I 

109TH CONGRESS 

1ST SESSION H. R. 1295

To protect consumers against unfair and deceptive practices in connection 

with higher cost mortgage transactions, to strengthen the civil remedies 

available to consumers under existing law, to provide for certain uniform 

lending standards, to improve housing counseling, to better mortgage 

servicing, to enhance appraisal standards and oversight, to establish 

licensing and minimum standards for mortgage brokers, and for other 

purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 15, 2005

Mr. NEY (for himself, Mr. KANJORSKI, Mr. GARY G. MILLER of California, 

Mr. MEEKS of New York, Mr. GILLMOR, Mr. CROWLEY, Mr. FEENEY, 

Mr. CLAY, Mr. SHERMAN, Mr. SCOTT of Georgia, Ms. HOOLEY, and Mr. 

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

A BILL

To protect consumers against unfair and deceptive practices 

in connection with higher cost mortgage transactions, 

to strengthen the civil remedies available to consumers 

under existing law, to provide for certain uniform lending 

standards, to improve housing counseling, to better mortgage servicing, to enhance appraisal standards and oversight, to establish licensing and minimum standards for 

mortgage brokers, 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,
2

•HR 1295 IH 

1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Responsible Lending 

3 Act’’. 

4 SEC. 2. TABLE OF CONTENTS.

Sec. 1. Short title. 

Sec. 2. Table of contents. 

TITLE I—HIGHER-COST MORTGAGES 

Sec. 101. Short title. 

Sec. 102. Definitions relating to higher-cost mortgages. 

Sec. 103. Amendments to requirements for higher-cost mortgages. 

Sec. 104. Amendments relating to dispute and error resolution. 

Sec. 105. Amendments to damages, rescission and liability provisions. 

Sec. 106. Coordination with State law. 

Sec. 107. Clarification of State enforcement authority. 

Sec. 108. Prepayment penalties and late charges. 

Sec. 109. Regulations. 

Sec. 110. Effective dates. 

TITLE II—HOUSING COUNSELING 

Subtitle A—Consumer counseling 

Sec. 201. Consumer counseling requirements. 

Subtitle B—Expanded housing counseling opportunities 

Sec. 211. Short title. 

Sec. 212. Establishment of Office of Housing Counseling. 

Sec. 213. Counseling procedures. 

Sec. 214. Grants for housing counseling assistance. 

Sec. 215. Requirements to use HUD-certified counselors under HUD programs. 

Sec. 216. Study of defaults and foreclosures. 

Sec. 217. Definitions for counseling-related programs. 

Sec. 218. Updating and simplification of mortgage information booklet. 

Sec. 219. Option for notice of foreclosure prevention counseling availability. 

TITLE III—MORTGAGE SERVICING 

Sec. 301. Escrow and impound accounts relating to certain consumer credit 

transactions. 

Sec. 302. Disclosure notice required for consumers who opt out of escrow services. 

Sec. 303. Mortgage servicing clarification. 

Sec. 304. Real Estate Settlement Procedures Act of 1974 amendments. 

Sec. 305. Mortgage servicing studies required. 

TITLE IV—APPRAISAL ACTIVITIES 

Sec. 401. Property appraisal requirements. 
3

•HR 1295 IH 

Sec. 402. Amendments relating to appraisal subcommittee of FIEC, appraiser 

independence, and approved appraiser education. 

Sec. 403. Study required on improvements in appraisal process and compliance programs. 

TITLE V—REQUIREMENTS FOR MORTGAGE BROKERS 

Subtitle A—Licensing and minimum standards 

Sec. 501. State regulation of mortgage brokers. 

Sec. 502. Federal mortgage broker requirements. 

Sec. 503. Definitions. 

Subtitle B—Database of licensed mortgage brokers 

Sec. 511. Establishment. 

Sec. 512. Database. 

Sec. 513. Fees. 

Sec. 514. Confidentiality of information. 

Sec. 515. Liability provisions.

1 TITLE I—HIGHER-COST 

2 MORTGAGES 

3 SEC. 101. SHORT TITLE. 

4 This title may be cited as the ‘‘Mortgage Lending Im5 provements and Uniform National Standards Act’’. 

6 SEC. 102. DEFINITIONS RELATING TO HIGHER-COST MORT7 GAGES. 

8 (a) HIGHER-COST MORTGAGE DEFINED.—Section 

9 103(aa) of the Truth in Lending Act (15 U.S.C. 

10 1602(aa)(1)) is amended—

11 (1) by striking all that precedes paragraph (2) 

12 and inserting the following: 

13 ‘‘(aa) HIGHER-COST MORTGAGE DEFINED.—

14 ‘‘(1) IN GENERAL.—The terms ‘higher-cost 

15 mortgage’ and ‘mortgage referred to in this sub16 section’ mean a consumer credit transaction that is 
4

•HR 1295 IH 

1 secured by the consumer’s principal dwelling, other 

2 than a reverse mortgage transaction, if any of the 

3 following apply with respect to such consumer credit 

4 transaction: 

5 ‘‘(A) The transaction is secured by a first 

6 mortgage on the consumer’s principal dwelling 

7 and the annual percentage rate on the credit, at 

8 consummation of the transaction, will exceed by 

9 more than 8 percentage points the yield on 

10 Treasury securities having comparable periods 

11 of maturity on the 15th day of the month im12 mediately preceding the month in which the ap13 plication for the extension of credit is received 

14 by the creditor. 

15 ‘‘(B) The transaction is secured by a jun16 ior or subordinate mortgage on the consumer’s 

17 principal dwelling and the annual percentage 

18 rate on the credit, at consummation of the 

19 transaction, will exceed by more than 10 per20 centage points the yield on Treasury securities 

21 having comparable periods of maturity on the 

22 15th day of the month immediately preceding 

23 the month in which the application for the ex24 tension of credit is received by the creditor. 
5

•HR 1295 IH 

1 ‘‘(C) The total loan amount exceeds 

2 $40,000 and total points and fees payable on 

3 the transaction will exceed 5 percent of the 

4 total loan amount. 

5 ‘‘(D) The total loan amount is $40,000 or 

6 less and total points and fees payable on the 

7 transaction will exceed 6 percent of the total 

8 loan amount.’’; and 

9 (2) in paragraph (2)(B)(i), by striking ‘‘that’’ 

10 and inserting ‘‘than’’. 

11 (b) POINTS AND FEES DEFINED.—Section 103(aa) 

12 of the Truth in Lending Act (15 U.S.C. 1602(aa)) is 

13 amended—

14 (1) by striking paragraph (3); 

15 (2) by striking paragraph (4) and inserting the 

16 following new paragraph: 

17 ‘‘(3) POINTS AND FEES DEFINED.—

18 ‘‘(A) IN GENERAL.—For purposes of sub19 paragraphs (C) and (D) of paragraph (1), the 

20 term ‘points and fees’ includes—

21 ‘‘(i) all items included in the finance 

22 charge, except interest or the time-price 

23 differential; 
6

•HR 1295 IH 

1 ‘‘(ii) all compensation paid directly to 

2 mortgage brokers by or on behalf of the 

3 consumer (other than borrower credits); 

4 ‘‘(iii) each of the charges listed in sec5 tion 106(e), except an escrow for future 

6 payment of taxes or insurance, unless—

7 ‘‘(I) the charge is bona fide, com8 petitive, and reasonable; 

9 ‘‘(II) the creditor receives no di10 rect compensation; and 

11 ‘‘(III) the charge is paid to a 

12 third party; and 

13 ‘‘(iv) all prepayment fees or penalties 

14 on the new loan that will be incurred by 

15 the borrower if the loan refinances a pre16 vious loan currently held by the same cred17 itor or an affiliate of the creditor. 

18 ‘‘(B) EXCLUDABLE BONA FIDE DISCOUNT

19 POINTS.—Not more than 2 bona fide loan dis20 count points in connection with the loan trans21 action may be excluded from the amount of 

22 points and fees taken into account for purposes 

23 of paragraph (1).’’; and 

24 (3) by redesignating paragraph (5) as para25 graph (4). 
7

•HR 1295 IH 

1 (c) BONA FIDE DISCOUNT POINTS AND BENCHMARK

2 RATE DEFINED.—Section 103 of the Truth in Lending 

3 Act (15 U.S.C. 1602) is amended by adding at the end 

4 the following new subsection: 

5 ‘‘(cc) OTHER INTEREST RATE RELATED TERMS.—

6 ‘‘(1) BONA FIDE DISCOUNT POINTS.—The term 

7 ‘bona fide discount points’ means loan discount 

8 points that—

9 ‘‘(A) are knowingly paid by the borrower; 

10 ‘‘(B) are paid for the express purpose of 

11 lowering the interest rate; 

12 ‘‘(C) reduce the interest rate applicable to 

13 the loan from an interest rate that does not ex14 ceed the benchmark rate; and 

15 ‘‘(D) reduce the interest rate by a min16 imum of 25 basis points per discount point so 

17 long as all other terms of the loan remain the 

18 same. 

19 ‘‘(2) BENCHMARK RATE.—The term ‘bench20 mark rate’ means the interest rate that the con21 sumer can reduce by paying bona fide discount 

22 points, not to exceed the sum of—

23 ‘‘(A) the yield on Treasury securities hav24 ing comparable periods of maturity on the 15th 

25 day of the month immediately preceding the 
8

•HR 1295 IH 

1 month in which the application for the exten2 sion of credit is received by the creditor; and 

3 ‘‘(B) 4 percentage points.’’. 

4 (d) TECHNICAL AND CONFORMING AMENDMENT.—

5 Paragraph (2) of section 103(aa) of the Truth in Lending 

6 Act (15 U.S.C. 1602(aa)(2)) is amended by striking 

7 ‘‘specified in paragraph (1)(A)’’ and inserting ‘‘specified 

8 in subparagraph (A) or (B) of paragraph (1)’’. 

9 SEC. 103. AMENDMENTS TO REQUIREMENTS FOR HIGHER10 COST MORTGAGES. 

11 (a) PREPAYMENT PENALTIES.—Subsection (c) of 

12 section 129 of the Truth in Lending Act (15 U.S.C. 

13 1639(c)) is amended to read as follows: 

14 ‘‘(c) [Repealed]’’. 

15 (b) BALLOON PAYMENTS.—Section 129(e) of the 

16 Truth in Lending Act (15 U.S.C. 1639(e)) is amended—

17 (1) by striking ‘‘PAYMENTS.—A mortgage’’ and 

18 inserting ‘‘PAYMENTS.—

19 ‘‘(1) IN GENERAL.—A mortgage’’; 

20 (2) by striking ‘‘having a term of less than 5 

21 years’’; and 

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

23 paragraphs: 

24 ‘‘(2) EXCEPTION.—
9

•HR 1295 IH 

1 ‘‘(A) IN GENERAL.—Paragraph (1) shall 

2 not apply when the payment schedule is ad3 justed to account for the seasonal or irregular 

4 income of the consumer or if the purpose of the 

5 loan is a bridge loan. 

6 ‘‘(B) BRIDGE LOAN DEFINED.—For pur7 poses of this subsection, the term ‘bridge loan’ 

8 means a loan that—

9 ‘‘(i) has a period to maturity of 18 

10 months or less; and 

11 ‘‘(ii) is made in connection with the 

12 acquisition or construction of a dwelling. 

13 ‘‘(3) NOTICE REQUIRED.—A creditor that offers 

14 a higher-cost mortgage having a balloon payment 

15 term that, in accordance with paragraph (2), is not 

16 subject to paragraph (1) shall clearly disclose to the 

17 consumer that—

18 ‘‘(A) the loan contains such a term; 

19 ‘‘(B) the balloon payment amount that will 

20 be owed by the consumer on the loan maturity 

21 date will be equal to the initial principal loan 

22 amount, plus interest and costs that may be 

23 due, minus any principal payments that may 

24 have been made over the term of the loan; and 
10

•HR 1295 IH 

1 ‘‘(C) balloon payments are permissible 

2 under the circumstances described in paragraph 

3 (2).’’. 

4 (c) NEGATIVE AMORTIZATION.—Subsection (f) of 

5 section 129 of the Truth in Lending Act (15 U.S.C. 

6 1639(f)) is amended—

7 (1) by striking ‘‘AMORTIZATION.—A mortgage 

8 referred to in section 103(aa)’’ and inserting ‘‘AM9 ORTIZATION.—

10 ‘‘(1) IN GENERAL.—A higher-cost mortgage’’; 

11 and 

12 (2) by adding at the end the following new 

13 paragraph: 

14 ‘‘(2) EXCEPTION FOR PERIOD OF FORBEAR15 ANCE.—Paragraph (1) shall not apply with respect 

16 to negative amortization resulting from periods of 

17 temporary forbearance allowed by the creditor.’’. 

18 (d) FINANCING OF POINTS OR FEES.—Section 129 

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

20 by adding at the end the following new subsection: 

21 ‘‘(m) RESTRICTIONS ON FINANCING OF POINTS OR

22 FEES; DISCLOSURES REQUIRED.—

23 ‘‘(1) IN GENERAL.—No creditor may, in con24 nection with the formation or consummation of a 

25 higher-cost mortgage transaction, finance, directly or 
11

•HR 1295 IH 

1 indirectly, any portion of the points and fees applica2 ble to such mortgage that exceeds an amount equal 

3 to 5 percent of the total loan amount (or, if the total 

4 loan amount is $40,000 or less, an amount equal to 

5 6 percent of the total loan amount). 

6 ‘‘(2) DISCLOSURE.—If, in connection with the 

7 consummation of a higher-cost mortgage, any por8 tion of the points, fees, or other charges payable to 

9 the creditor or any third party are included, directly 

10 or indirectly, in the principal amount of the loan or 

11 otherwise financed by the creditor, the creditor shall 

12 disclose that fact to the consumer together with a 

13 statement that the creditor cannot require that such 

14 point, fee or charge be financed.’’. 

