I 

111TH CONGRESS 

1ST SESSION H. R. 1782 

To amend the Truth in Lending Act to protect consumers from certain 

practices in connection with the origination of consumer credit transactions secured by the consumer’s principal dwelling, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 30, 2009 

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

Committee on Financial Services 

A BILL 

To amend the Truth in Lending Act to protect consumers 

from certain practices in connection with the origination 

of consumer credit transactions secured by the consumer’s principal dwelling, and for other purposes. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Fairness for Home5 owners Act of 2009’’. 


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1 SEC. 2. ORIGINATIONS OF CONSUMER CREDIT TRANS2 ACTIONS SECURED BY THE CONSUMER’S 

3 PRINCIPAL DWELLING. 

4 (a) IN GENERAL.—The Truth in Lending Act (15 

5 U.S.C. 1601 et seq.) is amended by inserting after section 

6 129A the following new section: 

7 ‘‘SEC. 129B. ORIGINATIONS OF CONSUMER CREDIT TRANS8 ACTIONS SECURED BY THE CONSUMER’S 

9 PRINCIPAL DWELLING. 

10 ‘‘(a) DEFINITIONS.—For purposes of this section, the 

11 following definitions shall apply: 

12 ‘‘(1) FULLY INDEXED RATE.—The term ‘fully 

13 indexed rate’ means the index rate prevailing at the 

14 time a consumer credit transaction secured by a con15 sumer’s principal dwelling is originated, plus the 

16 margin that will apply after the expiration of an in17 troductory interest rate. 

18 ‘‘(2) MORTGAGE BROKER.—The term ‘mortgage 

19 broker’ means any person who is defined as a mort20 gage broker under applicable State law. 

21 ‘‘(b) REQUIREMENTS FOR ORIGINATORS.— 

22 ‘‘(1) ABILITY TO PAY.— 

23 ‘‘(A) IN GENERAL.—No creditor or mort24 gage broker may make, provide, or arrange for 

25 any consumer credit transaction secured by a 

26 consumer’s principal dwelling without verifying 


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1 the consumer’s reasonable ability to pay the 

2 scheduled payments of the following, as applica3 ble: 

4 ‘‘(i) Principal. 

5 ‘‘(ii) Interest. 

6 ‘‘(iii) Real estate taxes. 

7 ‘‘(iv) Homeowner’s insurance, assess8 ments, and mortgage insurance premiums. 

9 ‘‘(B) VARIABLE INTEREST RATE.—In the 

10 case of any consumer credit transaction secured 

11 by a consumer’s principal dwelling for which 

12 the applicable annual percentage rate may vary 

13 over the life of the credit, the reasonable ability 

14 to pay shall be determined, for purposes of this 

15 paragraph, on the basis of a fully indexed rate 

16 plus 200 basis points and a repayment schedule 

17 which achieves full amortization over the life of 

18 the extension of credit. 

19 ‘‘(C) VERIFICATION OF CONSUMER INCOME

20 AND FINANCIAL RESOURCES.— 

21 ‘‘(i) IN GENERAL.—In the case of any 

22 consumer credit transaction secured by a 

23 consumer’s principal dwelling, the income 

24 and financial resources of the consumer 

25 shall be verified for purposes of this paraVerDate Nov 24 2008 01:24 Apr 01, 2009 Jkt 079200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1782.IH H1782

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1 graph by tax returns, payroll receipts, 

2 bank records, or other similarly reliable 

3 documents. 

4 ‘‘(ii) CONSUMER STATEMENT INSUF5 FICIENT.—A statement by a consumer of 

6 the consumer’s income or financial re7 sources shall not be sufficient to establish 

8 the existence of any income or financial re9 sources when verifying the reasonable abil10 ity of the consumer to repay any consumer 

11 credit transaction secured by the con12 sumer’s principal dwelling, for purposes of 

13 this paragraph. 

14 ‘‘(D) OTHER CRITERIA.—Creditors or 

15 mortgage brokers may rely on additional cri16 teria other than a consumer’s income and fi17 nancial resources to establish the reasonable 

18 ability of the consumer to repay any consumer 

19 credit transaction secured by the consumer’s 

20 principal dwelling, to the extent such other cri21 teria are also verified through reasonably reli22 able methods and documentation. 

