I 

111TH CONGRESS 

1ST SESSION H. R. 1728 

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 

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. 

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: 


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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. 

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. 

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. 

Sec. 304. Amendment to provision governing correction of errors. 

Sec. 305. Regulations. 

Sec. 306. 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. 

TITLE V—MORTGAGE SERVICING 


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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. Mortgage servicing studies required. 

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. 

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 ORIGI9 NATION AND RESIDENTIAL MORTGAGE LOANS.— 

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

11 the term ‘Commission’ means the Federal Trade 

12 Commission. 

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

14 ‘Federal banking agencies’ means the Board of Gov15 ernors of the Federal Reserve System, the Comp16 troller of the Currency, the Director of the Office of 

17 Thrift Supervision, the Federal Deposit Insurance 


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1 Corporation, and the National Credit Union Admin2 istration Board. 

3 ‘‘(3) MORTGAGE ORIGINATOR.—The term 

4 ‘mortgage originator’— 

5 ‘‘(A) means any person who— 

6 ‘‘(i) takes a residential mortgage loan 

7 application; 

8 ‘‘(ii) assists a consumer in obtaining 

9 or applying to obtain a residential mort10 gage loan; or 

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

12 residential mortgage loan, for direct or in13 direct compensation or gain, or in the ex14 pectation of direct or indirect compensa15 tion or gain; 

16 ‘‘(B) includes any person who represents 

17 to the public, through advertising or other 

18 means of communicating or providing informa19 tion (including the use of business cards, sta20 tionery, brochures, signs, rate lists, or other 

21 promotional items), that such person can or will 

22 provide any of the services or perform any of 

23 the activities described in subparagraph (A); 

24 and 


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1 ‘‘(C) does not include any person who is 

2 not otherwise described in subparagraph (A) or 

3 (B) and who performs purely administrative or 

4 clerical tasks on behalf of a person who is de5 scribed in any such subparagraph. 

6 ‘‘(4) NATIONWIDE MORTGAGE LICENSING SYS7 TEM AND REGISTRY.—The term ‘Nationwide Mort8 gage Licensing System and Registry’ has the same 

9 meaning as in the Secure and Fair Enforcement for 

10 Mortgage Licensing Act of 2008. 

11 ‘‘(5) OTHER DEFINITIONS RELATING TO MORT12 GAGE ORIGINATOR.—For purposes of this sub13 section, a person ‘assists a consumer in obtaining or 

14 applying to obtain a residential mortgage loan’ by, 

15 among other things, advising on residential mort16 gage loan terms (including rates, fees, and other 

17 costs), preparing residential mortgage loan packages, 

18 or collecting information on behalf of the consumer 

19 with regard to a residential mortgage loan. 

20 ‘‘(6) RESIDENTIAL MORTGAGE LOAN.—The 

21 term ‘residential mortgage loan’ means any con22 sumer credit transaction that is secured by a mort23 gage, deed of trust, or other equivalent consensual 

24 security interest on a dwelling or on residential real 

25 property that includes a dwelling, other than a conVerDate Nov 24 2008 01:03 Mar 27, 2009 Jkt 079200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1728.IH H1728

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1 sumer credit transaction under an open end credit 

2 plan or a reverse mortgage. 

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

4 used in connection with any transaction or person 

5 involved with a residential mortgage loan, means the 

6 Secretary of Housing and Urban Development. 

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

8 ‘securitization vehicle’ means a trust, corporation, 

9 partnership, limited liability entity, special purpose 

10 entity, or other structure that— 

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

12 issuer, of mortgage pass-through certificates, 

13 participation certificates, mortgage-backed secu14 rities, or other similar securities backed by a 

15 pool of assets that includes residential mortgage 

16 loans; and 

17 ‘‘(B) holds such loans. 

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

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

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

21 residential mortgage loans, including through a spe22 cial purpose vehicle, to any securitization vehicle, ex23 cluding any trustee that holds such loans solely for 

24 the benefit of the securitization vehicle. 


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

2 same meaning as in section 6(i)(2) of the Real Es3 tate Settlement Procedures Act of 1974.’’. 

4 SEC. 102. RESIDENTIAL MORTGAGE LOAN ORIGINATION. 

5 (a) IN GENERAL.—Chapter 2 of the Truth in Lend6 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 

7 after section 129A the following new section: 

8 ‘‘§ 129B. Residential mortgage loan origination 

9 ‘‘(a) FINDING AND PURPOSE.— 

10 ‘‘(1) FINDING.—The Congress finds that eco11 nomic stabilization would be enhanced by the protec12 tion, limitation, and regulation of the terms of resi13 dential mortgage credit and the practices related to 

14 such credit. 

15 ‘‘(2) PURPOSE.—It is the purpose of this sec16 tion and section 129C to assure that consumers are 

17 offered and receive residential mortgage loans on 

18 terms that reasonably reflect their ability to repay 

19 the loans and that are understandable and not un20 fair, deceptive or abusive. 

21 ‘‘(b) DUTY OF CARE.— 

22 ‘‘(1) STANDARD.—Subject to regulations pre23 scribed under this subsection, each mortgage origi24 nator shall, in addition to the duties imposed by othVerDate Nov 24 2008 01:03 Mar 27, 2009 Jkt 079200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1728.IH H1728

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1 erwise applicable provisions of State or Federal 

2 law— 

3 ‘‘(A) be qualified and, when required, reg4 istered and licensed as a mortgage originator in 

5 accordance with applicable State or Federal 

6 law, including the Secure and Fair Enforcement 

7 for Mortgage Licensing Act of 2008; 

8 ‘‘(B) with respect to each consumer seek9 ing or inquiring about a residential mortgage 

10 loan, diligently work to present the consumer 

11 with a range of residential mortgage loan prod12 ucts for which the consumer likely qualifies and 

13 which are appropriate to the consumer’s exist14 ing circumstances, based on information known 

15 by, or obtained in good faith by, the originator; 

16 ‘‘(C) make full, complete, and timely dis17 closure to each such consumer of— 

18 ‘‘(i) the comparative costs and bene19 fits of each residential mortgage loan prod20 uct offered, discussed, or referred to by the 

21 originator; 

22 ‘‘(ii) the nature of the originator’s re23 lationship to the consumer (including the 

24 cost of the services to be provided by the 

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1 gage originator is or is not acting as an 

2 agent for the consumer, as the case may 

3 be); and 

4 ‘‘(iii) any relevant conflicts of interest; 

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

6 any transaction involving a residential mortgage 

7 loan, that the mortgage originator has fulfilled 

8 all requirements applicable to the originator 

9 under this section with respect to the trans10 action; and 

11 ‘‘(E) include the unique identifier of the 

12 originator provided by the Nationwide Mortgage 

13 Licensing System and Registry on all loan doc14 uments. 

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

16 PRESENT RANGE OF PRODUCTS AND APPROPRIATE

17 PRODUCTS.— 

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

19 WHICH ORIGINATOR IS NOT AUTHORIZED TO

20 TAKE AN APPLICATION.—Paragraph (1)(B) 

21 shall not be construed as requiring— 

22 ‘‘(i) a mortgage originator to present 

23 to any consumer any specific residential 

24 mortgage loan product that is offered by a 

25 creditor which does not accept consumer 


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1 referrals from, or consumer applications 

2 submitted by or through, such originator; 

3 or 

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

5 the creditor does not offer to the general 

6 public. 

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

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

9 mortgage loan shall be presumed to be appro10 priate for a consumer if— 

11 ‘‘(i) the mortgage originator deter12 mines in good faith, based on then existing 

13 information and without undergoing a full 

14 underwriting process, that the consumer 

15 has a reasonable ability to repay and, in 

16 the case of a refinancing of an existing res17 idential mortgage loan, receives a net tan18 gible benefit, as determined in accordance 

19 with regulations prescribed under sub20 sections (a) and (b) of section 129B; and 

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

22 characteristics or effects (such as equity 

23 stripping and excessive fees and abusive 

24 terms) as determined in accordance with 


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1 regulations prescribed under paragraph 

2 (4). 

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

4 of this subsection shall be construed as— 

5 ‘‘(A) creating an agency or fiduciary rela6 tionship between a mortgage originator and a 

7 consumer if the originator does not hold himself 

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

9 ‘‘(B) restricting a mortgage originator 

10 from holding himself or herself out as an agent 

11 or fiduciary of a consumer subject to any addi12 tional duty, requirement, or limitation applica13 ble to agents or fiduciaries under any Federal 

14 or State law. 

15 ‘‘(4) REGULATIONS.— 

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

17 agencies, in consultation with the Secretary, the 

18 Chairman of the State Liaison Committee to 

19 the Financial Institutions Examination Council, 

20 and the Commission, shall jointly prescribe reg21 ulations to— 

22 ‘‘(i) further define the duty estab23 lished under paragraph (1); 

24 ‘‘(ii) implement the requirements of 

25 this subsection; 


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1 ‘‘(iii) establish the time period within 

2 which any disclosure required under para3 graph (1) shall be made to the consumer; 

4 and 

5 ‘‘(iv) establish such other require6 ments for any mortgage originator as such 

7 regulatory agencies may determine to be 

8 appropriate to meet the purposes of this 

9 subsection. 

10 ‘‘(B) COMPLEMENTARY AND NONDUPLICA11 TIVE DISCLOSURES.—The agencies referred to 

12 in subparagraph (A) shall endeavor to make the 

13 required disclosures to consumers under this 

14 subsection complementary and nonduplicative 

15 with other disclosures for mortgage consumers 

16 to the extent such efforts— 

17 ‘‘(i) are practicable; and 

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

19 such disclosure to recipients of such disclo20 sures. 

21 ‘‘(5) COMPLIANCE PROCEDURES REQUIRED.— 

22 The Federal banking agencies shall prescribe regula23 tions requiring depository institutions to establish 

24 and maintain procedures reasonably designed to as25 sure and monitor the compliance of such depository 


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1 institutions, the subsidiaries of such institutions, 

2 and the employees of such institutions or subsidi3 aries with the requirements of this section and the 

4 registration procedures established under section 

5 1507 of the Secure and Fair Enforcement for Mort6 gage Licensing Act of 2008.’’. 

7 (b) CLERICAL AMENDMENT.—The table of sections 

8 for chapter 2 of the Truth in Lending Act is amended 

9 by inserting after the item relating to section 129 the fol10 lowing new items: 

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

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

11 SEC. 103. PROHIBITION ON STEERING INCENTIVES. 

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

13 by section 102(a)) is amended by inserting after sub14 section (b) the following new subsection: 

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

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

17 total amount of direct and indirect compensation 

18 from all sources permitted to a mortgage originator 

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

20 than the amount of the principal). 

21 ‘‘(2) REGULATIONS.—The Federal banking 

22 agencies, in consultation with the Secretary and the 

23 Commission, shall jointly prescribe regulations to 

24 prohibit— 


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1 ‘‘(A) mortgage originators from steering 

2 any consumer to a residential mortgage loan 

3 that— 

4 ‘‘(i) the consumer lacks a reasonable 

5 ability to repay (in accordance with regula6 tions prescribed under section 129B(a)); 

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

8 residential mortgage loan, does not provide 

9 the consumer with a net tangible benefit 

10 (in accordance with regulations prescribed 

11 under section 129B(b)); or 

12 ‘‘(iii) has predatory characteristics or 

13 effects (such as equity stripping, excessive 

14 fees, or abusive terms); 

15 ‘‘(B) mortgage originators from steering 

16 any consumer from a residential mortgage loan 

17 for which the consumer is qualified that is a 

18 qualified mortgage (as defined in section 

19 129B(c)(3)) to a residential mortgage loan that 

20 is not a qualified mortgage; and 

21 ‘‘(C) abusive or unfair lending practices 

22 that promote disparities among consumers of 

23 equal credit worthiness but of different race, 

24 ethnicity, gender, or age. 


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1 ‘‘(3) RULES OF CONSTRUCTION.—No provision 

2 of this subsection shall be construed as— 

3 ‘‘(A) affecting the mechanism for providing 

4 the total amount of direct and indirect com5 pensation permitted to a mortgage originator; 

6 ‘‘(B) limiting or affecting the ability of a 

7 mortgage originator to sell residential mortgage 

8 loans to subsequent purchasers; 

9 ‘‘(C) restricting a consumer’s ability to fi10 nance, including through rate or principal, any 

11 origination fees or costs permitted under this 

12 subsection, or the originator’s ability to receive 

13 such fees or costs (including compensation) 

14 from any person, so long as such fees or costs 

15 were fully and clearly disclosed to the consumer 

16 earlier in the application process as required by 

17 129A(a)(1)(C)(ii) and do not vary based on the 

18 terms of the loan or the consumer’s decision 

19 about whether to finance such fees or costs; or 

20 ‘‘(D) prohibiting incentive payments to a 

21 mortgage originator based on the number of 

22 residential mortgage loans originated within a 

23 specified period of time.’’. 


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1 SEC. 104. LIABILITY. 

2 Section 129B of the Truth in Lending Act is amend3 ed by inserting after subsection (c) (as added by section 

4 103) the following new subsection: 

5 ‘‘(d) LIABILITY FOR VIOLATIONS.— 

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

7 a cause of action for any failure by a mortgage origi8 nator to comply with any requirement imposed 

9 under this section and any regulation prescribed 

10 under this section, subsections (a) and (b) of section 

11 130 shall be applied with respect to any such failure 

12 by substituting ‘mortgage originator’ for ‘creditor’ 

13 each place such term appears in each such sub14 section. 

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

16 liability of a mortgage originator under paragraph 

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

18 shall not exceed øthe greater of actual damages or¿ 

19 an amount equal to 3 times the total amount of di20 rect and indirect compensation or gain accruing to 

21 the mortgage originator in connection with the resi22 dential mortgage loan involved in the violation, plus 

23 the costs to the consumer of the action, including a 

24 reasonable attorney’s fee.’’. 


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1 SEC. 105. REGULATIONS. 

2 (a) DISCRETIONARY REGULATORY AUTHORITY.— 

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

4 by inserting after subsection (c) (as added by section 104) 

5 the following new subsection: 

6 ‘‘(e) DISCRETIONARY REGULATORY AUTHORITY.— 

7 ‘‘(1) IN GENERAL.—The Federal banking agen8 cies shall, by regulations issued jointly, prohibit or 

9 condition terms, acts or practices relating to residen10 tial mortgage loans that the agencies find to be abu11 sive, unfair, deceptive, predatory, inconsistent with 

12 reasonable underwriting standards, necessary or 

13 proper to effectuate the purposes of this section and 

14 section 129C, to prevent circumvention or evasion 

15 thereof, or to facilitate compliance with such sec16 tions, or are not in the interest of the borrower. 

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

18 under paragraph (1) shall be applicable to all resi19 dential mortgage loans and shall be applied in the 

20 same manner as regulations prescribed under section 

21 105.’’. 

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

23 authorized to be prescribed under this title or the amend24 ments made by this title— 


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

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

3 the enactment of this Act; and 

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

5 after the date of the enactment of this Act. 

6 (c) TECHNICAL AND CONFORMING AMENDMENTS.— 

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

8 1639(l)(2)) is amended by inserting ‘‘referred to in section 

9 103(aa)’’ after ‘‘loans’’ each place such term appears. 

10 TITLE II—MINIMUM STANDARDS 

11 FOR MORTGAGES 

12 SEC. 201. ABILITY TO REPAY. 

13 (a) IN GENERAL.—Chapter 2 of the Truth in Lend14 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 

15 after section 129B (as added by section 102(a)) the fol16 lowing new section: 

17 ‘‘§ 129C. Minimum standards for residential mortgage 

18 loans 

19 ‘‘(a) ABILITY TO REPAY.— 

20 ‘‘(1) IN GENERAL.—In accordance with regula21 tions prescribed jointly by the Federal banking agen22 cies, in consultation with the Commission, no cred23 itor may make a residential mortgage loan unless 

24 the creditor makes a reasonable and good faith de25 termination based on verified and documented inforVerDate Nov 24 2008 01:03 Mar 27, 2009 Jkt 079200 PO 00000 Frm 00018 Fmt 6652 Sfmt 6201 E:\BILLS\H1728.IH H1728

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1 mation that, at the time the loan is consummated, 

2 the consumer has a reasonable ability to repay the 

3 loan, according to its terms, and all applicable taxes, 

4 insurance, and assessments. 

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

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

7 mortgage loans secured by the same dwelling will be 

8 made to the same consumer, the creditor shall make 

9 a reasonable and good faith determination, based on 

10 verified and documented information, that the con11 sumer has a reasonable ability to repay the com12 bined payments of all loans on the same dwelling ac13 cording to the terms of those loans and all applicable 

14 taxes, insurance, and assessments. 

15 ‘‘(3) BASIS FOR DETERMINATION.—A deter16 mination under this subsection of a consumer’s abil17 ity to repay a residential mortgage loan shall be 

18 based on consideration of the consumer’s credit his19 tory, current income, expected income the consumer 

20 is reasonably assured of receiving, current obliga21 tions, debt-to-income ratio, employment status, and 

22 other financial resources other than the consumer’s 

23 equity in the dwelling or real property that secures 

24 repayment of the loan. 

25 ‘‘(4) NONSTANDARD LOANS.— 


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1 ‘‘(A) VARIABLE RATE LOANS THAT DEFER

2 REPAYMENT OF ANY PRINCIPAL OR INTER3 EST.—For purposes of determining, under this 

4 subsection, a consumer’s ability to repay a vari5 able rate residential mortgage loan that allows 

6 or requires the consumer to defer the repay7 ment of any principal or interest, the creditor 

8 shall use a fully amortizing repayment schedule. 

9 ‘‘(B) INTEREST-ONLY LOANS.—For pur10 poses of determining, under this subsection, a 

11 consumer’s ability to repay a residential mort12 gage loan that permits or requires the payment 

13 of interest only, the creditor use the payment 

14 amount required to amortize the loan by its 

15 final maturity. 

16 ‘‘(C) CALCULATION FOR NEGATIVE AMOR17 TIZATION.—In making any determination under 

18 this subsection, a creditor shall also take into 

19 consideration any balance increase that may ac20 crue from any negative amortization provision. 

21 ‘‘(D) CALCULATION PROCESS.—For pur22 poses of making any determination under this 

23 subsection, a creditor shall calculate the month24 ly payment amount for principal and interest on 

25 any residential mortgage loan by assuming— 


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1 ‘‘(i) the loan proceeds are fully dis2 bursed on the date of the consummation of 

3 the loan; 

4 ‘‘(ii) the loan is to be repaid in sub5 stantially equal monthly amortizing pay6 ments for principal and interest over the 

7 entire term of the loan with no balloon 

8 payment, unless the loan contract requires 

9 more rapid repayment (including balloon 

10 payment), in which case the contract’s re11 payment schedule shall be used in this cal12 culation; and 

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

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

15 fully indexed rate at the time of the loan 

16 closing, without considering the introduc17 tory rate. 

18 ‘‘(5) FULLY-INDEXED RATE DEFINED.—For 

19 purposes of this subsection, the term ‘fully indexed 

20 rate’ means the index rate prevailing on a residential 

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

22 margin that will apply after the expiration of any in23 troductory interest rates.’’. 

24 (b) CLERICAL AMENDMENT.—The table of sections 

25 for chapter 2 of the Truth in Lending Act is amended 


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1 by inserting after the item relating to section 129B (as 

2 added by section 102(b)) the following new item: 

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

3 SEC. 202. NET TANGIBLE BENEFIT FOR REFINANCING OF 

4 RESIDENTIAL MORTGAGE LOANS. 

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

6 by section 201(a)) is amended by inserting after sub7 section (a) the following new subsection: 

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

9 RESIDENTIAL MORTGAGE LOANS.— 

10 ‘‘(1) IN GENERAL.—In accordance with regula11 tions prescribed under paragraph (3), no creditor 

12 may extend credit in connection with any residential 

13 mortgage loan that involves a refinancing of a prior 

14 existing residential mortgage loan unless the creditor 

15 reasonably and in good faith determines, at the time 

16 the loan is consummated and on the basis of infor17 mation known by or obtained in good faith by the 

18 creditor, that the refinanced loan will provide a net 

19 tangible benefit to the consumer. 

20 ‘‘(2) CERTAIN LOANS PROVIDING NO NET TAN21 GIBLE BENEFIT.—A residential mortgage loan that 

22 involves a refinancing of a prior existing residential 

23 mortgage loan shall not be considered to provide a 

24 net tangible benefit to the consumer if the costs of 

25 the refinanced loan, including points, fees and other 


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1 charges, exceed the amount of any newly advanced 

2 principal without any corresponding changes in the 

3 terms of the refinanced loan that are advantageous 

4 to the consumer. 

