. 

7 ‘‘(B) ASSESSMENT VALUE.—The amount 

8 taken into account under subparagraph (A) for 

9 the payment of property taxes, hazard and flood 

10 (if any) insurance premiums, or other periodic 

11 payments or premiums with respect to the prop12 erty shall reflect the taxable assessed value of the 

13 real property securing the transaction after the 

14 consummation of the transaction, including the 

15 value of any improvements on the property or to 

16 be constructed on the property (whether or not 

17 such construction will be financed from the pro18 ceeds of the transaction), if known, and the re19 placement costs of the property for hazard insur20 ance, in the initial year after the transaction.’’. 


bajohnson on PROD1PC77 with BILLS
145 

•HR 1728 RH

1 TITLE VI—APPRAISAL 

2 ACTIVITIES 

3 SEC. 601. PROPERTY APPRAISAL REQUIREMENTS. 

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

5 1639) is amended by inserting after subsection (v) (as 

6 added by section 303(f)) the following new subsection: 

7 ‘‘(w) PROPERTY APPRAISAL REQUIREMENTS.— 

8 ‘‘(1) IN GENERAL.—A creditor may not extend 

9 credit in the form of a subprime mortgage to any con10 sumer without first obtaining a written appraisal of 

11 the property to be mortgaged prepared in accordance 

12 with the requirements of this subsection. 

13 ‘‘(2) APPRAISAL REQUIREMENTS.— 

14 ‘‘(A) PHYSICAL PROPERTY VISIT.—An ap15 praisal of property to be secured by a subprime 

16 mortgage does not meet the requirement of this 

17 subsection unless it is performed by a qualified 

18 appraiser who conducts a physical property visit 

19 of the interior of the mortgaged property. 

20 ‘‘(B) SECOND APPRAISAL UNDER CERTAIN

21 CIRCUMSTANCES.— 

22 ‘‘(i) IN GENERAL.—If the purpose of a 

23 subprime mortgage is to finance the pur24 chase or acquisition of the mortgaged prop25 erty from a person within 180 days of the 


bajohnson on PROD1PC77 with BILLS
146 

•HR 1728 RH

1 purchase or acquisition of such property by 

2 that person at a price that was lower than 

3 the current sale price of the property, the 

4 creditor shall obtain a second appraisal 

5 from a different qualified appraiser. The 

6 second appraisal shall include an analysis 

7 of the difference in sale prices, changes in 

8 market conditions, and any improvements 

9 made to the property between the date of the 

10 previous sale and the current sale. 

11 ‘‘(ii) NO COST TO APPLICANT.—The 

12 cost of any second appraisal required under 

13 clause (i) may not be charged to the appli14 cant. 

15 ‘‘(C) QUALIFIED APPRAISER DEFINED.—For 

16 purposes of this subsection, the term ‘qualified 

17 appraiser’ means a person who— 

18 ‘‘(i) is, at a minimum, certified or li19 censed by the State in which the property to 

20 be appraised is located; and 

21 ‘‘(ii) performs each appraisal in con22 formity with the Uniform Standards of 

23 Professional Appraisal Practice and title XI 

24 of the Financial Institutions Reform, Recov25 ery, and Enforcement Act of 1989, and the 


bajohnson on PROD1PC77 with BILLS
147 

•HR 1728 RH

1 regulations prescribed under such title, as 

2 in effect on the date of the appraisal. 

3 ‘‘(3) FREE COPY OF APPRAISAL.—A creditor 

4 shall provide 1 copy of each appraisal conducted in 

5 accordance with this subsection in connection with a 

6 subprime mortgage to the applicant without charge, 

7 and at least 3 days prior to the transaction closing 

8 date. 

9 ‘‘(4) CONSUMER NOTIFICATION.—At the time of 

10 the initial mortgage application, the applicant shall 

11 be provided with a statement by the creditor that any 

12 appraisal prepared for the mortgage is for the sole use 

13 of the creditor, and that the applicant may choose to 

14 have a separate appraisal conducted at their own ex15 pense. 

16 ‘‘(5) VIOLATIONS.—In addition to any other li17 ability to any person under this title, a creditor 

18 found to have willfully failed to obtain an appraisal 

19 as required in this subsection shall be liable to the ap20 plicant or borrower for the sum of $2,000. 

21 ‘‘(6) SUBPRIME MORTGAGE DEFINED.—For pur22 poses of this subsection, the term ‘subprime mortgage’ 

23 means a residential mortgage loan with an annual 

24 percentage rate that exceeds the average prime offer 


bajohnson on PROD1PC77 with BILLS
148 

•HR 1728 RH

1 rate for a comparable transaction, as of the date the 

2 interest rate is set— 

3 ‘‘(A) by 1.5 or more percentage points for a 

4 first lien residential mortgage loan; and 

5 ‘‘(B) by 3.5 or more percentage points for a 

6 subordinate lien residential mortgage loan.’’. 

7 SEC. 602. UNFAIR AND DECEPTIVE PRACTICES AND ACTS 

8 RELATING TO CERTAIN CONSUMER CREDIT 

9 TRANSACTIONS. 

10 (a) IN GENERAL.—Chapter 2 of the Truth in Lending 

11 Act (15 U.S.C. 1631 et seq.) is amended by inserting after 

12 section 129D (as added by section 501(a)) the following new 

13 section: 

14 ‘‘SEC. 129E. UNFAIR AND DECEPTIVE PRACTICES AND ACTS 

15 RELATING TO CERTAIN CONSUMER CREDIT 

16 TRANSACTIONS. 

17 ‘‘(a) IN GENERAL.—It shall be unlawful, in extending 

18 credit or in providing any services for a consumer credit 

19 transaction secured by the principal dwelling of the con20 sumer, to engage in any unfair or deceptive act or practice 

21 as described in or pursuant to regulations prescribed under 

22 this section. 

23 ‘‘(b) APPRAISAL INDEPENDENCE.—For purposes of 

24 subsection (a), unfair and deceptive practices shall in25 clude— 


bajohnson on PROD1PC77 with BILLS
149 

•HR 1728 RH

1 ‘‘(1) any appraisal of a property offered as secu2 rity for repayment of the consumer credit transaction 

3 that is conducted in connection with such transaction 

4 in which a person with an interest in the underlying 

5 transaction compensates, coerces, extorts, colludes, in6 structs, induces, bribes, or intimidates a person con7 ducting or involved in an appraisal, or attempts, to 

8 compensate, coerce, extort, collude, instruct, induce, 

9 bribe, or intimidate such a person, for the purpose of 

10 causing the appraised value assigned, under the ap11 praisal, to the property to be based on any factor 

12 other than the independent judgment of the appraiser; 

13 ‘‘(2) mischaracterizing, or suborning any 

14 mischaracterization of, the appraised value of the 

15 property securing the extension of the credit; 

16 ‘‘(3) seeking to influence an appraiser or other17 wise to encourage a targeted value in order to facili18 tate the making or pricing of the transaction; and 

19 ‘‘(4) withholding or threatening to withhold 

20 timely payment for an appraisal report or for ap21 praisal services rendered. 