23 ‘‘(E) EQUITY IN DWELLING NOT TO BE

24 TAKEN INTO ACCOUNT.—The consumer’s equity 

25 in the principal dwelling that secures or would 


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1 secure the consumer credit transaction may not 

2 be used to establish the ability to make the pay3 ments described in subparagraph (A) with re4 spect to such transaction. 

5 ‘‘(2) PROHIBITION ON STEERING.— 

6 ‘‘(A) IN GENERAL.—In connection with a 

7 home mortgage loan, a mortgage broker or 

8 creditor may not— 

9 ‘‘(i) steer, counsel, or direct a con10 sumer to rates, charges, principal amount, 

11 or prepayment terms that are more expen12 sive for that which the consumer qualifies; 

13 or 

14 ‘‘(ii) make, provide, or arrange for 

15 any consumer credit transaction secured by 

16 a consumer’s principal dwelling that is 

17 more expensive than that for which the 

18 consumer qualifies. 

19 ‘‘(B) DUTIES TO CONSUMERS.—If unable 

20 to suggest, offer, or recommend to a consumer 

21 a home loan that is not more expensive than 

22 that for which the consumer qualifies, a mort23 gage originator shall— 

24 ‘‘(i) based on the information reason25 ably available and using the skill, care, and 


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1 diligence reasonably expected for a mort2 gage originator, originate or otherwise fa3 cilitate a suitable home mortgage loan by 

4 another creditor to a consumer, if per5 mitted by and in accordance with all other6 wise applicable law; or 

7 ‘‘(ii) disclose to a consumer— 

8 ‘‘(I) that the creditor does not 

9 offer a home mortgage loan that is 

10 not more expensive than a loan for 

11 which the consumer qualifies, but that 

12 other creditors may offer such a loan; 

13 and 

14 ‘‘(II) the reasons that the prod15 ucts and services offered by the mort16 gage originator are not available to or 

17 reasonably advantageous for the con18 sumer. 

19 ‘‘(C) PROHIBITED CONDUCT.—In connec20 tion with a home mortgage loan, a mortgage 

21 originator may not— 

22 ‘‘(i) mischaracterize the credit history 

23 of a consumer or the home loans available 

24 to a consumer; 


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1 ‘‘(ii) mischaracterize or suborn the 

2 mischaracterization of the appraised value 

3 of the property securing the extension of 

4 credit; and 

5 ‘‘(iii) if unable to suggest, offer, or 

6 recommend to a consumer a loan that is 

7 not more expensive than a loan for which 

8 the consumer qualifies, discourage a con9 sumer from seeking a home mortgage loan 

10 from another creditor or with another 

11 mortgage originator. 

12 ‘‘(3) PROHIBITION ON PREPAYMENT PEN13 ALTIES.—In the case of any consumer credit trans14 action secured by a consumer’s principal dwelling, 

15 the transaction may not contain terms under which 

16 a consumer is required to pay a prepayment penalty 

17 for paying all or part of the principal before the date 

18 on which the principal is due. 

19 ‘‘(c) LIMITATION ON FINANCED POINTS, CHARGES, 

20 AND FEES.— 

21 ‘‘(1) IN GENERAL.—No creditor or mortgage 

22 broker may, in connection with any consumer credit 

23 transaction secured by the consumer’s principal 

24 dwelling, include in the principal amount of such 

25 transaction any portion of any qualified finance 


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1 charge in excess of the amount which is equal to 5 

2 percent of the principal amount of the transaction. 

3 ‘‘(2) DEFINITIONS.—For purposes of this sub4 section, the following definitions shall apply: 

5 ‘‘(A) QUALIFIED FINANCE CHARGE.—The 

6 term ‘qualified finance charge’ means the sum 

7 of— 

8 ‘‘(i) the finance charge as determined 

9 under section 103(aa)(4); and 

10 ‘‘(ii) all compensation paid to a mort11 gage broker from any source in connection 

12 with this transaction. 