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

6 banking agencies shall jointly prescribe regulations 

7 defining the term ‘net tangible benefit’ for purposes 

8 of this subsection.’’. 

9 SEC. 203. SAFE HARBOR AND REBUTTABLE PRESUMPTION. 

10 Section 129C of the Truth in Lending Act is amend11 ed by inserting after subsection (b) (as added by section 

12 202) the following new subsection: 

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

14 TANGIBLE BENEFIT.— 

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

16 to any residential mortgage loan, and any assignee 

17 or securitizer of such loan, may presume that the 

18 loan has met the requirements of subsections (a) 

19 and (b), if the loan is a qualified mortgage 

20 ‘‘(2) DEFINITIONS.—For purposes of this sub21 section, the following definitions shall apply: 

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

23 ‘qualified mortgage’ means any residential 

24 mortgage loan— 


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1 ‘‘(i) with an annual percentage rate 

2 that does not exceed the average prime 

3 offer rate for a comparable transaction, as 

4 of the date the interest rate is set— 

5 ‘‘(I) by 1.5 or more percentage 

6 points for a first lien residential mort7 gage loan; and 

8 ‘‘(II) by 3.5 or more percentage 

9 points for a subordinate lien residen10 tial mortgage loan; 

11 ‘‘(ii) for which the income and finan12 cial resources of the consumer are verified 

13 and documented; 

14 ‘‘(iii) for which the residential mort15 gage loan underwriting process is based on 

16 the fully-indexed rate, and takes into ac17 count all applicable taxes, insurance, and 

18 assessments; 

19 ‘‘(iv) that does not cause the con20 sumer’s total monthly debts, including 

21 amounts under the loan, to exceed a per22 centage established by regulation of the 

23 consumer’s monthly gross income or such 

24 other maximum percentage of such income 


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1 as may be prescribed by regulation under 

2 paragraph (4); and 

3 ‘‘(v) for which the term of the loan is 

4 fixed for a period of not less than or more 

5 than 30 years. 

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

7 term ‘average prime offer rate’ means an an8 nual percentage rate that is derived from aver9 age interest rates, points, and other loan pric10 ing terms currently offered to consumers by a 

11 representative sample of creditors for mortgage 

12 transactions that have low risk pricing charac13 teristics. 

14 ‘‘(3) PUBLICATION OF AVERAGE PRIME OFFER

15 RATE.—The Board— 

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

17 weekly, average prime offer rates; and 

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

19 varying types of mortgage transactions. 

20 ‘‘(4) REGULATIONS.— 

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

22 agencies shall jointly prescribe regulations to 

23 carry out the purposes of this subsection. 

24 ‘‘(B) REVISION OF SAFE HARBOR CRI25 TERIA.—The Federal banking agencies may 


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1 jointly prescribe regulations that revise, add to, 

2 or subtract from the criteria that define a quali3 fied mortgage to the extent necessary and ap4 propriate to effectuate the purposes of this sub5 section, to prevent circumvention or evasion of 

6 this subsection, or to facilitate compliance with 

7 this subsection.’’. 

8 SEC. 204. LIABILITY. 

9 Section 129C of the Truth in Lending Act is amend10 ed by inserting after subsection (c) (as added by section 

11 203) the following new subsection: 

12 ‘‘(d) LIABILITY FOR VIOLATIONS.— 

13 ‘‘(1) IN GENERAL.— 

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

15 other liability under this title for a violation by 

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

17 under section 130) and subject to the statute of 

18 limitations in paragraph (7), a civil action may 

19 be maintained against a creditor for a violation 

20 of subsection (a) or (b) with respect to a resi21 dential mortgage loan for the rescission of the 

22 loan, and such additional costs as the obligor 

23 may have incurred as a result of the violation 

24 and in connection with obtaining a rescission of 

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


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

2 for rescission under subparagraph (A) with re3 spect to a residential mortgage loan if, no later 

4 than 90 days after the receipt of notification 

5 from the consumer that the loan violates sub6 section (a) or (b), the creditor provides a cure. 

7 ‘‘(2) LIMITED ASSIGNEE AND SECURITIZER LI8 ABILITY.—Notwithstanding sections 125(e) and 131 

9 and except as provided in paragraph (3), a civil ac10 tion which may be maintained against a creditor 

11 with respect to a residential mortgage loan for a vio12 lation of subsection (a) or (b) may be maintained 

13 against any assignee or securitizer of such residen14 tial mortgage loan, who has acted in good faith, for 

15 the following liabilities only: 

16 ‘‘(A) Rescission of the loan. 

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

18 may have incurred as a result of the violation 

19 and in connection with obtaining a rescission of 

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

21 ‘‘(3) ASSIGNEE AND SECURITIZER EXEMP22 TION.—No assignee or securitizer of a residential 

23 mortgage loan shall be liable under paragraph (2) 

24 with respect to such loan if, no later than 90 days 

25 after the receipt of notification from the consumer 


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1 that the loan violates subsection (a) or (b), the as2 signee or securitizer provides a cure so that the loan 

3 satisfies the requirements of subsections (a) and (b). 

4 ‘‘(4) ABSENT PARTIES.— 

5 ‘‘(A) ABSENT CREDITOR.—Notwith6 standing the exemption provided in paragraph 

7 (3), if the creditor with respect to a residential 

8 mortgage loan made in violation of subsection 

9 (a) or (b) has ceased to exist as a matter of law 

10 or has filed for bankruptcy protection under 

11 title 11, United States Code, or has had a re12 ceiver or liquidating agent appointed, a con13 sumer may maintain a civil action against an 

14 assignee to cure the residential mortgage loan, 

15 plus the costs and reasonable attorney’s fees in16 curred in obtaining such remedy. 

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

18 Notwithstanding the exemption provided in 

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

20 residential mortgage loan made in violation of 

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

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

23 have filed for bankruptcy protection under title 

24 11, United States Code, or have had receivers 

25 or liquidating agents appointed, the consumer 


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1 may maintain the civil action referred to in sub2 paragraph (A) against the securitizer. 

3 ‘‘(5) CURE DEFINED.—For purposes of this 

4 subsection, the term ‘cure’ means, with respect to a 

5 residential mortgage loan that violates subsection (a) 

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

7 the consumer, of the loan to provide terms that 

8 would have satisfied the requirements of subsections 

9 (a) and (b) if the loan had contained such terms as 

10 of the origination of the loan and the payment of 

11 such additional costs as the obligor may have in12 curred as a result of the violation and in connection 

13 with obtaining a cure of the loan, including a rea14 sonable attorney’s fee. 

15 ‘‘(6) DISAGREEMENT OVER CURE.—If any cred16 itor, assignee, or securitizer and a consumer fail to 

17 reach agreement on a cure with respect to a residen18 tial mortgage loan that violates subsection (a) or (b), 

19 or the consumer fails to accept a cure proffered by 

20 a creditor, assignee, or securitizer— 

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

22 may provide the cure; and 

23 ‘‘(B) the consumer may challenge the ade24 quacy of the cure during the 6-month period be25 ginning when the cure is provided. 


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1 If the consumer’s challenge, under this paragraph, 

2 of a cure is successful, the creditor, assignee, or 

3 securitizer shall be liable to the consumer for rescis4 sion of the loan and such additional costs under 

5 paragraph (2). 

6 ‘‘(7) INABILITY TO PROVIDE OR OBTAIN RE7 SCISSION.—If a creditor, assignee, or securitizer 

8 cannot provide, or a consumer cannot obtain, rescis9 sion under paragraph (1) or (2), the liability of such 

10 creditor, assignee, or securitizer shall be met by pro11 viding the financial equivalent of a rescission, to12 gether with such additional costs as the obligor may 

13 have incurred as a result of the violation and in con14 nection with obtaining a rescission of the loan, in15 cluding a reasonable attorney’s fee. 

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

17 SECURITIZER UNDER PARAGRAPH (2).—Only indi18 vidual actions may be brought against an assignee 

19 or securitizer of a residential mortgage loan for a 

20 violation of subsection (a) or (b). 

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

22 of a creditor, assignee, or securitizer under this sub23 section shall apply in any original action against a 

24 creditor under paragraph (1) or an assignee or 


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1 securitizer under paragraph (2) which is brought be2 fore— 

3 ‘‘(A) in the case of any residential mort4 gage loan other than a loan to which subpara5 graph (B) applies, the end of the 3-year period 

6 beginning on the date the loan is consummated; 

7 or 

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

9 loan that provides for a fixed interest rate for 

10 an introductory period and then resets or ad11 justs to a variable rate or that provides for a 

12 nonamortizing payment schedule and then con13 verts to an amortizing payment schedule, the 

14 earlier of— 

15 ‘‘(i) the end of the 1-year period be16 ginning on the date of such reset, adjust17 ment, or conversion; or 

18 ‘‘(ii) the end of the 6-year period be19 ginning on the date the loan is con20 summated. 

21 ‘‘(10) POOLS AND INVESTORS IN POOLS EX22 CLUDED.—In the case of residential mortgage loans 

23 acquired or aggregated for the purpose of including 

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

25 of issuing or selling instruments representing interVerDate Nov 24 2008 01:03 Mar 27, 2009 Jkt 079200 PO 00000 Frm 00031 Fmt 6652 Sfmt 6201 E:\BILLS\H1728.IH H1728

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1 ests in such pools including through a securitization 

2 vehicle, the terms ‘assignee’ and ‘securitizer’, as 

3 used in this section, do not include the securitization 

4 vehicle, the pools of such loans or any original or 

5 subsequent purchaser of any interest in the 

6 securitization vehicle or any instrument representing 

7 a direct or indirect interest in such pool.’’. 

8 SEC. 205. DEFENSE TO FORECLOSURE. 

9 Section 129C of the Truth in Lending Act is amend10 ed by inserting after subsection (d) (as added by section 

11 204) the following new subsection: 

12 ‘‘(e) DEFENSE TO FORECLOSURE.—Notwithstanding 

13 any other provision of law— 

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

15 loan or anyone acting for such holder initiates a ju16 dicial or nonjudicial foreclosure— 

17 ‘‘(A) a consumer who has the right to re18 scind under this section with respect to such 

19 loan against the creditor or any assignee or 

20 securitizer may assert such right as a defense 

21 to foreclosure or counterclaim to such fore22 closure against the holder, or 

23 ‘‘(B) if the foreclosure proceeding begins 

24 after the end of the period during which a con25 sumer may bring an action for rescission under 


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1 subsection (c) and the consumer would have 

2 had a valid basis for such an action if it had 

3 been brought before the end of such period, the 

4 consumer may seek actual damages incurred by 

5 reason of the violation which gave rise to the 

6 right of rescission, together with costs of the 

7 action, including a reasonable attorney’s fee 

8 against the creditor or any assignee or 

9 securitizer; and 

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

11 holder or any other applicable third party may sell, 

12 transfer, convey, or assign a residential mortgage 

13 loan to a creditor, any assignee, or any securitizer, 

14 or their designees, to effect a rescission or cure.’’. 

15 SEC. 206. ADDITIONAL STANDARDS AND REQUIREMENTS. 

16 (a) IN GENERAL.—Section 129C of the Truth in 

17 Lending Act is amended by inserting after subsection (e) 

18 (as added by section 205) the following new subsections: 

19 ‘‘(f) PROHIBITION ON CERTAIN PREPAYMENT PEN20 ALTIES.— 

21 ‘‘(1) PROHIBITED ON CERTAIN LOANS.—A resi22 dential mortgage loan that is not a ‘qualified mort23 gage’ may not contain terms under which a con24 sumer must pay a prepayment penalty for paying all 


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1 or part of the principal after the loan is con2 summated. 

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

4 MORTGAGES.—A qualified mortgage (as defined in 

5 subsection (c)) may not contain terms under which 

6 a consumer must pay a prepayment penalty for pay7 ing all or part of the principal after the loan is con8 summated in excess of the following limitations: 

9 ‘‘(A) During the 1-year period beginning 

10 on the date the loan is consummated, the pre11 payment penalty shall not exceed an amount 

12 equal to 3 percent of the outstanding balance 

13 on the loan. 

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

15 after the period described in subparagraph (A), 

16 the prepayment penalty shall not exceed an 

17 amount equal to 2 percent of the outstanding 

18 balance on the loan. 

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

20 after the 1-year period described in subpara21 graph (B), the prepayment penalty shall not ex22 ceed an amount equal to 1 percent of the out23 standing balance on the loan. 

24 ‘‘(D) After the end of the 3-year period be25 ginning on the date the loan is consummated, 


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1 no prepayment penalty may be imposed on a 

2 qualified mortgage. 

3 ‘‘(3) PROHIBITED AFTER INITIAL PERIOD ON

4 LOANS WITH A RESET.—A qualified mortgage with 

5 a fixed interest rate for an introductory period that 

6 adjusts or resets after such period may not contain 

7 terms under which a consumer must pay a prepay8 ment penalty for paying all or part of the principal 

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

10 the date of the adjustment or reset. 

11 ‘‘(4) OPTION FOR NO PREPAYMENT PENALTY

12 REQUIRED.—A creditor may not offer a consumer a 

13 residential mortgage loan product that has a prepay14 ment penalty for paying all or part of the principal 

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

16 without offering the consumer a residential mort17 gage loan product that does not have a prepayment 

18 penalty as a term of the loan. 

19 ‘‘(g) SINGLE PREMIUM CREDIT INSURANCE PROHIB20 ITED.—No creditor may finance, directly or indirectly, in 

21 connection with any residential mortgage loan or with any 

22 extension of credit under an open end consumer credit 

23 plan secured by the principal dwelling of the consumer 

24 (other than a reverse mortgage), any credit life, credit dis25 ability, credit unemployment or credit property insurance, 


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1 or any other accident, loss-of-income, life or health insur2 ance, or any payments directly or indirectly for any debt 

3 cancellation or suspension agreement or contract, except 

4 that— 

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

6 suspension fees calculated and paid in full on a 

7 monthly basis shall not be considered financed by 

8 the creditor; and 

9 ‘‘(2) this subsection shall not apply to credit 

10 unemployment insurance for which the unemploy11 ment insurance premiums are reasonable and at no 

12 additional cost to the consumer, the creditor receives 

13 no direct or indirect compensation in connection 

14 with the unemployment insurance premiums, and 

15 the unemployment insurance premiums are paid pur16 suant to another insurance contract and not paid to 

17 an affiliate of the creditor. 

18 ‘‘(h) ARBITRATION.— 

19 ‘‘(1) IN GENERAL.—No residential mortgage 

20 loan and no extension of credit under an open end 

21 consumer credit plan secured by the principal dwell22 ing of the consumer, other than a reverse mortgage, 

23 may include terms which require arbitration or any 

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1 ing any controversy or settling any claims arising 

2 out of the transaction. 

3 ‘‘(2) POST-CONTROVERSY AGREEMENTS.—Sub4 ject to paragraph (3), paragraph (1) shall not be 

5 construed as limiting the right of the consumer and 

6 the creditor, any assignee, or any securitizer to 

7 agree to arbitration or any other nonjudicial proce8 dure as the method for resolving any controversy at 

9 any time after a dispute or claim under the trans10 action arises. 

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

13 loan or of any extension of credit under an open end 

14 consumer credit plan secured by the principal dwell15 ing of the consumer (other than a reverse mort16 gage), and no other agreement between the con17 sumer and the creditor relating to the residential 

18 mortgage loan or extension of credit referred to in 

19 paragraph (1), shall be applied or interpreted so as 

20 to bar a consumer from bringing an action in an ap21 propriate district court of the United States, or any 

22 other court of competent jurisdiction, pursuant to 

23 section 130 or any other provision of law, for dam24 ages or other relief in connection with any alleged 


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1 violation of this section, any other provision of this 

2 title, or any other Federal law. 

3 ‘‘(i) DUTY OF SECURITIZER TO RETAIN ACCESS TO

4 LOANS.—Any securitizer shall reserve the right and pre5 serve an ability, in any document or contract establishing 

6 any pool of assets that includes any residential mortgage 

7 loan— 

8 ‘‘(1) to identify and obtain access to any such 

9 loan in the pool; and 

10 ‘‘(2) to provide for and obtain a remedy under 

11 this title for the obligor under any such loan. 

12 ‘‘(j) MORTGAGES WITH NEGATIVE AMORTIZATION.— 

13 No creditor may extend credit to a borrower in connection 

14 with a consumer credit transaction under an open or 

15 closed end consumer credit plan secured by a dwelling or 

16 residential real property that includes a dwelling, other 

17 than a reverse mortgage, that provides or permits a pay18 ment plan that may, at any time over the term of the ex19 tension of credit, result in negative amortization unless, 

20 before such transaction is consummated— 

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

22 statement that— 

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

24 as the case may be, result in negative amortiza25 tion; 


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1 ‘‘(B) describes negative amortization in 

2 such manner as the Federal banking agencies 

3 shall prescribe; 

4 ‘‘(C) negative amortization increases the 

5 outstanding principal balance of the account; 

6 and 

7 ‘‘(D) negative amortization reduces the 

8 consumer’s equity in the dwelling or real prop9 erty; and 

10 ‘‘(2) in the case of a first-time borrower with 

11 respect to a residential mortgage loan that is not a 

12 qualified mortgage, the first-time borrower provides 

13 the creditor with sufficient documentation to dem14 onstrate that the consumer received homeownership 

15 counseling from organizations or counselors certified 

16 by the Secretary of Housing and Urban Develop17 ment as competent to provide such counseling. 

18 ‘‘(k) ANNUAL CONTACT INFORMATION.—At least 

19 once annually and whenever there is a change in owner20 ship of a residential mortgage loan, the servicer with re21 spect to a residential mortgage loan shall provide a written 

22 notice to the consumer identifying the name of the creditor 

23 or any assignee or securitizer who should be contacted by 

24 the consumer for any reason concerning the consumer’s 

25 rights with respect to the loan. 


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1 ‘‘(l) TENANT PROTECTION.— 

2 ‘‘(1) IN GENERAL.—In the case of any fore3 closure on any dwelling or residential real property, 

4 after the date of the enactment of the Mortgage Re5 form and Anti-Predatory Lending Act, any imme6 diate successor in interest in such property pursuant 

7 to the foreclosure shall assume such interest subject 

8 to— 

9 ‘‘(A) except as provided in paragraph (2), 

10 the rights of any bona fide tenant, as of the 

11 date of foreclosure under any bona fide lease 

12 entered into before the notice of foreclosure, to 

13 occupy the premises until the end of the re14 maining term of the lease; and 

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

16 of the date of foreclosure, without a lease or 

17 with a lease terminable at will under State law, 

18 subject to the provision by the immediate suc19 cessor in interest and the receipt by the tenant 

20 in the unit, of a notice to vacate at least 90 

21 days before the effective date of such notice. 

22 ‘‘(2) EXCEPTION FOR SUBSEQUENT OWNER-OC23 CUPANT.—Notwithstanding paragraph (1), if the im24 mediate successor in interest of any dwelling or resi25 dential real property that is otherwise subject to 


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1 paragraph (1) is a purchaser who will occupy a unit 

2 of the dwelling or residential real property as a pri3 mary residence, or such successor in interest sells 

4 the dwelling or residential real property to a pur5 chaser who will occupy a unit of the dwelling or resi6 dential real property, as a primary residence— 

7 ‘‘(A) such purchaser may terminate a lease 

8 relating to such unit on the effective date of a 

9 notice to vacate; and 

10 ‘‘(B) such notice to vacate shall be pro11 vided by the purchaser to the tenant in such 

12 unit at least 90 days before the effective date 

13 of such notice. 

14 ‘‘(3) BONA FIDE LEASE OR TENANCY.—For 

15 purposes of this section, a lease or tenancy shall be 

16 considered bona fide only if— 

17 ‘‘(A) the mortgagor under the contract is 

18 not the tenant; 

19 ‘‘(B) the lease or tenancy was the result of 

20 an arms-length transaction; or 

21 ‘‘(C) the lease or tenancy requires the re22 ceipt of rent that is not substantially less than 

23 fair market rent for the property. 


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1 ‘‘(4) RULE OF CONSTRUCTION.—No provision 

2 of this subsection shall be construed as affecting the 

3 requirements— 

4 ‘‘(A) for termination of any Federal- or 

5 State-subsidized tenancy; or 

6 ‘‘(B) of any State or local law that pro7 vides longer time periods or other additional 

8 protections for tenants.’’. 

