I 

111TH CONGRESS 

1ST SESSION H. R. 2108 

To protect home buyers from predatory lending practices. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 27, 2009 

Ms. FUDGE introduced the following bill; which was referred to the Committee 

on Financial Services 

A BILL 

To protect home buyers from predatory lending practices. 

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 ‘‘Predatory Mortgage 

5 Lending Practices Reduction Act’’. 

6 SEC. 2. CERTIFICATION REQUIREMENTS FOR MORTGAGE 

7 LENDERS AND BROKERS. 

8 (a) IN GENERAL.—The Real Estate Settlement Pro9 cedures Act of 1974 is amended by inserting after section 

10 12 (12 U.S.C. 2610) the following new section: 


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1 ‘‘SEC. 13. CERTIFICATION REQUIREMENTS FOR MORTGAGE 

2 LENDERS AND BROKERS. 

3 ‘‘(a) REQUIREMENT.—No person may, in connection 

4 with a subprime federally mortgage related loan, provide 

5 mortgage lending services or mortgage brokerage services 

6 unless such person is, at the time of the provision of such 

7 services, certified by the Secretary pursuant to this section 

8 as having been adequately trained with regard to subprime 

9 lending. 

10 ‘‘(b) STANDARDS AND EXAMINATION.— 

11 ‘‘(1) IN GENERAL.—The Secretary shall, by 

12 regulation, establish requirements, standards, and 

13 procedures for testing and certifying persons pro14 viding mortgage lending services or mortgage bro15 kerage services in connection with a subprime, feder16 ally related mortgage loans. 

17 ‘‘(2) EXAMINATION.—Such standards and pro18 cedures shall require, for certification under this sec19 tion, that the individual shall demonstrate, by writ20 ten examination, knowledge regarding the following 

21 areas: 

22 ‘‘(A) FEDERAL LAW.—The requirements 

23 and limitations under Federal laws regarding 

24 mortgage lending, including the Truth in Lend25 ing Act, the Fair Credit Reporting Act, the 

26 Equal Credit Opportunity Act, the Real Estate 


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1 Settlement Procedures Act of 1974, the Home 

2 Ownership and Equity Protection Act of 1994, 

3 the Home Mortgage Disclosure Act of 1975, 

4 and the Fair Housing Act. 

5 ‘‘(B) SUBPRIME LENDING.—Legal and ap6 propriate practices, methods, conventions, and 

7 terms of subprime lending in all lending func8 tions, including advertising and marketing, con9 sumer education and counseling, origination, 

10 underwriting, closing, servicing, information 

11 technology, and internal control policies and 

12 procedures. 

13 ‘‘(C) PREDATORY LENDING.—Illegal and 

14 inappropriate practices, methods, practices, and 

15 terms of predatory lending. The Secretary shall, 

16 by regulation, define the term ‘predatory lend17 ing’ for purposes of this subsection. 

18 ‘‘(D) LAW REGARDING COMPETENCY TO

19 CONTRACT.—Basic contract law regarding com20 petency and incapacity to contract. 

21 ‘‘(c) DECERTIFICATION.—The Secretary shall estab22 lish standards and procedures for suspension and revoca23 tion of the certification under this section, which shall— 

24 ‘‘(1) provide the individual subject to suspen25 sion or revocation an opportunity to be heard; and 


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1 ‘‘(2) provide for suspension or revocation in 

2 such instances as the Secretary determines appro3 priate, which shall include an agency determination 

4 or a judgment by a court of competent jurisdiction 

5 that a certified individual has engaged in an act or 

6 practice that is unfair or deceptive under section 5 

7 of the Predatory Mortgage Lending Practices Re8 duction Act. 

9 ‘‘(d) RENEWAL OF CERTIFICATION.—The Secretary 

10 shall provide that certification under this section shall be 

11 effective for a specified period of time, as determined by 

12 the Secretary. The Secretary shall establish standards and 

13 procedures for recertification of individuals whose certifi14 cations are expiring. The Secretary shall establish a proce15 dure for notifying certified individuals of the expiration 

16 of their certifications. 

17 ‘‘(e) INFORMATION AND TRAINING.— 

18 ‘‘(1) IN GENERAL.—The Secretary shall make 

19 available, for persons engaged in providing mortgage 

20 lending services and mortgage brokerage services, in21 formation and training in the areas described in sub22 section (b)(2). Such information and training shall 

23 be made available through classes, written materials, 

24 and the World Wide Web. 


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1 ‘‘(2) CONTRACTS.—The Secretary may enter 

2 into such agreements and contracts as the Secretary 

3 considers necessary to make information and train4 ing under this subsection available. 

5 ‘‘(3) AUTHORIZATION OF APPROPRIATIONS.— 

6 For providing information and training under this 

7 subsection, there are authorized to be appropriated 

8 to the Secretary $2,000,000 for each of fiscal years 

9 2009 and 2010. 