15 (e) PROHIBITION ON EVASIONS THROUGH STRUC16 TURING TRANSACTION OR RECIPROCAL ARRANGE17 MENTS.—Section 129 of the Truth in Lending Act (15 

18 U.S.C. 1639) is amended by inserting after subsection (n) 

19 (as added by section 104(a) of this Act) the following new 

20 subsection: 

21 ‘‘(o) PROHIBITION ON EVASIONS THROUGH STRUC22 TURING TRANSACTION OR RECIPROCAL ARRANGE23 MENTS.—

24 ‘‘(1) IN GENERAL.—No creditor, or any affiliate 

25 of a creditor, may take any action for the purpose 
12

•HR 1295 IH 

1 of, or with the intent to, circumvent or evade any re2 quirement of this title with respect to higher-cost 

3 mortgages, including—

4 ‘‘(A) entering into any reciprocal arrange5 ment; 

6 ‘‘(B) dividing any loan transaction into 

7 separate parts for the purpose of evading, and 

8 with the intent to evade, the provisions of this 

9 section; and 

10 ‘‘(C) in the case of a credit transaction 

11 that would be a higher-cost mortgage if struc12 tured as a consumer loan, structuring or re13 structuring such transaction as a business loan 

14 or other form of credit for the purpose of evad15 ing, and with the intent to evade, the provisions 

16 of this section. 

17 ‘‘(2) RULE ON NONATTRIBUTION.—If, in the 

18 case of 2 credit transactions that are consummated 

19 at the same time and are secured by the same real 

20 property, the loan-to-value ratio of 1 of such trans21 actions is 80 percent or more, the points and fees 

22 payable by the consumer at or before closing on such 

23 transaction may not be imputed or attributed to the 

24 other transaction for purposes of determining wheth-
13

•HR 1295 IH 

1 er a creditor has attempted to evade any require2 ment of this title. 

3 ‘‘(3) RECIPROCAL ARRANGEMENT DEFINED.—

4 For purposes of this subsection, the term ‘reciprocal 

5 arrangement’ means any agreement, understanding, 

6 or other arrangement under which—

7 ‘‘(A) a creditor or affiliate of a creditor 

8 agrees to engage in a transaction with, or on 

9 behalf of, another creditor, or an affiliate of 

10 such other creditor, in exchange for 

11 ‘‘(B) the agreement of the second creditor 

12 referred to in subparagraph (A), or any affiliate 

13 of such creditor, to engage in a transaction 

14 with, or on behalf of, the first creditor referred 

15 to in such subparagraph, or any affiliate of 

16 such creditor, 

17 for the purpose of evading any requirement or prohi18 bition under this title, or any other provision of any 

19 Federal law or regulation relating to higher-cost 

20 mortgages.’’. 

21 (f) NO ENCOURAGEMENT OF DEFAULT OR NON22 PAYMENT ON PRIOR EXISTING LOAN.—Section 129 of the 

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

24 inserting after subsection (o) (as added by subsection (e) 

25 of this section) the following new subsection: 
14

•HR 1295 IH 

1 ‘‘(p) NO ENCOURAGEMENT OF DEFAULT OR

2 SKIPPED PAYMENT.—No creditor may recommend or en3 courage default or nonpayment, including nonpayment of 

4 any periodic payment, on an existing loan or other debt 

5 prior to and in connection with the consummation or 

6 planned consummation of a higher-cost mortgage that re7 finances all or any portion of such existing loan or debt.’’. 

8 (g) ABILITY TO REPAY.—Subsection (h) of section 

9 129 of the Truth in Lending Act (15 U.S.C. 1639(h)) is 

10 amended to read as follows: 

11 ‘‘(h) PROHIBITION ON EXTENDING CREDIT WITH12 OUT REGARD TO PAYMENT ABILITY OF CONSUMER.—

13 ‘‘(1) IN GENERAL.—A creditor shall not extend 

14 credit to a consumer under a higher-cost mortgage 

15 based on the foreclosure value of the consumer’s 

16 principal dwelling securing the loan without regard 

17 to the consumer’s repayment ability, including the 

18 consumer’s current and expected income, current ob19 ligations, and employment. 

20 ‘‘(2) PRESUMPTION OF ABILITY.—

21 ‘‘(A) IN GENERAL.—Unless a creditor 

22 knows or has reason to know otherwise and ex23 cept as provided in paragraphs (3) and (4), a 

24 creditor may presume that a consumer is able 

25 to make the scheduled payments to repay the 
15

•HR 1295 IH 

1 higher-cost mortgage, if, at the time the exten2 sion of credit is approved—

3 ‘‘(i) the consumer’s total monthly pay4 ments due on outstanding obligations, in5 cluding amounts owed under the higher6 cost mortgage, do not exceed 50 percent of 

7 the consumer’s monthly gross income, as 

8 verified by the credit application, the con9 sumer’s financial statement, a credit re10 port, or any other reasonable means, sub11 ject to subparagraph (B); and 

12 ‘‘(ii) the consumer has sufficient re13 sidual income, as determined in accordance 

14 with regulations issued by the Board, to 

15 pay essential monthly expenses after pay16 ing the scheduled monthly payments and 

17 any additional debt. 

18 ‘‘(B) VERIFICATION OF RETIREMENT AND

19 OTHER BENEFITS.—If a consumer’s repayment 

20 ability is based substantially on fixed income 

21 (from any source, public or private, including 

22 retirement or disability benefits paid by the So23 cial Security Administration or other govern24 mental agency), the income verification required 

25 under subparagraph (A)(i) shall include reason-
16

•HR 1295 IH 

1 able documentation of such fixed income, in ad2 dition to any statement by the consumer. 

3 ‘‘(C) RULE OF CONSTRUCTION.—The ab4 sence of any means of verification described in 

5 clause (i) or (ii) of subparagraph (A) shall not 

6 be construed as creating a presumption of a 

7 violation of this subsection. 

8 ‘‘(3) PRESUMPTION NOT APPLICABLE IN CASE

9 OF BALLOON PAYMENTS.—A balloon payment or 

10 final payment on a bridge loan otherwise permissible 

11 under subsection (e) shall not be construed as a pay12 ment for purposes of paragraph (2)(A). 

13 ‘‘(4) VERIFICATION OF INCOME REQUIRED IN

14 CASE OF CONSUMER WITHOUT EARNED OR FIXED

15 INCOME.—A creditor may rely on a consumer’s 

16 statement of income for purposes of paragraph 

17 (2)(A) if—

18 ‘‘(A) the consumer verifies his or her 

19 monthly income on a signed financial statement 

20 or other documentation that shows the con21 sumer’s income and obligations before the ex22 tension of credit; and 

23 ‘‘(B) the creditor has a reasonable basis 

24 for believing that the income exists and will 

25 support repayment of the transaction.’’. 
17

•HR 1295 IH 

1 (h) PROHIBITION ON SINGLE PREMIUM CREDIT IN2 SURANCE.—Section 129 of the Truth in Lending Act (15 

3 U.S.C. 1639) is amended by inserting after subsection (p) 

4 (as added by subsection (f) of this section) the following 

5 new subsection: 

6 ‘‘(q) PROHIBITION ON SINGLE PREMIUM CREDIT IN7 SURANCE.—

8 ‘‘(1) IN GENERAL.—No consumer credit trans9 action involving a higher-cost mortgage may include 

10 the offer or sale of any credit insurance policy, or 

11 any analogous product whether deemed to be insur12 ance, including any debt cancellation or suspension 

13 agreement or contract, on a single premium basis. 

14 ‘‘(2) COLLECTION OF MONTHLY PREMIUMS NOT

15 AFFECTED.—The prohibition in paragraph (1) shall 

16 not be construed as affecting the right of a creditor 

17 to collect premium payments on credit insurance or 

18 any analogous products that are calculated and paid 

19 on a regular monthly basis. 

20 ‘‘(3) CREDIT INSURANCE DEFINED.—For pur21 poses of this subsection, the term ‘credit insurance’ 

22 means a policy of insurance that insures, guarantees 

23 or indemnifies the creditor, as the primary bene24 ficiary, for the repayment of the outstanding balance 

25 of the loan against death, illness, accident, disability, 
18

•HR 1295 IH 

1 loss of property, or unemployment of the con2 sumer.’’. 

3 (i) LIMITATIONS ON REFINANCING.—Section 129 of 

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

5 by inserting after subsection (q) (as added by subsection 

6 (h) of this section) the following new subsection: 

7 ‘‘(r) LIMITATIONS ON REFINANCING.—

8 ‘‘(1) IN GENERAL.—No creditor shall knowingly 

9 or intentionally engage in the unfair act or practice 

10 of loan flipping. 

11 ‘‘(2) SAFE HARBOR.—A higher-cost mortgage 

12 shall be presumed to provide a reasonable tangible 

13 benefit to the consumer if any 1 of the following fac14 tors applies to the new loan: 

15 ‘‘(A) The purpose of the higher-cost mort16 gage is to finance a personal investment or a 

17 purchase or acquisition of real property that is 

18 not the principal dwelling of the consumer. 

19 ‘‘(B) The interest rate on the new fixed20 rate higher-cost mortgage is lower than the in21 terest rate on the fixed-rate refinanced loan and 

22 it will take 4 years or less for the consumer to 

23 recoup the costs of the points and fees, and 

24 other closing costs that are required to be paid 

25 by the consumer on the new higher-cost mort-
19

•HR 1295 IH 

1 gage through savings resulting from the lower 

2 interest rate. 

3 ‘‘(C) The creditor makes a good-faith de4 termination that the consumer’s monthly pay5 ment to pay the higher-cost mortgage is a min6 imum of 15 percent less than the total of all 

7 minimum monthly payments on the obligations 

8 being financed, based on a consumer credit re9 port or other reasonable documentation utilized 

10 by the creditor. 

11 ‘‘(D) Any cash proceeds paid either to the 

12 consumer, or on behalf of the consumer, above 

13 the payoff of the refinanced loan are in excess 

14 of twice the amount of total points and fees and 

15 closing costs that are required to be paid by the 

16 consumer. 

17 ‘‘(E) The refinanced loan is changed from 

18 a loan that is not a fixed-rate fully-amortizing 

19 loan to a fixed-rate fully-amortizing loan. 

20 ‘‘(F) The terms of repayment of the refi21 nanced loan are changed from a longer full am22 ortization term to a shorter full amortization 

23 term by at least 5 years. 

24 ‘‘(G) The consumer presents a certificate, 

25 dated not more than 90 days prior to the date 
20

•HR 1295 IH 

1 of the application for the new higher-cost mort2 gage, from an independent housing or credit 

3 counselor approved by the United States De4 partment of Housing and Urban Development, 

5 or by any State regulatory agency, which states 

6 that the consumer has received counseling with 

7 regard to refinancing the existing loan. 

8 ‘‘(H) The consumer provides the creditor 

9 with a written, signed statement not prepared 

10 by the creditor, at or before the consummation 

11 of the new higher-cost mortgage, that the new 

12 loan is needed to meet a bona fide personal or 

13 family financial, health or medical emergency, 

14 or to avoid a filed foreclosure action. 

15 ‘‘(I) The refinancing is necessary under, or 

16 in response to, any order or judgment of a 

17 court of competent jurisdiction. 

18 ‘‘(3) SPECIAL MORTGAGES.—

19 ‘‘(A) IN GENERAL.—A higher-cost mort20 gage may not be used to refinance an existing 

21 loan if—

22 ‘‘(i) it is apparent on the face of the 

23 security instrument for the existing loan 

24 that it is a special mortgage; and 
21

•HR 1295 IH 

1 ‘‘(ii) as a result of the refinancing, the 

2 consumer would lose 1 or more of the ben3 efits of the special mortgage. 

4 ‘‘(B) EXCEPTION UNDER CERTAIN CIR5 CUMSTANCES.—The restriction in subparagraph 

6 (A) shall not apply if—

7 ‘‘(i) the holder of the special mortgage 

8 being refinanced consents in writing to the 

9 new higher-cost mortgage; and 

10 ‘‘(ii) a credit counselor referred to in 

11 paragraph (2)(G) certifies in writing that 

12 the consumer has obtained counseling on 

13 the advantages and disadvantages of the 

14 new loan. 

15 ‘‘(4) DEFINITIONS.—For purposes of this sub16 section, the following definitions shall apply: 

17 ‘‘(A) LOAN FLIPPING.—

18 ‘‘(i) IN GENERAL.—The term ‘loan 

19 flipping’ means an extension of credit by a 

20 creditor to a consumer for a higher-cost 

21 mortgage that—

22 ‘‘(I) refinances an existing home 

23 loan that was consummated within the 

24 prior 24 months; and 
22

•HR 1295 IH 

1 ‘‘(II) does not have a reasonable 

2 tangible benefit to the consumer con3 sidering all material circumstances 

4 known to the creditor. 

5 ‘‘(ii) DETERMINATION OF REASON6 ABLE TANGIBLE BENEFIT.—In instances 

7 where one of the safe harbor provisions 

8 contained in subsection (r) is inapplicable, 

9 the factors to be considered may include 

10 the terms and conditions of both the new 

11 and refinanced loan, the consumer’s known 

12 economic and non-economic circumstances, 

13 the purpose of the loan, and the cost of the 

14 new loan. 