9 (b) CORRESPONDING PROVISION RELATING TO EF10 FECT OF FORECLOSURES ON SECTION 8 TENANCIES.— 

11 Paragraph (7) of section 8(o) of the United States Hous12 ing Act of 1937 (42 U.S.C. 1437f(o)(7)) is amended— 

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

14 semicolon at the end the following: ‘‘, and in the 

15 case of an owner who is an immediate successor in 

16 interest pursuant to foreclosure— 

17 ‘‘(i) during the initial term of the ten18 ant’s lease having the property vacant 

19 prior to sale shall not constitute good 

20 cause; and 

21 ‘‘(ii) in subsequent lease terms, having 

22 the property vacant prior to sale may con23 stitute good cause if the property is un24 marketable while occupied, or if such 


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1 owner will occupy the unit as a primary 

2 residence’’; 

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

4 the end; 

5 (3) by redesignating subparagraph (F) as sub6 paragraph (G); and 

7 (4) by inserting after subparagraph (E) the fol8 lowing: 

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

10 foreclosure on any residential real property in 

11 which a recipient of assistance under this sub12 section resides, the immediate successor in in13 terest in such property pursuant to the fore14 closure shall assume such interest subject to the 

15 lease between the prior owner and the tenant 

16 and to the housing assistance payments con17 tract between the prior owner and the public 

18 housing agency for the occupied unit; if a public 

19 housing agency is unable to make payments 

20 under the contract to the immediate successor 

21 in interest after foreclosure, due to action or in22 action by the successor in interest, including 

23 the rejection of payments or the failure of the 

24 successor to maintain the unit in compliance 

25 with paragraph (8) or an inability to identify 


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1 the successor, the agency may use funds that 

2 would have been used to pay the rental amount 

3 on behalf of the family— 

4 ‘‘(i) to pay for utilities that are the 

5 responsibility of the owner under the lease 

6 or applicable law, after taking reasonable 

7 steps to notify the owner that it intends to 

8 make payments to a utility provider in lieu 

9 of payments to the owner, except prior no10 tification shall not be required in any case 

11 in which the unit will be or has been ren12 dered uninhabitable due to the termination 

13 or threat of termination of service, in 

14 which case the public housing agency shall 

15 notify the owner within a reasonable time 

16 after making such payment; or 

17 ‘‘(ii) for the family’s reasonable mov18 ing costs, including security deposit costs; 

19 except that this subparagraph and the provi20 sions related to foreclosure in subparagraph (C) 

21 shall not affect any State or local law that pro22 vides longer time periods or other additional 

23 protections for tenants.’’. 

24 (c) CONFORMING AMENDMENT RELATING TO EN25 FORCEMENT.—Section 108(a) of the Truth in Lending 


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1 Act (15 U.S.C. 1607(a)) is amended by inserting after 

2 paragraph (6) the following new paragraph: 

3 ‘‘(7) sections 21B and 21C of the Securities 

4 Exchange Act of 1934, in the case of a broker or 

5 dealer, other than a depository institution, by the 

6 Securities and Exchange Commission.’’. 

7 SEC. 207. RULE OF CONSTRUCTION. 

8 Except as otherwise expressly provided in section 

9 129B or 129C of the Truth in Lending Act (as added by 

10 this Act), no provision of such section 129B or 129C shall 

11 be construed as superseding, repealing, or affecting any 

12 duty, right, obligation, privilege, or remedy of any person 

13 under any other provision of the Truth in Lending Act 

14 or any other provision of Federal or State law. 

15 SEC. 208. EFFECT ON STATE LAWS. 

16 (a) IN GENERAL.—Section 129C(d) of the Truth in 

17 Lending Act (as added by section 204) shall supersede any 

18 State law or application thereof that provides additional 

19 remedies against any assignee, securitizer, or 

20 securitization vehicle, and the remedies described in such 

21 section shall constitute the sole remedies against any as22 signee, securitizer, or securitization vehicle, for a violation 

23 of subsection (a) or (b) of section 129C of such Act or 

24 any other State law the terms of which address the specific 

25 subject matter of subsection (a) (determination of ability 


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1 to repay) or (b) (requirement of a net tangible benefit) 

2 of such section 129C. 

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

4 section shall be construed as limiting— 

5 (1) the application of any State law against a 

6 creditor for a particular residential mortgage loan 

7 regardless of whether such creditor also acts as as8 signee, securitizer, or securitization vehicle for such 

9 mortgage; or 

10 (2) availability of remedies based upon fraud, 

11 misrepresentation, deceptive acts or practices, false 

12 advertising, or civil rights laws— 

13 (A) against any assignee, securitizer, or 

14 securitization vehicle for its own conduct relat15 ing to the making of a residential mortgage 

16 loan to a consumer; or 

17 (B) against any assignee, securitizer, or 

18 securitization vehicle in the sale or purchase of 

19 residential mortgage loans or securities. 

20 (c) DEFINITION.—For purposes of subsection (b)(2), 

21 acts or practices are deceptive if— 

22 (1) there is a representation, omission, or prac23 tice that misleads or is likely to mislead a consumer; 


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1 (2) from the consumer’s perspective, the inter2 pretation of the representation, omission, or practice 

3 is reasonable under the circumstances; and 

4 (3) the representation, omission or practice is 

5 material so that it is likely to affect the consumer’s 

6 conduct or decision with regard to a product or serv7 ice. 

8 SEC. 209. REGULATIONS. 

9 Regulations required or authorized to be prescribed 

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

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

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

13 the enactment of this Act; and 

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

15 after the date of the enactment of this Act. 

16 SEC. 210. AMENDMENTS TO CIVIL LIABILITY PROVISIONS. 

17 (a) INCREASE IN AMOUNT OF CIVIL MONEY PEN18 ALTIES FOR CERTAIN VIOLATIONS.—Section 130(a)(2) of 

19 the Truth in Lending Act (15 U.S.C. 1640(a)(2)) is 

20 amended— 

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

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

23 ‘‘$2,000’’; 

24 (3) by striking ‘‘$200’’ and inserting ‘‘$400’’; 


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

2 ‘‘$4,000’’; and 

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

4 ‘‘$1,000,000’’. 

5 (b) STATUTE OF LIMITATIONS EXTENDED FOR SEC6 TION 129 VIOLATIONS.—Section 130(e) of the Truth in 

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

8 (1) in the first sentence, by striking ‘‘Any ac9 tion’’ and inserting ‘‘Except as provided in the sub10 sequent sentence, any action’’; and 

11 (2) by inserting after the first sentence the fol12 lowing new sentence: ‘‘Any action under this section 

13 with respect to any violation of section 129 may be 

14 brought in any United States district court, or in 

15 any other court of competent jurisdiction, before the 

16 end of the 3-year period beginning on the date of the 

17 occurrence of the violation.’’. 

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

19 DECEPTION. 

20 Section 130 of the Truth in Lending Act is amended 

21 by adding at the end the following new subsection: 

22 ‘‘(j) EXEMPTION FROM LIABILITY AND RESCISSION

23 IN CASE OF BORROWER FRAUD OR DECEPTION.—In ad24 dition to any other remedy available by law or contract, 

25 no creditor, assignee, or securitizer shall be liable to an 


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1 obligor under this section, nor shall it be subject to the 

2 right of rescission of any obligor under 129B, if such obli3 gor, or co-obligor, knowingly, or willfully and with actual 

4 knowledge furnished material information known to be 

5 false for the purpose of obtaining such residential mort6 gage loan.’’. 

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

8 HYBRID ADJUSTABLE RATE MORTGAGES. 

9 (a) IN GENERAL.—Chapter 2 of the Truth in Lend10 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 

11 after section 128 the following new section: 

12 ‘‘§ 128A. Reset of hybrid adjustable rate mortgages 

13 ‘‘(a) HYBRID ADJUSTABLE RATE MORTGAGES DE14 FINED.—For purposes of this section, the term ‘hybrid ad15 justable rate mortgage’ means a consumer credit trans16 action secured by the consumer’s principal residence with 

17 a fixed interest rate for an introductory period that ad18 justs or resets to a variable interest rate after such period. 

19 ‘‘(b) NOTICE OF RESET AND ALTERNATIVES.—Dur20 ing the 1-month period that ends 6 months before the date 

21 on which the interest rate in effect during the introductory 

22 period of a hybrid adjustable rate mortgage adjusts or 

23 resets to a variable interest rate, the creditor or servicer 

24 of such loan shall provide a written notice, separate and 


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1 distinct from all other correspondence to the consumer, 

2 that includes the following: 

3 ‘‘(1) Any index or formula used in making ad4 justments to or resetting the interest rate and a 

5 source of information about the index or formula. 

6 ‘‘(2) An explanation of how the new interest 

7 rate and payment would be determined, including an 

8 explanation of how the index was adjusted, such as 

9 by the addition of a margin. 

10 ‘‘(3) A good faith estimate, based on accepted 

11 industry standards, of the creditor or servicer of the 

12 amount of the monthly payment that will apply after 

13 the date of the adjustment or reset, and the assump14 tions on which this estimate is based. 

15 ‘‘(4) A list of alternatives consumers may pur16 sue before the date of adjustment or reset, and de17 scriptions of the actions consumers must take to 

18 pursue these alternatives, including— 

19 ‘‘(A) refinancing; 

20 ‘‘(B) renegotiation of loan terms; 

21 ‘‘(C) payment forbearances; and 

22 ‘‘(D) pre-foreclosure sales. 

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

24 and Internet addresses of counseling agencies or 

25 programs reasonably available to the consumer that 


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1 have been certified or approved and made publicly 

2 available by the Secretary of Housing and Urban 

3 Development or a State housing finance authority 

4 (as defined in section 1301 of the Financial Institu5 tions Reform, Recovery, and Enforcement Act of 

6 1989). 

7 ‘‘(6) The address, telephone number, and Inter8 net address for the State housing finance authority 

9 (as so defined) for the State in which the consumer 

10 resides.’’. 

11 (b) CLERICAL AMENDMENT.—The table of sections 

12 for chapter 2 of the Truth in Lending Act is amended 

13 by inserting after the item relating to section 128 the fol14 lowing new item: 

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

15 SEC. 213. CREDIT RISK RETENTION. 

16 Section 129C of the Truth in Lending Act is amend17 ed by inserting after subsection (l) (as added by section 

18 206) the following new subsection: 

19 ‘‘(m) CREDIT RISK RETENTION.— 

20 ‘‘(1) IN GENERAL.—The Federal banking agen21 cies shall prescribe regulations jointly to require any 

22 creditor that makes a residential mortgage loan that 

23 is not a qualified mortgage (as defined in section 

24 129B(c)), to retain an economic interest in a mate25 rial portion of the credit risk for any such loan that 


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1 the creditor transfers, sells or conveys to a third 

2 party. 

3 ‘‘(2) STANDARDS FOR REGULATIONS.—Regula4 tions prescribed under paragraph (1) shall— 

5 ‘‘(A) apply only to residential mortgage 

6 loans that are not qualified mortgages (as so 

7 defined); 

8 ‘‘(B) prohibit creditors from directly or in9 directly hedging or otherwise transferring the 

10 credit risk creditors are required to retain 

11 under the regulations with respect to any resi12 dential mortgage loan; and 

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

14 percent of the credit risk on any non-qualified 

15 mortgage that is transferred, sold or con16 veyed.’’. 

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 

20 by 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 ap24 plicable taxes, insurance, and assessments— 


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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 

9 monthly payment due under the loan for the 

10 payment of principal and interest, and the 

11 amount of such fully indexed monthly payment 

12 including the monthly payment deposited in the 

13 account for the payment of all applicable taxes, 

14 insurance, and assessments. 

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

16 loan, the aggregate amount of settlement charges for 

17 all settlement services provided in connection with 

18 the loan, the amount of charges that are included in 

19 the loan and the amount of such charges the bor20 rower must pay at closing, the approximate amount 

21 of the wholesale rate of funds in connection with the 

22 loan, and the aggregate amount of other fees or re23 quired payments in connection with the loan. 

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

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1 gage originator in connection with the loan, the 

2 amount of such fees paid directly by the consumer, 

3 and any additional amount received by the originator 

4 from the creditor based on the interest rate of the 

5 loan.’’. 

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

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

8 the following new paragraph: 

9 ‘‘(4) RESIDENTIAL MORTGAGE LOAN DISCLO10 SURES.—In the case of a residential mortgage loan, 

11 the information required to be disclosed under sub12 section (a) with respect to such loan shall be dis13 closed before the earlier of— 

14 ‘‘(A) the time required under the first sen15 tence of paragraph (1); or 

16 ‘‘(B) the end of the 3-day period beginning 

17 on the date the application for the loan from a 

18 consumer is received by the creditor.’’. 

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

21 LOANS. 

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

23 1638) is amended by adding at the end the following new 

24 subsection: 


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1 ‘‘(f) PERIODIC STATEMENTS FOR RESIDENTIAL

2 MORTGAGE LOANS.— 

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

4 servicer with respect to any residential mortgage 

5 loan shall transmit to the obligor, for each billing 

6 cycle, a statement setting forth each of the following 

7 items, to the extent applicable, in a conspicuous and 

8 prominent manner: 

9 ‘‘(A) The amount of the principal obliga10 tion under the mortgage. 

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

12 the loan. 

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

14 may next reset or adjust. 

15 ‘‘(D) The amount of any prepayment fee 

16 to be charged, if any. 

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

18 fees. 

19 ‘‘(F) A telephone number and electronic 

20 mail address that may be used by the obligor to 

21 obtain information regarding the mortgage. 

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

23 may prescribe in regulations. 

24 ‘‘(2) DEVELOPMENT AND USE OF STANDARD

25 FORM.—The Federal banking agencies shall jointly 


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1 develop and prescribe a standard form for the disclo2 sure required under this subsection, taking into ac3 count that the statements required may be trans4 mitted in writing or electronically.’’. 

5 SEC. 216. LEGAL ASSISTANCE FOR FORECLOSURE-RELATED 

6 ISSUES. 

7 (a) ESTABLISHMENT.—The Secretary of Housing 

8 and Urban Development (hereafter in this section referred 

9 to as the ‘‘Secretary’’ shall establish a program for making 

10 grants for providing a full range of foreclosure legal assist11 ance to low- and moderate-income homeowners and ten12 ants related to home ownership preservation, home fore13 closure prevention, and tenancy associated with home fore14 closure. 

15 (b) COMPETITIVE ALLOCATION.—The Secretary shall 

16 allocate amounts made available for grants under this sec17 tion to State and local legal organizations on the basis 

18 of a competitive process. 

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. 


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1 (d) LEGAL ASSISTANCE.— 

2 (1) IN GENERAL.—Any State or local legal or3 ganization that receives financial assistance pursu4 ant to this section may use such amounts only to as5 sist— 

6 (A) homeowners of owner-occupied homes 

7 with mortgages in default, in danger of default, 

8 or subject to or at risk of foreclosure; and 

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

10 as a result of foreclosure of the property in 

11 which such tenant resides. 

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

13 State or local legal organization that receives finan14 cial assistance pursuant to this section shall begin 

15 using any financial assistance received under this 

16 section within 90 days after receipt of the assist17 ance. 

18 (3) PROHIBITION ON CLASS ACTIONS.—No 

19 funds provided to a State or local legal organization 

20 under this section may be used to support any class 

21 action litigation. 

22 (4) LIMITATION ON LEGAL ASSISTANCE.—Legal 

23 assistance funded with amounts provided under this 

24 section shall be limited to mortgage-related default, 


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1 eviction, or foreclosure proceedings, without regard 

2 to whether such foreclosure is judicial or nonjudicial. 

3 (e) AUTHORIZATION OF APPROPRIATIONS.—There 

4 are authorized to be appropriated to the Secretary 

5 $35,000,000 for each of fiscal years 2009 through 2012 

6 for grants under this section. 

7 SEC. 217. EFFECTIVE DATE. 

8 The amendments made by this title shall apply to 

9 transactions consummated on or after the effective date 

10 of the regulations specified in section 209. 

11 SEC. 218. REPORT BY THE GAO. 

12 (a) REPORT REQUIRED.—The Comptroller General 

13 shall conduct a study to determine the effects the enact14 ment of this Act will have on the availability and afford15 ability of credit for homebuyers and mortgage lending, in16 cluding the effect— 

17 (1) on the mortgage market for mortgages that 

18 are not within the safe harbor provided in the 

19 amendments made by this title; 

20 (2) on the ability of prospective homebuyers to 

21 obtain financing; 

22 (3) on the ability of homeowners facing resets 

23 or adjustments to refinance—for example, do they 

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1 ability of certain loan products that were available 

2 before the enactment of this Act; 

3 (4) on minorities’ ability to access affordable 

4 credit compared with other prospective borrowers; 

5 (5) on home sales and construction; 

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

7 adjustable rate loans and its impact on litigation; 

8 (7) of State foreclosure laws and, if any, an in9 vestor’s ability to transfer a property after fore10 closure; 

11 (8) of expanding the existing provisions of the 

12 Home Ownership and Equity Protection Act of 

13 1994; 

14 (9) of prohibiting prepayment penalties on 

15 high-cost mortgages; and 

16 (10) of establishing counseling services under 

17 the Department of Housing and Urban Development 

18 and offered through the Office of Housing Coun19 seling. 

20 (b) REPORT.—Before the end of the 1-year period be21 ginning on the date of the enactment of this Act, the 

22 Comptroller General shall submit a report to the Congress 

23 containing the findings and conclusions of the Comptroller 

24 General with respect to the study conducted pursuant to 

25 subsection (a). 


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1 TITLE III—HIGH-COST 

2 MORTGAGES 

3 SEC. 301. DEFINITIONS RELATING TO HIGH-COST MORT4 GAGES. 

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

6 103(aa) of the Truth in Lending Act (15 U.S.C. 

7 1602(aa)) is amended by striking all that precedes para8 graph (2) and inserting the following: 

9 ‘‘(aa) HIGH-COST MORTGAGE.— 

10 ‘‘(1) DEFINITION.— 

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

12 mortgage’, and a mortgage referred to in this 

13 subsection, means a consumer credit trans14 action that is secured by the consumer’s prin15 cipal dwelling, other than a reverse mortgage 

16 transaction, if— 

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

18 secured— 

19 ‘‘(I) by a first mortgage on the 

20 consumer’s principal dwelling, the an21 nual percentage rate at consummation 

22 of the transaction will exceed by more 

23 than 8 percentage (10 percentage 

24 points, if the dwelling is personal 

25 property and the transaction is for 


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1 less than $50,000) points the yield on 

2 Treasury securities having comparable 

3 periods of maturity on the 15th day of 

4 the month immediately preceding the 

5 month in which the application for the 

6 extension of credit is received by the 

7 creditor; or 

8 ‘‘(II) by a subordinate or junior 

9 mortgage on the consumer’s principal 

10 dwelling, the annual percentage rate 

11 at consummation of the transaction 

12 will exceed by more than 10 percent13 age points the yield on Treasury secu14 rities having comparable periods of 

15 maturity on the 15th day of the 

16 month immediately preceding the 

17 month in which the application for the 

18 extension of credit is received by the 

19 creditor; 

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

21 in connection with the transaction ex22 ceed— 

23 ‘‘(I) in the case of a transaction 

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

25 total transaction amount; or 


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

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

3 percent of the total transaction 

4 amount or $1,000; or 

5 ‘‘(iii) the credit transaction documents 

6 permit the creditor to charge or collect pre7 payment fees or penalties more than 36 

8 months after the transaction closing or 

9 such fees or penalties exceed, in the aggre10 gate, more than 2 percent of the amount 

11 prepaid. 

12 ‘‘(B) INTRODUCTORY RATES TAKEN INTO

13 ACCOUNT.—For purposes of subparagraph 

14 (A)(i), the annual percentage rate of interest 

15 shall be determined based on the following in16 terest rate: 

17 ‘‘(i) In the case of a fixed-rate trans18 action in which the annual percentage rate 

19 will not vary during the term of the loan, 

20 the interest rate in effect on the date of 

21 consummation of the transaction. 

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

23 which the rate of interest varies solely in 

24 accordance with an index, the interest rate 

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1 fect on the date of consummation of the 

2 transaction to the maximum margin per3 mitted at any time during the transaction 

4 agreement. 