22 ‘‘(c) EXCEPTIONS.—The requirements of subsection (b) 

23 shall not be construed as prohibiting a mortgage lender, 

24 mortgage broker, mortgage banker, real estate broker, ap25 praisal management company, employee of an appraisal 


bajohnson on PROD1PC77 with BILLS
150 

•HR 1728 RH

1 management company, consumer, or any other person with 

2 an interest in a real estate transaction from asking an ap3 praiser to provide 1 or more of the following services: 

4 ‘‘(1) Consider additional, appropriate property 

5 information, including the consideration of additional 

6 comparable properties to make or support an ap7 praisal. 

8 ‘‘(2) Provide further detail, substantiation, or ex9 planation for the appraiser’s value conclusion. 

10 ‘‘(3) Correct errors in the appraisal report. 

11 ‘‘(d) PROHIBITIONS ON CONFLICTS OF INTEREST.—No 

12 certified or licensed appraiser conducting, and no appraisal 

13 management company procuring or facilitating, an ap14 praisal in connection with a consumer credit transaction 

15 secured by the principal dwelling of a consumer may have 

16 a direct or indirect interest, financial or otherwise, in the 

17 property or transaction involving the appraisal. 

18 ‘‘(e) MANDATORY REPORTING.—Any mortgage lender, 

19 mortgage broker, mortgage banker, real estate broker, ap20 praisal management company, employee of an appraisal 

21 management company, or any other person involved in a 

22 real estate transaction involving an appraisal in connection 

23 with a consumer credit transaction secured by the principal 

24 dwelling of a consumer who has a reasonable basis to believe 

25 an appraiser is failing to comply with the Uniform StandVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00150 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
151 

•HR 1728 RH

1 ards of Professional Appraisal Practice, is violating appli2 cable laws, or is otherwise engaging in unethical or unpro3 fessional conduct, shall refer the matter to the applicable 

4 State appraiser certifying and licensing agency. 

5 ‘‘(f) NO EXTENSION OF CREDIT.—In connection with 

6 a consumer credit transaction secured by a consumer’s 

7 principal dwelling, a creditor who knows, at or before loan 

8 consummation, of a violation of the appraisal independence 

9 standards established in subsections (b) or (d) shall not ex10 tend credit based on such appraisal unless the creditor docu11 ments that the creditor has acted with reasonable diligence 

12 to determine that the appraisal does not materially misstate 

13 or misrepresent the value of such dwelling. 

14 ‘‘(g) RULEMAKING PROCEEDINGS.—The Board, the 

15 Comptroller of the Currency, the Director of the Office of 

16 Thrift Supervision, the Federal Deposit Insurance Corpora17 tion, the National Credit Union Administration Board, 

18 and the Federal Trade Commission— 

19 ‘‘(1) shall, for purposes of this section, jointly 

20 prescribe regulations no later than 180 days after the 

21 date of the enactment of this section, and where such 

22 regulations have an effective date of no later than 1 

23 year after the date of the enactment of this section, 

24 defining with specificity acts or practices which are 

25 unfair or deceptive in the provision of mortgage lendVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00151 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
152 

•HR 1728 RH

1 ing services for a consumer credit transaction secured 

2 by the principal dwelling of the consumer or mortgage 

3 brokerage services for such a transaction and defining 

4 any terms in this section or such regulations; and 

5 ‘‘(2) may jointly issue interpretive guidelines 

6 and general statements of policy with respect to un7 fair or deceptive acts or practices in the provision of 

8 mortgage lending services for a consumer credit trans9 action secured by the principal dwelling of the con10 sumer and mortgage brokerage services for such a 

11 transaction, within the meaning of subsections (a), 

12 (b), (c), (d), (e), and (f). 

13 ‘‘(h) PENALTIES.— 

14 ‘‘(1) FIRST VIOLATION.—In addition to the en15 forcement provisions referred to in section 130, each 

16 person who violates this section shall forfeit and pay 

17 a civil penalty of not more than $10,000 for each day 

18 any such violation continues. 

19 ‘‘(2) SUBSEQUENT VIOLATIONS.—In the case of 

20 any person on whom a civil penalty has been imposed 

21 under paragraph (1), paragraph (1) shall be applied 

22 by substituting ‘$20,000’ for ‘$10,000’ with respect to 

23 all subsequent violations. 

24 ‘‘(3) ASSESSMENT.—The agency referred to in 

25 subsection (a) or (c) of section 108 with respect to 


bajohnson on PROD1PC77 with BILLS
153 

•HR 1728 RH

1 any person described in paragraph (1) shall assess 

2 any penalty under this subsection to which such per3 son is subject.’’. 

4 (b) CLERICAL AMENDMENT.—The table of sections for 

5 chapter 2 of the Truth in Lending Act is amended by insert6 ing after the item relating to section 129D (as added by 

7 section 501(c)) the following new item: 

‘‘129E. Unfair and deceptive practices and acts relating to certain consumer credit transactions.’’. 

8 SEC. 603. AMENDMENTS RELATING TO APPRAISAL SUB9 COMMITTEE OF FIEC, APPRAISER INDEPEND10 ENCE, AND APPROVED APPRAISER EDU11 CATION. 

12 (a) CONSUMER PROTECTION MISSION.— 

13 (1) PURPOSES.—Section 1101 of the Financial 

14 Institutions Reform, Recovery, and Enforcement Act 

15 of 1989 (12 U.S.C. 3331) is amended by inserting 

16 ‘‘and to provide the Appraisal Subcommittee with a 

17 consumer protection mandate’’ before the period at the 

18 end. 

19 (2) FUNCTIONS OF APPRAISAL SUBCOMMITTEE.— 

20 Section 1103(a) of the Financial Institutions Reform, 

21 Recovery, and Enforcement Act of 1989 (12 U.S.C. 

22 3332(a)) is amended— 

23 (A) by striking ‘‘and’’ at the end of para24 graph (3); 


bajohnson on PROD1PC77 with BILLS
154 

•HR 1728 RH

1 (B) by striking the period at the end of 

2 paragraph (4) and inserting ‘‘;’’; and 

3 (C) by adding at the end the following new 

4 paragraph: 

5 ‘‘(5) monitor the efforts of, and requirements es6 tablished by, States and the Federal financial institu7 tions regulatory agencies to protect consumers from 

8 improper appraisal practices and the predations of 

9 unlicensed appraisers in consumer credit transactions 

10 that are secured by a consumer’s principal dwelling; 

11 and’’. 

12 (3) THRESHOLD LEVELS.—Section 1112(b) of the 

13 Financial Institutions Reform, Recovery, and En14 forcement Act of 1989 (12 U.S.C. 3341(b)) is amended 

15 by inserting before the period the following: ‘‘, and 

16 that such threshold level provides reasonable protec17 tion for consumers who purchase 1–4 unit single-fam18 ily residences. In determining whether a threshold 

19 level provides reasonable protection for consumers, 

20 each Federal financial institutions regulatory agency 

21 shall consult with consumer groups and convene a 

22 public hearing’’. 