15 ‘‘(B) SPECIAL MORTGAGE.—The term ‘spe16 cial mortgage’ means a consumer credit trans17 action that is originated, subsidized, or guaran18 teed by or through a Federal, State, tribal, or 

19 local government, government-sponsored enter20 prise (as defined in section 1404(e) of Financial 

21 Institutions Reform, Recovery, and Enforce22 ment Act of 1989), or nonprofit organization 

23 (other than a mutual bank, mutual savings as24 sociation, or credit union) that either—
23

•HR 1295 IH 

1 ‘‘(i) bears, by at least 2 percentage 

2 points, a below-market interest rate as of 

3 the date of its consummation; or 

4 ‘‘(ii) has non-standard payment terms 

5 beneficial to the consumer, such as pay6 ments that vary with income or are limited 

7 to a percentage of income, or terms that 

8 permit the consumer to make no payments 

9 under specified conditions. 

10 ‘‘(5) RULE OF CONSTRUCTION.—No negative 

11 inference may be drawn from the absence of any fac12 tor or circumstance described in any subparagraph 

13 of paragraph (2) with regard to any higher-cost 

14 mortgage so as to create a presumption of a viola15 tion of this subsection with regard to such mortgage 

16 by reason of such absence. 

17 ‘‘(6) LIMITATION ON LEGAL FEES.—Notwith18 standing section 130 or any other provision of law, 

19 in any successful action instituted by a person for a 

20 violation of paragraph (1), the person shall not be 

21 entitled to recover the costs of the action and attor22 ney’s fees if the court determines, in the court’s dis23 cretion, that a reasonable offer to remedy the viola24 tion and compensate the person for the violation was 

25 made to such person and the offer was rejected.’’. 
24

•HR 1295 IH 

1 (j) REQUIREMENTS RELATING TO HOME IMPROVE2 MENT CONTRACTS.—Section 129(i) of the Truth in Lend3 ing Act (15 U.S.C. 1639(i)) is amended—

4 (1) by redesignating paragraphs (1) and (2) as 

5 subparagraphs (A) and (B), respectively, and mov6 ing the left margin of each such subparagraph (as 

7 so redesignated) 2 ems to the right; 

8 (2) by striking ‘‘IMPROVEMENT CONTRACTS.—

9 A creditor shall not’’ and inserting ‘‘IMPROVEMENT

10 CONTRACTS.— 

11 ‘‘(1) IN GENERAL.—A creditor shall not’’; and 

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

13 paragraph: 

14 ‘‘(2) NO PAYMENT IN FULL WITHOUT PROOF

15 OF COMPLETION OF THE WORK.—

16 ‘‘(A) IN GENERAL.—No creditor may use 

17 the proceeds of a higher-cost mortgage to make 

18 a final payment or payment in full to a home 

19 improvement contractor under a home improve20 ment contract without proof of completion in 

21 accordance with subparagraph (B). 

22 ‘‘(B) PROOF OF COMPLETION.—

23 ‘‘(i) COMPLETION CERTIFICATE

24 UNDER STATE LAW.—A completion certifi25 cate, completed in compliance with applica-
25

•HR 1295 IH 

1 ble State law, stating that the contractor 

2 has fully performed the contract obliga3 tions, shall be deemed proof of completion 

4 of such obligations for purposes of this 

5 subsection. 

6 ‘‘(ii) LACK OF AVAILABILITY OF CER7 TIFICATE UNDER STATE LAW.—If applica8 ble State law does not provide for or recog9 nize completion certificates for home im10 provement contractors, a signed statement 

11 by both the consumer who entered into the 

12 higher-cost mortgage and the home im13 provement contractor referred to in sub14 paragraph (A) that the contractor has fully 

15 performed the contract shall constitute 

16 proof of completion of such obligation for 

17 purposes of this subsection. 

18 ‘‘(C) INSPECTION.—No creditor may use 

19 the proceeds of a higher-cost mortgage to make 

20 a final payment or payment in full to a home 

21 improvement contractor under a home improve22 ment contract without first arranging and pay23 ing for an independent inspection of any home 

24 improvements exceeding $10,000 to verify that 

25 the work has been completed. 
26

•HR 1295 IH 

1 ‘‘(D) DISCLOSURE.—Before making a final 

2 payment to a home improvement contractor, the 

3 creditor shall provide the following written dis4 closure to the consumer: ‘You will be asked, 

5 when the job is completed, to sign a statement 

6 confirming the work has been completed be7 cause the lender may not make a final payment 

8 or payment in full to the home improvement 

9 contractor without such a statement signed by 

10 both the contractor and you. If the work has 

11 not been completed according to the terms of 

12 your work agreement, do not sign the statement 

13 and notify the lender immediately. If the im14 provements you are financing exceed $10,000, 

15 the lender is required by law to arrange for an 

16 inspection of the job. The purpose of the in17 spection is to ensure that the job has been com18 pleted according to the terms of the contract, 

19 and it is not a warranty or guarantee of the 

20 overall quality of the work. If you would like a 

21 more detailed inspection of the contractor’s 

22 work, you may want to arrange for an addi23 tional inspection on your own.’.’’. 

24 (k) ADDITIONAL SPECIFIC DISCLOSURES.—Section 

25 129(a)(1) of the Truth in Lending Act (15 U.S.C. 
27

•HR 1295 IH 

1 1639(a)(1)) is amended by adding at the end the following 

2 new subparagraphs: 

3 ‘‘(C) ‘The interest rate and the amount of 

4 fees you pay on this loan are higher than you 

5 would pay for a conventional or ‘‘prime’’ rate 

6 loan. As a result, your monthly interest pay7 ments are higher than those on a comparable 

8 loan with a lower interest rate.’. 

9 ‘‘(D) ‘The rate of interest and the amount 

10 of fees you pay on a loan may vary depending 

11 on which lender or broker you select. You may 

12 be able to get a loan with a lower interest rate. 

13 Your credit score can provide an indication of 

14 whether you may qualify for a lower-cost prime 

15 loan. If you have a relatively good credit score, 

16 such as a FICO score in excess of 660, you 

17 may qualify for a ‘‘prime’’ loan. In that event, 

18 you should consider shopping more for a lower19 cost loan instead of simply accepting the high20 er-cost loan that has been offered to you.’. 

21 ‘‘(E) ‘If you are taking out this loan to 

22 repay other loans, look to see how many months 

23 it will take to pay for this loan and what the 

24 total amount is that you will have to pay before 

25 this loan is repaid. Even though the total 
28

•HR 1295 IH 

1 amount you will have to pay each month for 

2 this loan may be less than the total amount you 

3 are paying each month for those other loans, 

4 you may have to pay on this loan for a longer 

5 period than those other loans, and that may 

6 cost you more overall.’. 

7 ‘‘(F) ‘You may get into serious financial 

8 difficulties if you use this loan to pay off old 

9 debts and then replace them with other new 

10 debts.’.’’. 

11 (l) NO CALL PROVISION.—Section 129 of the Truth 

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

13 after subsection (r) (as added by subsection (i) of this sec14 tion) the following new subsection: 

15 ‘‘(s) NO CALL PROVISION.—

16 ‘‘(1) IN GENERAL.—A higher-cost mortgage 

17 may not include terms under which the indebtedness 

18 may be accelerated by the creditor, in the creditor’s 

19 sole discretion. 

20 ‘‘(2) EXCEPTIONS.—Paragraph (1) shall not 

21 apply if the repayment of the higher-cost mortgage 

22 has been accelerated—

23 ‘‘(A) by default or pursuant to a due-on24 sale provision or some other provision of the 
29

•HR 1295 IH 

1 loan documents unrelated to the payment 

2 schedule; or 

3 ‘‘(B) due to any action or omission by the 

4 consumer that adversely affects the creditor’s 

5 security interest in the dwelling or any rights of 

6 the creditor in such security.’’. 

7 (m) MODIFICATION AND DEFERRAL FEES PROHIB8 ITED.—Section 129 of the Truth in Lending Act (15 

9 U.S.C. 1639) is amended by inserting after subsection (s) 

10 (as added by subsection (l) of this section) the following 

11 new subsection: 

12 ‘‘(t) MODIFICATION AND DEFERRAL FEES PROHIB13 ITED.—

14 ‘‘(1) IN GENERAL.—A creditor may not charge 

15 a consumer any fee in excess of the lesser of the 

16 amount of 1 monthly loan payment on the existing 

17 higher-cost mortgage or $300.00 to modify, renew, 

18 extend, or amend a higher-cost mortgage, or to defer 

19 any payment due under the terms of such mortgage. 

20 ‘‘(2) EXCEPTION FOR CERTAIN WORKOUTS.—

21 The restrictions in paragraph (1) shall not apply in 

22 the case of an existing higher-cost mortgage that is 

23 in default or more than 60 days delinquent, if the 

24 modification, renewal, extension, or amendment is 
30

•HR 1295 IH 

1 part of the resolution or workout of the default or 

2 delinquency.’’. 

3 (n) INCREASED INTEREST RATE UPON DEFAULT

4 PROHIBITED.—Section 129 of the Truth in Lending Act 

5 (15 U.S.C. 1639) is amended by inserting after subsection 

6 (t) (as added by subsection (m) of this section) the fol7 lowing new subsection: 

8 ‘‘(u) INCREASED INTEREST RATE UPON DEFAULT

9 PERMITTED FOR VARIABLE-RATE HIGHER-COST MORT10 GAGE.—In the case of a higher-cost mortgage that is sub11 ject to a variable rate of interest, subsection (d) shall not 

12 apply to changes in the rate of interest due to any change 

13 in the index rate, to the extent the change of interest is 

14 not due in any part to a default by the consumer or a 

15 permissible acceleration by the creditor.’’. 

16 (o) PREPAYMENT OF PERIODIC PAYMENTS FROM

17 PROCEEDS PROHIBITED.—Subsection (g) of section 129 

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

19 to read as follows: 

20 ‘‘(g) PREPAYMENT OF PERIODIC PAYMENTS FROM

21 PROCEEDS PROHIBITED.—No higher-cost mortgage may 

22 include terms under which more than 2 scheduled pay23 ments of interest or principal due under such mortgage 

24 may be paid in advance or otherwise deducted from the 

25 proceeds of the loan.’’. 
31

•HR 1295 IH 

1 (p) PAYOFF STATEMENTS.—Section 129 of the 

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

3 inserting after subsection (u) (as added by subsection (n) 

4 of this section) the following new subsection: 

5 ‘‘(v) PAYOFF STATEMENTS.—

6 ‘‘(1) FEES.—

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

8 subparagraphs (B) and (C), no creditor or 

9 servicer may charge a fee for informing or 

10 transmitting to any person the balance due to 

11 pay off the outstanding balance on a higher12 cost mortgage. 

13 ‘‘(B) TRANSACTION FEE.—When payoff in14 formation referred to in subparagraph (A) is 

15 provided by facsimile transmission or by a cou16 rier service, a creditor or servicer may charge a 

17 processing fee not to exceed an amount that is 

18 comparable to fees imposed for similar services 

19 provided in connection with consumer credit 

20 transactions that are secured by the consumer’s 

21 principal dwelling and that are not higher-cost 

22 mortgages. 

23 ‘‘(C) MULTIPLE REQUESTS.—A creditor or 

24 servicer shall not charge any fee for the first 2 

25 payoff requests in any continuous 6-month pe-
32

•HR 1295 IH 

1 riod. A creditor or servicer may charge a rea2 sonable fee for each additional request during 

3 any such period. 

4 ‘‘(2) PROMPT DELIVERY.—A creditor or 

5 servicer shall send a payoff balance within 7 busi6 ness days of receipt of a written request for such 

7 balance.’’. 

8 (q) CREDIT REPORTING REQUIREMENTS.—Section 

9 129 of the Truth in Lending Act (15 U.S.C. 1639) is 

10 amended by inserting after subsection (v) (as added by 

11 subsection (p) of this section) the following new sub12 section: 

13 ‘‘(w) DUTY TO REPORT.—

14 ‘‘(1) IN GENERAL.—Each creditor who enters 

15 into a higher-cost mortgage, and each successor, as16 signee or servicer to such creditor with respect to 

17 such mortgage shall report monthly the complete 

18 payment history, favorable and unfavorable, of the 

19 obligor with respect to such transaction to a con20 sumer reporting agency that compiles and maintains 

21 files on consumers on a nationwide basis, while such 

22 transaction is in effect. 

23 ‘‘(2) EXCEPTION FOR SHORT-TERM HOLD24 ERS.—Paragraph (1) shall not apply to any person 
33

•HR 1295 IH 

1 who holds a higher-cost mortgage for less than 90 

2 days. 

3 ‘‘(3) EXCEPTION FOR CERTAIN CIR4 CUMSTANCES.—Paragraph (1) shall not apply in 

5 connection with a loan forbearance or workout of a 

6 loan in default or the settlement of a dispute or con7 sumer complaint.’’. 

8 (r) STEERING PROHIBITED.—Section 129 of the 

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

10 inserting after (w) (as added by subsection (q) of this sec11 tion) the following new subsection: 

12 ‘‘(x) STEERING PROHIBITED.—

13 ‘‘(1) CREDITORS.—

14 ‘‘(A) IN GENERAL.—A creditor who origi15 nates a higher-cost mortgage shall not know16 ingly or intentionally steer or direct a consumer 

17 into a loan product offered by the creditor that 

18 is not based upon the creditor’s best credit 

19 grade that the consumer would qualify for 

20 under the creditor’s then-current underwriting 

21 guidelines. 

22 ‘‘(B) NOTICE OF CREDIT SCORE.—A cred23 itor who originates a higher-cost mortgage 

24 shall, within 3 business days of the later of—
34

•HR 1295 IH 

1 ‘‘(i) the receipt of an application for 

2 such higher-cost mortgage loan; or 

3 ‘‘(ii) the making of a determination 

4 that the consumer only qualifies for a 

5 higher-cost mortgage, 

6 notify the consumer in writing of the con7 sumer’s credit score. 