5 ‘‘(iii) In the case of any other trans6 action in which the rate may vary at any 

7 time during the term of the loan for any 

8 reason, the interest charged on the trans9 action at the maximum rate that may be 

10 charged during the term of the trans11 action.’’. 

12 (b) ADJUSTMENT OF PERCENTAGE POINTS.—Section 

13 103(aa)(2) of the Truth in Lending Act (15 U.S.C. 

14 1602(aa)(2)) is amended by striking subparagraph (B) 

15 and inserting the following new subparagraph: 

16 ‘‘(B) An increase or decrease under sub17 paragraph (A)— 

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

19 percentage points referred to in paragraph 

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

21 points or greater than 10 percentage 

22 points; and 

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

24 percentage points referred to in paragraph 

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


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1 points or greater than 12 percentage 

2 points.’’. 

3 (c) POINTS AND FEES DEFINED.— 

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

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

6 amended— 

7 (A) by striking subparagraph (B) and in8 serting the following: 

9 ‘‘(B) all compensation paid directly or indi10 rectly by a consumer or creditor to a mortgage 

11 broker from any source, including a mortgage 

12 originator that originates a loan in the name of 

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

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

15 ‘‘except where applied to the charges set forth 

16 in section 106(e)(1) where a creditor may re17 ceive indirect compensation solely as a result of 

18 obtaining distributions of profits from an affili19 ated entity based on its ownership interest in 

20 compliance with section 8(c)(4) of the Real Es21 tate Settlement Procedures Act of 1974’’ before 

22 the semicolon at the end; 

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

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

25 clause (ii);’’; 


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1 (D) by redesignating subparagraph (D) as 

2 subparagraph (G); and 

3 (E) by inserting after subparagraph (C) 

4 the following new subparagraphs: 

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

6 or before closing for any credit life, credit dis7 ability, credit unemployment, or credit property 

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

9 life or health insurance, or any payments di10 rectly or indirectly for any debt cancellation or 

11 suspension agreement or contract, except that 

12 insurance premiums or debt cancellation or sus13 pension fees calculated and paid in full on a 

14 monthly basis shall not be considered financed 

15 by the creditor; 

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

17 the maximum prepayment fees and penalties 

18 which may be charged or collected under the 

19 terms of the credit transaction; 

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

21 are incurred by the consumer if the loan refi22 nances a previous loan made or currently held 

23 by the same creditor or an affiliate of the cred24 itor; and’’. 


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1 (2) CALCULATION OF POINTS AND FEES FOR

2 OPEN-END CONSUMER CREDIT PLANS.—Section 

3 103(aa) of the Truth in Lending Act (15 U.S.C. 

4 1602(aa)) is amended— 

5 (A) by redesignating paragraph (5) as 

6 paragraph (6); and 

7 (B) by inserting after paragraph (4) the 

8 following new paragraph: 

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

10 OPEN-END CONSUMER CREDIT PLANS.—In the case 

11 of open-end consumer credit plans, points and fees 

12 shall be calculated, for purposes of this section and 

13 section 129, by adding the total points and fees 

14 known at or before closing, including the maximum 

15 prepayment penalties which may be charged or col16 lected under the terms of the credit transaction, plus 

17 the minimum additional fees the consumer would be 

18 required to pay to draw down an amount equal to 

19 the total credit line.’’. 

20 (d) HIGH-COST MORTGAGE LENDER.—Section 

21 103(f) of the Truth in Lending Act (15 U.S.C. 1602(f)) 

22 is amended by striking the last sentence and inserting the 

23 following new sentence: ‘‘Any person who originates or 

24 brokers 2 or more mortgages referred to in subsection (aa) 

25 in any 12-month period, any person who originates 1 or 


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1 more such mortgages through a mortgage broker in any 

2 12 month period, or, in connection with a table funding 

3 transaction of such a mortgage, any person to whom the 

4 obligation is initially assigned at or after settlement shall 

5 be considered to be a creditor for purposes of this title.’’. 

6 (e) BONA FIDE DISCOUNT LOAN DISCOUNT POINTS

7 AND PREPAYMENT PENALTIES.—Section 103 of the 

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

9 inserting after subsection (cc) (as added by section 101) 

10 the following 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 

15 the 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 de19 termining the amounts of points and fees with re20 spect to a high-cost mortgage for purposes of sub21 section (aa): 

22 ‘‘(A) Up to and including 2 bona fide dis23 count points payable by the consumer in con24 nection with the mortgage, but only if the inter25 est rate from which the mortgage’s interest rate 


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1 will be discounted does not exceed by more than 

2 1 percentage point 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. 

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

9 have been excluded under subparagraph (A), up 

10 to and including 1 bona fide discount point pay11 able by the consumer in connection with the 

12 mortgage, but only if the interest rate from 

13 which the mortgage’s interest rate will be dis14 counted does not exceed by more than 2 per15 centage points the required net yield for a 90- 

16 day standard mandatory delivery commitment 

17 for a reasonably comparable loan from either 

18 the Federal National Mortgage Association or 

19 the Federal Home Loan Mortgage Corporation, 

20 whichever is greater. 

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

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

23 discount points which are knowingly paid by the con24 sumer for the purpose of reducing, and which in fact 


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1 result in a bona fide reduction of, the interest rate 

2 or time-price differential applicable to the mortgage. 

3 ‘‘(3) EXCEPTION FOR INTEREST RATE REDUC4 TIONS INCONSISTENT WITH INDUSTRY NORMS.— 

5 Paragraph (1) shall not apply to discount points 

6 used to purchase an interest rate reduction unless 

7 the amount of the interest rate reduction purchased 

8 is reasonably consistent with established industry 

9 norms and practices for secondary mortgage market 

10 transactions. 

11 ‘‘(4) ALLOWANCE OF CONVENTIONAL PREPAY12 MENT PENALTY.—Subsection (aa)(1)(4)(E) shall not 

13 apply so as to include a prepayment penalty or fee 

14 that is authorized by law other than this title and 

15 may be imposed pursuant to the terms of a high-cost 

16 mortgage (or other consumer credit transaction se17 cured by the consumer’s principal dwelling) if— 

18 ‘‘(A) the annual percentage rate applicable 

19 with respect to such mortgage or transaction 

20 (as determined for purposes of subsection 

21 (aa)(1)(A)(i))— 

22 ‘‘(i) in the case of a first mortgage on 

23 the consumer’s principal dwelling, does not 

24 exceed by more than 2 percentage points 

25 the yield on Treasury securities having 


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1 comparable periods of maturity on the 

2 15th day of the month immediately pre3 ceding the month in which the application 

4 for the extension of credit is received by 

5 the creditor; or 

6 ‘‘(ii) in the case of a subordinate or 

7 junior mortgage on the consumer’s prin8 cipal dwelling, does not exceed by more 

9 than 4 percentage points the yield on such 

10 Treasury securities; and 

11 ‘‘(B) the total amount of any prepayment 

12 fees or penalties permitted under the terms of 

13 the high-cost mortgage or transaction does not 

14 exceed 2 percent of the amount prepaid.’’. 

15 SEC. 302. AMENDMENTS TO EXISTING REQUIREMENTS FOR 

16 CERTAIN MORTGAGES. 

17 (a) PREPAYMENT PENALTY PROVISIONS.—Section 

18 129(c)(2) of the Truth in Lending Act (15 U.S.C. 

19 1639(c)(2)) is amended— 

20 (1) by striking ‘‘and’’ after the semicolon at the 

21 end of subparagraph (C); 

22 (2) by redesignating subparagraph (D) as sub23 paragraph (E); and 

24 (3) by inserting after subparagraph (C) the fol25 lowing new subparagraph: 


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1 ‘‘(D) the amount of the principal obliga2 tion of the mortgage exceeds the maximum 

3 principal obligation limitation (for the applica4 ble size residence) under section 203(b)(2) of 

5 the National Housing Act for the area in which 

6 the residence subject to the mortgage is located; 

7 and’’. 

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

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

10 read as follows: 

11 ‘‘(e) NO BALLOON PAYMENTS.—No high-cost mort12 gage may contain a scheduled payment that is more than 

13 twice as large as the average of earlier scheduled pay14 ments. This subsection shall not apply when the payment 

15 schedule is adjusted to the seasonal or irregular income 

16 of the consumer.’’. 

17 (c) NO LENDING WITHOUT DUE REGARD TO ABIL18 ITY TO REPAY.—Section 129(h) of the Truth in Lending 

19 Act (15 U.S.C. 1639(h)) is amended— 

20 (1) by striking ‘‘PAYMENT ABILITY OF CON21 SUMER.—A creditor shall not’’ and inserting ‘‘PAY22 MENT ABILITY OF CONSUMER.— 

23 ‘‘(1) PATTERN OR PRACTICE.— 

24 ‘‘(A) IN GENERAL.—A creditor shall not’’; 


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1 (2) by inserting after subparagraph (A) (as so 

2 designated by paragraph (1) of this subsection) the 

3 following new subparagraph: 

4 ‘‘(B) PRESUMPTION OF VIOLATION.— 

5 There shall be a presumption that a creditor 

6 has violated this subsection if the creditor en7 gages in a pattern or practice of making high8 cost mortgages without verifying or docu9 menting the repayment ability of consumers 

10 with respect to such mortgages.’’; and 

11 (3) by adding at the end the following new 

12 paragraph: 

13 ‘‘(2) PROHIBITION ON EXTENDING CREDIT

14 WITHOUT REGARD TO PAYMENT ABILITY OF CON15 SUMER.— 

16 ‘‘(A) IN GENERAL.—A creditor may not 

17 extend credit to a consumer under a high-cost 

18 mortgage unless a reasonable creditor would be19 lieve at the time the mortgage is closed that the 

20 consumer or consumers that are residing or will 

21 reside in the residence subject to the mortgage 

22 will be able to make the scheduled payments as23 sociated with the mortgage, based upon a con24 sideration of current and expected income, cur25 rent obligations, employment status, and other 


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1 financial resources, other than equity in the res2 idence. 

3 ‘‘(B) PRESUMPTION OF ABILITY.—For 

4 purposes of this subsection, there shall be a re5 buttable presumption that a consumer is able to 

6 make the scheduled payments to repay the obli7 gation if, at the time the high-cost mortgage is 

8 consummated, the consumer’s total monthly 

9 debts, including amounts under the mortgage, 

10 do not exceed 50 percent of his or her monthly 

11 gross income as verified by tax returns, payroll 

12 receipts, or other third-party income 

13 verification.’’. 

14 SEC. 303. ADDITIONAL REQUIREMENTS FOR CERTAIN 

15 MORTGAGES. 

16 (a) ADDITIONAL REQUIREMENTS FOR CERTAIN

17 MORTGAGES.—Section 129 of the Truth in Lending Act 

18 (15 U.S.C. 1639) is amended— 

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

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

21 (2) by inserting after subsection (i) the fol22 lowing new subsections: 

23 ‘‘(j) RECOMMENDED DEFAULT.—No creditor shall 

24 recommend or encourage default on an existing loan or 

25 other debt prior to and in connection with the closing or 


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1 planned closing of a high-cost mortgage that refinances 

2 all or any portion of such existing loan or debt. 

3 ‘‘(k) LATE FEES.— 

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

5 late payment charge or fee in connection with a 

6 high-cost mortgage— 

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

8 of the amount of the payment past due; 

9 ‘‘(B) unless the loan documents specifically 

10 authorize the charge or fee; 

11 ‘‘(C) before the end of the 15-day period 

12 beginning on the date the payment is due, or in 

13 the case of a loan on which interest on each in14 stallment is paid in advance, before the end of 

15 the 30-day period beginning on the date the 

16 payment is due; or 

17 ‘‘(D) more than once with respect to a sin18 gle late payment. 

19 ‘‘(2) COORDINATION WITH SUBSEQUENT LATE

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

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

22 within an applicable grace period, and the only delin23 quency or insufficiency of payment is attributable to 

24 any late fee or delinquency charge assessed on any 


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1 earlier payment, no late fee or delinquency charge 

2 may be imposed on such payment. 

3 ‘‘(3) FAILURE TO MAKE INSTALLMENT PAY4 MENT.—If, in the case of a loan agreement the 

5 terms of which provide that any payment shall first 

6 be applied to any past due principal balance, the 

7 consumer fails to make an installment payment and 

8 the consumer subsequently resumes making install9 ment payments but has not paid all past due install10 ments, the creditor may impose a separate late pay11 ment charge or fee for any principal due (without 

12 deduction due to late fees or related fees) until the 

13 default is cured. 

14 ‘‘(l) ACCELERATION OF DEBT.—No high-cost mort15 gage may contain a provision which permits the creditor, 

16 in its sole discretion, to accelerate the indebtedness. This 

17 provision shall not apply when repayment of the loan has 

18 been accelerated by default, pursuant to a due-on-sale pro19 vision, or pursuant to a material violation of some other 

20 provision of the loan documents unrelated to the payment 

21 schedule. 

22 ‘‘(m) RESTRICTION ON FINANCING POINTS AND

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

24 connection with any high-cost mortgage, any of the fol25 lowing: 


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

2 the consumer in a refinancing transaction if the 

3 creditor or an affiliate of the creditor is the 

4 noteholder of the note being refinanced. 

5 ‘‘(2) Any points or fees.’’. 

6 (b) PROHIBITIONS ON EVASIONS.—Section 129 of 

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

8 by inserting after subsection (p) (as so redesignated by 

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

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

11 TRANSACTIONS, AND RECIPROCAL ARRANGEMENTS.—A 

12 creditor may not take any action in connection with a 

13 high-cost mortgage— 

14 ‘‘(1) to structure a loan transaction as an open15 end credit plan or another form of loan for the pur16 pose and with the intent of evading the provisions of 

17 this title; or 

18 ‘‘(2) to divide any loan transaction into sepa19 rate parts for the purpose and with the intent of 

20 evading provisions of this title.’’. 

21 (c) MODIFICATION OR DEFERRAL FEES.—Section 

22 129 of the Truth in Lending Act (15 U.S.C. 1639) is 

23 amended by inserting after subsection (q) (as added by 

24 subsection (b) of this section) the following new sub25 section: 


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1 ‘‘(r) MODIFICATION AND DEFERRAL FEES PROHIB2 ITED.—A creditor may not charge a consumer any fee to 

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

4 to defer any payment due under the terms of such mort5 gage, unless the modification, renewal, extension or 

6 amendment results in a lower annual percentage rate on 

7 the mortgage for the consumer and then only if the 

8 amount of the fee is comparable to fees imposed for simi9 lar transactions in connection with consumer credit trans10 actions that are secured by a consumer’s principal dwell11 ing and are not high-cost mortgages.’’. 

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

13 in Lending Act (15 U.S.C. 1639) is amended by inserting 

14 after subsection (r) (as added by subsection (c) of this 

15 section) the following new subsection: 

16 ‘‘(s) PAYOFF STATEMENT.— 

17 ‘‘(1) FEES.— 

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

19 subparagraph (B), no creditor or servicer may 

20 charge a fee for informing or transmitting to 

21 any person the balance due to pay off the out22 standing balance on a high-cost mortgage. 

23 ‘‘(B) TRANSACTION FEE.—When payoff in24 formation referred to in subparagraph (A) is 

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1 rier service, a creditor or servicer may charge a 

2 processing fee to cover the cost of such trans3 mission or service in an amount not to exceed 

4 an amount that is comparable to fees imposed 

5 for similar services provided in connection with 

6 consumer credit transactions that are secured 

7 by the consumer’s principal dwelling and are 

8 not high-cost mortgages. 

9 ‘‘(C) FEE DISCLOSURE.—Prior to charging 

10 a transaction fee as provided in subparagraph 

11 (B), a creditor or servicer shall disclose that 

12 payoff balances are available for free pursuant 

13 to subparagraph (A). 

14 ‘‘(D) MULTIPLE REQUESTS.—If a creditor 

15 or servicer has provided payoff information re16 ferred to in subparagraph (A) without charge, 

17 other than the transaction fee allowed by sub18 paragraph (B), on 4 occasions during a cal19 endar year, the creditor or servicer may there20 after charge a reasonable fee for providing such 

21 information during the remainder of the cal22 endar year. 

23 ‘‘(2) PROMPT DELIVERY.—Payoff balances shall 

24 be provided within 5 business days after receiving a 


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1 request by a consumer or a person authorized by the 

2 consumer to obtain such information.’’. 

3 (e) PRE-LOAN COUNSELING REQUIRED.—Section 

4 129 of the Truth in Lending Act (15 U.S.C. 1639) is 

5 amended by inserting after subsection (s) (as added by 

6 subsection (d) of this section) the following new sub7 section: 

8 ‘‘(t) PRE-LOAN COUNSELING.— 

9 ‘‘(1) IN GENERAL.—A creditor may not extend 

10 credit to a consumer under a high-cost mortgage 

11 without first receiving certification from a counselor 

12 that is approved by the Secretary of Housing and 

13 Urban Development, or at the discretion of the Sec14 retary, a State housing finance authority, that the 

15 consumer has received counseling on the advisability 

16 of the mortgage. Such counselor shall not be em17 ployed by the creditor or an affiliate of the creditor 

18 or be affiliated with the creditor. 

19 ‘‘(2) DISCLOSURES REQUIRED PRIOR TO COUN20 SELING.—No counselor may certify that a consumer 

21 has received counseling on the advisability of the 

22 high-cost mortgage unless the counselor can verify 

23 that the consumer has received each statement re24 quired (in connection with such loan) by this section 


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1 or the Real Estate Settlement Procedures Act of 

2 1974 with respect to the transaction. 

3 ‘‘(3) REGULATIONS.—The Secretary of Housing 

4 and Urban Development may prescribe such regula5 tions as the Secretary determines to be appropriate 

6 to carry out the requirements of paragraph (1).’’. 

7 (f) FLIPPING PROHIBITED.—Section 129 of the 

8 Truth in Lending Act (15 U.S.C. 1639) is amended by 

9 inserting after subsection (t) (as added by subsection (e)) 

10 the following new subsection: 

11 ‘‘(u) FLIPPING.— 

12 ‘‘(1) IN GENERAL.—No creditor may knowingly 

13 or intentionally engage in the unfair act or practice 

14 of flipping in connection with a high-cost mortgage. 

15 ‘‘(2) FLIPPING DEFINED.—For purposes of this 

16 subsection, the term ‘flipping’ means the making of 

17 a loan or extension of credit in the form a high-cost 

18 mortgage to a consumer which refinances an existing 

19 mortgage when the new loan or extension of credit 

20 does not have reasonable, net tangible benefit (as de21 termined in accordance with regulations prescribed 

22 under section 129B(b)) to the consumer considering 

23 all of the circumstances, including the terms of both 

24 the new and the refinanced loans or credit, the cost 


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1 of the new loan or credit, and the consumer’s cir2 cumstances.’’. 

3 SEC. 304. AMENDMENT TO PROVISION GOVERNING COR4 RECTION OF ERRORS. 

5 Section 130(b) of the Truth in Lending Act (15 

6 U.S.C. 1640(b)) is amended to read as follows: 

7 ‘‘(b) CORRECTION OF ERRORS.—A creditor has no li8 ability under this section or section 108 or 112 for any 

9 failure to comply with any requirement imposed under this 

10 chapter or chapter 5, if— 

11 ‘‘(1) within 30 days of the loan closing and 

12 prior to the institution of any action, the consumer 

13 is notified of or discovers the violation, appropriate 

14 restitution is made, and whatever adjustments are 

15 necessary are made to the loan to either, at the 

16 choice of the consumer— 

17 ‘‘(A) make the loan satisfy the require18 ments of this chapter; or 

19 ‘‘(B) in the case of a high-cost mortgage, 

20 change the terms of the loan in a manner bene21 ficial to the consumer so that the loan will no 

22 longer be a high-cost mortgage; or 

23 ‘‘(2) within 60 days of the creditor’s discovery 

24 or receipt of notification of an unintentional viola25 tion or bona fide error as described in subsection (c) 


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1 and prior to the institution of any action, the con2 sumer is notified of the compliance failure, appro3 priate restitution is made, and whatever adjustments 

4 are necessary are made to the loan to either, at the 

5 choice of the consumer— 

6 ‘‘(A) make the loan satisfy the require7 ments of this chapter; or 

8 ‘‘(B) in the case of a high-cost mortgage, 

9 change the terms of the loan in a manner bene10 ficial so that the loan will no longer be a high11 cost mortgage.’’. 