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

11 following definitions shall apply: 

12 ‘‘(1) MORTGAGE BROKERAGE SERVICES.—The 

13 term ‘mortgage brokerage services’ means the bring14 ing together of a borrower and lender to obtain a 

15 federally related mortgage loan and the rendering of 

16 settlement services, by a person who is not an em17 ployee or exclusive agent of a lender. 

18 ‘‘(2) MORTGAGE LENDING SERVICES.—The 

19 term ‘mortgage lending services’ means services re20 lating to the origination of a federally related mort21 gage loan, including the taking of loan applications, 

22 loan processing, and the underwriting and funding 

23 of a loan. 

24 ‘‘(3) PRIME LENDING RATE.—The term ‘prime 

25 lending rate’ means, with respect to a lender, the 


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1 lowest interest rate charged by such lender to its 

2 most creditworthy customers. 

3 ‘‘(4) SUBPRIME.— 

4 ‘‘(A) IN GENERAL.—The term ‘subprime’ 

5 means, with respect to a federally related mort6 gage loan, that the borrower under the loan, or 

7 the loan terms, exhibit characteristics that indi8 cate that the loan is subject to a significantly 

9 higher risk of default than federally related 

10 mortgage loans made to borrowers at prime 

11 lending rates. 

12 ‘‘(B) REGULATIONS.—The Secretary shall 

13 prescribe regulations to carry out this para14 graph, which shall specify characteristics re15 ferred to in subparagraph (A) that indicate a 

16 higher risk of default and shall establish cri17 teria based on such characteristics for deter18 mining whether a federally related mortgage 

19 loan is a subprime loan. Such characteristics 

20 shall include— 

21 ‘‘(i) higher loan fees or penalties; 

22 ‘‘(ii) higher interest rates; 

23 ‘‘(iii) higher debt-to-income ratios; 

24 ‘‘(iv) a history of loan delinquency; 

25 ‘‘(v) higher loan-to-value ratios; 


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1 ‘‘(vi) lower credit scores or other cred2 it ratings; 

3 ‘‘(vii) more recent declaration of 

4 bankruptcy; 

5 ‘‘(viii) lack of a credit history; and 

6 ‘‘(ix) any other factors that the Sec7 retary considers appropriate.’’. 

8 (b) REGULATIONS.—Not later than 6 months after 

9 the date of the enactment of this Act, the Secretary of 

10 Housing and Urban Development shall issue regulations 

11 pursuant to section 19(a) of the Real Estate Settlement 

12 Procedures Act of 1974 (12 U.S.C. 2617(a)) as may be 

13 necessary to carry out the amendment made by subsection 

14 (a) of this section. 

15 SEC. 3. LENDER REQUIREMENTS FOR HIGH COST MORT16 GAGES. 

17 Section 129 of the Truth in Lending Act (15 U.S.C. 

18 1639) is amended by adding at the end the following new 

19 subsections: 

20 ‘‘(m) BEST PRACTICES PLAN.— 

21 ‘‘(1) IN GENERAL.—Any creditor who extends 

22 credit in connection with a mortgage referred to in 

23 section 103(aa) shall establish and maintain a best 

24 practices plan, in accordance with regulations which 


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1 the Board shall prescribe, to ensure compliance with 

2 the requirements of this title. 

3 ‘‘(2) REQUIREMENTS.—The best practices plan 

4 established under paragraph (1) by any creditor 

5 shall require the creditor, and any subcontractor or 

6 agent of the creditor to— 

7 ‘‘(A) provide all employees of the creditor, 

8 subcontractor, or agent who are involved in any 

9 aspect of an extension of credit in connection 

10 with a mortgage referred to in section 103(aa), 

11 and any subcontractor or agent of such creditor 

12 so involved, with such training in the best prac13 tices plan of the creditor as the Board deter14 mines by regulation to be appropriate; and 

15 ‘‘(B) periodically review and evaluate the 

16 performance of such employees, contractors, 

17 and agents under the best practices plan. 

18 ‘‘(n) GOOD FAITH RESOLUTION OF COMPLAINTS.— 

19 A creditor, and any agent or assignee of the creditor— 

20 ‘‘(1) shall make a good faith effort to resolve 

21 any consumer complaint concerning improper or 

22 questionable lending practices with respect to a 

23 mortgage referred to in section 103(aa) before the 

24 end of the 60-day period beginning on the date the 


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1 complaint is received by the creditor, agent or as2 signee; and 

3 ‘‘(2) may take no action, directly or indirectly, 

4 including seeking any remedy in law or equity, to 

5 collect the amount of any mortgage referred to in 

6 paragraph (1), or any part of such amount, or oth7 erwise enforce the mortgage against the consumer or 

8 the property securing the mortgage, during such 60- 

9 day period (and any time limit for bringing an ac10 tion to collect any such amount shall toll during 

11 such period and any civil action filed before the be12 ginning of such period in any court shall be sus13 pended during such period). 