8 ‘‘(C) RESCISSION OR REFORMATION.—

9 ‘‘(i) IN GENERAL.—A creditor found 

10 by a preponderance of the evidence to have 

11 violated subparagraph (A) shall, if the 

12 creditor is the holder of the obligation, at 

13 the consumer’s option—

14 ‘‘(I) rescind the loan as provided 

15 for in section 125; or 

16 ‘‘(II) rewrite the loan into a loan 

17 product at the credit grade that the 

18 consumer would have originally quali19 fied for but for the violation. 

20 ‘‘(ii) RESTITUTION.—In addition to 

21 the action required under clause (i) with 

22 respect to a creditor, or in the case of a 

23 creditor who is not the holder of the obli24 gation and has been found by a preponder25 ance of the evidence to have violated sub-
35

•HR 1295 IH 

1 paragraph (A), such creditor shall make 

2 appropriate restitution to the consumer of 

3 all fees, interest, or other charges paid by 

4 the consumer above those that would have 

5 been paid had the loan not been originated 

6 at the less favorable credit grade. 

7 ‘‘(D) SAFE HARBOR.—A creditor shall not 

8 be presumed to have violated subparagraph (A) 

9 if—

10 ‘‘(i) the creditor had a reasonable 

11 basis to believe that the credit grade deter12 mined by the creditor’s then-current un13 derwriting guidelines applied to a con14 sumer was appropriate, based on the infor15 mation available to that creditor, including 

16 the information provided by the consumer; 

17 or 

18 ‘‘(ii) the consumer voluntarily, on an 

19 informed basis, agreed to a loan with a 

20 higher rate than that for which the con21 sumer would otherwise qualify. 

22 ‘‘(2) BROKERS.—

23 ‘‘(A) IN GENERAL.—A broker who is not a 

24 creditor shall not knowingly or intentionally 

25 steer or direct any prospective consumer to ac-
36

•HR 1295 IH 

1 cept a loan product offered by a creditor that 

2 is less favorable than the loan products offered 

3 by the creditors with whom the broker regularly 

4 does business and for which the consumer 

5 would qualify for under such creditors’ best 

6 credit grade based on such creditors’ then-cur7 rent underwriting guidelines. 

8 ‘‘(B) SAFE HARBOR.—A broker shall not 

9 be presumed to have violated subparagraph (A) 

10 if—

11 ‘‘(i) the broker had a reasonable basis 

12 to believe that the credit grade applied to 

13 a consumer was appropriate, based on the 

14 information available to that broker, in15 cluding the information provided by the 

16 consumer; or 

17 ‘‘(ii) the consumer voluntarily, on an 

18 informed basis, agreed to a loan with a 

19 higher rate than that for which the con20 sumer would otherwise qualify. 

21 ‘‘(C) PENALTY.—A broker who knowingly 

22 or intentionally violates this section shall be lia23 ble to the consumer for an amount equal to the 

24 sum of $4,000 and the consumer’s actual finan-
37

•HR 1295 IH 

1 cial damages and reasonable attorney’s fees and 

2 court costs.’’. 

3 (s) REGULATIONS FOR DISCLOSURES.—Section 

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

5 is amended by adding at the end the following new para6 graph: 

7 ‘‘(3) REDEFINITION.—The Board may amend 

8 the definition and determination of what constitutes 

9 a prime loan for purposes of the disclosure require10 ments contained in subsection (a)(1).’’. 

11 SEC. 104. AMENDMENTS RELATING TO DISPUTE AND 

12 ERROR RESOLUTION. 

13 (a) PROHIBITION ON ARBITRATION REQUIRE14 MENTS.—Section 129 of the Truth in Lending Act (15 

15 U.S.C. 1639) is amended by inserting after subsection (m) 

16 (as added by subsection (d) of section 103) the following 

17 new subsection: 

18 ‘‘(n) ARBITRATION.—

19 ‘‘(1) IN GENERAL.—A higher-cost mortgage 

20 may not include terms that require arbitration or 

21 any other nonjudicial procedure as the method for 

22 resolving any controversy or settling any claim aris23 ing out of the transaction. 

24 ‘‘(2) POST-CONTROVERSY VOLUNTARY AGREE25 MENTS.—
38

•HR 1295 IH 

1 ‘‘(A) IN GENERAL.—Subject to paragraph 

2 (3), paragraph (1) shall not be construed as 

3 limiting the right of the consumer and the cred4 itor to agree voluntarily to arbitration or any 

5 other nonjudicial procedure as the method for 

6 resolving any controversy at any time after a 

7 dispute or claim under the transaction arises. 

8 ‘‘(B) REQUIREMENTS FOR POST-CON9 TROVERSY AGREEMENTS.—Post-controversy 

10 voluntary agreements shall—

11 ‘‘(i) establish the venue for the arbi12 tration in the Federal judicial district or 

13 division in which the real property that is 

14 the security for the higher-cost mortgage is 

15 located; 

16 ‘‘(ii) comply with the standards set 

17 forth by a nationally recognized arbitration 

18 organization, such as the Statement of 

19 Principles of the National Consumer Dis20 pute Advisory Committee of the American 

21 Arbitration Association or any comparable 

22 standards of such other organization as 

23 may be approved by the Board; and 

24 ‘‘(iii) require the creditor to bear the 

25 reasonable costs of all parties to the arbi-
39

•HR 1295 IH 

1 tration, including the production of fact 

2 witnesses and documents, during at least 

3 the first 2 days of such arbitration. 

4 ‘‘(3) NO WAIVER OF STATUTORY CAUSE OF AC5 TION.—No provision of any higher-cost mortgage or 

6 any voluntary agreement between the consumer and 

7 the creditor shall be applied or interpreted so as to 

8 bar a consumer from bringing an action in an appro9 priate district court of the United States, or any 

10 other court of competent jurisdiction, pursuant to 

11 section 130 or any other provision of law, for dam12 ages or other relief in connection with any alleged 

13 violation of this section, any other provision of this 

14 title, or any other Federal law.’’. 

15 (b) CORRECTION OF ERRORS.—Subsection (b) of sec16 tion 130 of the Truth in Lending Act (15 U.S.C. 1640(b)) 

17 is amended to read as follows: 

18 ‘‘(b) CORRECTION OF ERRORS.—

19 ‘‘(1) IN GENERAL.—A creditor or assignee shall 

20 have no liability under this section or section 108 or 

21 section 112 for any failure to comply with any re22 quirement imposed under this chapter or chapter 5, 

23 if—

24 ‘‘(A) before the end of the 45-day period 

25 beginning on the date of consummation of a 
40

•HR 1295 IH 

1 loan, the creditor or assignee notifies the con2 sumer of the error and makes appropriate res3 titution to the consumer of any amounts col4 lected in error, and takes the necessary action 

5 to make all appropriate adjustments to the 

6 credit transaction to correct the error, includ7 ing, if applicable, that the consumer will not be 

8 required to pay an amount in excess of the 

9 charge actually disclosed, or the dollar equiva10 lent of the annual percentage rate actually dis11 closed, whichever is less; or 

12 ‘‘(B) before the end of the 60-day period 

13 beginning on the date an error is discovered, 

14 whether pursuant to a final examination report 

15 or notice issued under section 108(e) of this 

16 title, or through the creditor’s or assignee’s own 

17 procedures, or receipt of written notice from the 

18 consumer or service upon the creditor or as19 signee of the institution of an action, the cred20 itor or assignee notifies the consumer of the 

21 error, makes appropriate restitution to the con22 sumer of any amounts collected in error, takes 

23 the necessary action to make all appropriate ad24 justments to the credit transaction to correct 

25 the error, including, if applicable, that the con-
41

•HR 1295 IH 

1 sumer will not be required to pay an amount in 

2 excess of the charge actually disclosed, or the 

3 dollar equivalent of the annual percentage rate 

4 actually disclosed, whichever is less, pays the 

5 consumer an error penalty of $2,000 and the 

6 consumer’s reasonable attorney’s fees, if any, 

7 except that no error penalty or attorney’s fees 

8 shall be assessed if the creditor or assignee dis9 covers the error through the creditor’s or as10 signee’s own procedures. 

11 ‘‘(2) MODIFICATION OF TERMS.—In the case of 

12 a higher-cost mortgage, appropriate restitution for 

13 purposes of paragraph (1) above may also include a 

14 creditor modifying the terms of the credit trans15 action in such a way that the transaction is no 

16 longer a higher-cost mortgage within the meaning of 

17 this title. 

18 ‘‘(3) CONSUMER REMEDY.—If a creditor or as19 signee fails to correct the error as provided for above 

20 in paragraph (1), the consumer may file an action 

21 or proceed with an action already filed. 

22 ‘‘(4) EFFECTIVE DATE OF DOCUMENT REVI23 SIONS.—Any document revisions necessitated by and 

24 made consistent with the procedures set forth above 

25 in subparagraph (A) or (B) of paragraph (1) shall 
42

•HR 1295 IH 

1 be deemed legally effective for all purposes as of the 

2 original date of the document that was revised.’’. 

3 (c) CLARIFICATION RELATING TO STATE-REGU4 LATED TRANSACTIONS.—Section 123 of the Truth in 

5 Lending Act (15 U.S.C. 1633) is amended by striking 

6 ‘‘The Board’’and inserting ‘‘Except with respect to higher7 cost mortgages, the Board’’. 

8 SEC. 105. AMENDMENTS TO DAMAGES, RESCISSION AND LI9 ABILITY PROVISIONS. 

10 (a) INCREASE IN AMOUNT OF CIVIL MONEY PEN11 ALTIES FOR CERTAIN VIOLATIONS.—Section 130(a) of 

12 the Truth in Lending Act (15 U.S.C. 1640(a)) is amend13 ed—

14 (1) in paragraph (2)(A)(iii), by striking 

15 ‘‘$2,000’’ and inserting ‘‘$4,000’’; and 

16 (2) in paragraph (2)(B), by striking 

17 ‘‘$500,000’’ and inserting ‘‘$1,000,000’’. 

18 (b) COORDINATION OF CLASS-ACTION DAMAGES

19 WITH ACTUAL DAMAGES.—Section 130 of the Truth in 

20 Lending Act (15 U.S.C. 1640) is amended by adding at 

21 the end the following new subsection: 

22 ‘‘(j) CLASS ACTIONS RELATING TO HIGHER-COST

23 MORTGAGES.—

24 ‘‘(1) COORDINATION OF CLASS-ACTION DAM25 AGES WITH ACTUAL DAMAGES.—The maximum 
43

•HR 1295 IH 

1 amount of general damages that may otherwise be 

2 imposed on any person under subsection (a)(2)(B) 

3 for violations of section 129 in a class action shall 

4 be reduced by the aggregate amount of actual dam5 ages for which such person is liable to members of 

6 the class under subsection (a)(1). 

7 ‘‘(2) PATTERN AND PRACTICE.—In determining 

8 the amount of any liability of any person under sub9 section (a)(2)(B) for violations of section 129 in a 

10 class action, the court shall consider the pattern and 

11 practices of the person giving rise to the violations, 

12 and whether or not such pattern and practices were 

13 willful.’’. 

14 (c) AMENDMENTS RELATING TO TIMING OF WAIVER

15 BY CONSUMER OF RIGHT OF RESCISSION.—Section 

16 125(a) of the Truth in Lending Act (15 U.S.C. 1635(a)) 

17 is amended—

18 (1) by striking ‘‘(a) Except as otherwise pro19 vided’’ and inserting ‘‘(a) RIGHT ESTABLISHED.— 

20 ‘‘(1) IN GENERAL.—Except as otherwise pro21 vided’’; and 

22 (2) by adding at the end the following new 

23 paragraph: 

24 ‘‘(2) TIMING OF ELECTION OF WAIVER BY CON25 SUMER.—No election by a consumer to waive the 
44

•HR 1295 IH 

1 right established under paragraph (1) to rescind a 

2 transaction shall be effective if—

3 ‘‘(A) the waiver was required by the cred4 itor as a condition for the transaction; or 

5 ‘‘(B) the creditor advised or encouraged 

6 the consumer to waive such right of the con7 sumer.’’. 

8 (d) STATUTE OF LIMITATIONS EXTENDED FOR SEC9 TION 129 VIOLATIONS.—Section 130(e) of the Truth in 

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

11 (1) in the 1st sentence, by striking ‘‘Any ac12 tion’’ and inserting ‘‘Except as provided in the sub13 sequent sentence, any action’’; 

14 (2) by inserting after the first sentence the fol15 lowing new sentence: ‘‘Any action under this section 

16 with respect to any violation of section 129 (other 

17 than subsection (x) of such section) may be brought 

18 in any United States district court, or in any other 

19 court of competent jurisdiction, before the end of the 

20 2-year period beginning on the date of the occur21 rence of the violation, unless a shorter time period 

22 is herein provided.’’; and 

23 (3) by inserting ‘‘and except that this sentence 

24 shall not apply to a violation of section 129(x)’’ be25 fore the period at the end of the 3rd sentence (as 
45

•HR 1295 IH 

1 determined taking into account the amendment 

2 made by paragraph (2) of this subsection). 

3 (e) AMENDMENTS RELATING TO LIABILITY OF AS4 SIGNEES.—

5 (1) IN GENERAL.—Paragraph (4) of section 

6 131(d) of the Truth in Lending Act (15 U.S.C. 

7 1641(d)) is amended by striking ‘‘mortgage referred 

8 to in section 103(aa)’’ and inserting ‘‘higher-cost 

9 mortgage’’. 