23 (b) ANNUAL REPORT OF APPRAISAL SUB24 COMMITTEE.— 


bajohnson on PROD1PC77 with BILLS
155 

•HR 1728 RH

1 (1) IN GENERAL.—Section 1103(a) of the Finan2 cial Institutions Reform, Recovery, and Enforcement 

3 Act of 1989 (12 U.S.C. 3332(a)) is amended at the 

4 end by inserting the following new paragraph: 

5 ‘‘(6) transmit an annual report to the Congress 

6 not later than January 31 of each year that describes 

7 the manner in which each function assigned to the 

8 Appraisal Subcommittee has been carried out during 

9 the preceding year. The report shall also detail the ac10 tivities of the Appraisal Subcommittee, including the 

11 results of all audits of State appraiser regulatory 

12 agencies, and provide an accounting of disapproved 

13 actions and warnings taken in the previous year, in14 cluding a description of the conditions causing the 

15 disapproval and actions taken to achieve compli16 ance.’’. 

17 (c) OPEN MEETINGS.—Section 1104(b) of the Finan18 cial Institutions Reform, Recovery, and Enforcement Act 

19 of 1989 (12 U.S.C. 3333(b)) is amended by inserting ‘‘in 

20 public session after notice in the Federal Register’’ after 

21 ‘‘shall meet’’. 

22 (d) REGULATIONS.—Section 1106 of the Financial In23 stitutions Reform, Recovery, and Enforcement Act of 1989 

24 (12 U.S.C. 3335) is amended— 


bajohnson on PROD1PC77 with BILLS
156 

•HR 1728 RH

1 (1) by inserting ‘‘prescribe regulations after no2 tice and opportunity for comment,’’ after ‘‘hold hear3 ings’’; and 

4 (2) at the end by inserting ‘‘Any regulations pre5 scribed by the Appraisal Subcommittee shall (unless 

6 otherwise provided in this title) be limited to the fol7 lowing functions: temporary practice, national reg8 istry, information sharing, and enforcement. For pur9 poses of prescribing regulations, the Appraisal Sub10 committee shall establish an advisory committee of in11 dustry participants, including appraisers, lenders, 

12 consumer advocates, and government agencies, and 

13 hold meetings as necessary to support the development 

14 of regulations.’’. 

15 (e) FIELD APPRAISALS AND APPRAISAL REVIEWS.— 

16 Section 1113 of the Financial Institutions Reform, Recov17 ery, and Enforcement Act of 1989 (12 U.S.C. 3342) is 

18 amended— 

19 (1) by striking ‘‘In determining’’ and inserting 

20 ‘‘(a) IN GENERAL.—In determining’’; 

21 (2) in subsection (a) (as designated by para22 graph (1)), by inserting before the period the fol23 lowing: ‘‘, where a complex 1-to-4 unit single family 

24 residential appraisal means an appraisal for which 

25 the property to be appraised, the form of ownership, 


bajohnson on PROD1PC77 with BILLS
157 

•HR 1728 RH

1 the property characteristics, or the market conditions 

2 are atypical’’; and 

3 (3) by adding at the end the following new sub4 section: 

5 ‘‘(b) APPRAISALS AND APPRAISAL REVIEWS.—All ap6 praisals performed at a property within a State shall be 

7 prepared by appraisers licensed or certified in the State 

8 where the property is located. All appraisal reviews, includ9 ing appraisal reviews by a lender, appraisal management 

10 company, or other third party organization, shall be per11 formed by an appraiser who is duly licensed or certified 

12 by a State appraisal board.’’. 

13 (f) APPRAISAL MANAGEMENT SERVICES.— 

14 (1) SUPERVISION OF THIRD PARTY PROVIDERS

15 OF APPRAISAL MANAGEMENT SERVICES.—Section 

16 1103(a) of the Financial Institutions Reform, Recov17 ery, and Enforcement Act of 1989 (12 U.S.C. 

18 3332(a)) (as previously amended by this section) is 

19 further amended— 

20 (A) by amending paragraph (1) to read as 

21 follows: 

22 ‘‘(1) monitor the requirements established by 

23 States— 

24 ‘‘(A) for the certification and licensing of 

25 individuals who are qualified to perform apVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00157 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
158 

•HR 1728 RH

1 praisals in connection with federally related 

2 transactions, including a code of professional re3 sponsibility; and 

4 ‘‘(B) for the registration and supervision of 

5 the operations and activities of an appraisal 

6 management company;’’; and 

7 (B) by adding at the end the following new 

8 paragraph: 

9 ‘‘(7) maintain a national registry of appraisal 

10 management companies that either are registered with 

11 and subject to supervision of a State appraiser certi12 fying and licensing agency or are operating subsidi13 aries of a Federally regulated financial institution.’’. 

14 (2) APPRAISAL MANAGEMENT COMPANY MINIMUM

15 QUALIFICATIONS.—Title XI of the Financial Institu16 tions Reform, Recovery, and Enforcement Act of 1989 

17 (12 U.S.C. 3331 et seq.) is amended by adding at the 

18 end the following new section (and amending the 

19 table of contents accordingly): 

20 ‘‘SEC. 1124. APPRAISAL MANAGEMENT COMPANY MINIMUM 

21 QUALIFICATIONS. 

22 ‘‘(a) IN GENERAL.—The Appraiser Qualifications 

23 Board of the Appraisal Foundation shall establish min24 imum qualifications to be applied by a State in the regVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00158 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
159 

•HR 1728 RH

1 istration of appraisal management companies. Such quali2 fications shall include a requirement that such companies— 

3 ‘‘(1) register with and be subject to supervision 

4 by a State appraiser certifying and licensing agency 

5 in each State in which such company operates; 

6 ‘‘(2) verify that only licensed or certified ap7 praisers are used for federally related transactions; 

8 ‘‘(3) require that appraisals coordinated by an 

9 appraisal management company comply with the 

10 Uniform Standards of Professional Appraisal Prac11 tice; and 

12 ‘‘(4) require that appraisals are conducted inde13 pendently and free from inappropriate influence and 

14 coercion pursuant to the appraisal independence 

15 standards established under section 129E of the Truth 

16 in Lending Act. 

17 ‘‘(b) EXCEPTION FOR FEDERALLY REGULATED FINAN18 CIAL INSTITUTIONS.—The requirements of subsection (a) 

19 shall not apply to an appraisal management company that 

20 is a subsidiary owned and controlled by a financial institu21 tion and regulated by a federal financial institution regu22 latory agency. In such case, the appropriate federal finan23 cial institutions regulatory agency shall, at a minimum, 

24 develop regulations affecting the operations of the appraisal 

25 management company to— 


bajohnson on PROD1PC77 with BILLS
160 

•HR 1728 RH

1 ‘‘(1) verify that only licensed or certified ap2 praisers are used for federally related transactions; 

3 ‘‘(2) require that appraisals coordinated by an 

4 institution or subsidiary providing appraisal man5 agement services comply with the Uniform Standards 

6 of Professional Appraisal Practice; and 

7 ‘‘(3) require that appraisals are conducted inde8 pendently and free from inappropriate influence and 

9 coercion pursuant to the appraisal independence 

10 standards established under section 129E of the Truth 

11 in Lending Act. 