14 ‘‘(o) PROHIBITION ON CHARGES NOT PREVIOUSLY

15 DISCLOSED.—A creditor, or an agent or assignee of a 

16 creditor, may not impose any charge or fee, or attempt 

17 to collect any charge or fee, in connection with a mortgage 

18 referred to in section 103(aa) that was not disclosed be19 fore the mortgage was executed, or impose or attempt to 

20 collect any charge or fee that was so disclosed in an 

21 amount in excess of the amount disclosed, unless the cred22 itor or assignee establishes, in accordance with regulations 

23 which the Board shall prescribe, that the charge or fee 

24 is reasonable and could not have reasonably been foreseen 

25 at the time the mortgage was executed. 


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1 ‘‘(p) PLAIN DESCRIPTION AND DISCLOSURE RE2 QUIREMENT.— 

3 ‘‘(1) CHARGES AND FEES.—Notwithstanding 

4 any other provision of this title, all disclosures of 

5 charges and fees required under this title with re6 gard to a mortgage referred to in section 103(aa), 

7 shall be separately enumerated and clearly labeled, 

8 stated, and described, including charges described in 

9 clause (ii) or (iii) of section 128(a)(2)(A). 

10 ‘‘(2) RESCISSION AND OTHER RIGHTS.—The 

11 disclosure required under the penultimate sentence 

12 of section 125(a) in connection with a mortgage re13 ferred to in section 103(aa), together with a sum14 mary of the consumer’s rights, shall be provided to 

15 the consumer in clear and plain language not less 

16 than 24 hours before the mortgage is executed.’’. 

17 SEC. 4. UNFAIR AND DECEPTIVE ACTS AND PRACTICES. 

18 (a) PROHIBITION.—It shall be unlawful, in providing 

19 any mortgage lending services for a subprime federally re20 lated mortgage loan or any mortgage brokerage services 

21 for such a loan, to engage in any unfair or deceptive act 

22 or practice, which shall include, in the case of any ap23 praisal of a property offered as security for repayment of 

24 the loan that is conducted in connection with such loan— 


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1 (1) directly or indirectly, compensating, coerc2 ing, or intimidating a person conducting or involved 

3 in an appraisal, or attempting, directly or indirectly, 

4 to compensate, coerce, or intimidate such a person, 

5 for the purpose of causing the appraised value as6 signed under the appraisal to the property to be 

7 based on any factor other than the independent 

8 judgment of the appraiser; and 

9 (2) knowingly submitting a false or misleading 

10 appraisal in connection with the loan. 

11 (b) RULEMAKING PROCEEDINGS.—The Secretary of 

12 Housing and Urban Development, the Board of Governors 

13 of the Federal Reserve System, and the Federal Trade 

14 Commission may jointly issue— 

15 (1) interpretive rules and general statements of 

16 policy with respect to unfair or deceptive acts or 

17 practices in the provision of mortgage lending serv18 ices for a subprime federally related mortgage loan 

19 and mortgage brokerage services for such a loan, 

20 within the meaning of subsection (a); and 

21 (2) regulations defining with specificity acts or 

22 practices which are unfair or deceptive in the provi23 sion of mortgage lending services for a subprime fed24 erally related mortgage loan or mortgage brokerage 


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1 services for such a loan, within the meaning of sub2 section (a). 

3 (c) COMPLIANCE ENFORCEMENT.—Any violation of 

4 a regulation issued under subsection (b)(2) shall be treat5 ed as a violation of a requirement imposed under the 

6 Truth in Lending Act and compliance with such regulation 

7 shall be enforceable under sections 108 and 130 of such 

8 Act. 

9 (d) DEFINITIONS.—For purposes of this section, the 

10 terms ‘‘mortgage brokerage services’’, ‘‘mortgage lending 

11 services’’, and ‘‘subprime’’ have the meanings given such 

12 terms in section 13(f) of the Real Estate Settlement Pro13 cedures Act of 1974 (12 U.S.C. 2611(f)). 

14 (e) PENALTIES.— 

15 (1) FIRST VIOLATION.—In addition to the en16 forcement provisions referred to in subsection (c), 

17 each person who violates this section shall forfeit 

18 and pay a civil penalty of not more than $10,000 for 

19 each 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’’ 

24 with 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 of the Truth in 

3 Lending Act with respect to any person described in 

4 paragraph (1) shall assess any penalty under this 

5 subsection to which such person is subject. 