10 (2) RIGHTS UPON ASSIGNMENT OF HIGHER11 COST MORTGAGES.—Section 131(d) of the Truth in 

12 Lending Act (15 U.S.C. 1641(d)) is amended—

13 (A) by redesignating paragraphs (3) and 

14 (4) as paragraphs (4) and (5), respectively; and 

15 (B) by striking paragraphs (1) and (2) and 

16 inserting the following new paragraphs: 

17 ‘‘(1) CLAIMS AND DEFENSES.—

18 ‘‘(A) IN GENERAL.—Any person who pur19 chases or is otherwise assigned a higher-cost 

20 mortgage shall be subject to all claims and de21 fenses with respect to that mortgage that the 

22 consumer could assert against the creditor of 

23 the mortgage either— 

24 ‘‘(i) as a defense to the enforcement 

25 of such mortgage by the purchaser or as-
46

•HR 1295 IH 

1 signee based on a default by the consumer 

2 if such default is reasonably related to a 

3 violation of this section by the creditor, un4 less the consumer demonstrates that the 

5 purchaser or assignee had actual knowl6 edge of or exhibited reckless indifference to 

7 a violation in which case the consumer may 

8 raise any defensive claim without regard to 

9 whether such violation is related to the 

10 consumer’s default; or 

11 ‘‘(ii) as an affirmative claim, unless 

12 the purchaser or assignee demonstrates, by 

13 a preponderance of the evidence, that a 

14 reasonable person exercising ordinary due 

15 diligence could not determine with reason16 able certainty based on information con17 tained in the documentation required by 

18 this title, the itemization of the amount fi19 nanced, and other disclosure of disburse20 ments that a violation had occurred. 

21 ‘‘(B) CLARIFICATION OF RIGHTS OF CON22 SUMER.—Subparagraph (A) may not be con23 strued as affecting any rights of a consumer 

24 under subsection (a), (b), or (c) of this section 

25 or any other provision of this title. 
47

•HR 1295 IH 

1 ‘‘(C) EXCLUSION.—This section shall not 

2 apply if a purchaser or assignee has exercised 

3 such due diligence by demonstrating that such 

4 purchaser or assignee— 

5 ‘‘(i) has in place at the time of the 

6 purchase or assignment of the loans, poli7 cies that expressly prohibit the purchase or 

8 acceptance of assignment, by such pur9 chaser or assignee, of either any higher10 cost mortgage at all or any higher-cost 

11 mortgage containing such violations; 

12 ‘‘(ii) requires, by the applicable pur13 chase contract, that a seller or assignor of 

14 such loans to the purchaser or assignee 

15 represents and warrants to the purchaser 

16 or assignee as of the applicable sale date 

17 that either— 

18 ‘‘(I) the seller or assignor will not 

19 sell or assign to the purchaser or as20 signee either any higher-cost mort21 gage at all or any higher-cost mort22 gage containing such violations; or 

23 ‘‘(II) the seller or assignor is a 

24 beneficiary of a representation and 

25 warranty from a previous seller or as-
48

•HR 1295 IH 

1 signor to that effect, and, as a result 

2 of its purchase of the loans, the pur3 chaser or assignee is a beneficiary of 

4 such representation and warranty; 

5 and 

6 ‘‘(iii) exercises reasonable due dili7 gence at or before the time of the purchase 

8 or assignment of home loans, or within a 

9 reasonable period of time after the pur10 chase or assignment of such home loans, 

11 that is intended by the purchaser or as12 signee to prevent the purchaser or assignee 

13 from purchasing or taking assignment of 

14 either any higher-cost mortgages at all or 

15 any higher-cost mortgages containing such 

16 violations. 

17 ‘‘(D) REASONABLE DUE DILIGENCE.—The 

18 reasonable due diligence requirement referred to 

19 in subparagraph (C)(iii) may be met by employ20 ing a statistically significant sampling method21 ology and shall not require loan-by-loan review, 

22 for purposes of this subsection. 

23 ‘‘(2) LIMITATION ON RELIEF.—

24 ‘‘(A) IN GENERAL.—Notwithstanding any 

25 other provision of law, relief provided as a re-
49

•HR 1295 IH 

1 sult of any action made permissible by para2 graph (1) may not exceed the greater of—

3 ‘‘(i) with respect to actions based 

4 upon a violation of this title, the amount 

5 specified in section 130; or 

6 ‘‘(ii) with respect to other actions, as 

7 specified in paragraph (1)(A)(i), the sum 

8 of—

9 ‘‘(I) the amount of all remaining 

10 indebtedness; and 

11 ‘‘(II) the total amount paid by 

12 the consumer in connection with the 

13 transaction. 

14 ‘‘(B) FACTORS FOR THE COURT TO CON15 SIDER.—In determining the amount of the 

16 award in any action referred to in clause (i) or 

17 (ii) of subparagraph (A), the court shall con18 sider, among other relevant factors—

19 ‘‘(i) the amount of any actual eco20 nomic damages awarded and the extent to 

21 which the noneconomic harm suffered from 

22 the violation should be compensable by 

23 general damages; 

24 ‘‘(ii) the lack of such purchaser’s or 

25 assignee’s knowledge of or participation in 
50

•HR 1295 IH 

1 the facts or circumstances giving rise to 

2 the violations and claim and defenses; 

3 ‘‘(iii) the materiality of the violation; 

4 and 

5 ‘‘(iv) the relative harm to the con6 sumer. 

7 ‘‘(C) LIMITATION ON DAMAGES FOR

8 WRONGS NOT CREATING FINANCIAL LOSSES.—

9 Unless the consumer demonstrates that the 

10 purchaser or assignee had actual knowledge of 

11 or exhibited reckless indifference to a violation 

12 of this title or other applicable law, the dam13 ages for which a purchaser or assignee shall be 

14 liable shall be limited to the amounts specified 

15 in paragraphs (1) and (2) of section 130(a), 

16 which consist of damages for actual financial 

17 losses and attorney’s fees. 

18 ‘‘(3) CLARIFICATION OF TERMS.—For purposes 

19 of determining the liability of assignees under this 

20 section, the terms ‘purchaser’ and ‘assignee’ shall 

21 not include— 

22 ‘‘(A) persons whose interest in higher-cost 

23 mortgages is limited to a security interest or 

24 who acquire title as a result of the foreclosure 

25 of such security interest; 
51

•HR 1295 IH 

1 ‘‘(B) broker-dealers and their affiliates 

2 that trade in mortgage loans and related mort3 gage securities and otherwise are not involved 

4 in any material respect in the terms and condi5 tions under which such mortgage loans were 

6 made or such securities were issued; 

7 ‘‘(C) passive investors in securities, or in8 terests in securities, including investors who 

9 guarantee the payment of principal and interest 

10 of securities to other investors, based on and 

11 backed by a pool of residential mortgage loans; 

12 or 

13 ‘‘(D) purchasers of mortgage loans that do 

14 not take record title to such loans where, within 

15 1 year following the initial sale, the seller is ob16 ligated by written agreement to repurchase the 

17 loans or the purchaser is obligated by written 

18 agreement to deliver the loans to a third party 

19 at the direction of a seller.’’. 

20 SEC. 106. COORDINATION WITH STATE LAW. 

21 Section 111 of the Truth in Lending Act (15 U.S.C. 

22 1610) is amended—

23 (1) by adding at the end the following new sub24 section: 

25 ‘‘(f) HIGHER-COST MORTGAGES.—
52

•HR 1295 IH 

1 ‘‘(1) IN GENERAL.—The provisions of this title 

2 shall supersede any provision of the law of any State 

3 to the extent that such provision of law attempts, di4 rectly or indirectly, to regulate, or has the effect of 

5 regulating, mortgage lending activities by or 

6 through—

7 ‘‘(A) the imposition of a high-cost limita8 tion, including—

9 ‘‘(i) through limitations or prohibi10 tions in connection with contracts for other 

11 business with any such State or any polit12 ical subdivision of any such State; 

13 ‘‘(ii) by making any conduct in con14 nection with any such activities subject to 

15 civil or criminal penalties; or 

16 ‘‘(iii) by making activities regulated 

17 under real estate, foreclosure, or other 

18 laws of such State or political subdivision 

19 contingent upon the manner in which 

20 mortgage lending activities are conducted; 

21 or 

22 ‘‘(B) any requirement, limitation, or prohi23 bition without regard to whether the provisions 

24 of the requirement, limitation, or prohibition 

25 are consistent or inconsistent with section 129 
53

•HR 1295 IH 

1 or 129A or whether the consumer credit trans2 action subject to such requirement is a higher3 cost mortgage, 

4 without respect to whether or the extent to which 

5 such provision of law may afford greater protection, 

6 substantive or otherwise, to consumers. 

7 ‘‘(2) DEFINITIONS.—For purposes of this sub8 section, the following definitions shall apply: 

9 ‘‘(A) MORTGAGE LENDING ACTIVITIES.—

10 The term ‘mortgage lending activities’ includes 

11 any advertisement, solicitation, offer, negotia12 tion, placement, application, processing, under13 writing, originating, closing, funding, recording, 

14 assignment, purchase, pledge, securitization, 

15 holding, servicing, collection, modification, satis16 faction, or foreclosure in connection with or 

17 arising out of a consumer credit transaction se18 cured by a lien against a consumer’s dwelling, 

19 by or on behalf of a broker, creditor, secured 

20 creditor, purchaser, servicer, trustee, certificate 

21 or securities holder, or any other person or enti22 ty that may engage in any of the above enumer23 ated activities and their respective agents, con24 tractors, employees, officers, and directors. 
54

•HR 1295 IH 

1 ‘‘(B) LAW OF ANY STATE.—The term ‘law 

2 of any State’ includes any constitutional provi3 sion, statute, rule, regulation, or ordinance of 

4 any State or any political subdivision of any 

5 State, including any State law as to which the 

6 Board has made a determination under section 

7 123, and any judicial decision or determination 

8 rendered in connection therewith. 

9 ‘‘(C) HIGH-COST LIMITATION.—The term 

10 ‘high-cost limitation’ means any requirement, 

11 limitation, or prohibition on any mortgage lend12 ing activities in connection with a consumer 

13 credit transaction secured by a lien against a 

14 consumer’s dwelling when the applicability of 

15 such requirement, limitation or prohibition is 

16 based in whole or in part on whether the actual 

17 or contingent, direct or indirect, interest rate, 

18 costs, fees, price or finance charges to the con19 sumer associated with such consumer credit 

20 transaction exceed any particular threshold, 

21 however such threshold may be defined, without 

22 regard to whether the consumer credit trans23 action subject to such requirement, limitation, 

24 or prohibition is a higher-cost mortgage. 
55

•HR 1295 IH 

1 ‘‘(3) CLARIFICATION OF PREEMPTION.—Any 

2 law of any State preempted under paragraph (1) of 

3 this subsection shall, without in any way limiting the 

4 effect of paragraph (1) of this subsection, include 

5 any law of any State that directly or indirectly—

6 ‘‘(A) limits a creditor’s ability to extend 

7 new credit to a consumer; 

8 ‘‘(B) limits the rights, claims, defenses, or 

9 other remedies at law or equity available to a 

10 creditor, secured creditor, servicer, assignee or 

11 other direct or indirect holder, and their respec12 tive agents or contractors, including without 

13 limitation, the right to foreclose on the lien 

14 against the consumer’s dwelling in respect of a 

15 consumer’s default under the related loan docu16 ments; or 

17 ‘‘(C) imposes legal liability on any party 

18 for the violations of law by another party by 

19 virtue of such first party’s acquisition of any di20 rect or indirect right, title or interest in and to, 

21 or contractual responsibility for the servicing or 

22 administration of, a higher-cost mortgage. 

23 ‘‘(4) EXCLUSIONS.—Notwithstanding para24 graphs (1), (2), and (3), the following laws are ex-
56

•HR 1295 IH 

1 pressly excluded from the preemption established 

2 under paragraph (1): 

3 ‘‘(A) Any law of any State, not otherwise 

4 preempted under Federal law, limiting the rate 

5 of interest reflected in the note or other instru6 ment evidencing an extension of consumer cred7 it secured by a lien against a consumer’s dwell8 ing, to the extent that such law does not re9 quire compliance with any law that is otherwise 

10 preempted under paragraphs (1), (2), and (3) 

11 as a condition of contracting for, charging, or 

12 collecting any rate of interest otherwise per13 mitted by such law. 

14 ‘‘(B) Any law of any State requiring the li15 censing, registration, or authorization of any 

16 person engaged in mortgage-lending activities, 

17 except that the law of any State will be pre18 empted to the extent that such law conditions 

19 the issuance or maintenance of such a license, 

20 registration or other authorization, or the au21 thority granted thereby, on compliance with any 

22 law that is otherwise preempted under para23 graphs (1), (2) and (3). 

24 ‘‘(5) PROMPT DETERMINATION BY BOARD OF

25 GOVERNORS.—
57

•HR 1295 IH 

1 ‘‘(A) IN GENERAL.—In response to a re2 quest from any person, the Board, or any offi3 cial or employee of the Board duly authorized 

4 by the Board, shall—

5 ‘‘(i) promptly determine whether and 

6 to the extent to which the specific law of 

7 any State identified in such request is pre8 empted by operation of this subsection; 

9 and 

10 ‘‘(ii) cause such determination to be 

11 published in the Federal Register. 