12 ‘‘(c) REGISTRATION LIMITATIONS.—An appraisal 

13 management company shall not be registered by a State if 

14 such company, in whole or in part, directly or indirectly, 

15 is owned by any person who has had an appraiser license 

16 or certificate refused, denied, cancelled, surrendered in lieu 

17 of revocation, or revoked in any State. Additionally, each 

18 person that owns more than 10 percent of an appraisal 

19 management company shall be of good moral character, as 

20 determined by the State appraiser certifying and licensing 

21 agency, and shall submit to a background investigation car22 ried out by the State appraiser certifying and licensing 

23 agency. 

24 ‘‘(d) REGULATIONS.—The Appraisal Subcommittee 

25 shall promulgate regulations to implement the minimum 


bajohnson on PROD1PC77 with BILLS
161 

•HR 1728 RH

1 qualifications developed by the Appraiser Qualifications 

2 Board under this section, as such qualifications relate to 

3 the State appraiser certifying and licensing agencies. The 

4 Appraisal Subcommittee shall also promulgate regulations 

5 for the reporting of the activities of appraisal management 

6 companies in determining the payment of the annual reg7 istry fee. 

8 ‘‘(e) EFFECTIVE DATE.— 

9 ‘‘(1) IN GENERAL.—No appraisal management 

10 company may perform services related to a federally 

11 related transaction in a State after the date that is 

12 36 months after the date of the enactment of this sec13 tion unless such company is registered with such 

14 State or subject to oversight by a federal financial in15 stitutions regulatory agency. 

16 ‘‘(2) EXTENSION OF EFFECTIVE DATE.—Subject 

17 to the approval of the Council, the Appraisal Sub18 committee may extend by an additional 12 months 

19 the requirements for the registration and supervision 

20 of appraisal management companies if it makes a 

21 written finding that a State has made substantial 

22 progress in establishing a State appraisal manage23 ment company registration and supervision system 

24 that appears to conform with the provisions of this 

25 title.’’. 


bajohnson on PROD1PC77 with BILLS
162 

•HR 1728 RH

1 (3) STATE APPRAISER CERTIFYING AND LICENS2 ING AGENCY AUTHORITY.—Section 1117 of the Finan3 cial Institutions Reform, Recovery, and Enforcement 

4 Act of 1989 (12 U.S.C. 3346) is amended by adding 

5 at the end the following: ‘‘The duties of such agency 

6 may additionally include the registration and super7 vision of appraisal management companies.’’. 

8 (4) APPRAISAL MANAGEMENT COMPANY DEFINI9 TION.—Section 1121 of the Financial Institutions Re10 form, Recovery, and Enforcement Act of 1989 (12 

11 U.S.C. 3350) is amended by adding at the end the fol12 lowing: 

13 ‘‘(11) APPRAISAL MANAGEMENT COMPANY.—The 

14 term ‘appraisal management company’ means, in 

15 connection with valuing properties collateralizing 

16 mortgage loans or mortgages incorporated into a 

17 securitization, any external third party authorized ei18 ther by a creditor of a consumer credit transaction se19 cured by a consumer’s principal dwelling or by an 

20 underwriter of or other principal in the secondary 

21 mortgage markets, that oversees a network or panel of 

22 more than 10 certified or licensed appraisers in a 

23 State or 25 or more nationally within a given year— 

24 ‘‘(A) to recruit, select, and retain apprais25 ers; 


bajohnson on PROD1PC77 with BILLS
163 

•HR 1728 RH

1 ‘‘(B) to contract with licensed and certified 

2 appraisers to perform appraisal assignments; 

3 ‘‘(C) to manage the process of having an 

4 appraisal performed, including providing ad5 ministrative duties such as receiving appraisal 

6 orders and appraisal reports, submitting com7 pleted appraisal reports to creditors and under8 writers, collecting fees from creditors and under9 writers for services provided, and reimbursing 

10 appraisers for services performed; or 

11 ‘‘(D) to review and verify the work of ap12 praisers.’’. 

13 (g) STATE AGENCY REPORTING REQUIREMENT.—Sec14 tion 1109(a) of the Financial Institutions Reform, Recov15 ery, and Enforcement Act of 1989 (12 U.S.C. 3338(a)) is 

16 amended— 

17 (1) by striking ‘‘and’’ after the semicolon in 

18 paragraph (1); 

19 (2) by redesignating paragraph (2) as para20 graph (4); and 

21 (3) by inserting after paragraph (1) the fol22 lowing new paragraphs: 

23 ‘‘(2) transmit reports on sanctions, disciplinary 

24 actions, license and certification revocations, and li25 cense and certification suspensions on a timely basis 


bajohnson on PROD1PC77 with BILLS
164 

•HR 1728 RH

1 to the national registry of the Appraisal Sub2 committee; 

3 ‘‘(3) transmit reports on a timely basis of super4 visory activities involving appraisal management 

5 companies or other third-party providers of apprais6 als and appraisal management services, including in7 vestigations initiated and disciplinary actions taken; 

8 and’’. 

9 (h) REGISTRY FEES MODIFIED.— 

10 (1) IN GENERAL.—Section 1109(a) of the Finan11 cial Institutions Reform, Recovery, and Enforcement 

12 Act of 1989 (12 U.S.C. 3338(a)) is amended— 

13 (A) by amending paragraph (4) (as modi14 fied by section 603(g) of this Act) to read as fol15 lows: 

16 ‘‘(4) collect— 

17 ‘‘(A) from such individuals who perform or 

18 seek to perform appraisals in federally related 

19 transactions, an annual registry fee of not more 

20 than $40, such fees to be transmitted by the 

21 State agencies to the Council on an annual 

22 basis; and 

23 ‘‘(B) from an appraisal management com24 pany that either has registered with a State ap25 praiser certifying and licensing agency in acVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00164 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
165 

•HR 1728 RH

1 cordance with this title or operates as a sub2 sidiary of a federally regulated financial institu3 tion, an annual registry fee of— 

4 ‘‘(i) in the case of such a company that 

5 has been in existence for more than a year, 

6 $25 multiplied by the number of appraisers 

7 working for or contracting with such com8 pany in such State during the previous 

9 year, but where such $25 amount may be 

10 adjusted, up to a maximum of $50, at the 

11 discretion of the Appraisal Subcommittee, if 

12 necessary to carry out the Subcommittee’s 

13 functions under this title; and 

14 ‘‘(ii) in the case of such a company 

15 that has not been in existence for more than 

16 a year, $25 multiplied by an appropriate 

17 number to be determined by the Appraisal 

18 Subcommittee, and where such number will 

19 be used for determining the fee of all such 

20 companies that were not in existence for 

21 more than a year, but where such $25 

22 amount may be adjusted, up to a maximum 

23 of $50, at the discretion of the Appraisal 

24 Subcommittee, if necessary to carry out the 


bajohnson on PROD1PC77 with BILLS
166 

•HR 1728 RH

1 Subcommittee’s functions under this title.’’; 

2 and 

3 (B) by amending the matter following para4 graph (4), as redesignated, to read as follows: 