13 ‘‘(B) PRINCIPAL AMOUNT.—The term 

14 ‘principal amount’ means— 

15 ‘‘(i) in the case of any consumer cred16 it transaction under an open end credit 

17 plan secured by the consumer’s principal 

18 dwelling, the maximum amount of credit 

19 that may be extended under the terms of 

20 such plan as determined without taking 

21 into account any amount included in deter22 mining the finance charge under section 

23 106; and 

24 ‘‘(ii) in the case of any other con25 sumer credit transaction secured by a conVerDate Nov 24 2008 01:24 Apr 01, 2009 Jkt 079200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1782.IH H1782

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1 sumer’s principal dwelling, the face 

2 amount of the obligation on the note. 

3 ‘‘(3) PROHIBITION ON EXCESSIVE FINANCE

4 CHARGES.— 

5 ‘‘(A) LIMITATION BASED ON AMOUNT OF

6 TRANSACTION.—No person may, in connection 

7 with any consumer credit transaction secured 

8 by the consumer’s principal dwelling, impose or 

9 receive any amount included in determining the 

10 qualified finance charge for such transaction 

11 that exceeds the amount which is equal to 5 

12 percent of the principal amount of the trans13 action; 

14 ‘‘(B) LIMITATION ON FEE FOR PROVIDING

15 LESS BENEFICIAL TERMS FOR CONSUMER.—Ex16 cept as provided in subparagraph (c), no person 

17 may provide and no mortgage originator may 

18 receive, directly or indirectly, any compensation 

19 for originating a consumer credit transaction 

20 secured by a consumer’s principal dwelling that 

21 is more costly than that for which the consumer 

22 qualifies, or that is based on, or varies with, the 

23 terms of any home mortgage loan (other than 

24 the amount of loan principal.); 


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1 ‘‘(C) EXCEPTION.—Notwithstanding sub2 paragraph (B), a mortgage broker may receive 

3 compensation in the form of an increased rate, 

4 but only if— 

5 ‘‘(i) the mortgage broker receives no 

6 other compensation, however denominated, 

7 directly or indirectly, from the consumer, 

8 creditor, or other mortgage originator; 

9 ‘‘(ii) the loan does not include dis10 count points, origination points, or rate re11 duction points, however denominated, or 

12 any payment reduction fee, however de13 nominated; 

14 ‘‘(iii) the loan does not include a pre15 payment penalty; and 

16 ‘‘(iv) there are no other closing costs 

17 associated with the loan, except for fees to 

18 government officials or amounts to fund 

19 escrow accounts for taxes and insurance. 

20 ‘‘(d) MORTGAGE BROKER DUTIES.— 

21 ‘‘(1) IN GENERAL.—Any mortgage broker act22 ing to obtain or arrange for any consumer credit 

23 transaction secured by the consumer’s principal 

24 dwelling shall owe a duty to the borrower to comply 

25 with the following duties: 


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1 ‘‘(A) Mortgage brokers shall act in the 

2 consumer’s best interest and in the utmost good 

3 faith toward each consumer and shall not com4 promise a consumer’s right or interest in favor 

5 of another’s right or interest, including a right 

6 or interest of the mortgage broker. 

7 ‘‘(B) A mortgage broker shall not accept, 

8 give, or charge any undisclosed compensation or 

9 realize any undisclosed remuneration, either 

10 through direct or indirect means, that inures to 

11 the benefit of the mortgage broker on an ex12 penditure made for the consumer. 

13 ‘‘(C) Mortgage brokers shall carry out all 

14 lawful instructions given by the consumer. 

15 ‘‘(D) Mortgage brokers shall disclose to 

16 consumers all material facts of which the mort17 gage broker has knowledge which might reason18 ably affect the consumer’s rights, interests, or 

19 ability to receive the consumer’s intended ben20 efit from the consumer credit transaction, but 

21 not facts which are reasonably susceptible to 

22 the knowledge of the consumer. 

23 ‘‘(E) Mortgage brokers shall use reason24 able care in performing duties. 