6 SEC. 5. PROHIBITION ON CERTAIN ARBITRATION CLAUSES. 

7 (a) IN GENERAL.—The Consumer Credit Protection 

8 Act (15 U.S.C. 1601 et seq.) is amended by adding at 

9 the end the following new title: 

10 ‘‘TITLE X—DISPUTE 

11 RESOLUTION 

12 ‘‘SEC. 1001. SHORT TITLE. 

13 ‘‘This title may be cited as the ‘Consumer Fairness 

14 Act’. 

15 ‘‘SEC. 1002. DEFINITIONS. 

16 ‘‘For purposes of this title, the following definitions 

17 shall apply: 

18 ‘‘(1) CONSUMER.—The term ‘consumer’ means 

19 any individual. 

20 ‘‘(2) CONSUMER TRANSACTION.—The term 

21 ‘consumer transaction’ means the sale or rental of 

22 goods or services, the extension of credit, or the pro23 vision of any other financial product or service, to an 

24 individual in a transaction entered into primarily for 

25 personal, family, or household purposes, including 


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1 any consumer credit transaction that is secured by 

2 the consumer’s principal dwelling. 

3 ‘‘(3) CONSUMER CONTRACT.—The term ‘con4 sumer contract’ means any written, standardized 

5 form contract between the parties to a consumer 

6 transaction. 

7 ‘‘SEC. 1003. PROHIBITION ON ARBITRATION CLAUSES IM8 POSED ON CONSUMERS WITHOUT THEIR 

9 CONSENT. 

10 ‘‘(a) IN GENERAL.—A written provision in any con11 sumer transaction or consumer contract which requires 

12 binding arbitration to resolve any controversy arising out 

13 of such transaction or contract, or the refusal to perform 

14 the whole or any part of the transaction shall not be en15 forceable. 

16 ‘‘(b) POST-CONTROVERSY AGREEMENTS.—Sub17 section (a) shall not apply with respect to a written agree18 ment to determine by binding arbitration an existing con19 troversy arising out of a consumer transaction or con20 sumer contract if the written agreement has been entered 

21 into by the parties to the consumer transaction or con22 sumer contract after the controversy has arisen. 

23 ‘‘(c) COORDINATION WITH OTHER LAW.—No provi24 sion of this section shall be construed as annulling, alter25 ing, affecting, or superseding any Federal law, or the laws 


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1 of any State, relating to arbitration in connection with 

2 consumer transactions or consumer contracts, except to 

3 the extent that those laws are inconsistent with the provi4 sions of this section, and then only to the extent of the 

5 inconsistency.’’. 

6 (b) APPLICABILITY.—The amendments made by this 

7 section shall apply to all consumer transactions and con8 sumer contracts entered into on, or after the date of the 

9 enactment of this Act and to all controversies pending or 

10 filed on, or arising after, the date of the enactment of this 

11 Act. 

12 SEC. 6. GRANTS TO COMMUNITY DEVELOPMENT CORPORA13 TIONS FOR PREDATORY LENDING EDU14 CATION. 

15 (a) IN GENERAL.—The Community Development 

16 Banking and Financial Institutions Act of 1994 (12 

17 U.S.C. 4701 et seq.) is amended by adding at the end 

18 the following new section: 

19 ‘‘SEC. 122. GRANTS TO COMMUNITY DEVELOPMENT COR20 PORATIONS FOR PREDATORY LENDING EDU21 CATION. 

22 ‘‘(a) IN GENERAL.—To the extent amounts are made 

23 available under subsection (d), the Fund may make grants 

24 to nonprofit community development corporations to pro25 vide education and training to borrowers, potential borVerDate Nov 24 2008 06:15 Apr 28, 2009 Jkt 079200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\H2108.IH H2108

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1 rowers, and community groups regarding illegal and inap2 propriate practices, methods, practices, and terms of pred3 atory lending. 

4 ‘‘(b) SELECTION.—The selection of community devel5 opment corporations to receive grants under this section 

6 shall be at the discretion of the Fund and in accordance 

7 with criteria established by the Fund. 

8 ‘‘(c) GRANT AMOUNTS.—The Fund may establish a 

9 limitation on the amount received by any single commu10 nity development corporation from grants under this sec11 tion for any single fiscal year. 

12 ‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—There 

13 is authorized to be appropriated to the Fund for grants 

14 under this section $2,000,000 for each of fiscal years 2009 

15 and 2010.’’. 

16 (b) AMENDMENT TO TABLE OF CONTENTS.—The 

17 table of contents in section 1(b) of the Riegle Community 

18 Development and Regulatory Improvement Act of 1994 

19 (12 U.S.C. 4701 note) is amended by inserting after the 

20 item relating to section 121 the following new item: 

‘‘Sec. 122. Grants to community development corporations for predatory lending education.’’. 

Æ 


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