5 ‘‘Subject to the approval of the Council, the Appraisal Sub6 committee may adjust the dollar amount of registry fees 

7 under paragraph (4)(A), up to a maximum of $80 per 

8 annum, as necessary to carry out its functions under this 

9 title. The Appraisal Subcommittee shall consider at least 

10 once every 5 years whether to adjust the dollar amount of 

11 the registry fees to account for inflation. In implementing 

12 any change in registry fees, the Appraisal Subcommittee 

13 shall provide flexibility to the States for multi-year certifi14 cations and licenses already in place, as well as a transition 

15 period to implement the changes in registry fees. In estab16 lishing the amount of the annual registry fee for an ap17 praisal management company, the Appraisal Subcommittee 

18 shall have the discretion to impose a minimum annual reg19 istry fee for an appraisal management company to protect 

20 against the under reporting of the number of appraisers 

21 working for or contracted by the appraisal management 

22 company.’’. 

23 (2) INCREMENTAL REVENUES.—Incremental rev24 enues collected pursuant to the increases required by 

25 this subsection shall be placed in a separate account 


bajohnson on PROD1PC77 with BILLS
167 

•HR 1728 RH

1 at the United States Treasury, entitled the ‘‘Ap2 praisal Subcommittee Account’’. 

3 (i) GRANTS AND REPORTS.—Section 1109(b) of the Fi4 nancial Institutions Reform, Recovery, and Enforcement 

5 Act of 1989 (12 U.S.C. 3348(b)) is amended— 

6 (1) by striking ‘‘and’’ after the semicolon in 

7 paragraph (3); 

8 (2) by striking the period at the end of para9 graph (4) and inserting a semicolon; 

10 (3) by adding at the end the following new para11 graphs: 

12 ‘‘(5) to make grants to State appraiser certifying 

13 and licensing agencies to support the efforts of such 

14 agencies to comply with this title, including— 

15 ‘‘(A) the complaint process, complaint in16 vestigations, and appraiser enforcement activi17 ties of such agencies; and 

18 ‘‘(B) the submission of data on State li19 censed and certified appraisers and appraisal 

20 management companies to the National ap21 praisal registry, including information affirm22 ing that the appraiser or appraisal management 

23 company meets the required qualification cri24 teria and formal and informal disciplinary ac25 tions; and 


bajohnson on PROD1PC77 with BILLS
168 

•HR 1728 RH

1 ‘‘(6) to report to all State appraiser certifying 

2 and licensing agencies when a license or certification 

3 is surrendered, revoked, or suspended.’’. 

4 Obligations authorized under this subsection may not ex5 ceed 75 percent of the fiscal year total of incremental in6 crease in fees collected and deposited in the ‘‘Appraisal Sub7 committee Account’’ pursuant to subsection (h). 

8 (j) CRITERIA.—Section 1116 of the Financial Institu9 tions Reform, Recovery, and Enforcement Act of 1989 (12 

10 U.S.C. 3345) is amended— 

11 (1) in subsection (c), by inserting ‘‘whose criteria 

12 for the licensing of a real estate appraiser currently 

13 meet or exceed the minimum criteria issued by the 

14 Appraisal Qualifications Board of The Appraisal 

15 Foundation for the licensing of real estate appraisers’’ 

16 before the period at the end; and 

17 (2) by striking subsection (e) and inserting the 

18 following new subsection: 

19 ‘‘(e) MINIMUM QUALIFICATION REQUIREMENTS.—Any 

20 requirements established for individuals in the position of 

21 ‘Trainee Appraiser’ and ‘Supervisory Appraiser’ shall meet 

22 or exceed the minimum qualification requirements of the 

23 Appraiser Qualifications Board of The Appraisal Founda24 tion. The Appraisal Subcommittee shall have the authority 

25 to enforce these requirements.’’. 


bajohnson on PROD1PC77 with BILLS
169 

•HR 1728 RH

1 (k) MONITORING OF STATE APPRAISER CERTIFYING

2 AND LICENSING AGENCIES.—Section 1118 of the Financial 

3 Institutions Reform, Recovery, and Enforcement Act of 

4 1989 (12 U.S.C. 3347) is amended— 

5 (1) by amending subsection (a) to read as fol6 lows: 

7 ‘‘(a) IN GENERAL.—The Appraisal Subcommittee shall 

8 monitor each State appraiser certifying and licensing agen9 cy for the purposes of determining whether such agency— 

10 ‘‘(1) has policies, practices, funding, staffing, 

11 and procedures that are consistent with this title; 

12 ‘‘(2) processes complaints and completes inves13 tigations in a reasonable time period; 

14 ‘‘(3) appropriately disciplines sanctioned ap15 praisers and appraisal management companies; 

16 ‘‘(4) maintains an effective regulatory program; 

17 and 

18 ‘‘(5) reports complaints and disciplinary actions 

19 on a timely basis to the national registries on ap20 praisers and appraisal management companies main21 tained by the Appraisal Subcommittee. 

22 The Appraisal Subcommittee shall have the authority to re23 move a State licensed or certified appraiser or a registered 

24 appraisal management company from a national registry 

25 on an interim basis pending State agency action on licensVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00169 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
170 

•HR 1728 RH

1 ing, certification, registration, and disciplinary pro2 ceedings. The Appraisal Subcommittee and all agencies, in3 strumentalities, and Federally recognized entities under 

4 this title shall not recognize appraiser certifications and li5 censes from States whose appraisal policies, practices, fund6 ing, staffing, or procedures are found to be inconsistent with 

7 this title. The Appraisal Subcommittee shall have the au8 thority to impose sanctions, as described in this section, 

9 against a State agency that fails to have an effective ap10 praiser regulatory program. In determining whether such 

11 a program is effective, the Appraisal Subcommittee shall 

12 include an analyses of the licensing and certification of ap13 praisers, the registration of appraisal management compa14 nies, the issuance of temporary licenses and certifications 

15 for appraisers, the receiving and tracking of submitted com16 plaints against appraisers and appraisal management 

17 companies, the investigation of complaints, and enforce18 ment actions against appraisers and appraisal manage19 ment companies. The Appraisal Subcommittee shall have 

20 the authority to impose interim actions and suspensions 

21 against a State agency as an alternative to, or in advance 

22 of, the derecognition of a State agency.’’. 