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1 ‘‘(F) Mortgage brokers shall account to a 

2 consumer for all the consumer’s money and 

3 property received as agent. 

4 ‘‘(2) SCOPE.—The duties of the mortgage 

5 broker to the consumer apply when the mortgage 

6 broker is acting in the capacity of mortgage broker 

7 providing mortgage brokerage services with respect 

8 to any consumer credit transaction secured by the 

9 consumer’s principal dwelling for which the broker is 

10 not the creditor. 

11 ‘‘(3) RULES OF CONSTRUCTION.— 

12 ‘‘(A) FEES FOR SERVICES RENDERED.— 

13 No provision of this subsection shall be con14 strued as prohibiting a mortgage broker from 

15 contracting for or collecting a fee for services 

16 actually rendered to the extent the fee has been 

17 disclosed to the consumer in advance of the pro18 vision of such services and complies with sub19 section (c)(3). 

20 ‘‘(B) DUTY OF BROKER.—Except as re21 quired by subsection (b)(2), no provision of this 

22 subsection shall be construed as requiring a 

23 mortgage broker— 

24 ‘‘(i) to obtain or arrange for any con25 sumer credit transaction secured by the 


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1 consumer’s principal dwelling on behalf of 

2 a consumer that contains terms or condi3 tions not available to the mortgage broker 

4 in the mortgage broker’s usual course of 

5 business; or 

6 ‘‘(ii) to obtain or arrange for any con7 sumer credit transaction secured by the 

8 consumer’s principal dwelling from a cred9 itor with whom the mortgage broker does 

10 not have a business relationship. 

11 ‘‘(e) INDEPENDENT VERIFICATION OF CONSUMER

12 COUNSELING BEFORE REFINANCING SPECIAL MORT13 GAGES.— 

14 ‘‘(1) IN GENERAL.—No creditor or mortgage 

15 broker may make, provide, or arrange for any con16 sumer credit transaction secured by the consumer’s 

17 principal dwelling all or a portion of the proceeds of 

18 which are used to fully or partially pay off a special 

19 mortgage unless the borrower has obtained a written 

20 certification from an authorized independent loan 

21 counselor that the borrower has received counseling 

22 on the advisability of the transaction. 

23 ‘‘(2) DEFINITIONS.—For purposes of this sec24 tion, the following definitions shall apply: 


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1 ‘‘(A) SPECIAL MORTGAGE.—The term ‘spe2 cial mortgage’ means any consumer credit 

3 transaction secured by the consumer’s principal 

4 dwelling that was originated, subsidized, fund5 ed, or guaranteed by or through a State, tribal, 

6 or local government, or nonprofit organization, 

7 that bears 1 or more of the following non8 standard payment terms which substantially 

9 benefit the consumer: 

10 ‘‘(i) Payments vary with income. 

11 ‘‘(ii) Payments of principal or interest 

12 are not required or can be deferred under 

13 specified conditions. 

14 ‘‘(iii) Principal or interest is forgiv15 able under specified conditions. 

16 ‘‘(iv) Either no interest or an annual 

17 interest rate of 2 percent or less is charged 

18 in connection with the loan. 

19 ‘‘(B) AUTHORIZED LOAN COUNSELOR.— 

20 The term ‘authorized independent loan coun21 selor’ means any nonprofit, third-party indi22 vidual or organization providing homebuyer 

23 education programs, foreclosure prevention 

24 services, mortgage loan counseling, or credit 

25 counseling that is certified by the Secretary of 


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1 Housing and Urban Development, or certified 

2 by any State housing agency or nonprofit orga3 nization designated by such Secretary, for such 

4 purposes. 

5 ‘‘(f) MINIMUM FINANCIAL REQUIREMENTS FOR

6 MORTGAGE BROKERS.—No mortgage broker may obtain 

7 or arrange for any consumer credit transaction secured 

8 by the consumer’s principal dwelling unless at all times 

9 the mortgage broker— 

10 ‘‘(1) maintains a minimum net worth, net of in11 tangibles, of at least $500,000, as determined in ac12 cordance with generally accepted accounting prin13 ciples; or 

14 ‘‘(2) maintains a surety bond or irrevocable let15 ter of credit in the amount of $50,000. 