12 ‘‘(B) EFFECT OF PUBLICATION.—The pre13 emption provided under this section shall be 

14 self-executing, and the publication of a finding 

15 or preemption by the Board shall not be re16 quired in order for preemption to occur in ac17 cordance with the terms of this section.’’; 

18 (2) in subsection (a)(1), by striking the 1st sen19 tence and inserting the following new sentence: ‘‘Ex20 cept as provided in subsections (e) and (f), no provi21 sion of chapter 1, 2, or 3 shall be construed as an22 nulling, altering, or affecting the laws of any State 

23 relating to the disclosure of information in connec24 tion with credit transactions, except to the extent 

25 that those laws are inconsistent with the provisions 
58

•HR 1295 IH 

1 of this title, and then only to the extent of the incon2 sistency.’’; 

3 (3) in subsection (b)—

4 (A) by striking ‘‘section 129’’ the 1st place 

5 such term appears and inserting ‘‘subsection (f) 

6 and sections 129, 129A, and 129B’’; and 

7 (B) by inserting ‘‘, 129A, or 129B’’ after 

8 ‘‘section 129’’ each place such term appears 

9 after the 1st place; and 

10 (4) in subsection (d), by striking ‘‘sections 125, 

11 130, and 166’’ and inserting ‘‘subsection (f) and 

12 sections 125, 130, and 166’’. 

13 SEC. 107. CLARIFICATION OF STATE ENFORCEMENT AU14 THORITY. 

15 Subsection (e) of section 130 of Truth in Lending 

16 Act (15 U.S.C. 1640(e)) (as amended by section 105(d) 

17 of this Act) is amended—

18 (1) by striking ‘‘(e) Except as provided in the 

19 subsequent sentence, any action’’ and inserting ‘‘(e) 

20 JURISDICTION; STATUTE OF LIMITATIONS.— 

21 ‘‘(1) IN GENERAL.—Except as provided in the 

22 subsequent sentence, any action’’; and 

23 (2) by adding at the end the following new 

24 paragraph: 
59

•HR 1295 IH 

1 ‘‘(2) CLARIFICATION OF PRIMARY ENFORCE2 MENT AUTHORITY WITH RESPECT TO STATE-CHAR3 TERED OR LICENSED ENTITIES.—In addition to the 

4 authority provided under subsection (1), no provision 

5 of this title shall be construed as limiting the au6 thority of any State to enforce the provisions of this 

7 title, as the primary enforcement authority, with re8 gard to any person licensed or chartered by such 

9 State.’’. 

10 SEC. 108. PREPAYMENT PENALTIES AND LATE CHARGES. 

11 (a) IN GENERAL.—Chapter 2 of the Truth in Lend12 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 

13 after section 129 the following new section: 

14 ‘‘§ 129A. Prepayment penalties and late charges 

15 ‘‘Except as otherwise provided by this title, any con16 sumer credit transaction that is secured by a dwelling that 

17 is, or upon the consummation of the transaction will be, 

18 occupied by the consumer as his principal dwelling, may 

19 contain—

20 ‘‘(1) a provision for the imposition of a prepay21 ment penalty for the prepayment of the credit trans22 action, only if—

23 ‘‘(A) the penalty cannot be imposed if the 

24 debt is accelerated as a result of default or any 

25 other breach of the loan documents; 
60

•HR 1295 IH 

1 ‘‘(B) the penalty does not apply after the 

2 end of the 36-month period beginning on the 

3 date the transaction is consummated; 

4 ‘‘(C) the consumer is offered a choice of 

5 another similar loan without a prepayment pen6 alty and is given a description of the benefit the 

7 consumer will receive, and the consequences the 

8 consumer might encounter, for accepting a loan 

9 with the prepayment penalty; and 

10 ‘‘(D) the penalty does not exceed an 

11 amount equal to the payment of 6 months ad12 vance interest on the amount prepaid in any 

13 12-month period in excess of 20 percent of the 

14 original principal amount; and 

15 ‘‘(2) a provision for the imposition of unantici16 pated late payment, only if the late-payment fee—

17 ‘‘(A) is not in excess of 5 percent of the 

18 amount of the scheduled payment past due; 

19 ‘‘(B) may only be assessed on a payment 

20 past due for 15 days or more; and 

21 ‘‘(C) may not be charged more than once 

22 with respect to a single late payment.’’. 

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

24 for chapter 2 of the Truth in Lending Act is amended 
61

•HR 1295 IH 

1 by inserting after the item relating to section 129 the fol2 lowing new item:

‘‘129A. Prepayment penalties and late charges.’’.

3 SEC. 109. REGULATIONS. 

4 Notwithstanding any provision of the Truth in Lend5 ing Act, the Board of Governors of the Federal Reserve 

6 System shall—

7 (1) prescribe such regulations implementing 

8 this title and the amendments made by this title as 

9 the Board may determine to be appropriate; and 

10 (2) publish such regulations in final form in the 

11 Federal Register before the end of the 12-month pe12 riod beginning on the date of the enactment of this 

13 Act. 

14 SEC. 110. EFFECTIVE DATES. 

15 (a) IN GENERAL.—This title, and the amendments 

16 made by this title, shall take effect at the end of the 3-

17 month period beginning on the date of the enactment of 

18 this Act. 

19 (b) SCOPE OF APPLICATION.—This title, and the 

20 amendments made by this title, shall apply with respect 

21 to applications for consumer credit transactions received 

22 on or after the effective date of this Act. 
62

•HR 1295 IH 

1 TITLE II—HOUSING 

2 COUNSELING 

3 Subtitle A—Consumer Counseling 

4 SEC. 201. CONSUMER COUNSELING REQUIREMENTS. 

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

6 1639) is amended by inserting after subsection (x) (as 

7 added by section 103(r) of this Act) the following: 

8 ‘‘(y) CONSUMER COUNSELING REQUIREMENTS.—

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

10 any credit in the form of a higher-cost mortgage to 

11 any consumer unless the creditor has provided to the 

12 consumer, at such time before the consummation of 

13 the mortgage and in such manner as the Board shall 

14 provide by regulation—

15 ‘‘(A) a separate written statement recom16 mending that the consumer take advantage of 

17 available home ownership or credit counseling 

18 services before agreeing to the terms of any 

19 higher-cost mortgage; and 

20 ‘‘(B) a written statement containing the 

21 names, addresses and telephone numbers of 

22 counseling agencies or programs reasonably 

23 available to the consumer that have been cer24 tified or approved and made publicly available 

25 by the Secretary of Housing and Urban Devel-
63

•HR 1295 IH 

1 opment, a State housing finance authority (as 

2 defined in section 1301 of the Financial Institu3 tions Reform, Recovery, and Enforcement Act 

4 of 1989), or the agency referred to in sub5 section (a) or (c) of section 108 with jurisdic6 tion over the creditor as qualified to provide 

7 counseling on—

8 ‘‘(i) the advisability of a higher-cost 

9 mortgage transaction; and 

10 ‘‘(ii) the appropriateness of a higher11 cost mortgage for the consumer. 

12 ‘‘(2) COMPLETE AND UPDATED LISTS RE13 QUIRED.—A creditor shall be deemed to be in com14 pliance with the requirements of this subsection if 

15 the creditor provides the consumer with a reasonably 

16 complete or updated list of counseling agencies re17 quired by section 5(a) of the Real Estate Settlement 

18 Procedures Act of 1974.’’. 

19 Subtitle B—Expanded Housing 

20 Counseling Opportunities 

21 SEC. 211. SHORT TITLE. 

22 This subtitle may be cited as the ‘‘Expanding Hous23 ing Opportunities Through Education and Counseling 

24 Act’’. 
64

•HR 1295 IH 

1 SEC. 212. ESTABLISHMENT OF OFFICE OF HOUSING COUN2 SELING. 

3 Section 4 of the Department of Housing and Urban 

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

5 at the end the following new subsection: 

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

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

8 in the Office of the Secretary, the Office of Housing 

9 Counseling. 

10 ‘‘(2) DIRECTOR.—There is established the posi11 tion of Director of Housing Counseling. The Direc12 tor shall be the head of the Office of Housing Coun13 seling and shall be appointed by the Secretary. Such 

14 position shall be a career-reserved position in the 

15 Senior Executive Service. 

16 ‘‘(3) FUNCTIONS.—

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

18 have ultimate responsibility within the Depart19 ment, except for the Secretary, for all activities 

20 and matters relating to homeownership coun21 seling and rental housing counseling, includ22 ing—

23 ‘‘(i) research, grant administration, 

24 public outreach, and policy development re25 lating to such counseling; and 
65

•HR 1295 IH 

1 ‘‘(ii) establishment, coordination, and 

2 administration of all regulations, require3 ments, standards, and performance meas4 ures under programs and laws adminis5 tered by the Department that relate to 

6 housing counseling, homeownership coun7 seling (including maintenance of homes), 

8 mortgage-related counseling (including 

9 home equity conversion mortgages and 

10 credit protection options to avoid fore11 closure), and rental housing counseling, in12 cluding the requirements, standards, and 

13 performance measures relating to housing 

14 counseling. 

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

16 shall carry out the functions assigned to the Di17 rector and the Office under this section and any 

18 other provisions of law. Such functions shall in19 clude establishing rules necessary for—

20 ‘‘(i) the counseling procedures under 

21 section 106(h)(1) of the Housing and 

22 Urban Development Act of 1968 (12 

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

24 ‘‘(ii) carrying out all other functions 

25 of the Secretary under section 106(h) of 
66

•HR 1295 IH 

1 the Housing and Urban Development Act 

2 of 1968, including the establishment, oper3 ation, and publication of the availability of 

4 the toll-free telephone number under para5 graph (2) of such section; 

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

7 Real Estate Settlement Procedures Act of 

8 1974 (12 U.S.C. 2604) for home buying 

9 information booklets prepared pursuant to 

10 such section; 

11 ‘‘(iv) carrying out the certification 

12 program under section 106(e) of the Hous13 ing and Urban Development Act of 1968 

14 (12 U.S.C. 1701x(e)); 

15 ‘‘(v) carrying out the assistance pro16 gram under section 106(a)(4) of the Hous17 ing and Urban Development Act of 1968, 

18 including criteria for selection of applica19 tions to receive assistance; 

20 ‘‘(vi) carrying out any functions re21 garding abusive, deceptive, or unscrupulous 

22 lending practices relating to residential 

23 mortgage loans that the Secretary con24 siders appropriate, which shall include con25 ducting the study under section 216 of the 
67

•HR 1295 IH 

1 Expanding Housing Opportunities 

2 Through Education and Counseling Act; 

3 ‘‘(vii) providing for operation of the 

4 advisory committee established under para5 graph (4) of this subsection; and 

6 ‘‘(viii) collaborating with community7 based organizations with expertise in the 

8 field of housing counseling. 

9 ‘‘(4) ADVISORY COMMITTEE.—

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

11 appoint an advisory committee to provide advice 

12 and oversight regarding the carrying out of the 

13 functions of the Director. 

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

15 shall consist of not more than 12 individuals, 

16 and the membership of the committee shall 

17 equally represent all aspects of the mortgage 

18 and real estate industry, including consumers. 

19 ‘‘(C) TERMS.—Except as provided in sub20 paragraph (D), each member of the advisory 

21 committee shall be appointed for a term of 

22 three years. Members may be reappointed at 

23 the discretion of the Secretary. 

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

25 designated by the Secretary at the time of ap-
68

•HR 1295 IH 

1 pointment, of the members first appointed to 

2 the advisory committee, four shall be appointed 

3 for a term of one year and four shall be ap4 pointed for a term of two years. 

5 ‘‘(E) PROHIBITION OF PAY; TRAVEL EX6 PENSES.—Members of the advisory committee 

7 shall serve without pay, but shall receive travel 

8 expenses, including per diem in lieu of subsist9 ence, in accordance with applicable provisions 

10 under subchapter I of chapter 57 of title 5, 

11 United States Code. 

12 ‘‘(F) ADVISORY ROLE ONLY.—The advi13 sory committee shall have no role in reviewing 

14 or awarding housing counseling grants. 

15 ‘‘(5) SCOPE OF HOMEOWNERSHIP COUN16 SELING.—In carrying out the responsibilities of the 

17 Director, the Director shall ensure that homeowner18 ship counseling provided by, in connection with, or 

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

20 Department addresses the entire process of home21 ownership, including the decision to purchase a 

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

23 arising during or affecting the period of ownership 

24 of a home (including refinancing, default and fore-
69

•HR 1295 IH 

1 closure, and other financial decisions), and the sale 

2 or other disposition of a home.’’. 

3 SEC. 213. COUNSELING PROCEDURES. 

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

5 Urban Development Act of 1968 (12 U.S.C. 1701x), as 

6 amended by the preceding provisions of this title, is fur7 ther amended by adding at the end the following new sub8 section: 

9 ‘‘(h) PROCEDURES AND ACTIVITIES.—

10 ‘‘(1) COUNSELING PROCEDURES.—

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

12 establish, coordinate, and monitor the adminis13 tration by the Department of Housing and 

14 Urban Development of the counseling proce15 dures for homeownership counseling and rental 

16 housing counseling provided in connection with 

17 any program of the Department, including all 

18 requirements, standards, and performance 

19 measures that relate to homeownership and 

20 rental housing counseling. 

21 ‘‘(B) HOMEOWNERSHIP COUNSELING.—

22 For purposes of this subsection and as used in 

23 the provisions referred to in this subparagraph, 

24 the term ‘homeownership counseling’ means 

25 counseling related to homeownership and resi-
70

•HR 1295 IH 

1 dential mortgage loans. Such term includes 

2 counseling related to homeownership and resi3 dential mortgage loans that is provided pursu4 ant to—

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

6 and Community Development Act of 1974 

7 (42 U.S.C. 5305(a)(20)); 

8 ‘‘(ii) in the United States Housing 

9 Act of 1937—

10 ‘‘(I) section 9(e) (42 U.S.C. 

11 1437g(e)); 

12 ‘‘(II) section 8(y)(1)(D) (42 

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

14 ‘‘(III) section 18(a)(4)(D) (42 

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

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

17 1437u(c)(4)); 

18 ‘‘(V) section 32(e)(4) (42 U.S.C. 