12 SEC. 305. REGULATIONS. 

13 (a) IN GENERAL.—The Board of Governors of the 

14 Federal Reserve System shall publish regulations imple15 menting this title and the amendments made by this title 

16 in final form before the end of the 6-month period begin17 ning on the date of the enactment of this Act. 

18 (b) CONSUMER MORTGAGE EDUCATION.— 

19 (1) REGULATIONS.—The Board of Governors of 

20 the Federal Reserve System may prescribe regula21 tions requiring or encouraging creditors to provide 

22 consumer mortgage education to prospective cus23 tomers or direct such customers to qualified con24 sumer mortgage education or counseling programs 

25 in the vicinity of the residence of the consumer. 


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1 (2) COORDINATION WITH STATE LAW.—No re2 quirement established by the Board of Governors of 

3 the Federal Reserve System pursuant to paragraph 

4 (1) shall be construed as affecting or superseding 

5 any requirement under the law of any State with re6 spect to consumer mortgage counseling or education. 

7 SEC. 306. EFFECTIVE DATE. 

8 The amendments made by this title shall take effect 

9 at the end of the 6-month period beginning on the date 

10 of the enactment of this Act and shall apply to mortgages 

11 referred to in section 103(aa) of the Truth in Lending 

12 Act (15 U.S.C. 1602(aa)) consummated after the end of 

13 such period. 

14 TITLE IV—OFFICE OF HOUSING 

15 COUNSELING 

16 SEC. 401. SHORT TITLE. 

17 This title may be cited as the ‘‘Expand and Preserve 

18 Home Ownership Through Counseling Act’’. 

19 SEC. 402. ESTABLISHMENT OF OFFICE OF HOUSING COUN20 SELING. 

21 Section 4 of the Department of Housing and Urban 

22 Development Act (42 U.S.C. 3533) is amended by adding 

23 at the end the following new subsection: 

24 ‘‘(g) OFFICE OF HOUSING COUNSELING.— 


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1 ‘‘(1) ESTABLISHMENT.—There is established, 

2 in the Office of the Secretary, the Office of Housing 

3 Counseling. 

4 ‘‘(2) DIRECTOR.—There is established the posi5 tion of Director of Housing Counseling. The Direc6 tor shall be the head of the Office of Housing Coun7 seling and shall be appointed by the Secretary. Such 

8 position shall be a career-reserved position in the 

9 Senior Executive Service. 

10 ‘‘(3) FUNCTIONS.— 

11 ‘‘(A) IN GENERAL.—The Director shall 

12 have ultimate responsibility within the Depart13 ment, except for the Secretary, for all activities 

14 and matters relating to homeownership coun15 seling and rental housing counseling, includ16 ing— 

17 ‘‘(i) research, grant administration, 

18 public outreach, and policy development re19 lating to such counseling; and 

20 ‘‘(ii) establishment, coordination, and 

21 administration of all regulations, require22 ments, standards, and performance meas23 ures under programs and laws adminis24 tered by the Department that relate to 

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1 seling (including maintenance of homes), 

2 mortgage-related counseling (including 

3 home equity conversion mortgages and 

4 credit protection options to avoid fore5 closure), and rental housing counseling, in6 cluding the requirements, standards, and 

7 performance measures relating to housing 

8 counseling. 

9 ‘‘(B) SPECIFIC FUNCTIONS.—The Director 

10 shall carry out the functions assigned to the Di11 rector and the Office under this section and any 

12 other provisions of law. Such functions shall in13 clude establishing rules necessary for— 

14 ‘‘(i) the counseling procedures under 

15 section 106(g)(1) of the Housing and 

16 Urban Development Act of 1968 (12 

17 U.S.C. 1701x(h)(1)); 

18 ‘‘(ii) carrying out all other functions 

19 of the Secretary under section 106(g) of 

20 the Housing and Urban Development Act 

21 of 1968, including the establishment, oper22 ation, and publication of the availability of 

23 the toll-free telephone number under para24 graph (2) of such section; 


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1 ‘‘(iii) carrying out section 5 of the 

2 Real Estate Settlement Procedures Act of 

3 1974 (12 U.S.C. 2604) for home buying 

4 information booklets prepared pursuant to 

5 such section; 

6 ‘‘(iv) carrying out the certification 

7 program under section 106(e) of the Hous8 ing and Urban Development Act of 1968 

9 (12 U.S.C. 1701x(e)); 

10 ‘‘(v) carrying out the assistance pro11 gram under section 106(a)(4) of the Hous12 ing and Urban Development Act of 1968, 

13 including criteria for selection of applica14 tions to receive assistance; 

15 ‘‘(vi) carrying out any functions re16 garding abusive, deceptive, or unscrupulous 

17 lending practices relating to residential 

18 mortgage loans that the Secretary con19 siders appropriate, which shall include con20 ducting the study under section 6 of the 

21 Expand and Preserve Home Ownership 

22 Through Counseling Act; 

23 ‘‘(vii) providing for operation of the 

24 advisory committee established under para25 graph (4) of this subsection; 


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1 ‘‘(viii) collaborating with community2 based organizations with expertise in the 

3 field of housing counseling; and 

4 ‘‘(ix) providing for the building of ca5 pacity to provide housing counseling serv6 ices in areas that lack sufficient services. 

7 ‘‘(4) ADVISORY COMMITTEE.— 

8 ‘‘(A) IN GENERAL.—The Secretary shall 

9 appoint an advisory committee to provide advice 

10 regarding the carrying out of the functions of 

11 the Director. 

12 ‘‘(B) MEMBERS.—Such advisory committee 

13 shall consist of not more than 12 individuals, 

14 and the membership of the committee shall 

15 equally represent all aspects of the mortgage 

16 and real estate industry, including consumers. 

17 ‘‘(C) TERMS.—Except as provided in sub18 paragraph (D), each member of the advisory 

19 committee shall be appointed for a term of 3 

20 years. Members may be reappointed at the dis21 cretion of the Secretary. 

22 ‘‘(D) TERMS OF INITIAL APPOINTEES.—As 

23 designated by the Secretary at the time of ap24 pointment, of the members first appointed to 

25 the advisory committee, 4 shall be appointed for 


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1 a term of 1 year and 4 shall be appointed for 

2 a term of 2 years. 

3 ‘‘(E) PROHIBITION OF PAY; TRAVEL EX4 PENSES.—Members of the advisory committee 

5 shall serve without pay, but shall receive travel 

6 expenses, including per diem in lieu of subsist7 ence, in accordance with applicable provisions 

8 under subchapter I of chapter 57 of title 5, 

9 United States Code. 

10 ‘‘(F) ADVISORY ROLE ONLY.—The advi11 sory committee shall have no role in reviewing 

12 or awarding housing counseling grants. 

13 ‘‘(5) SCOPE OF HOMEOWNERSHIP COUN14 SELING.—In carrying out the responsibilities of the 

15 Director, the Director shall ensure that homeowner16 ship counseling provided by, in connection with, or 

17 pursuant to any function, activity, or program of the 

18 Department addresses the entire process of home19 ownership, including the decision to purchase a 

20 home, the selection and purchase of a home, issues 

21 arising during or affecting the period of ownership 

22 of a home (including refinancing, default and fore23 closure, and other financial decisions), and the sale 

24 or other disposition of a home.’’. 


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1 SEC. 403. COUNSELING PROCEDURES. 

2 (a) IN GENERAL.—Section 106 of the Housing and 

3 Urban Development Act of 1968 (12 U.S.C. 1701x) is 

4 amended by adding at the end the following new sub5 section: 

6 ‘‘(g) PROCEDURES AND ACTIVITIES.— 

7 ‘‘(1) COUNSELING PROCEDURES.— 

8 ‘‘(A) IN GENERAL.—The Secretary shall 

9 establish, coordinate, and monitor the adminis10 tration by the Department of Housing and 

11 Urban Development of the counseling proce12 dures for homeownership counseling and rental 

13 housing counseling provided in connection with 

14 any program of the Department, including all 

15 requirements, standards, and performance 

16 measures that relate to homeownership and 

17 rental housing counseling. 

18 ‘‘(B) HOMEOWNERSHIP COUNSELING.— 

19 For purposes of this subsection and as used in 

20 the provisions referred to in this subparagraph, 

21 the term ‘homeownership counseling’ means 

22 counseling related to homeownership and resi23 dential mortgage loans. Such term includes 

24 counseling related to homeownership and resi25 dential mortgage loans that is provided pursu26 ant to— 


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1 ‘‘(i) section 105(a)(20) of the Housing 

2 and Community Development Act of 1974 

3 (42 U.S.C. 5305(a)(20)); 

4 ‘‘(ii) in the United States Housing 

5 Act of 1937— 

6 ‘‘(I) section 9(e) (42 U.S.C. 

7 1437g(e)); 

8 ‘‘(II) section 8(y)(1)(D) (42 

9 U.S.C. 1437f(y)(1)(D)); 

10 ‘‘(III) section 18(a)(4)(D) (42 

11 U.S.C. 1437p(a)(4)(D)); 

12 ‘‘(IV) section 23(c)(4) (42 U.S.C. 

13 1437u(c)(4)); 

14 ‘‘(V) section 32(e)(4) (42 U.S.C. 

15 1437z–4(e)(4)); 

16 ‘‘(VI) section 33(d)(2)(B) (42 

17 U.S.C. 1437z–5(d)(2)(B)); 

18 ‘‘(VII) sections 302(b)(6) and 

19 303(b)(7) (42 U.S.C. 1437aaa– 

20 1(b)(6), 1437aaa–2(b)(7)); and 

21 ‘‘(VIII) section 304(c)(4) (42 

22 U.S.C. 1437aaa–3(c)(4)); 

23 ‘‘(iii) section 302(a)(4) of the Amer24 ican Homeownership and Economic Oppor25 tunity Act of 2000 (42 U.S.C. 1437f note); 


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1 ‘‘(iv) sections 233(b)(2) and 258(b) of 

2 the Cranston-Gonzalez National Affordable 

3 Housing Act (42 U.S.C. 12773(b)(2), 

4 12808(b)); 

5 ‘‘(v) this section and section 101(e) of 

6 the Housing and Urban Development Act 

7 of 1968 (12 U.S.C. 1701x, 1701w(e)); 

8 ‘‘(vi) section 220(d)(2)(G) of the Low9 Income Housing Preservation and Resident 

10 Homeownership Act of 1990 (12 U.S.C. 

11 4110(d)(2)(G)); 

12 ‘‘(vii) sections 422(b)(6), 423(b)(7), 

13 424(c)(4), 442(b)(6), and 443(b)(6) of the 

14 Cranston-Gonzalez National Affordable 

15 Housing Act (42 U.S.C. 12872(b)(6), 

16 12873(b)(7), 12874(c)(4), 12892(b)(6), 

17 and 12893(b)(6)); 

18 ‘‘(viii) 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 ‘‘(ix) sections 202(3) and 

22 810(b)(2)(A) of the Native American 

23 Housing and Self-Determination Act of 

24 1996 (25 U.S.C. 4132(3), 4229(b)(2)(A)); 

25 ‘‘(x) in the National Housing Act— 


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1 ‘‘(I) in section 203 (12 U.S.C. 

2 1709), the penultimate undesignated 

3 paragraph of paragraph (2) of sub4 section (b), subsection (c)(2)(A), and 

5 subsection (r)(4); 

6 ‘‘(II) subsections (a) and (c)(3) 

7 of section 237 (12 U.S.C. 1715z–2); 

8 and 

9 ‘‘(III) subsections (d)(2)(B) and 

10 (m)(1) of section 255 (12 U.S.C. 

11 1715z–20); 

12 ‘‘(xi) section 502(h)(4)(B) of the 

13 Housing Act of 1949 (42 U.S.C. 

14 1472(h)(4)(B)); and 

15 ‘‘(xii) section 508 of the Housing and 

16 Urban Development Act of 1970 (12 

17 U.S.C. 1701z–7). 

18 ‘‘(C) RENTAL HOUSING COUNSELING.— 

19 For purposes of this subsection, the term ‘rent20 al housing counseling’ means counseling related 

21 to rental of residential property, which may in22 clude counseling regarding future homeowner23 ship opportunities and providing referrals for 

24 renters and prospective renters to entities pro25 viding counseling and shall include counseling 


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1 related to such topics that is provided pursuant 

2 to— 

3 ‘‘(i) section 105(a)(20) of the Housing 

4 and Community Development Act of 1974 

5 (42 U.S.C. 5305(a)(20)); 

6 ‘‘(ii) in the United States Housing 

7 Act of 1937— 

8 ‘‘(I) section 9(e) (42 U.S.C. 

9 1437g(e)); 

10 ‘‘(II) section 18(a)(4)(D) (42 

11 U.S.C. 1437p(a)(4)(D)); 

12 ‘‘(III) section 23(c)(4) (42 

13 U.S.C. 1437u(c)(4)); 

14 ‘‘(IV) section 32(e)(4) (42 U.S.C. 

15 1437z–4(e)(4)); 

16 ‘‘(V) section 33(d)(2)(B) (42 

17 U.S.C. 1437z–5(d)(2)(B)); and 

18 ‘‘(VI) section 302(b)(6) (42 

19 U.S.C. 1437aaa–1(b)(6)); 

20 ‘‘(iii) section 233(b)(2) of the Cran21 ston-Gonzalez National Affordable Housing 

22 Act (42 U.S.C. 12773(b)(2)); 

23 ‘‘(iv) section 106 of the Housing and 

24 Urban Development Act of 1968 (12 

25 U.S.C. 1701x); 


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1 ‘‘(v) section 422(b)(6) of the Cran2 ston-Gonzalez National Affordable Housing 

3 Act (42 U.S.C. 12872(b)(6)); 

4 ‘‘(vi) section 491(b)(1)(F)(iii) of the 

5 McKinney-Vento Homeless Assistance Act 

6 (42 U.S.C. 11408(b)(1)(F)(iii)); 

7 ‘‘(vii) sections 202(3) and 

8 810(b)(2)(A) of the Native American 

9 Housing and Self-Determination Act of 

10 1996 (25 U.S.C. 4132(3), 4229(b)(2)(A)); 

11 and 

12 ‘‘(viii) the rental assistance program 

13 under section 8 of the United States Hous14 ing Act of 1937 (42 U.S.C. 1437f). 

15 ‘‘(2) STANDARDS FOR MATERIALS.—The Sec16 retary, in conjunction with the advisory committee 

17 established under subsection (g)(4) of the Depart18 ment of Housing and Urban Development Act, shall 

19 establish standards for materials and forms to be 

20 used, as appropriate, by organizations providing 

21 homeownership counseling services, including any re22 cipients of assistance pursuant to subsection (a)(4). 

23 ‘‘(3) MORTGAGE SOFTWARE SYSTEMS.— 

24 ‘‘(A) CERTIFICATION.—The Secretary shall 

25 provide for the certification of various computer 


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1 software programs for consumers to use in eval2 uating different residential mortgage loan pro3 posals. The Secretary shall require, for such 

4 certification, that the mortgage software sys5 tems take into account— 

6 ‘‘(i) the consumer’s financial situation 

7 and the cost of maintaining a home, in8 cluding insurance, taxes, and utilities; 

9 ‘‘(ii) the amount of time the consumer 

10 expects to remain in the home or expected 

11 time to maturity of the loan; 

12 ‘‘(iii) such other factors as the Sec13 retary considers appropriate to assist the 

14 consumer in evaluating whether to pay 

15 points, to lock in an interest rate, to select 

16 an adjustable or fixed rate loan, to select 

17 a conventional or government-insured or 

18 guaranteed loan and to make other choices 

19 during the loan application process. 

20 If the Secretary determines that available exist21 ing software is inadequate to assist consumers 

22 during the residential mortgage loan application 

23 process, the Secretary shall arrange for the de24 velopment by private sector software companies 


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1 of new mortgage software systems that meet 

2 the Secretary’s specifications. 

3 ‘‘(B) USE AND INITIAL AVAILABILITY.— 

4 Such certified computer software programs 

5 shall be used to supplement, not replace, hous6 ing counseling. The Secretary shall provide that 

7 such programs are initially used only in connec8 tion with the assistance of housing counselors 

9 certified pursuant to subsection (e). 

10 ‘‘(C) AVAILABILITY.—After a period of ini11 tial availability under subparagraph (B) as the 

12 Secretary considers appropriate, the Secretary 

13 shall take reasonable steps to make mortgage 

14 software systems certified pursuant to this 

15 paragraph widely available through the Internet 

16 and at public locations, including public librar17 ies, senior-citizen centers, public housing sites, 

18 offices of public housing agencies that admin19 ister rental housing assistance vouchers, and 

20 housing counseling centers. 

21 ‘‘(4) NATIONAL PUBLIC SERVICE MULTIMEDIA

22 CAMPAIGNS TO PROMOTE HOUSING COUNSELING.— 

23 ‘‘(A) IN GENERAL.—The Director of Hous24 ing Counseling shall develop, implement, and 

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1 paigns designed to make persons facing mort2 gage foreclosure, persons considering a 

3 subprime mortgage loan to purchase a home, el4 derly persons, persons who face language bar5 riers, low-income persons, and other potentially 

6 vulnerable consumers aware that it is advisable, 

7 before seeking or maintaining a residential 

8 mortgage loan, to obtain homeownership coun9 seling from an unbiased and reliable sources 

10 and that such homeownership counseling is 

11 available, including through programs spon12 sored by the Secretary of Housing and Urban 

13 Development. 

14 ‘‘(B) CONTACT INFORMATION.—Each seg15 ment of the multimedia campaign under sub16 paragraph (A) shall publicize the toll-free tele17 phone number and website of the Department 

18 of Housing and Urban Development through 

19 which persons seeking housing counseling can 

20 locate a housing counseling agency in their 

21 State that is certified by the Secretary of Hous22 ing and Urban Development and can provide 

23 advice on buying a home, renting, defaults, 

24 foreclosures, credit issues, and reverse mort25 gages. 


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1 ‘‘(C) AUTHORIZATION OF APPROPRIA2 TIONS.—There are authorized to be appro3 priated to the Secretary, not to exceed 

4 $3,000,000 for fiscal years 2009, 2010, and 

5 2011, for the development, implementation, and 

6 conduct of national public service multimedia 

7 campaigns under this paragraph. 

8 ‘‘(5) EDUCATION PROGRAMS.—The Secretary 

9 shall provide advice and technical assistance to 

10 States, units of general local government, and non11 profit organizations regarding the establishment and 

12 operation of, including assistance with the develop13 ment of content and materials for, educational pro14 grams to inform and educate consumers, particularly 

15 those most vulnerable with respect to residential 

16 mortgage loans (such as elderly persons, persons 

17 facing language barriers, low-income persons, and 

18 other potentially vulnerable consumers), regarding 

19 home mortgages, mortgage refinancing, home equity 

20 loans, and home repair loans.’’. 

21 (b) CONFORMING AMENDMENTS TO GRANT PRO22 GRAM FOR HOMEOWNERSHIP COUNSELING ORGANIZA23 TIONS.—Section 106(c)(5)(A)(ii) of the Housing and 

24 Urban Development Act of 1968 (12 U.S.C. 

25 1701x(c)(5)(A)(ii)) is amended— 


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1 (1) in subclause (III), by striking ‘‘and’’ at the 

2 end; 

3 (2) in subclause (IV) by striking the period at 

4 the end and inserting ‘‘; and’’; and 

5 (3) by inserting after subclause (IV) the fol6 lowing new subclause: 

7 ‘‘(V) notify the housing or mort8 gage applicant of the availability of 

9 mortgage software systems provided 

10 pursuant to subsection (g)(3).’’. 

11 SEC. 404. GRANTS FOR HOUSING COUNSELING ASSIST12 ANCE. 

13 Section 106(a) of the Housing and Urban Develop14 ment Act of 1968 (12 U.S.C. 1701x(a)(3)) is amended 

15 by adding at the end the following new paragraph: 

16 ‘‘(4) HOMEOWNERSHIP AND RENTAL COUNSELING

17 ASSISTANCE.— 

18 ‘‘(A) IN GENERAL.—The Secretary shall make 

19 financial assistance available under this paragraph 

20 to States, units of general local governments, and 

21 nonprofit organizations providing homeownership or 

22 rental counseling (as such terms are defined in sub23 section (g)(1)). 

24 ‘‘(B) QUALIFIED ENTITIES.—The Secretary 

25 shall establish standards and guidelines for eligibility 


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1 of organizations (including governmental and non2 profit organizations) to receive assistance under this 

3 paragraph. 