16 ‘‘(g) ENFORCEMENT.—For purposes of providing a 

17 cause of action for any failure by a mortgage broker to 

18 comply with any requirement imposed under this section, 

19 section 130(a) shall be applied with respect to any such 

20 failure— 

21 ‘‘(1) by substituting ‘mortgage broker’ for 

22 ‘creditor’ each place such term appears in such sec23 tion; and 

24 ‘‘(2) by treating all qualified finance charges 

25 (as defined in subsection (c)(2)(A)) incurred in the 


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1 origination of any consumer credit transaction se2 cured by the consumer’s principal dwelling and any 

3 compensation paid or payable in violation of (c)(3) 

4 as actual damages sustained by the consumer as a 

5 result of the failure. 

6 ‘‘(h) EXCLUSION OF REVERSE MORTGAGES.—This 

7 section shall not apply with respect to any consumer mort8 gage transaction that constitutes a reverse mortgage.’’. 

9 (b) TECHNICAL AND CONFORMING AMENDMENTS.— 

10 The Truth in Lending Act is amended— 

11 (1) in section 103(u) (15 U.S.C. 1602(u)), by 

12 striking ‘‘and the disclosures required by section 

13 129(a)’’ and inserting ‘‘and the provisions of sec14 tions 129 and 129B’’; 

15 (2) in section 130 (15 U.S.C. 1640), by insert16 ing ‘‘or 129B’’ after ‘‘section 129’’ each place such 

17 term appears; 

18 (3) in the heading for subsection (d) of section 

19 131 (15 U.S.C. 1641), strike ‘‘CERTAIN’’ and insert 

20 ‘‘HIGH-COST’’; 

21 (4) in section 131(c) (15 U.S.C. 1641)— 

22 (A) by striking ‘‘(c) Any consumer’’ and 

23 inserting ‘‘(c) RESCISSION RIGHTS.— 

24 ‘‘(1) IN GENERAL.—Any consumer’’; and 


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1 (B) by inserting after paragraph (1) (as so 

2 designated by subparagraph (A) of this para3 graph) the following new paragraph: 

4 ‘‘(2) CIVIL DAMAGES.—In a consumer credit 

5 transaction secured by a principal dwelling, other 

6 than a mortgage referred to in section 103(aa), an 

7 assignee or holder shall be liable for violations of 

8 this chapter or, of section 129B in a civil action for 

9 monetary damages under section 130(a), notwith10 standing paragraph (1), except that any relief made 

11 permissible by this subparagraph may not exceed the 

12 sum of the amount of any remaining indebtedness 

13 and the total amount paid by the consumer in con14 nection with the transaction.’’; and 

15 (5) in section 131 (15 U.S.C. 1641) by adding 

16 at the end the following new subsection: 

17 ‘‘(g) REMEDY IN LIEU OF RESCISSION FOR CERTAIN

18 VIOLATIONS.—At the election of a consumer entitled to 

19 rescission for violations of section 129B, any person, in20 cluding a creditor, who holds, purchases, or is otherwise 

21 assigned a mortgage or similar security interest in connec22 tion with a mortgage on a principal dwelling— 

23 ‘‘(1) may be required to make such adjustments 

24 to the balance of the obligation as are required 

25 under section 125, and to reflect any other relief 


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1 pursuant to section 130 and any other legal claims; 

2 and 

3 ‘‘(2) shall modify or refinance the loan, at no 

4 cost to the consumer, the resulting balance of which 

5 shall provide terms that would have satisfied the re6 quirements of section 129B at the origination of the 

7 loan and to pay costs and reasonable attorneys 

8 fees.’’. 

9 (c) CLERICAL AMENDMENT.—The table of sections 

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

11 by inserting after the item relating to section 129 the fol12 lowing new item: 

‘‘129B. Originations of consumer credit transactions secured by the consumer’s 

principal dwelling.’’. 

Æ 


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