23 (2) in subsection (b)(2), by inserting after ‘‘au24 thority’’ the following: ‘‘or sufficient funding’’. 


bajohnson on PROD1PC77 with BILLS
171 

•HR 1728 RH

1 (l) RECIPROCITY.—Subsection (b) of section 1122 of 

2 the Financial Institutions Reform, Recovery, and Enforce3 ment Act of 1989 (12 U.S.C. 3351(b)) is amended to read 

4 as follows: 

5 ‘‘(b) RECIPROCITY.—A State appraiser certifying or 

6 licensing agency shall issue a reciprocal certification or li7 cense for an individual from another State when— 

8 ‘‘(1) the appraiser licensing and certification 

9 program of such other State is in compliance with the 

10 provisions of this title; and 

11 ‘‘(2) the appraiser holds a valid certification 

12 from a State whose requirements for certification or 

13 licensing meet or exceed the licensure standards estab14 lished by the State where an individual seeks ap15 praisal licensure.’’. 

16 (m) CONSIDERATION OF PROFESSIONAL APPRAISAL

17 DESIGNATIONS.—Section 1122(d) of the Financial Institu18 tions Reform, Recovery, and Enforcement Act of 1989 (12 

19 U.S.C. 3351(d)) is amended by striking ‘‘shall not exclude’’ 

20 and all that follows through the end of the subsection and 

21 inserting the following: ‘‘may include education achieved, 

22 experience, sample appraisals, and references from prior 

23 clients. Membership in a nationally recognized professional 

24 appraisal organization may be a criteria considered, 

25 though lack of membership therein shall not be the sole bar 


bajohnson on PROD1PC77 with BILLS
172 

•HR 1728 RH

1 against consideration for an assignment under these cri2 teria.’’. 

3 (n) APPRAISER INDEPENDENCE.—Section 1122 of the 

4 Financial Institutions Reform, Recovery, and Enforcement 

5 Act of 1989 (12 U.S.C. 3351) is amended by adding at the 

6 end the following new subsection: 

7 ‘‘(g) APPRAISER INDEPENDENCE MONITORING.—The 

8 Appraisal Subcommittee shall monitor each State appraiser 

9 certifying and licensing agency for the purpose of deter10 mining whether such agency’s policies, practices, and proce11 dures are consistent with the purposes of maintaining ap12 praiser independence and whether such State has adopted 

13 and maintains effective laws, regulations, and policies 

14 aimed at maintaining appraiser independence.’’. 

15 (o) APPRAISER EDUCATION.—Section 1122 of the Fi16 nancial Institutions Reform, Recovery, and Enforcement 

17 Act of 1989 (12 U.S.C. 3351) is amended by inserting after 

18 subsection (g) (as added by subsection (l) of this section) 

19 the following new subsection: 

20 ‘‘(h) APPROVED EDUCATION.—The Appraisal Sub21 committee shall encourage the States to accept courses ap22 proved by the Appraiser Qualification Board’s Course Ap23 proval Program.’’. 

24 (p) APPRAISAL COMPLAINT HOTLINE.—Section 1122 

25 of the Financial Institutions Reform, Recovery, and EnVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00172 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
173 

•HR 1728 RH

1 forcement Act of 1989 (12 U.S.C. 3351), as amended by 

2 this section, is further amended by adding at the end the 

3 following new subsection: 

4 ‘‘(i) APPRAISAL COMPLAINT NATIONAL HOTLINE.—If, 

5 1 year after the date of the enactment of this subsection, 

6 the Appraisal Subcommittee determines that no national 

7 hotline exists to receive complaints of non-compliance with 

8 appraisal independence standards and Uniform Standards 

9 of Professional Appraisal Practice, including complaints 

10 from appraisers, individuals, or other entities concerning 

11 the improper influencing or attempted improper influ12 encing of appraisers or the appraisal process, the Appraisal 

13 Subcommittee shall establish and operate such a national 

14 hotline, which shall include a toll-free telephone number and 

15 an email address. If the Appraisal Subcommittee operates 

16 such a national hotline, the Appraisal Subcommittee shall 

17 refer complaints for further action to appropriate govern18 mental bodies, including a State appraiser certifying and 

19 licensing agency, a financial institution regulator, or other 

20 appropriate legal authorities. For complaints referred to 

21 State appraiser certifying and licensing agencies or to Fed22 eral regulators, the Appraisal Subcommittee shall have the 

23 authority to follow up such complaint referrals in order to 

24 determine the status of the resolution of the complaint.’’. 


bajohnson on PROD1PC77 with BILLS
174 

•HR 1728 RH

1 (q) AUTOMATED VALUATION MODELS.—Title XI of the 

2 Financial Institutions Reform, Recovery, and Enforcement 

3 Act of 1989 (12 U.S.C. 3331 et seq.), as amended by this 

4 section, is further amended by adding at the end the fol5 lowing new section (and amending the table of contents ac6 cordingly): 

7 ‘‘SEC. 1125. AUTOMATED VALUATION MODELS USED TO 

8 VALUE CERTAIN MORTGAGES. 

9 ‘‘(a) IN GENERAL.—Automated valuation models shall 

10 adhere to quality control standards designed to— 

11 ‘‘(1) ensure a high level of confidence in the esti12 mates produced by automated valuation models; 

13 ‘‘(2) protect against the manipulation of data; 

14 ‘‘(3) seek to avoid conflicts of interest; and 

15 ‘‘(4) require random sample testing and reviews, 

16 where such testing and reviews are performed by an 

17 appraiser who is licensed or certified in the State 

18 where the testing and reviews take place. 

19 ‘‘(b) ADOPTION OF REGULATIONS.—The Appraisal 

20 Subcommittee and its member agencies shall promulgate 

21 regulations to implement the quality control standards re22 quired under this section. 

23 ‘‘(c) ENFORCEMENT.—Compliance with regulations 

24 issued under this subsection shall be enforced by— 


bajohnson on PROD1PC77 with BILLS
175 

•HR 1728 RH

1 ‘‘(1) with respect to a financial institution, or 

2 subsidiary owned and controlled by a financial insti3 tution and regulated by a federal financial institu4 tion or regulatory agency, the federal financial insti5 tution regulatory agency that acts as the primary fed6 eral supervisor of such financial institution or sub7 sidiary; and 

8 ‘‘(2) with respect to other persons, the Appraisal 

9 Subcommittee. 

10 ‘‘(d) AUTOMATED VALUATION MODEL DEFINED.—For 

11 purposes of this section, the term ‘automated valuation 

12 model’ means any computerized model used by mortgage 

13 originators and secondary market issuers to determine the 

14 collateral worth of a mortgage secured by a consumer’s 

15 principal dwelling.’’. 

16 (r) BROKER PRICE OPINIONS.—Title XI of the Finan17 cial Institutions Reform, Recovery, and Enforcement Act 

18 of 1989 (12 U.S.C. 3331 et seq.), as amended by this section, 

19 is further amended by adding at the end the following new 

20 section (and amending the table of contents accordingly): 

21 ‘‘SEC. 1126. BROKER PRICE OPINIONS. 

22 ‘‘(a) GENERAL PROHIBITION.—Broker price opinions 

23 may not be used as the sole basis to determine the value 

24 of a piece of property for the purpose of a loan origination 


bajohnson on PROD1PC77 with BILLS
176 

•HR 1728 RH

1 of a residential mortgage loan secured by such piece of prop2 erty. 