19 1437z–4(e)(4)); 

20 ‘‘(VI) section 33(d)(2)(B) (42 

21 U.S.C. 1437z–5(d)(2)(B)); 

22 ‘‘(VII) sections 302(b)(6) and 

23 303(b)(7) (42 U.S.C. 1437aaa–

24 1(b)(6), 1437aaa–2(b)(7)); and 
71

•HR 1295 IH 

1 ‘‘(VIII) section 304(c)(4) (42 

2 U.S.C. 1437aaa–3(c)(4)); 

3 ‘‘(iii) section 302(a)(4) of the Amer4 ican Homeownership and Economic Oppor5 tunity Act of 2000 (42 U.S.C. 1437f note); 

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

7 the Cranston-Gonzalez National Affordable 

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

9 12808(b)); 

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

11 the Housing and Urban Development Act 

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

13 ‘‘(vi) section 220(d)(2)(G) of the Low14 Income Housing Preservation and Resident 

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

16 4110(d)(2)(G)); 

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

18 424(c)(4), 442(b)(6), and 443(b)(6) of the 

19 Cranston-Gonzalez National Affordable 

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

21 12873(b)(7), 12874(c)(4), 12892(b)(6), 

22 and 12893(b)(6)); 

23 ‘‘(viii) section 491(b)(1)(F)(iii) of the 

24 McKinney-Vento Homeless Assistance Act 

25 (42 U.S.C. 11408(b)(1)(F)(iii)); 
72

•HR 1295 IH 

1 ‘‘(ix) sections 202(3) and 

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

3 Housing and Self-Determination Act of 

4 1996 (25 U.S.C. 4132(3), 4229(b)(2)(A)); 

5 ‘‘(x) in the National Housing Act—

6 ‘‘(I) in section 203 (12 U.S.C. 

7 1709), the penultimate undesignated 

8 paragraph of paragraph (2) of sub9 section (b), subsection (c)(2)(A), and 

10 subsection (r)(4); 

11 ‘‘(II) subsections (a) and (c)(3) 

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

13 and 

14 ‘‘(III) subsections (d)(2)(B) and 

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

16 1715z–20); 

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

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

19 1472(h)(4)(B)); and 

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

21 Urban Development Act of 1970 (12 

22 U.S.C. 1701z–7). 

23 ‘‘(C) RENTAL HOUSING COUNSELING.—

24 For purposes of this subsection, the term ‘rent25 al housing counseling’ means counseling related 
73

•HR 1295 IH 

1 to rental of residential property, which may in2 clude counseling regarding future homeowner3 ship opportunities and providing referrals for 

4 renters and prospective renters to entities pro5 viding counseling and shall include counseling 

6 related to such topics that is provided pursuant 

7 to—

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

9 and Community Development Act of 1974 

10 (42 U.S.C. 5305(a)(20)); 

11 ‘‘(ii) in the United States Housing 

12 Act of 1937—

13 ‘‘(I) section 9(e) (42 U.S.C. 

14 1437g(e)); 

15 ‘‘(II) section 18(a)(4)(D) (42 

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

17 ‘‘(III) section 23(c)(4) (42 

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

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

20 1437z–4(e)(4)); 

21 ‘‘(V) section 33(d)(2)(B) (42 

22 U.S.C. 1437z–5(d)(2)(B)); and 

23 ‘‘(VI) section 302(b)(6) (42 

24 U.S.C. 1437aaa–1(b)(6)); 
74

•HR 1295 IH 

1 ‘‘(iii) section 233(b)(2) of the Cran2 ston-Gonzalez National Affordable Housing 

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

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

5 Urban Development Act of 1968 (12 

6 U.S.C. 1701x); 

7 ‘‘(v) section 422(b)(6) of the Cran8 ston-Gonzalez National Affordable Housing 

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

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

11 McKinney-Vento Homeless Assistance Act 

12 (42 U.S.C. 11408(b)(1)(F)(iii)); 

13 ‘‘(vii) sections 202(3) and 

14 810(b)(2)(A) of the Native American 

15 Housing and Self-Determination Act of 

16 1996 (25 U.S.C. 4132(3), 4229(b)(2)(A)); 

17 and 

18 ‘‘(viii) the rental assistance program 

19 under section 8 of the United States Hous20 ing Act of 1937 (42 U.S.C. 1437f). 

21 ‘‘(2) TOLL-FREE TELEPHONE NUMBER AND

22 WEB SITE.—The Secretary shall provide for the es23 tablishment, operation, and publication of a toll-free 

24 telephone number and a World Wide Web site 

25 through which persons interested in homeownership 
75

•HR 1295 IH 

1 or rental housing counseling services may locate and 

2 obtain names and contact information of persons 

3 and organizations certified under section 106(e) of 

4 the Housing and Urban Development Act of 1968 to 

5 provide such services. 

6 ‘‘(3) STANDARDS FOR MATERIALS.—The Sec7 retary, in conjunction with the advisory committee 

8 established under subsection (g)(4), shall establish 

9 standards for materials and forms to be used, as ap10 propriate, by organizations providing homeownership 

11 counseling services, including any recipients of as12 sistance pursuant to subsection (a)(4). 

13 ‘‘(4) MORTGAGE SOFTWARE SYSTEMS.—

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

15 provide for the certification of various computer 

16 software programs for consumers to use in eval17 uating different residential mortgage loan pro18 posals. The Secretary shall require, for such 

19 certification, that the mortgage software sys20 tems take into account—

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

22 and the cost of maintaining a home, in23 cluding insurance, taxes, and utilities; 
76

•HR 1295 IH 

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

2 expects to remain in the home or expected 

3 time to maturity of the loan; 

4 ‘‘(iii) such other factors as the Sec5 retary considers appropriate to assist the 

6 consumer in evaluating whether to pay 

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

8 an adjustable or fixed rate loan, to select 

9 a conventional or government-insured or 

10 guaranteed loan and to make other choices 

11 during the loan application process. 

12 If the Secretary determines that available exist13 ing software is inadequate to assist consumers 

14 during the residential mortgage loan application 

15 process, the Secretary shall arrange for the de16 velopment by private sector software companies 

17 of new mortgage software systems that meet 

18 the Secretary’s specifications. 

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

20 Such certified computer software programs 

21 shall be used to supplement, not replace, hous22 ing counseling. The Secretary shall provide that 

23 such programs are initially used only in connec24 tion with the assistance of housing counselors 

25 certified pursuant to subsection (e). 
77

•HR 1295 IH 

1 ‘‘(C) AVAILABILITY.—After a period of ini2 tial availability under subparagraph (B) as the 

3 Secretary considers appropriate, the Secretary 

4 shall take reasonable steps to make mortgage 

5 software systems certified pursuant to this 

6 paragraph widely available through the Internet 

7 and at public locations, including public librar8 ies, senior-citizen centers, public housing sites, 

9 offices of public housing agencies that admin10 ister rental housing assistance vouchers, and 

11 housing counseling centers. 

12 ‘‘(5) OUTREACH TO VULNERABLE POPU13 LATIONS.—The Secretary shall develop a multimedia 

14 outreach program designed to make elderly persons, 

15 persons who face language barriers, low-income per16 sons, and other potentially vulnerable consumers 

17 aware that it is advisable, before seeking a residen18 tial mortgage loan, to obtain homeownership coun19 seling from an unbiased and reliable source and that 

20 such homeownership counseling is available, includ21 ing through programs of the Department of Housing 

22 and Urban Development. 

23 ‘‘(6) EDUCATION PROGRAMS.—The Secretary 

24 shall provide advice and technical assistance to 

25 States, units of general local government, and non-
78

•HR 1295 IH 

1 profit organizations regarding the establishment and 

2 operation of, including assistance with the develop3 ment of content and materials for, educational pro4 grams to inform and educate consumers, particularly 

5 those most vulnerable with respect to residential 

6 mortgage loans (such as elderly persons, persons 

7 facing language barriers, low-income persons, and 

8 other potentially vulnerable consumers), regarding 

9 home mortgages, mortgage refinancing, home equity 

10 loans, and home repair loans.’’. 

11 (b) CONFORMING AMENDMENTS TO GRANT PRO12 GRAM FOR HOMEOWNERSHIP COUNSELING ORGANIZA13 TIONS.—Section 106(c)(5)(A)(ii) of the Housing and 

14 Urban Development Act of 1968 (12 U.S.C. 

15 1701x(c)(5)(A)(ii)) is amended—

16 (1) in subclause (II), by striking ‘‘and’’ at the 

17 end; 

18 (2) in subclause (III) by striking the period at 

19 the end and inserting ‘‘; and’’; and 

20 (3) by inserting after subclause (III) the fol21 lowing new subclause: 

22 ‘‘(IV) notify the housing or mort23 gage applicant of the availability of 

24 mortgage software systems provided 

25 pursuant to subsection (h)(4).’’. 
79

•HR 1295 IH 

1 SEC. 214. GRANTS FOR HOUSING COUNSELING ASSIST2 ANCE. 

3 Section 106(a) of the Housing and Urban Develop4 ment Act of 1968 (12 U.S.C. 1701x(a)(3)) is amended 

5 by adding at the end the following new paragraph: 

6 ‘‘(4) HOMEOWNERSHIP AND RENTAL COUNSELING

7 ASSISTANCE.—

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

9 financial assistance available under this paragraph 

10 to States, units of general local governments, and 

11 nonprofit organizations providing homeownership or 

12 rental counseling (as such terms are defined in sub13 section (h)(1)). 

14 ‘‘(B) QUALIFIED ENTITIES.—The Secretary 

15 shall establish standards and guidelines for eligibility 

16 of organizations (including governmental and non17 profit organizations) to receive assistance under this 

18 paragraph. 

19 ‘‘(C) DISTRIBUTION.—Assistance made avail20 able under this paragraph shall be distributed in a 

21 manner that encourages efficient and successful 

22 counseling programs. 

23 ‘‘(D) AUTHORIZATION OF APPROPRIATIONS.—

24 There are authorized to be appropriated 

25 $75,000,000 for each of fiscal years 2006 through 

26 2009 for—
80

•HR 1295 IH 

1 ‘‘(i) the operations of the Office of Hous2 ing Counseling of the Department of Housing 

3 and Urban Development; 

4 ‘‘(ii) the responsibilities of the Secretary 

5 under paragraphs (2) through (6) of subsection 

6 (h); and 

7 ‘‘(iii) assistance pursuant to this para8 graph for entities providing homeownership and 

9 rental counseling.’’. 

10 SEC. 215. REQUIREMENTS TO USE HUD-CERTIFIED COUN11 SELORS UNDER HUD PROGRAMS. 

12 Section 106(e) of the Housing and Urban Develop13 ment Act of 1968 (12 U.S.C. 1701x(e)) is amended—

14 (1) by striking paragraph (1) and inserting the 

15 following new paragraph: 

16 ‘‘(1) REQUIREMENT FOR ASSISTANCE.—An or17 ganization may not receive assistance for counseling 

18 activities under subsection (a)(1)(iii), (a)(2), (a)(4), 

19 (c), or (d) of this section, or under section 101(e), 

20 unless the organization, or the individuals through 

21 which the organization provides such counseling, has 

22 been certified by the Secretary under this subsection 

23 as competent to provide such counseling.’’; 

24 (2) in paragraph (2)—
81

•HR 1295 IH 

1 (A) by inserting ‘‘and for certifying organi2 zations’’ before the period at the end of the 

3 first sentence; and 

4 (B) in the second sentence by striking ‘‘for 

5 certification’’ and inserting ‘‘, for certification 

6 of an organization, that each individual through 

7 which the organization provides counseling shall 

8 demonstrate, and, for certification of an indi9 vidual,’’; 

10 (3) in paragraph (3), by inserting ‘‘organiza11 tions and’’ before ‘‘individuals’’; 

12 (4) by redesignating paragraph (3) as para13 graph (5); and 

14 (5) by inserting after paragraph (2) the fol15 lowing new paragraphs: 

16 ‘‘(3) REQUIREMENT UNDER HUD PROGRAMS.—

17 Any homeownership counseling or rental housing 

18 counseling (as such terms are defined in subsection 

19 (h)(1)) required under, or provided in connection 

20 with, any program administered by the Department 

21 of Housing and Urban Development shall be pro22 vided only by organizations or counselors certified by 

23 the Secretary under this subsection as competent to 

24 provide such counseling. 
82

•HR 1295 IH 

1 ‘‘(4) OUTREACH.—The Secretary shall take 

2 such actions as the Secretary considers appropriate 

3 to ensure that individuals and organizations pro4 viding homeownership or rental housing counseling 

5 are aware of the certification requirements and 

6 standards of this subsection and of the training and 

7 certification programs under subsection (f).’’. 

8 SEC. 216. STUDY OF DEFAULTS AND FORECLOSURES. 

9 The Secretary of Housing and Urban Development 

10 shall conduct an extensive study of the root causes of de11 fault and foreclosure of home loans, using as much empir12 ical data as are available. The study shall also examine 

13 the role of escrow accounts in helping prime and nonprime 

14 borrowers to avoid defaults and foreclosures. Not later 

15 than 12 months after the date of the enactment of this 

16 Act, the Secretary shall submit to the Congress a prelimi17 nary report regarding the study. Not later than 24 months 

18 after such date of enactment, the Secretary shall submit 

19 a final report regarding the results of the study, which 

20 shall include any recommended legislation relating to the 

21 study, and recommendations for best practices and for a 

22 process to identify populations that need counseling the 

23 most. 
83

•HR 1295 IH 

1 SEC. 217. DEFINITIONS FOR COUNSELING-RELATED PRO2 GRAMS. 

3 Section 106 of the Housing and Urban Development 

4 Act of 1968 (12 U.S.C. 1701x), as amended by the pre5 ceding provisions of this title, is further amended by add6 ing at the end the following new subsection: 

7 ‘‘(i) DEFINITIONS.—For purposes of this section: 

8 ‘‘(1) NONPROFIT ORGANIZATION.—The term 

9 ‘nonprofit organization’ has the meaning given such 

10 term in section 104(5) of the Cranston-Gonzalez Na11 tional Affordable Housing Act (42 U.S.C. 