4 ‘‘(C) DISTRIBUTION.—Assistance made avail5 able under this paragraph shall be distributed in a 

6 manner that encourages efficient and successful 

7 counseling programs. 

8 ‘‘(D) AUTHORIZATION OF APPROPRIATIONS.— 

9 There are authorized to be appropriated 

10 $45,000,000 for each of fiscal years 2009 through 

11 2012 for— 

12 ‘‘(i) the operations of the Office of Hous13 ing Counseling of the Department of Housing 

14 and Urban Development; 

15 ‘‘(ii) the responsibilities of the Secretary 

16 under paragraphs (2) through (5) of subsection 

17 (g); and 

18 ‘‘(iii) assistance pursuant to this para19 graph for entities providing homeownership and 

20 rental counseling.’’. 

21 SEC. 405. REQUIREMENTS TO USE HUD-CERTIFIED COUN22 SELORS UNDER HUD PROGRAMS. 

23 Section 106(e) of the Housing and Urban Develop24 ment Act of 1968 (12 U.S.C. 1701x(e)) is amended— 


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1 (1) by striking paragraph (1) and inserting the 

2 following new paragraph: 

3 ‘‘(1) REQUIREMENT FOR ASSISTANCE.—An or4 ganization may not receive assistance for counseling 

5 activities under subsection (a)(1)(iii), (a)(2), (a)(4), 

6 (c), or (d) of this section, or under section 101(e), 

7 unless the organization, or the individuals through 

8 which the organization provides such counseling, has 

9 been certified by the Secretary under this subsection 

10 as competent to provide such counseling.’’; 

11 (2) in paragraph (2)— 

12 (A) by inserting ‘‘and for certifying organi13 zations’’ before the period at the end of the 

14 first sentence; and 

15 (B) in the second sentence by striking ‘‘for 

16 certification’’ and inserting ‘‘, for certification 

17 of an organization, that each individual through 

18 which the organization provides counseling shall 

19 demonstrate, and, for certification of an indi20 vidual,’’; 

21 (3) in paragraph (3), by inserting ‘‘organiza22 tions and’’ before ‘‘individuals’’; 

23 (4) by redesignating paragraph (3) as para24 graph (5); and 


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1 (5) by inserting after paragraph (2) the fol2 lowing new paragraphs: 

3 ‘‘(3) REQUIREMENT UNDER HUD PROGRAMS.— 

4 Any homeownership counseling or rental housing 

5 counseling (as such terms are defined in subsection 

6 (g)(1)) required under, or provided in connection 

7 with, any program administered by the Department 

8 of Housing and Urban Development shall be pro9 vided only by organizations or counselors certified by 

10 the Secretary under this subsection as competent to 

11 provide such counseling. 

12 ‘‘(4) OUTREACH.—The Secretary shall take 

13 such actions as the Secretary considers appropriate 

14 to ensure that individuals and organizations pro15 viding homeownership or rental housing counseling 

16 are aware of the certification requirements and 

17 standards of this subsection and of the training and 

18 certification programs under subsection (f).’’. 

19 SEC. 406. STUDY OF DEFAULTS AND FORECLOSURES. 

20 The Secretary of Housing and Urban Development 

21 shall conduct an extensive study of the root causes of de22 fault and foreclosure of home loans, using as much empir23 ical data as are available. The study shall also examine 

24 the role of escrow accounts in helping prime and nonprime 

25 borrowers to avoid defaults and foreclosures. Not later 


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1 than 12 months after the date of the enactment of this 

2 Act, the Secretary shall submit to the Congress a prelimi3 nary report regarding the study. Not later than 24 months 

4 after such date of enactment, the Secretary shall submit 

5 a final report regarding the results of the study, which 

6 shall include any recommended legislation relating to the 

7 study, and recommendations for best practices and for a 

8 process to identify populations that need counseling the 

9 most. 

10 SEC. 407. DEFINITIONS FOR COUNSELING-RELATED PRO11 GRAMS. 

12 Section 106 of the Housing and Urban Development 

13 Act of 1968 (12 U.S.C. 1701x), as amended by the pre14 ceding provisions of this title, is further amended by add15 ing at the end the following new subsection: 

16 ‘‘(h) DEFINITIONS.—For purposes of this section: 

17 ‘‘(1) NONPROFIT ORGANIZATION.—The term 

18 ‘nonprofit organization’ has the meaning given such 

19 term in section 104(5) of the Cranston-Gonzalez Na20 tional Affordable Housing Act (42 U.S.C. 

21 12704(5)), except that subparagraph (D) of such 

22 section shall not apply for purposes of this section. 

23 ‘‘(2) STATE.—The term ‘State’ means each of 

24 the several States, the Commonwealth of Puerto 

25 Rico, the District of Columbia, the Commonwealth 


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1 of the Northern Mariana Islands, Guam, the Virgin 

2 Islands, American Samoa, the Trust Territories of 

3 the Pacific, or any other possession of the United 

4 States. 

5 ‘‘(3) UNIT OF GENERAL LOCAL GOVERN6 MENT.—The term ‘unit of general local government’ 

7 means any city, county, parish, town, township, bor8 ough, village, or other general purpose political sub9 division of a State.’’. 

10 SEC. 408. UPDATING AND SIMPLIFICATION OF MORTGAGE 

11 INFORMATION BOOKLET. 

12 Section 5 of the Real Estate Settlement Procedures 

13 Act of 1974 (12 U.S.C. 2604) is amended— 

14 (1) in the section heading, by striking ‘‘SPE15 CIAL’’ and inserting ‘‘HOME BUYING’’; 

16 (2) by striking subsections (a) and (b) and in17 serting the following new subsections: 

18 ‘‘(a) PREPARATION AND DISTRIBUTION.—The Sec19 retary shall prepare, at least once every 5 years, a booklet 

20 to help consumers applying for federally related mortgage 

21 loans to understand the nature and costs of real estate 

22 settlement services. The Secretary shall prepare the book23 let in various languages and cultural styles, as the Sec24 retary determines to be appropriate, so that the booklet 

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1 ferent ethnic and cultural backgrounds. The Secretary 

2 shall distribute such booklets to all lenders that make fed3 erally related mortgage loans. The Secretary shall also dis4 tribute to such lenders lists, organized by location, of 

5 homeownership counselors certified under section 106(e) 

6 of the Housing and Urban Development Act of 1968 (12 

7 U.S.C. 1701x(e)) for use in complying with the require8 ment under subsection (c) of this section. 

9 ‘‘(b) CONTENTS.—Each booklet shall be in such form 

10 and detail as the Secretary shall prescribe and, in addition 

11 to such other information as the Secretary may provide, 

12 shall include in plain and understandable language the fol13 lowing information: 

14 ‘‘(1) A description and explanation of the na15 ture and purpose of the costs incident to a real es16 tate settlement or a federally related mortgage loan. 

17 The description and explanation shall provide gen18 eral information about the mortgage process as well 

19 as specific information concerning, at a minimum— 

20 ‘‘(A) balloon payments; 

21 ‘‘(B) prepayment penalties; and 

22 ‘‘(C) the trade-off between closing costs 

23 and the interest rate over the life of the loan. 

24 ‘‘(2) An explanation and sample of the uniform 

25 settlement statement required by section 4. 


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1 ‘‘(3) A list and explanation of lending practices, 

2 including those prohibited by the Truth in Lending 

3 Act or other applicable Federal law, and of other un4 fair practices and unreasonable or unnecessary 

5 charges to be avoided by the prospective buyer with 

6 respect to a real estate settlement. 

7 ‘‘(4) A list and explanation of questions a con8 sumer obtaining a federally related mortgage loan 

9 should ask regarding the loan, including whether the 

10 consumer will have the ability to repay the loan, 

11 whether the consumer sufficiently shopped for the 

12 loan, whether the loan terms include prepayment 

13 penalties or balloon payments, and whether the loan 

14 will benefit the borrower. 

15 ‘‘(5) An explanation of the right of rescission as 

16 to certain transactions provided by sections 125 and 

17 129 of the Truth in Lending Act. 

18 ‘‘(6) A brief explanation of the nature of a vari19 able rate mortgage and a reference to the booklet 

20 entitled ‘Consumer Handbook on Adjustable Rate 

21 Mortgages’, published by the Board of Governors of 

22 the Federal Reserve System pursuant to section 

23 226.19(b)(1) of title 12, Code of Federal Regula24 tions, or to any suitable substitute of such booklet 


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1 that such Board of Governors may subsequently 

2 adopt pursuant to such section. 

3 ‘‘(7) A brief explanation of the nature of a 

4 home equity line of credit and a reference to the 

5 pamphlet required to be provided under section 

6 127A of the Truth in Lending Act. 

7 ‘‘(8) Information about homeownership coun8 seling services made available pursuant to section 

9 106(a)(4) of the Housing and Urban Development 

10 Act of 1968 (12 U.S.C. 1701x(a)(4)), a rec11 ommendation that the consumer use such services, 

12 and notification that a list of certified providers of 

13 homeownership counseling in the area, and their 

14 contact information, is available. 

15 ‘‘(9) An explanation of the nature and purpose 

16 of escrow accounts when used in connection with 

17 loans secured by residential real estate and the re18 quirements under section 10 of this Act regarding 

19 such accounts. 

20 ‘‘(10) An explanation of the choices available to 

21 buyers of residential real estate in selecting persons 

22 to provide necessary services incidental to a real es23 tate settlement. 


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1 ‘‘(11) An explanation of a consumer’s respon2 sibilities, liabilities, and obligations in a mortgage 

3 transaction. 

4 ‘‘(12) An explanation of the nature and purpose 

5 of real estate appraisals, including the difference be6 tween an appraisal and a home inspection. 

7 ‘‘(13) Notice that the Office of Housing of the 

8 Department of Housing and Urban Development has 

9 made publicly available a brochure regarding loan 

10 fraud and a World Wide Web address and toll-free 

11 telephone number for obtaining the brochure. 

12 The booklet prepared pursuant to this section shall take 

13 into consideration differences in real estate settlement pro14 cedures that may exist among the several States and terri15 tories of the United States and among separate political 

16 subdivisions within the same State and territory.’’; 

17 (3) in subsection (c), by inserting at the end 

18 the following new sentence: ‘‘Each lender shall also 

19 include with the booklet a reasonably complete or 

20 updated list of homeownership counselors who are 

21 certified pursuant to section 106(e) of the Housing 

22 and Urban Development Act of 1968 (12 U.S.C. 

23 1701x(e)) and located in the area of the lender.’’; 

24 and 


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1 (4) in subsection (d), by inserting after the pe2 riod at the end of the first sentence the following: 

3 ‘‘The lender shall provide the HUD-issued booklet in 

4 the version that is most appropriate for the person 

5 receiving it.’’. 

6 TITLE V—MORTGAGE SERVICING 

7 SEC. 501. ESCROW AND IMPOUND ACCOUNTS RELATING TO 

8 CERTAIN CONSUMER CREDIT TRANS9 ACTIONS. 

10 (a) IN GENERAL.—Chapter 2 of the Truth in Lend11 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 

12 after section 129C (as added by section 201) the following 

13 new section: 

14 ‘‘SEC. 129D. ESCROW OR IMPOUND ACCOUNTS RELATING 

15 TO CERTAIN CONSUMER CREDIT TRANS16 ACTIONS. 

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

18 (b) or (c), a creditor, in connection with the formation or 

19 consummation of a consumer credit transaction secured 

20 by a first lien on the principal dwelling of the consumer, 

21 other than a consumer credit transaction under an open 

22 end credit plan or a reverse mortgage, shall establish, at 

23 the time of the consummation of such transaction, an es24 crow or impound account for the payment of taxes and 

25 hazard insurance, and, if applicable, flood insurance, 


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1 mortgage insurance, ground rents, and any other required 

2 periodic payments or premiums with respect to the prop3 erty or the loan terms, as provided in, and in accordance 

4 with, this section. 

5 ‘‘(b) WHEN REQUIRED.—No impound, trust, or other 

6 type of account for the payment of property taxes, insur7 ance premiums, or other purposes relating to the property 

8 may be required as a condition of a real property sale con9 tract or a loan secured by a first deed of trust or mortgage 

10 on the principal dwelling of the consumer, other than a 

11 consumer credit transaction under an open end credit plan 

12 or a reverse mortgage, except when— 

13 ‘‘(1) any such impound, trust, or other type of 

14 escrow or impound account for such purposes is re15 quired by Federal or State law; 

16 ‘‘(2) a loan is made, guaranteed, or insured by 

17 a State or Federal governmental lending or insuring 

18 agency; 

19 ‘‘(3) the consumer’s debt-to-income ratio at the 

20 time the home mortgage is established taking into 

21 account income from all sources including the con22 sumer’s employment exceeds 50 percent; 

23 ‘‘(4) the transaction is secured by a first mort24 gage or lien on the consumer’s principal dwelling 

25 and the annual percentage rate on the credit, at the 


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1 time of consummation of the transaction, will exceed 

2 by more than 3.0 percentage points the yield on 

3 Treasury securities having comparable periods of 

4 maturity on the 15th day of the month immediately 

5 preceding the month in which the application of the 

6 extension of credit is received by the creditor; 

7 ‘‘(5) a consumer obtains a mortgage referred to 

8 in section 103(aa); 

9 ‘‘(6) the original principal amount of such loan 

10 at the time of consummation of the transaction is— 

11 ‘‘(A) 90 percent or more of the sale price, 

12 if the property involved is purchased with the 

13 proceeds of the loan; or 

14 ‘‘(B) 90 percent or more of the appraised 

15 value of the property securing the loan; 

16 ‘‘(7) the combined principal amount of all loans 

17 secured by the real property exceeds 95 percent of 

18 the appraised value of the property securing the 

19 loans at the time of consummation of the last mort20 gage transaction; 

21 ‘‘(8) the consumer was the subject of a pro22 ceeding under title 11, United States Code, at any 

23 time during the 7-year period preceding the date of 

24 the transaction (as determined on the basis of the 

25 date of entry of the order for relief or the date of 


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1 adjudication, as the case may be, with respect to 

2 such proceeding and included in a consumer report 

3 on the consumer under the Fair Credit Reporting 

4 Act); or 

5 ‘‘(9) so required by the Board pursuant to reg6 ulation. 

7 ‘‘(c) DURATION OF MANDATORY ESCROW OR IM8 POUND ACCOUNT.—An escrow or impound account estab9 lished pursuant to subsection (b), shall remain in existence 

10 for a minimum period of 5 years and until such borrower 

11 has sufficient equity in the dwelling securing the consumer 

12 credit transaction so as to no longer be required to main13 tain private mortgage insurance, or such other period as 

14 may be provided in regulations to address situations such 

15 as borrower delinquency, unless the underlying mortgage 

16 establishing the account is terminated. 

17 ‘‘(d) CLARIFICATION ON ESCROW ACCOUNTS FOR

18 LOANS NOT MEETING STATUTORY TEST.—For mort19 gages not covered by the requirements of subsection (b), 

20 no provision of this section shall be construed as pre21 cluding the establishment of an impound, trust, or other 

22 type of account for the payment of property taxes, insur23 ance premiums, or other purposes relating to the prop24 erty— 


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1 ‘‘(1) on terms mutually agreeable to the parties 

2 to the loan; 

3 ‘‘(2) at the discretion of the lender or servicer, 

4 as provided by the contract between the lender or 

5 servicer and the borrower; or 

6 ‘‘(3) pursuant to the requirements for the 

7 escrowing of flood insurance payments for regulated 

8 lending institutions in section 102(d) of the Flood 

9 Disaster Protection Act of 1973. 

10 ‘‘(e) ADMINISTRATION OF MANDATORY ESCROW OR

11 IMPOUND ACCOUNTS.— 

12 ‘‘(1) IN GENERAL.—Except as may otherwise 

13 be provided for in this title or in regulations pre14 scribed by the Board, escrow or impound accounts 

15 established pursuant to subsection (b) shall be estab16 lished in a federally insured depository institution. 

17 ‘‘(2) ADMINISTRATION.—Except as provided in 

18 this section or regulations prescribed under this sec19 tion, an escrow or impound account subject to this 

20 section shall be administered in accordance with— 

21 ‘‘(A) the Real Estate Settlement Proce22 dures Act of 1974 and regulations prescribed 

23 under such Act; 


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1 ‘‘(B) the Flood Disaster Protection Act of 

2 1973 and regulations prescribed under such 

3 Act; and 

4 ‘‘(C) the law of the State, if applicable, 

5 where the real property securing the consumer 

6 credit transaction is located. 

7 ‘‘(3) APPLICABILITY OF PAYMENT OF INTER8 EST.—If prescribed by applicable State or Federal 

9 law, each creditor shall pay interest to the consumer 

10 on the amount held in any impound, trust, or escrow 

11 account that is subject to this section in the manner 

12 as prescribed by that applicable State or Federal 

13 law. 

14 ‘‘(4) PENALTY COORDINATION WITH RESPA.— 

15 Any action or omission on the part of any person 

16 which constitutes a violation of the Real Estate Set17 tlement Procedures Act of 1974 or any regulation 

18 prescribed under such Act for which the person has 

19 paid any fine, civil money penalty, or other damages 

20 shall not give rise to any additional fine, civil money 

21 penalty, or other damages under this section, unless 

22 the action or omission also constitutes a direct viola23 tion of this section. 

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1 pound, trust, or escrow account that is subject to this sec2 tion, the creditor shall disclose by written notice to the 

3 consumer at least 3 business days before the consumma4 tion of the consumer credit transaction giving rise to such 

5 account or in accordance with timeframes established in 

6 prescribed regulations the following information: 

7 ‘‘(1) The fact that an escrow or impound ac8 count will be established at consummation of the 

9 transaction. 

10 ‘‘(2) The amount required at closing to initially 

11 fund the escrow or impound account. 

12 ‘‘(3) The amount, in the initial year after the 

13 consummation of the transaction, of the estimated 

14 taxes and hazard insurance, including flood insur15 ance, if applicable, and any other required periodic 

16 payments or premiums that reflects, as appropriate, 

17 either the taxable assessed value of the real property 

18 securing the transaction, including the value of any 

19 improvements on the property or to be constructed 

20 on the property (whether or not such construction 

21 will be financed from the proceeds of the trans22 action) or the replacement costs of the property. 

23 ‘‘(4) The estimated monthly amount payable to 

24 be escrowed for taxes, hazard insurance (including 


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1 flood insurance, if applicable) and any other re2 quired periodic payments or premiums. 

3 ‘‘(5) The fact that, if the consumer chooses to 

4 terminate the account at the appropriate time in the 

5 future, the consumer will become responsible for the 

6 payment of all taxes, hazard insurance, and flood in7 surance, if applicable, as well as any other required 

8 periodic payments or premiums on the property un9 less a new escrow or impound account is established. 

10 ‘‘(g) DEFINITIONS.—For purposes of this section, the 

11 following definitions shall apply: 

12 ‘‘(1) FLOOD INSURANCE.—The term ‘flood in13 surance’ means flood insurance coverage provided 

14 under the national flood insurance program pursu15 ant to the National Flood Insurance Act of 1968. 

16 ‘‘(2) HAZARD INSURANCE.—The term ‘hazard 

17 insurance’ shall have the same meaning as provided 

18 for ‘hazard insurance’, ‘casualty insurance’, ‘home19 owner’s insurance’, or other similar term under the 

20 law of the State where the real property securing the 

21 consumer credit transaction is located.’’. 

22 (b) IMPLEMENTATION.— 

23 (1) REGULATIONS.—The Board of Governors of 

24 the Federal Reserve System, the Comptroller of the 

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1 vision, the Federal Deposit Insurance Corporation, 

2 the National Credit Union Administration Board, 

3 (hereafter in this Act referred to as the ‘‘Federal 

4 banking agencies’’) and the Federal Trade Commis5 sion shall prescribe, in final form, such regulations 

6 as determined to be necessary to implement the 

7 amendments made by subsection (a) before the end 

8 of the 180-day period beginning on the date of the 

9 enactment of this Act. 

10 (2) EFFECTIVE DATE.—The amendments made 

11 by subsection (a) shall only apply to covered mort12 gage loans consummated after the end of the 1-year 

13 period beginning on the date of the publication of 

14 final regulations in the Federal Register. 

15 (c) CLERICAL AMENDMENT.—The table of sections 

16 for chapter 2 of the Truth in Lending Act is amended 

17 by inserting after the item relating to section 129C (as 

18 added by section 201) the following new item: 

‘‘129D. Escrow or impound accounts relating to certain consumer credit transactions.’’. 