3 ‘‘(b) EXCEPTIONS.—Subsection (a) shall not apply 

4 to— 

5 ‘‘(1) those transaction as may be designated by 

6 the federal financial institutions regulatory agencies 

7 or the Federal Housing Finance Agency; or 

8 ‘‘(2) real estate brokers who produce broker price 

9 opinions or competitive market analyses solely for the 

10 purposes of the real estate listing process. 

11 ‘‘(c) BROKER PRICE OPINION DEFINED.—For pur12 poses of this section, the term ‘broker price opinion’ means 

13 an estimate, done in lieu of a written appraisal, prepared 

14 by a real estate broker, agent, or sales person that details 

15 the probable selling price of a particular piece of real estate 

16 property and provides a varying level of detail about the 

17 property’s condition, market, and neighborhood, and infor18 mation on comparable sales, but does not include an auto19 mated valuation model, as defined in section 1125(c).’’. 

20 (s) AMENDMENTS TO APPRAISAL SUBCOMMITTEE.— 

21 Section 1011 of the Federal Financial Institutions Exam22 ination Council Act of 1978 (12 U.S.C. 3310) is amended— 

23 (1) in the first sentence, by adding before the pe24 riod the following: ‘‘and the Federal Housing Finance 

25 Agency’’; and 


bajohnson on PROD1PC77 with BILLS
177 

•HR 1728 RH

1 (2) by inserting at the end the following: ‘‘At all 

2 times at least one member of the Appraisal Sub3 committee shall have demonstrated knowledge and 

4 competence through licensure, certification, or profes5 sional designation within the appraisal profession.’’. 

6 (t) TECHNICAL CORRECTIONS.— 

7 (1) Section 1119(a)(2) of the Financial Institu8 tions Reform, Recovery, and Enforcement Act of 1989 

9 (12 U.S.C. 3348(a)(2)) is amended by striking ‘‘coun10 cil,’’ and inserting ‘‘Council,’’. 

11 (2) Section 1121(6) of the Financial Institutions 

12 Reform, Recovery, and Enforcement Act of 1989 (12 

13 U.S.C. 3350(6)) is amended by striking ‘‘Corpora14 tions,’’ and inserting ‘‘Corporation,’’. 

15 (3) Section 1121(8) of the Financial Institutions 

16 Reform, Recovery, and Enforcement Act of 1989 (12 

17 U.S.C. 3350(8)) is amended by striking ‘‘council’’ 

18 and inserting ‘‘Council’’. 

19 (4) Section 1122 of the Financial Institutions 

20 Reform, Recovery, and Enforcement Act of 1989 (12 

21 U.S.C. 3351) is amended— 

22 (A) in subsection (a)(1) by moving the left 

23 margin of subparagraphs (A), (B), and (C) 2 

24 ems to the right; and 

25 (B) in subsection (c)— 


bajohnson on PROD1PC77 with BILLS
178 

•HR 1728 RH

1 (i) by striking ‘‘Federal Financial In2 stitutions Examination Council’’ and in3 serting ‘‘Financial Institutions Examina4 tion Council’’; and 

5 (ii) by striking ‘‘the council’s func6 tions’’ and inserting ‘‘the Council’s func7 tions’’. 

8 SEC. 604. STUDY REQUIRED ON IMPROVEMENTS IN AP9 PRAISAL PROCESS AND COMPLIANCE PRO10 GRAMS. 

11 (a) STUDY.—The Comptroller General shall conduct a 

12 comprehensive study on possible improvements in the ap13 praisal process generally, and specifically on the consist14 ency in and the effectiveness of, and possible improvements 

15 in, State compliance efforts and programs in accordance 

16 with title XI of the Financial Institutions Reform, Recov17 ery, and Enforcement Act of 1989. In addition, this study 

18 shall examine the existing exemptions to the use of certified 

19 appraisers issued by Federal financial institutions regu20 latory agencies. The study shall also review the threshold 

21 level established by Federal regulators for compliance under 

22 title XI and whether there is a need to revise them to reflect 

23 the addition of consumer protection to the purposes and 

24 functions of the Appraisal Subcommittee. The study shall 

25 additionally examine the quality of different types of mortVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00178 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
179 

•HR 1728 RH

1 gage collateral valuations produced by broker price opin2 ions, automated valuation models, licensed appraisals, and 

3 certified appraisals, among others, and the quality of ap4 praisals provided through different distribution channels, 

5 including appraisal management companies, independent 

6 appraisal operations within a mortgage originator, and fee7 for-service appraisals. The study shall also include an anal8 ysis and statistical breakdown of enforcement actions taken 

9 during the last 10 years against different types of apprais10 ers, including certified, licensed, supervisory, and trainee 

11 appraisers. Furthermore, the study shall examine the bene12 fits and costs, as well as the advantages and disadvantages, 

13 of establishing a national repository to collect data related 

14 to real estate property collateral valuations performed in 

15 the United States. 

16 (b) REPORT.—Before the end of the 18-month period 

17 beginning on the date of the enactment of this Act, the 

18 Comptroller General shall submit a report on the study 

19 under subsection (a) to the Committee on Financial Serv20 ices of the House of Representatives and the Committee on 

21 Banking, Housing, and Urban Affairs of the Senate, to22 gether with such recommendations for administrative or 

23 legislative action, at the Federal or State level, as the Comp24 troller General may determine to be appropriate. 


bajohnson on PROD1PC77 with BILLS
180 

•HR 1728 RH

1 SEC. 605. EQUAL CREDIT OPPORTUNITY ACT AMENDMENT. 

2 Subsection (e) of section 701 of the Equal Credit Op3 portunity Act ( U.S.C. 1691) is amended to read as follows: 

4 ‘‘(e) COPIES FURNISHED TO APPLICANTS.— 

5 ‘‘(1) IN GENERAL.—Each creditor shall furnish 

6 to an applicant a copy of any and all written ap7 praisals and valuations developed in connection with 

8 the applicant’s application for a loan that is secured 

9 or would have been secured by a first lien on a dwell10 ing promptly upon completion, but in no case later 

11 than 3 days prior to the closing of the loan, whether 

12 the creditor grants or denies the applicant’s request 

13 for credit or the application is incomplete or with14 drawn. 

15 ‘‘(2) WAIVER.—The applicant may waive the 3 

16 day requirement provided for in paragraph (1), ex17 cept where otherwise required in law. 

18 ‘‘(3) REIMBURSEMENT.—The applicant may be 

19 required to pay a reasonable fee to reimburse the 

20 creditor for the cost of the appraisal, except where 

21 otherwise required in law. 

22 ‘‘(4) FREE COPY.—Notwithstanding paragraph 

23 (3), the creditor shall provide a copy of each written 

24 appraisal or valuation at no additional cost to the 

25 applicant. 


bajohnson on PROD1PC77 with BILLS
181 

•HR 1728 RH

1 ‘‘(5) NOTIFICATION TO APPLICANTS.—At the time 

2 of application, the creditor shall notify an applicant 

3 in writing of the right to receive a copy of each writ4 ten appraisal and valuation under this subsection. 