19 SEC. 502. DISCLOSURE NOTICE REQUIRED FOR CON20 SUMERS WHO WAIVE ESCROW SERVICES. 

21 (a) IN GENERAL.—Section 129D of the Truth in 

22 Lending Act (as added by section 501) is amended by add23 ing at the end the following new subsection: 


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1 ‘‘(h) DISCLOSURE NOTICE REQUIRED FOR CON2 SUMERS WHO WAIVE ESCROW SERVICES.— 

3 ‘‘(1) IN GENERAL.—If— 

4 ‘‘(A) an impound, trust, or other type of 

5 account for the payment of property taxes, in6 surance premiums, or other purposes relating to 

7 real property securing a consumer credit trans8 action is not established in connection with the 

9 transaction; or 

10 ‘‘(B) a consumer chooses, at any time after 

11 such an account is established in connection 

12 with any such transaction and in accordance 

13 with any statute, regulation, or contractual 

14 agreement, to close such account, 

15 the creditor or servicer shall provide a timely and 

16 clearly written disclosure to the consumer that ad17 vises the consumer of the responsibilities of the con18 sumer and implications for the consumer in the ab19 sence of any such account. 

20 ‘‘(2) DISCLOSURE REQUIREMENTS.—Any dis21 closure provided to a consumer under paragraph (1) 

22 shall include the following: 

23 ‘‘(A) Information concerning any applica24 ble fees or costs associated with either the non25 establishment of any such account at the time 


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1 of the transaction, or any subsequent closure of 

2 any such account. 

3 ‘‘(B) A clear and prominent notice that the 

4 consumer is responsible for personally and di5 rectly paying the non-escrowed items, in addi6 tion to paying the mortgage loan payment, in 

7 the absence of any such account, and the fact 

8 that the costs for taxes, insurance, and related 

9 fees can be substantial. 

10 ‘‘(C) A clear explanation of the con11 sequences of any failure to pay non-escrowed 

12 items, including the possible requirement for 

13 the forced placement of insurance by the cred14 itor or servicer and the potentially higher cost 

15 (including any potential commission payments 

16 to the servicer) or reduced coverage for the con17 sumer in the event of any such creditor-placed 

18 insurance.’’. 

19 (b) IMPLEMENTATION.— 

20 (1) REGULATIONS.—The Federal banking agen21 cies and the Federal Trade Commission shall pre22 scribe, in final form, such regulations as such agen23 cies determine to be necessary to implement the 

24 amendments made by subsection (a) before the end 


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1 of the 180-day period beginning on the date of the 

2 enactment of this Act. 

3 (2) EFFECTIVE DATE.—The amendments made 

4 by subsection (a) shall only apply in accordance with 

5 the regulations established in paragraph (1) and be6 ginning on the date occurring 180-days after the 

7 date of the publication of final regulations in the 

8 Federal Register. 

9 SEC. 503. REAL ESTATE SETTLEMENT PROCEDURES ACT OF 

10 1974 AMENDMENTS. 

11 (a) SERVICER PROHIBITIONS.—Section 6 of the Real 

12 Estate Settlement Procedures Act of 1974 (12 U.S.C. 

13 2605) is amended by adding at the end the following new 

14 subsections: 

15 ‘‘(k) SERVICER PROHIBITIONS.— 

16 ‘‘(1) IN GENERAL.—A servicer of a federally re17 lated mortgage shall not— 

18 ‘‘(A) obtain force-placed hazard insurance 

19 unless there is a reasonable basis to believe the 

20 borrower has failed to comply with the loan 

21 contract’s requirements to maintain property 

22 insurance; 

23 ‘‘(B) charge fees for responding to valid 

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1 tions which the Secretary shall prescribe) under 

2 this section; 

3 ‘‘(C) fail to take timely action to respond 

4 to a borrower’s requests to correct errors relat5 ing to allocation of payments, final balances for 

6 purposes of paying off the loan, or avoiding 

7 foreclosure, or other standard servicer’s duties; 

8 ‘‘(D) fail to respond within 10 business 

9 days to a request from a borrower to provide 

10 the identity, address, and other relevant contact 

11 information about the owner assignee of the 

12 loan; or 

13 ‘‘(E) fail to comply with any other obliga14 tion found by the Secretary, by regulation, to 

15 be appropriate to carry out the consumer pro16 tection purposes of this Act. 

17 ‘‘(2) FORCE-PLACED INSURANCE DEFINED.— 

18 For purposes of this subsection and subsections (l) 

19 and (m), the term ‘force-placed insurance’ means 

20 hazard insurance coverage obtained by a servicer of 

21 a federally related mortgage when the borrower has 

22 failed to maintain or renew hazard insurance on 

23 such property as required of the borrower under the 

24 terms of the mortgage. 


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1 ‘‘(l) REQUIREMENTS FOR FORCE-PLACED INSUR2 ANCE.—A servicer of a federally related mortgage shall 

3 not be construed as having a reasonable basis for obtain4 ing force-placed insurance unless the requirements of this 

5 subsection have been met. 

6 ‘‘(1) WRITTEN NOTICES TO BORROWER.—A 

7 servicer may not impose any charge on any borrower 

8 for force-placed insurance with respect to any prop9 erty securing a federally related mortgage unless— 

10 ‘‘(A) the servicer has sent, by first-class 

11 mail, a written notice to the borrower con12 taining— 

13 ‘‘(i) a reminder of the borrower’s obli14 gation to maintain hazard insurance on the 

15 property securing the federally related 

16 mortgage; 

17 ‘‘(ii) a statement that the servicer 

18 does not have evidence of insurance cov19 erage of such property; 

20 ‘‘(iii) a clear and conspicuous state21 ment of the procedures by which the bor22 rower may demonstrate that the borrower 

23 already has insurance coverage; and 

24 ‘‘(iv) a statement that the servicer 

25 may obtain such coverage at the borrower’s 


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1 expense if the borrower does not provide 

2 such demonstration of the borrower’s exist3 ing coverage in a timely manner; 

4 ‘‘(B) the servicer has sent, by first-class 

5 mail, a second written notice, at least 30 days 

6 after the mailing of the notice under subpara7 graph (A) that contains all the information de8 scribed in each clauses of such subparagraph; 

9 and 

10 ‘‘(C) the servicer has not received from the 

11 borrower any demonstration of hazard insur12 ance coverage for the property securing the 

13 mortgage by the end of the 15-day period be14 ginning on the date the notice under subpara15 graph (B) was sent by the servicer. 

16 ‘‘(2) SUFFICIENCY OF DEMONSTRATION.—A 

17 servicer of a federally related mortgage shall accept 

18 any reasonable form of written confirmation from a 

19 borrower of existing insurance coverage, which shall 

20 include the existing insurance policy number along 

21 with the identity of, and contact information for, the 

22 insurance company or agent. 

23 ‘‘(3) TERMINATION OF FORCE-PLACED INSUR24 ANCE.—Within 15 days of the receipt by a servicer 


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1 of confirmation of a borrower’s existing insurance 

2 coverage, the servicer shall— 

3 ‘‘(A) terminate the force-placed insurance; 

4 and 

5 ‘‘(B) refund to the consumer all force6 placed insurance premiums paid by the bor7 rower during any period during which the bor8 rower’s insurance coverage and the force-placed 

9 insurance coverage were each in effect, and any 

10 related fees charged to the consumer’s account 

11 with respect to the force-placed insurance dur12 ing such period. 

13 ‘‘(4) CLARIFICATION WITH RESPECT TO FLOOD

14 DISASTER PROTECTION ACT.—No provision of this 

15 section shall be construed as prohibiting a servicer 

16 from providing simultaneous or concurrent notice of 

17 a lack of flood insurance pursuant to section 102(e) 

18 of the Flood Disaster Protection Act of 1973. 

19 ‘‘(m) LIMITATIONS ON FORCE-PLACED INSURANCE

20 CHARGES.—All charges for force-placed insurance pre21 miums shall be bona fide and reasonable in amount. 

22 ‘‘(n) PROMPT CREDITING OF PAYMENTS RE23 QUIRED.— 

24 ‘‘(1) IN GENERAL.—All amounts received by a 

25 lender or a servicer on a home loan at the address 


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1 where the borrower has been instructed to make 

2 payments shall be accepted and credited, or treated 

3 as credited, on the business day received, to the ex4 tent that the borrower has made the full contractual 

5 payment and has provided sufficient information to 

6 credit the account. 

7 ‘‘(2) SCHEDULED METHOD.—If a servicer uses 

8 the scheduled method of accounting, any regularly 

9 scheduled payment made prior to the scheduled due 

10 date shall be credited no later than the due date. 

11 ‘‘(3) NOTICE OF NONCREDIT.—If any payment 

12 is received by a lender or a servicer on a home loan 

13 and not credited, or treated as credited, the bor14 rower shall be notified within 10 business days by 

15 mail at the borrower’s last known address of the dis16 position of the payment, the reason the payment was 

17 not credited, or treated as credited to the account, 

18 and any actions necessary by the borrower to make 

19 the loan current.’’. 

20 (b) INCREASE IN PENALTY AMOUNTS.—Section 6(f) 

21 of the Real Estate Settlement Procedures Act of 1974 (12 

22 U.S.C. 2605(f)) is amended— 

23 (1) in paragraphs (1)(B) and (2)(B), by strik24 ing ‘‘$1,000’’ each place such term appears and in25 serting ‘‘$2,000’’; and 


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1 (2) in paragraph (2)(B)(i), by striking 

2 ‘‘$500,000’’ and inserting ‘‘$1,000,000’’. 

3 (c) DECREASE IN RESPONSE TIMES.—Section 6(e) of 

4 the Real Estate Settlement Procedures Act of 1974 (12 

5 U.S.C. 2605(e)) is amended— 

6 (1) in paragraph (1)(A), by striking ‘‘20 days’’ 

7 and inserting ‘‘10 days’’; 

8 (2) in paragraph (2), by striking ‘‘60 days’’ and 

9 inserting ‘‘30 days’’; and 

10 (3) by adding at the end the following new 

11 paragraph: 

12 ‘‘(4) LIMITED EXTENSION OF RESPONSE

13 TIME.—The 30-day period described in paragraph 

14 (2) may be extended for not more than 30 days if, 

15 before the end of such 30-day period, the servicer 

16 notifies the borrower of the extension and the rea17 sons for the delay in responding.’’. 

18 (d) REQUESTS FOR PAYOFF AMOUNTS.—Section 6(e) 

19 of the Real Estate Settlement Procedures Act of 1974 (12 

20 U.S.C. 2605(e)) is amended by inserting after paragraph 

21 (4) (as added by subsection (c) of this section) the fol22 lowing new paragraph: 

23 ‘‘(5) REQUESTS FOR PAYOFF AMOUNTS.—A 

24 creditor or servicer shall send a payoff balance with25 in 7 business days of the receipt of a written request 


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1 for such balance from or on behalf of the bor2 rower.’’. 

3 (e) PROMPT REFUND OF ESCROW ACCOUNTS UPON

4 PAYOFF.—Section 6(g) of the Real Estate Settlement 

5 Procedures Act of 1974 (12 U.S.C. 2605(g)) is amended 

6 by adding at the end the following new sentence: ‘‘Any 

7 balance in any such account that is within the servicer’s 

8 control at the time the loan is paid off shall be promptly 

9 returned to the borrower within 20 business days or cred10 ited to a similar account for a new mortgage loan to the 

11 borrower with the same lender.’’. 

12 SEC. 504. MORTGAGE SERVICING STUDIES REQUIRED. 

13 (a) MORTGAGE SERVICING PRACTICES.— 

14 (1) STUDY.—The Secretary of Housing and 

15 Urban Development, in consultation with the Fed16 eral banking agencies, and the Federal Trade Com17 mission, shall conduct a comprehensive study on 

18 mortgage servicing practices and their potential for 

19 fraud and abuse. 

20 (2) ISSUES TO BE INCLUDED.—In addition to 

21 other issues the Secretary of Housing and Urban 

22 Development, the Federal banking agencies, and the 

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1 ducted under paragraph (1), the study shall include 

2 the following issues: 

3 (A) A survey of the industry in order to 

4 examine the issue of the timely or effective 

5 posting of payments by servicers. 

6 (B) The employment of daily interest when 

7 payments are made after a due date. 

8 (C) The charging of late fees on the entire 

9 outstanding principal. 

10 (D) The charging of interest on servicing 

11 fees. 

12 (E) The utilization of collection practices 

13 that failed to comply with the Fair Debt Collec14 tion Practices Act. 

15 (F) The charging of prepayment penalties 

16 when not authorized by either the note or law. 

17 (G) The employment of unconscionable for18 bearance agreements. 

19 (H) Foreclosure abuses. 

20 (3) REPORT.—Before the end of the 12-month 

21 period beginning on the date of the enactment of 

22 this Act, the Secretary of Housing and Urban Devel23 opment shall submit a report on the study conducted 

24 under this subsection to the Committee on Financial 

25 Services of the House of Representatives and the 


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1 Committee on Banking, Housing, and Urban Affairs 

2 of the Senate. 

3 (b) MORTGAGE SERVICING IMPROVEMENTS.— 

4 (1) STUDY.—The Secretary of Housing and 

5 Urban Development, in consultation with the Fed6 eral banking agencies, and the Federal Trade Com7 mission, shall conduct a comprehensive study on 

8 means to improve the best practices of the mortgage 

9 servicing industry, and Federal and State laws gov10 erning such industry. 

11 (2) REPORT.—Before the end of the 18-month 

12 period beginning on the date of the enactment of 

13 this Act, the Secretary of Housing and Urban Devel14 opment shall submit a report on the study conducted 

15 under this subsection to the Committee on Financial 

16 Services of the House of Representatives and the 

17 Committee on Banking, Housing, and Urban Affairs 

18 of the Senate, together with such recommendations 

19 for administrative or legislative action as the Sec20 retary, in consultation with the Board and the Com21 mission, may determine to be appropriate. 

22 SEC. 505. ESCROWS INCLUDED IN REPAYMENT ANALYSIS. 

23 (a) IN GENERAL.—Section 128(b) of the Truth in 

24 Lending Act (15 U.S.C. 1638(b)) is amended by adding 

25 at the end the following new paragraph: 


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1 ‘‘(4) REPAYMENT ANALYSIS REQUIRED TO IN2 CLUDE ESCROW PAYMENTS.— 

3 ‘‘(A) IN GENERAL.—In the case of any 

4 consumer credit transaction secured by a first 

5 mortgage or lien on the principal dwelling of 

6 the consumer, other than a consumer credit 

7 transaction under an open end credit plan or a 

8 reverse mortgage, for which an impound, trust, 

9 or other type of account has been or will be es10 tablished in connection with the transaction for 

11 the payment of property taxes, hazard and flood 

12 (if any) insurance premiums, or other periodic 

13 payments or premiums with respect to the 

14 property, the information required to be pro15 vided under subsection (a) with respect to the 

16 number, amount, and due dates or period of 

17 payments scheduled to repay the total of pay18 ments shall take into account the amount of 

19 any monthly payment to such account for each 

20 such repayment in accordance with section 

21 10(a)(2) of the Real Estate Settlement Proce22 dures Act of 1974. 

23 ‘‘(B) ASSESSMENT VALUE.—The amount 

24 taken into account under subparagraph (A) for 

25 the payment of property taxes, hazard and flood 


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1 (if any) insurance premiums, or other periodic 

2 payments or premiums with respect to the 

3 property shall reflect the taxable assessed value 

4 of the real property securing the transaction 

5 after the consummation of the transaction, in6 cluding the value of any improvements on the 

7 property or to be constructed on the property 

8 (whether or not such construction will be fi9 nanced from the proceeds of the transaction), if 

10 known, and the replacement costs of the prop11 erty for hazard insurance, in the initial year 

12 after the transaction.’’. 

13 TITLE VI—APPRAISAL 

14 ACTIVITIES 

15 SEC. 601. PROPERTY APPRAISAL REQUIREMENTS. 

16 Section 129 of the Truth in Lending Act (15 U.S.C. 

17 1639) is amended by inserting after subsection (u) (as 

18 added by section 303(f)) the following new subsection: 

19 ‘‘(v) PROPERTY APPRAISAL REQUIREMENTS.— 

20 ‘‘(1) IN GENERAL.—A creditor may not extend 

21 credit in the form of a mortgage referred to in sec22 tion 103(aa) to any consumer without first obtaining 

23 a written appraisal of the property to be mortgaged 

24 prepared in accordance with the requirements of this 

25 subsection. 


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1 ‘‘(2) APPRAISAL REQUIREMENTS.— 

2 ‘‘(A) PHYSICAL PROPERTY VISIT.—An ap3 praisal of property to be secured by a mortgage 

4 referred to in section 103(aa) does not meet the 

5 requirement of this subsection unless it is per6 formed by a qualified appraiser who conducts a 

7 physical property visit of the interior of the 

8 mortgaged property. 

9 ‘‘(B) SECOND APPRAISAL UNDER CERTAIN

10 CIRCUMSTANCES.— 

11 ‘‘(i) IN GENERAL.—If the purpose of 

12 a mortgage referred to in section 103(aa) 

13 is to finance the purchase or acquisition of 

14 the mortgaged property from a person 

15 within 180 days of the purchase or acquisi16 tion of such property by that person at a 

17 price that was lower than the current sale 

18 price of the property, the creditor shall ob19 tain a second appraisal from a different 

20 qualified appraiser. The second appraisal 

21 shall include an analysis of the difference 

22 in sale prices, changes in market condi23 tions, and any improvements made to the 

24 property between the date of the previous 

25 sale and the current sale. 


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1 ‘‘(ii) NO COST TO CONSUMER.—The 

2 cost of any second appraisal required 

3 under clause (i) may not be charged to the 

4 consumer. 

5 ‘‘(C) QUALIFIED APPRAISER DEFINED.— 

6 For purposes of this subsection, the term 

7 ‘qualified appraiser’ means a person who— 

8 ‘‘(i) is certified or licensed by the 

9 State in which the property to be ap10 praised is located; and 

11 ‘‘(ii) performs each appraisal in con12 formity with the Uniform Standards of 

13 Professional Appraisal Practice and title 

14 XI of the Financial Institutions Reform, 

15 Recovery, and Enforcement Act of 1989, 

16 and the regulations prescribed under such 

17 title, as in effect on the date of the ap18 praisal. 

19 ‘‘(3) FREE COPY OF APPRAISAL.—A creditor 

20 shall provide 1 copy of each appraisal conducted in 

21 accordance with this subsection in connection with a 

22 mortgage referred to in section 103(aa) to the con23 sumer without charge, and at least 3 days prior to 

24 the transaction closing date. 


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1 ‘‘(4) CONSUMER NOTIFICATION.—At the time 

2 of the initial mortgage application, the consumer 

3 shall be provided with a statement by the creditor 

4 that any appraisal prepared for the mortgage is for 

5 the sole use of the creditor, and that the consumer 

6 may choose to have a separate appraisal conducted 

7 at their own expense. 

8 ‘‘(5) VIOLATIONS.—In addition to any other li9 ability to any person under this title, a creditor 

10 found to have willfully failed to obtain an appraisal 

11 as required in this subsection shall be liable to the 

12 consumer for the sum of $2,000.’’. 

13 SEC. 602. UNFAIR AND DECEPTIVE PRACTICES AND ACTS 

14 RELATING TO CERTAIN CONSUMER CREDIT 

15 TRANSACTIONS. 

16 (a) IN GENERAL.—Chapter 2 of the Truth in Lend17 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 

18 after section 129D (as added by section 501(a)) the fol19 lowing new section: 

20 ‘‘SEC. 129E. UNFAIR AND DECEPTIVE PRACTICES AND ACTS 

21 RELATING TO CERTAIN CONSUMER CREDIT 

22 TRANSACTIONS. 

23 ‘‘(a) IN GENERAL.—It shall be unlawful, in providing 

24 any services for a consumer credit transaction secured by 

25 the principal dwelling of the consumer, to engage in any 


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1 unfair or deceptive act or practice as described in or pur2 suant to regulations prescribed under this section. 