5 ‘‘(6) REGULATIONS.—The Board shall prescribe 

6 regulations to implement this subsection within 1 

7 year of the date of the enactment of this subsection. 

8 ‘‘(7) VALUATION DEFINED.—For purposes of this 

9 subsection, the term ‘valuation’ shall include any esti10 mate of the value of a dwelling developed in connec11 tion with a creditor’s decision to provide credit, in12 cluding those values developed pursuant to a policy of 

13 a government sponsored enterprise or by an auto14 mated valuation model, a broker price opinion, or 

15 other methodology or mechanism.’’. 

16 SEC. 606. REAL ESTATE SETTLEMENT PROCEDURES ACT OF 

17 1974 AMENDMENT RELATING TO CERTAIN AP18 PRAISAL FEES. 

19 Section 4 of the Real Estate Settlement Procedures Act 

20 of 1974 is amended by adding at the end the following new 

21 subsection: 

22 ‘‘(c) The standard form described in subsection (a) 

23 shall include, in the case of an appraisal coordinated by 

24 an appraisal management company (as such term is de25 fined in section 1121(11) of the Financial Institutions ReVerDate Nov 24 2008 03:43 May 05, 2009 Jkt 079200 PO 00000 Frm 00181 Fmt 6652 Sfmt 6203 E:\BILLS\H1728.RH H1728

bajohnson on PROD1PC77 with BILLS
182 

•HR 1728 RH

1 form, Recovery, and Enforcement Act of 1989 (12 U.S.C. 

2 3350(11))), a clear disclosure of— 

3 ‘‘(1) the fee paid directly to the appraiser by 

4 such company; and 

5 ‘‘(2) the administration fee charged by such com6 pany.’’. 

7 TITLE VII—SENSE OF CONGRESS 

8 REGARDING THE IMPOR9 TANCE OF GOVERNMENT 

10 SPONSORED ENTERPRISES 

11 REFORM 

12 SEC. 701. SENSE OF CONGRESS REGARDING THE IMPOR13 TANCE OF GOVERNMENT-SPONSORED ENTER14 PRISES REFORM TO ENHANCE THE PROTEC15 TION, LIMITATION, AND REGULATION OF THE 

16 TERMS OF RESIDENTIAL MORTGAGE CREDIT. 

17 (a) FINDINGS.—The Congress finds as follows: 

18 (1) The Government-sponsored enterprises, Fed19 eral National Mortgage Association (Fannie Mae) 

20 and the Federal Home Loan Mortgage Corporation 

21 (Freddie Mac), were chartered by Congress to ensure 

22 a reliable and affordable supply of mortgage funding, 

23 but enjoy a dual legal status as privately owned cor24 porations with Government mandated affordable 

25 housing goals. 


bajohnson on PROD1PC77 with BILLS
183 

•HR 1728 RH

1 (2) In 1996, the Department of Housing and 

2 Urban Development required that 42 percent of 

3 Fannie Mae’s and Freddie Mac’s mortgage financing 

4 should go to borrowers with income levels below the 

5 median for a given area. 

6 (3) In 2004, the Department of Housing and 

7 Urban Development revised those goals, increasing 

8 them to 56 percent of their overall mortgage purchases 

9 by 2008, and additionally mandated that 12 percent 

10 of all mortgage purchases by Fannie Mae and Freddie 

11 Mac be ‘‘special affordable’’ loans made to borrowers 

12 with incomes less than 60 percent of an area’s me13 dian income, a target that ultimately increased to 28 

14 percent for 2008. 

15 (4) To help fulfill those mandated affordable 

16 housing goals, in 1995 the Department of Housing 

17 and Urban Development authorized Fannie Mae and 

18 Freddie Mac to purchase subprime securities that in19 cluded loans made to low-income borrowers. 

20 (5) After this authorization to purchase 

21 subprime securities, subprime and near-prime loans 

22 increased from 9 percent of securitized mortgages in 

23 2001 to 40 percent in 2006, while the market share 

24 of conventional mortgages dropped from 78.8 percent 

25 in 2003 to 50.1 percent by 2007 with a corresponding 


bajohnson on PROD1PC77 with BILLS
184 

•HR 1728 RH

1 increase in subprime and Alt-A loans from 10.1 per2 cent to 32.7 percent over the same period. 

3 (6) In 2004 alone, Fannie Mae and Freddie Mac 

4 purchased $175,000,000,000 in subprime mortgage se5 curities, which accounted for 44 percent of the market 

6 that year, and from 2005 through 2007, Fannie Mae 

7 and Freddie Mac purchased approximately 

8 $1,000,000,000,000 in subprime and Alt-A loans, 

9 while Fannie Mae’s acquisitions of mortgages with 

10 less than 10 percent down payments almost tripled. 

11 (7) According to data from the Federal Housing 

12 Finance Agency (FHFA) for the fourth quarter of 

13 2008, Fannie Mae and Freddie Mac own or guarantee 

14 75 percent of all newly originated mortgages, and 

15 Fannie Mae and Freddie Mac currently own 13.3 

16 percent of outstanding mortgage debt in the United 

17 States and have issued mortgage-backed securities for 

18 31.0 percent of the residential debt market, a com19 bined total of 44.3 percent of outstanding mortgage 

20 debt in the United States. 

21 (8) On September 7, 2008, the FHFA placed 

22 Fannie Mae and Freddie Mac into conservatorship, 

23 with the Treasury Department subsequently agreeing 

24 to purchase at least $200,000,000,000 of preferred 

25 stock from each enterprise in exchange for warrants 


bajohnson on PROD1PC77 with BILLS
185 

•HR 1728 RH

1 for the purchase of 79.9 percent of each enterprise’s 

2 common stock. 

3 (9) The conservatorship for Fannie Mae and 

4 Freddie Mac has potentially exposed taxpayers to up5 wards of $5,300,000,000,000 worth of risk. 

6 (10) The hybrid public-private status of Fannie 

7 Mae and Freddie Mac is untenable and must be re8 solved to assure that consumers are offered and receive 

9 residential mortgage loans on terms that reasonably 

10 reflect their ability to repay the loans and that are 

11 understandable and not unfair, deceptive, or abusive. 

12 (b) SENSE OF THE CONGRESS.—It is the sense of the 

13 Congress that efforts to enhance by the protection, limita14 tion, and regulation of the terms of residential mortgage 

15 credit and the practices related to such credit would be in16 complete without enactment of meaningful structural re17 forms of Fannie Mae and Freddie Mac. 


bajohnson on PROD1PC77 with BILLS
Union Calendar No. 42 

111TH CONGRESS 

1ST SESSION H. R. 1728 

[Report No. 111–94] 

A BILL 

To amend the Truth in Lending Act to reform conand for other purposes. imum standards for consumer mortgage loans, ability for such practices, to provide certain min- sumer mortgage practices and provide accountMAY 4, 2009 

Reported with an amendment, committed to the Comand ordered to be printed mittee of the Whole House on the State of the Union, 


bajohnson on PROD1PC77 with BILLS