3 ‘‘(b) APPRAISAL INDEPENDENCE.—For purposes of 

4 subsection (a), unfair and deceptive practices shall in5 clude— 

6 ‘‘(1) any appraisal of a property offered as se7 curity for repayment of the consumer credit trans8 action that is conducted in connection with such 

9 transaction in which a person with an interest in the 

10 underlying transaction compensates, coerces, extorts, 

11 colludes, instructs, induces, bribes, or intimidates a 

12 person conducting or involved in an appraisal, or at13 tempts, to compensate, coerce, extort, collude, in14 struct, induce, bribe, or intimidate such a person, 

15 for the purpose of causing the appraised value as16 signed, under the appraisal, to the property to be 

17 based on any factor other than the independent 

18 judgment of the appraiser; 

19 ‘‘(2) mischaracterizing, or suborning any 

20 mischaracterization of, the appraised value of the 

21 property securing the extension of the credit; 

22 ‘‘(3) seeking to influence an appraiser or other23 wise to encourage a targeted value in order to facili24 tate the making or pricing of the transaction; and 


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1 ‘‘(4) failing to timely compensate an appraiser 

2 for a completed appraisal regardless of whether the 

3 transaction closes. 

4 ‘‘(c) EXCEPTIONS.—The requirements of subsection 

5 (b) shall not be construed as prohibiting a mortgage lend6 er, mortgage broker, mortgage banker, real estate broker, 

7 appraisal management company, employee of an appraisal 

8 management company, or any other person with an inter9 est in a real estate transaction from asking an appraiser 

10 to provide 1 or more of the following services: 

11 ‘‘(1) Consider additional, appropriate property 

12 information, including the consideration of addi13 tional comparable properties to make or support an 

14 appraisal. 

15 ‘‘(2) Provide further detail, substantiation, or 

16 explanation for the appraiser’s value conclusion. 

17 ‘‘(3) Correct errors in the appraisal report. 

18 ‘‘(d) RULEMAKING PROCEEDINGS.—The Board, the 

19 Comptroller of the Currency, the Director of the Office 

20 of Thrift Supervision, the Federal Deposit Insurance Cor21 poration, the National Credit Union Administration 

22 Board, and the Federal Trade Commission— 

23 ‘‘(1) shall, for purposes of this section, jointly 

24 prescribe regulations defining with specificity acts or 

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1 sion of mortgage lending services for a consumer 

2 credit transaction secured by the principal dwelling 

3 of the consumer or mortgage brokerage services for 

4 such a transaction and defining any terms in this 

5 section or such regulations; and 

6 ‘‘(2) may jointly issue interpretive guidelines 

7 and general statements of policy with respect to un8 fair or deceptive acts or practices in the provision of 

9 mortgage lending services for a consumer credit 

10 transaction secured by the principal dwelling of the 

11 consumer and mortgage brokerage services for such 

12 a transaction, within the meaning of subsections (a), 

13 (b), and (c). 

14 ‘‘(e) PENALTIES.— 

15 ‘‘(1) FIRST VIOLATION.—In addition to the en16 forcement provisions referred to in section 130, each 

17 person who violates this section shall forfeit and pay 

18 a civil penalty of not more than $10,000 for each 

19 day any such violation continues. 

20 ‘‘(2) SUBSEQUENT VIOLATIONS.—In the case of 

21 any person on whom a civil penalty has been im22 posed under paragraph (1), paragraph (1) shall be 

23 applied by substituting ‘$20,000’ for ‘$10,000’ with 

24 respect to all subsequent violations. 


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1 ‘‘(3) ASSESSMENT.—The agency referred to in 

2 subsection (a) or (c) of section 108 with respect to 

3 any person described in paragraph (1) shall assess 

4 any penalty under this subsection to which such per5 son is subject.’’. 

6 (b) CLERICAL AMENDMENT.—The table of sections 

7 for chapter 2 of the Truth in Lending Act is amended 

8 by inserting after the item relating to section 129D (as 

9 added by section 501(c)) the following new item: 

‘‘129E. Unfair and deceptive practices and acts relating to certain consumer 

credit transactions.’’. 

10 SEC. 603. AMENDMENTS RELATING TO APPRAISAL SUB11 COMMITTEE OF FIEC, APPRAISER INDEPEND12 ENCE, AND APPROVED APPRAISER EDU13 CATION. 

14 (a) CONSUMER PROTECTION MISSION.— 

15 (1) PURPOSES.—Section 1101 of the Financial 

16 Institutions Reform, Recovery, and Enforcement Act 

17 of 1989 (12 U.S.C. 3331) is amended by inserting 

18 ‘‘and to provide the Appraisal Subcommittee with a 

19 consumer protection mandate’’ before the period at 

20 the end. 

21 (2) FUNCTIONS OF APPRAISAL SUB22 COMMITTEE.—Section 1103(a) of the Financial In23 stitutions Reform, Recovery, and Enforcement Act 

24 of 1989 (12 U.S.C. 3332(a)) is amended— 


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1 (A) by striking ‘‘and’’ at the end of para2 graph (3); 

3 (B) by striking the period at the end of 

4 paragraph (4) and inserting ‘‘; and’’; and 

5 (C) by adding at the end the following new 

6 paragraph: 

7 ‘‘(5) protect the consumer from improper ap8 praisal practices and the predations of unlicensed 

9 appraisers.’’. 

10 (3) THRESHOLD LEVELS.—Section 1112(b) of 

11 the Financial Institutions Reform, Recovery, and 

12 Enforcement Act of 1989 (12 U.S.C. 3341(b)) is 

13 amended by inserting before the period the fol14 lowing: ‘‘, and that such threshold level provides rea15 sonable protection for consumers who purchase 1–4 

16 unit single-family residences’’. 

17 (b) ANNUAL REPORT OF APPRAISAL SUB18 COMMITTEE.—Section 1103(a)(4) of Financial Institu19 tions Reform, Recovery, and Enforcement Act of 1989 (12 

20 U.S.C. 3332(a)(4)) is amended at the end by inserting: 

21 ‘‘The report shall also detail the activities of the Appraisal 

22 Subcommittee, including the results of all audits of State 

23 appraiser regulatory agencies, and provide an accounting 

24 of disapproved actions and warnings taken in the previous 


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1 year, including a description of the conditions causing the 

2 disapproval.’’. 

3 (c) OPEN MEETINGS.—Section 1104(b) of the Finan4 cial Institutions Reform, Recovery, and Enforcement Act 

5 of 1989 (12 U.S.C. 3333(b)) is amended by inserting ‘‘in 

6 public session after notice in the Federal Register’’ after 

7 ‘‘shall meet’’. 

8 (d) REGULATIONS.—Section 1106 of the Financial 

9 Institutions Reform, Recovery, and Enforcement Act of 

10 1989 (12 U.S.C. 3335) is amended— 

11 (1) by inserting ‘‘prescribe regulations after no12 tice and opportunity for comment,’’ after ‘‘hold 

13 hearings’’; and 

14 (2) at the end by inserting ‘‘Any regulations 

15 prescribed by the Appraisal Subcommittee shall (un16 less otherwise provided in this title) be limited to the 

17 following functions: temporary practice, national reg18 istry, information sharing, and enforcement. For 

19 purposes of prescribing regulations, the Appraisal 

20 Subcommittee shall establish an advisory committee 

21 of industry participants, including appraisers and 

22 government agencies, and hold regular meetings.’’. 

23 (e) FIELD APPRAISALS AND APPRAISAL REVIEWS.— 

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1 ery, and Enforcement Act of 1989 (12 U.S.C. 3342) is 

2 amended— 

3 (1) by striking ‘‘In determining’’ and inserting 

4 ‘‘(a) IN GENERAL.—In determining’’; and 

5 (2) by adding at the end the following new sub6 section: 

7 ‘‘(b) FIELD APPRAISALS AND APPRAISAL RE8 VIEWS.—All field appraisals performed at a property with9 in a State shall be prepared by appraisers licensed in the 

10 State where the property is located. All Uniform Stand11 ards of Professional Appraisal Practice-compliant ap12 praisal reviews shall be performed by an appraiser who 

13 is duly licensed by a State appraisal board.’’. 

14 (f) STATE AGENCY REPORTING REQUIREMENT.— 

15 Section 1109(a) of the Financial Institutions Reform, Re16 covery, and Enforcement Act of 1989 (12 U.S.C. 3338(a)) 

17 is amended— 

18 (1) by striking ‘‘and’’ after the semicolon in 

19 paragraph (1); 

20 (2) by redesignating paragraph (2) as para21 graph (3); and 

22 (3) by inserting after paragraph (1) the fol23 lowing new paragraph: 

24 ‘‘(2) transmit reports on sanctions, disciplinary 

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1 cense and certification suspensions on a timely basis 

2 to the national registry of the Appraisal Sub3 committee; and’’. 

4 (g) REGISTRY FEES MODIFIED.—Section 1109(a)(3) 

5 of the Financial Institutions Reform, Recovery, and En6 forcement Act of 1989 (12 U.S.C. 3338(a)(3)) (as modi7 fied by section 203(e) of this Act) is amended by— 

8 (1) striking ‘‘$25’’ and inserting ‘‘$40’’; 

9 (2) striking ‘‘$50’’ and inserting ‘‘$80’’; and 

10 (3) inserting after the period at the end the fol11 lowing new sentences: ‘‘The Appraisal Subcommittee 

12 shall consider at least once every 5 years whether to 

13 adjust the dollar amount of the registry fees to ac14 count for inflation. In implementing any change in 

15 registry fees, the Appraisal Subcommittee shall pro16 vide flexibility to the States for multi-year certifi17 cations and licenses already in place, as well as a 

18 transition period to implement the changes in reg19 istry fees.’’ 

20 (h) GRANTS AND REPORTS.—Section 1109(b) of the 

21 Financial Institutions Reform, Recovery, and Enforce22 ment Act of 1989 (12 U.S.C. 3348(b)) is amended— 

23 (1) by striking ‘‘and’’ after the semicolon in 

24 paragraph (3); 


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1 (2) by striking the period at the end of para2 graph (4) and inserting a semicolon; and 

3 (3) by adding at the end the following new 

4 paragraphs: 

5 ‘‘(5) make grants to State appraiser regulatory 

6 agencies to help defray those costs relating to en7 forcement activities; and 

8 ‘‘(6) to report to all State appraiser certifying 

9 and licensing agencies when a license or certification 

10 is surrendered, revoked, or suspended.’’. 

11 (i) CRITERIA.—Section 1116 of the Financial Institu12 tions Reform, Recovery, and Enforcement Act of 1989 (12 

13 U.S.C. 3345) is amended— 

14 (1) in subsection (c), by inserting ‘‘whose cri15 teria for the licensing of a real estate appraiser cur16 rently meet or exceed the minimum criteria issued 

17 by the Appraisal Qualifications Board of The Ap18 praisal Foundation for the licensing of real estate 

19 appraisers’’ before the period at the end; and 

20 (2) by striking subsection (e) and inserting the 

21 following new subsection: 

22 ‘‘(e) MINIMUM QUALIFICATION REQUIREMENTS.— 

23 Any requirements established for individuals in the posi24 tion of ‘Trainee Appraiser’ and ‘Supervisory Appraiser’ 

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1 ments of the Appraiser Qualifications Board of The Ap2 praisal Foundation. The Appraisal Subcommittee shall 

3 have the authority to enforce these requirements.’’. 

4 (j) MONITORING OF STATE APPRAISER CERTIFYING

5 AND LICENSING AGENCIES.—Section 1118(a) of the Fi6 nancial Institutions Reform, Recovery, and Enforcement 

7 Act of 1989 (12 U.S.C. 3347(a)) is amended— 

8 (1) by inserting ‘‘funding, staffing,’’ after 

9 ‘‘practices,’’ each place such term appears; 

10 (2) by inserting before the period at the end of 

11 the first sentence the following: ‘‘, whether a State 

12 agency processes complaints and completes exams in 

13 a reasonable time period, and whether a State agen14 cy reports claims and disciplinary actions on a time15 ly basis to the national registry maintained by the 

16 Appraisal Subcommittee’’; and 

17 (3) by inserting at the end the following new 

18 sentence: ‘‘The Appraisal Subcommittee shall have 

19 the authority to impose interim sanctions and sus20 pensions.’’. 

21 (k) RECIPROCITY.—Subsection (b) of section 1122 of 

22 the Financial Institutions Reform, Recovery, and Enforce23 ment Act of 1989 (12 U.S.C. 3351(b)) is amended to read 

24 as follows: 


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1 ‘‘(b) RECIPROCITY.—A State appraiser certifying or 

2 licensing agency shall issue a reciprocal certification or li3 cense for an individual from another State when— 

4 ‘‘(1) the appraiser licensing and certification 

5 program of such other State is in compliance with 

6 the provisions of this title; and 

7 ‘‘(2) the appraiser holds a valid certification 

8 from a State whose requirements for certification or 

9 licensing meet or exceed the licensure standards es10 tablished by the State where an individual seeks ap11 praisal licensure.’’. 

12 (l) CONSIDERATION OF PROFESSIONAL APPRAISAL

13 DESIGNATIONS.—Section 1122(d) of the Financial Insti14 tutions Reform, Recovery, and Enforcement Act of 1989 

15 (12 U.S.C. 3351(d)) is amended by adding at the end the 

16 following new sentence: ‘‘No provision of this subsection 

17 shall be construed as prohibiting consideration of designa18 tions conferred by recognized national professional ap19 praisal organizations, such as sponsoring organizations of 

20 The Appraisal Foundation.’’. 

21 (m) APPRAISER INDEPENDENCE.—Section 1122 of 

22 the Financial Institutions Reform, Recovery, and Enforce23 ment Act of 1989 (12 U.S.C. 3351) is amended by adding 

24 at the end the following new subsection: 

25 ‘‘(g) APPRAISER INDEPENDENCE.— 


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1 ‘‘(1) PROHIBITIONS ON INTERESTED PARTIES

2 IN A REAL ESTATE TRANSACTION.—No mortgage 

3 lender, mortgage broker, mortgage banker, real es4 tate broker, appraisal management company, em5 ployee of an appraisal management company, or any 

6 other person with an interest in a real estate trans7 action involving an appraisal shall improperly influ8 ence, or attempt to improperly influence, through co9 ercion, extortion, collusion, compensation, instruc10 tion, inducement, intimidation, non-payment for 

11 services rendered, or bribery, the development, re12 porting, result, or review of a real estate appraisal 

13 sought in connection with a mortgage loan. 

14 ‘‘(2) EXCEPTIONS.—The requirements of para15 graph (1) shall not be construed as prohibiting a 

16 mortgage lender, mortgage broker, mortgage banker, 

17 real estate broker, appraisal management company, 

18 employee of an appraisal management company, or 

19 any other person with an interest in a real estate 

20 transaction from asking an appraiser to provide 1 or 

21 more of the following services: 

22 ‘‘(A) Consider additional, appropriate 

23 property information, including the consider24 ation of additional comparable properties to 

25 make or support an appraisal. 


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1 ‘‘(B) Provide further detail, substantiation, 

2 or explanation for the appraiser’s value conclu3 sion. 

4 ‘‘(C) Correct errors in the appraisal report. 

5 ‘‘(3) PROHIBITIONS ON CONFLICTS OF INTER6 EST.—No certified or licensed appraiser conducting 

7 an appraisal may have a direct or indirect interest, 

8 financial or otherwise, in the property or transaction 

9 involving the appraisal. 

10 ‘‘(4) MANDATORY REPORTING.—Any mortgage 

11 lender, mortgage broker, mortgage banker, real es12 tate broker, appraisal management company, em13 ployee of an appraisal management company, or any 

14 other person with an interest in a real estate trans15 action involving an appraisal who has a reasonable 

16 basis to believe an appraiser is violating applicable 

17 laws, or is otherwise engaging in unethical or unpro18 fessional conduct, shall refer the matter to the appli19 cable State appraiser certifying and licensing agen20 cy. 

21 ‘‘(5) REGULATIONS.—The Federal financial in22 stitutions regulatory agencies (as defined in section 

23 1003(1) of the Federal Financial Institutions Exam24 ination Council Act of 1978) shall prescribe such 


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1 regulations as may be necessary to carry out the 

2 provisions of this subsection. 

3 ‘‘(6) PENALTIES.—Any person who violates any 

4 provision of this section shall be subject to civil pen5 alties under section 8(i)(2) of the Federal Deposit 

6 Insurance Act or section 206(k)(2) of the Federal 

7 Credit Union Act, as appropriate. 

8 ‘‘(7) PROCEEDING.—A proceeding with respect 

9 to a violation of this section shall be an administra10 tive proceeding which may be conducted by a Fed11 eral financial institutions regulatory agency in ac12 cordance with the procedures set forth in subchapter 

13 II of chapter 5 of title 5, United States Code.’’. 

14 (n) APPRAISER EDUCATION.—Section 1122 of the 

15 Financial Institutions Reform, Recovery, and Enforce16 ment Act of 1989 (12 U.S.C. 3351) is amended by insert17 ing after subsection (g) (as added by subsection (l) of this 

18 section) the following new subsection: 

19 ‘‘(h) APPROVED EDUCATION.—The Appraisal Sub20 committee shall encourage the States to accept courses ap21 proved by the Appraiser Qualification Board’s Course Ap22 proval Program.’’. 

23 (o) TECHNICAL CORRECTIONS.— 

24 (1) Section 1119(a)(2) of the Financial Institu25 tions Reform, Recovery, and Enforcement Act of 


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1 1989 (12 U.S.C. 3348(a)(2)) is amended by striking 

2 ‘‘council,’’ and inserting ‘‘Council,’’. 

3 (2) Section 1121(6) of the Financial Institu4 tions Reform, Recovery, and Enforcement Act of 

5 1989 (12 U.S.C. 3350(6)) is amended by striking 

6 ‘‘Corporations,’’ and inserting ‘‘Corporation,’’. 

7 (3) Section 1121(8) of the Financial Institu8 tions Reform, Recovery, and Enforcement Act of 

9 1989 (12 U.S.C. 3350(8)) is amended by striking 

10 ‘‘council’’ and inserting ‘‘Council’’. 

11 (4) Section 1122 of the Financial Institutions 

12 Reform, Recovery, and Enforcement Act of 1989 

13 (12 U.S.C. 3351) is amended— 

14 (A) in subsection (a)(1) by moving the left 

15 margin of subparagraphs (A), (B), and (C) 2 

16 ems to the right; and 

17 (B) in subsection (c)— 

18 (i) by striking ‘‘Federal Financial In19 stitutions Examination Council’’ and in20 serting ‘‘Financial Institutions Examina21 tion Council’’; and 

22 (ii) by striking ‘‘the council’s func23 tions’’ and inserting ‘‘the Council’s func24 tions’’. 


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1 SEC. 604. STUDY REQUIRED ON IMPROVEMENTS IN AP2 PRAISAL PROCESS AND COMPLIANCE PRO3 GRAMS. 

4 (a) STUDY.—The Comptroller General shall conduct 

5 a comprehensive study on possible improvements in the 

6 appraisal process generally, and specifically on the consist7 ency in and the effectiveness of, and possible improve8 ments in, State compliance efforts and programs in ac9 cordance with title XI of the Financial Institutions Re10 form, Recovery, and Enforcement Act of 1989. In addi11 tion, this study shall examine the existing de minimis loan 

12 levels established by Federal regulators for compliance 

13 under title XI and whether there is a need to revise them 

14 to reflect the addition of consumer protection to the pur15 poses and functions of the Appraisal Subcommittee. 

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 

21 on Banking, Housing, and Urban Affairs of the Senate, 

22 together with such recommendations for administrative or 

23 legislative action, at the Federal or State level, as the 

24 Comptroller General may determine to be appropriate. 


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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 fol4 lows: 

5 ‘‘(e) COPIES FURNISHED TO APPLICANTS.— 

6 ‘‘(1) IN GENERAL.—Each creditor shall furnish 

7 to an applicant, a copy of all appraisal reports and 

8 valuations developed in connection with the appli9 cant’s application for a loan that is or would have 

10 been secured by a lien on residential real property. 

11 ‘‘(2) PROCEDURES..—Appraisal reports shall be 

12 furnished under this subsection upon written request 

13 by the applicant, made within a reasonable period of 

14 time of the application and before any closing on the 

15 loan. 

16 ‘‘(3) REIMBURSEMENT.—The creditor may re17 quire an applicant to pay a reasonable fee for the 

18 provision of copies of appraisal reports under this 

19 subsection. 

20 ‘‘(4) NOTIFICATION TO CONSUMERS.—The 

21 creditor shall notify (pursuant to regulations pre22 scribed by the Board) an applicant in writing of the 

23 right to receive a copy of each appraisal report, 

24 under this subsection.’’. 

Æ 


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