12 12704(5)), except that subparagraph (D) of such 

13 section shall not apply for purposes of this section. 

14 ‘‘(2) STATE.—The term ‘State’ means each of 

15 the several States, the Commonwealth of Puerto 

16 Rico, the District of Columbia, the Commonwealth 

17 of the Northern Mariana Islands, Guam, the Virgin 

18 Islands, American Samoa, the Trust Territories of 

19 the Pacific, or any other possession of the United 

20 States. 

21 ‘‘(3) UNIT OF GENERAL LOCAL GOVERN22 MENT.—The term ‘unit of general local government’ 

23 means any city, county, parish, town, township, bor24 ough, village, or other general purpose political sub25 division of a State.’’. 
84

•HR 1295 IH 

1 SEC. 218. UPDATING AND SIMPLIFICATION OF MORTGAGE 

2 INFORMATION BOOKLET. 

3 Section 5 of the Real Estate Settlement Procedures 

4 Act of 1974 (12 U.S.C. 2604) is amended—

5 (1) in the section heading, by striking ‘‘SPE6 CIAL’’ and inserting ‘‘HOME BUYING’’; 

7 (2) by striking subsections (a) and (b) and in8 serting the following new subsections: 

9 ‘‘(a) PREPARATION AND DISTRIBUTION.—The Sec10 retary shall prepare, at least once every 5 years, a booklet 

11 to help consumers applying for federally related mortgage 

12 loans to understand the nature and costs of real estate 

13 settlement services. The Secretary shall prepare the book14 let in various languages and cultural styles, as the Sec15 retary determines to be appropriate, so that the booklet 

16 is understandable and accessible to homebuyers of dif17 ferent ethnic and cultural backgrounds. The Secretary 

18 shall distribute such booklets to all lenders that make fed19 erally related mortgage loans. The Secretary shall also dis20 tribute to such lenders lists, organized by location, of 

21 homeownership counselors certified under section 106(e) 

22 of the Housing and Urban Development Act of 1968 (12 

23 U.S.C. 1701x(e)) for use in complying with the require24 ment under subsection (c) of this section. 

25 ‘‘(b) CONTENTS.—Each booklet shall be in such form 

26 and detail as the Secretary shall prescribe and, in addition 
85

•HR 1295 IH 

1 to such other information as the Secretary may provide, 

2 shall include in plain and understandable language the fol3 lowing information: 

4 ‘‘(1) A description and explanation of the na5 ture and purpose of the costs incident to a real es6 tate settlement or a federally related mortgage loan. 

7 The description and explanation shall provide gen8 eral information about the mortgage process as well 

9 as specific information concerning, at a minimum—

10 ‘‘(A) balloon payments; 

11 ‘‘(B) prepayment penalties; and 

12 ‘‘(C) the trade-off between closing costs 

13 and the interest rate over the life of the loan. 

14 ‘‘(2) An explanation and sample of the uniform 

15 settlement statement required by section 4. 

16 ‘‘(3) A list and explanation of lending practices, 

17 including those prohibited by the Truth in Lending 

18 Act or other applicable Federal law, and of other un19 fair practices and unreasonable or unnecessary 

20 charges to be avoided by the prospective buyer with 

21 respect to a real estate settlement. 

22 ‘‘(4) A list and explanation of questions a con23 sumer obtaining a federally related mortgage loan 

24 should ask regarding the loan, including whether the 

25 consumer will have the ability to repay the loan, 
86

•HR 1295 IH 

1 whether the consumer sufficiently shopped for the 

2 loan, whether the loan terms include prepayment 

3 penalties or balloon payments, and whether the loan 

4 will benefit the borrower. 

5 ‘‘(5) An explanation of the right of rescission as 

6 to certain transactions provided by sections 125 and 

7 129 of the Truth in Lending Act. 

8 ‘‘(6) A brief explanation of the nature of a vari9 able rate mortgage and a reference to the booklet 

10 entitled ‘Consumer Handbook on Adjustable Rate 

11 Mortgages’, published by the Board of Governors of 

12 the Federal Reserve System pursuant to section 

13 226.19(b)(1) of title 12, Code of Federal Regula14 tions, or to any suitable substitute of such booklet 

15 that such Board of Governors may subsequently 

16 adopt pursuant to such section. 

17 ‘‘(7) A brief explanation of the nature of a 

18 home equity line of credit and a reference to the 

19 pamphlet required to be provided under section 

20 127A of the Truth in Lending Act. 

21 ‘‘(8) Information about homeownership coun22 seling services made available pursuant to section 

23 106(a)(4) of the Housing and Urban Development 

24 Act of 1968 (12 U.S.C. 1701x(a)(4)), a rec25 ommendation that the consumer use such services, 
87

•HR 1295 IH 

1 and notification that a list of certified providers of 

2 homeownership counseling in the area, and their 

3 contact information, is available. 

4 ‘‘(9) An explanation of the nature and purpose 

5 of escrow accounts when used in connection with 

6 loans secured by residential real estate and the re7 quirements under section 10 of this Act regarding 

8 such accounts. 

9 ‘‘(10) An explanation of the choices available to 

10 buyers of residential real estate in selecting persons 

11 to provide necessary services incidental to a real es12 tate settlement. 

13 ‘‘(11) An explanation of a consumer’s respon14 sibilities, liabilities, and obligations in a mortgage 

15 transaction. 

16 ‘‘(12) An explanation of the nature and purpose 

17 of real estate appraisals, including the difference be18 tween an appraisal and a home inspection. 

19 ‘‘(13) Notice that the Office of Housing of the 

20 Department of Housing and Urban Development has 

21 made publicly available a brochure regarding loan 

22 fraud and a World Wide Web address and toll-free 

23 telephone number for obtaining the brochure. 

24 The booklet prepared pursuant to this section shall take 

25 into consideration differences in real estate settlement pro-
88

•HR 1295 IH 

1 cedures that may exist among the several States and terri2 tories of the United States and among separate political 

3 subdivisions within the same State and territory.’’; 

4 (3) in subsection (c), by striking the last sen5 tence and inserting the following new sentence: 

6 ‘‘Each lender shall also include with the booklet a 

7 reasonably complete or updated list of homeowner8 ship counselors who are certified pursuant to section 

9 106(e) of the Housing and Urban Development Act 

10 of 1968 (12 U.S.C. 1701x(e)) and located in the 

11 area of the lender.’’; and 

12 (4) in subsection (d), by inserting after the pe13 riod at the end of the first sentence the following: 

14 ‘‘The lender shall provide the HUD-issued booklet in 

15 the version that is most appropriate for the person 

16 receiving it.’’. 

17 SEC. 219. OPTION FOR NOTICE OF FORECLOSURE PREVEN18 TION COUNSELING AVAILABILITY. 

19 Section 4 of the Real Estate Settlement Procedures 

20 Act of 1974 (12 U.S.C. 2603) is amended by adding at 

21 the end the following new subsection: 

22 ‘‘(c) OPTION FOR NOTICE OF FORECLOSURE PRE23 VENTION COUNSELING AVAILABILITY.—

24 ‘‘(1) OPTION.—In connection with any federally 

25 related mortgage loan, the mortgagee shall provide 
89

•HR 1295 IH 

1 the borrower, at the time of the execution of the 

2 mortgage, an optional written agreement that, if 

3 signed by the borrower, allows, but does not require, 

4 the mortgagee to provide the notice described in 

5 paragraph (2) to a homeownership counseling entity 

6 that has agreed to provide the notice and counseling 

7 required under paragraph (3) and is approved by the 

8 Secretary. 

9 ‘‘(2) NOTICE TO COUNSELING AGENCY.—The 

10 notice described in this paragraph, with respect to 

11 any federally related mortgage loan, is notice, pro12 vided at the earliest time practicable after the bor13 rower becomes 60 days delinquent with respect to 

14 any payment due under the mortgage, that the bor15 rower is so delinquent and of how to contact the bor16 rower. Such notice may only be provided once with 

17 respect to each delinquency period for a mortgage. 

18 ‘‘(3) NOTICE TO MORTGAGOR.—Upon notice 

19 from a mortgagee that a borrower is 60 days delin20 quent with respect to payments due under the mort21 gage, the homeownership counseling entity shall at 

22 the earliest time practicable notify the borrower of 

23 such delinquency, that the entity makes available 

24 foreclosure-prevention counseling that may assist the 
90

•HR 1295 IH 

1 mortgagor in resolving the delinquency, and of how 

2 to contact the entity to arrange for such counseling. 

3 ‘‘(4) ABILITY TO CURE.—Failure to provide the 

4 optional written agreement required under para5 graph (1) may be corrected by sending such agree6 ment to the borrower not later than the earliest time 

7 practicable after the mortgagor first becomes 60 

8 days delinquent with respect to payments due under 

9 the mortgage. Mortgage insurance, if any, provided 

10 in connection with such federally related mortgage 

11 loan may not be terminated and penalties for such 

12 failure may not be prospectively or retroactively im13 posed if such failure is corrected in accordance with 

14 this paragraph. 

15 ‘‘(5) PENALTIES FOR FAILURE TO PROVIDE

16 AGREEMENT.—The Secretary may establish and im17 pose appropriate penalties for failure of a mortgagee 

18 to provide the optional written agreement required 

19 under paragraph (1). 

20 ‘‘(6) LIMITATION ON LIABILITY OF MORT21 GAGEE.—A mortgagee shall not incur any liability or 

22 penalties for any failure of a homeownership coun23 seling entity to provide notice under paragraph (3). 
91

•HR 1295 IH 

1 ‘‘(7) NO PRIVATE RIGHT OF ACTION.—This 

2 subsection shall not create any private right of ac3 tion on behalf of the borrower. 

4 ‘‘(8) DEFINITIONS.—For purposes of this sub5 section, the following definitions shall apply: 

6 ‘‘(A) DELINQUENCY PERIOD.—The term 

7 ‘delinquency period’ means, with respect to a 

8 mortgage, a period that begins upon the bor9 rower becoming delinquent with respect to pay10 ments due under the mortgage and ends upon 

11 the first subsequent occurrence of such pay12 ments under the mortgage becoming current or 

13 the property subject to the mortgage being fore14 closed or otherwise disposed of. 

15 ‘‘(B) HOMEOWNERSHIP COUNSELING ENTI16 TY.—The term ‘homeownership counseling enti17 ty’ means any State, unit of general local gov18 ernment, or nonprofit organization that pro19 vides homeownership counseling (as defined in 

20 section 106(h)(1)(B) of the Housing and Urban 

21 Development Act of 1968).’’. 
92

•HR 1295 IH 

1 TITLE III—MORTGAGE 

2 SERVICING 

3 SEC. 301. ESCROW AND IMPOUND ACCOUNTS RELATING TO 

4 CERTAIN CONSUMER CREDIT TRANS5 ACTIONS. 

6 (a) IN GENERAL.—Chapter 2 of the Truth in Lend7 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 

8 after section 129A (as added by section 108 of this Act) 

9 the following new section: 

10 ‘‘SEC. 129B. ESCROW OR IMPOUND ACCOUNTS RELATING 

11 TO CERTAIN CONSUMER CREDIT TRANS12 ACTIONS. 

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

14 (b) or (c), a creditor, in connection with the formation or 

15 consummation of a consumer credit transaction secured 

16 by the principal dwelling of the consumer, shall establish, 

17 at the time of the consummation of such transaction, an 

18 escrow or impound account for the payment of taxes and 

19 hazard insurance as provided in, and in accordance with, 

20 this section. 

21 ‘‘(b) WHEN REQUIRED.—No impound, trust, or other 

22 type of account for payment of taxes on the property, in23 surance premiums, or other purposes relating to the prop24 erty may be required as a condition of a real property sale 

25 contract or a loan secured by a deed of trust or mortgage 
93

•HR 1295 IH 

1 on real property containing only a single-family, owner2 occupied dwelling, except when—

3 ‘‘(1) any such impound, trust, or other type of 

4 escrow or impound account for such purposes is re5 quired by Federal or State law; 

6 ‘‘(2) a loan is made, guaranteed, or insured by 

7 a State or Federal governmental lending or insuring 

8 agency; 

9 ‘‘(3) the consumer’s debt-to-income ratio taking 

10 into account income from all sources including the 

11 consumer’s employment exceeds 45 percent; 

12 ‘‘(4) a consumer obtains a higher-cost mort13 gage; 

14 ‘‘(5) the original principal amount of such loan 

15 is—

16 ‘‘(A) 90 percent or more of the sale price, 

17 if the property involved is sold; or 

18 ‘‘(B) 90 percent or more of the appraised 

19 value of the property securing the loan; 

20 ‘‘(6) the combined principal amount of all loans 

21 secured by the real property exceeds 95 percent of 

22 the appraised value of the property securing the 

23 loans; or 

24 ‘‘(7) so required by the Board pursuant to reg25 ulation. 
94

•HR 1295 IH 

1 ‘‘(c) DURATION OF ESCROW OR IMPOUND AC2 COUNT.—An escrow or impound account established pur3 suant to this section, shall remain in existence for a min4 imum period of 5 years, unless the underlying mortgage 

5 is terminated. 

6 ‘‘(d) ADMINISTRATION OF ESCROW OR IMPOUND AC7 COUNTS.—

8 ‘‘(1) IN GENERAL.—Except as may otherwise 

9 be provided for in this title or in regulations pre10 scribed by the Board, escrow or impound accounts 

11 established pursuant to this section may be estab12 lished in an insured depository institution in the 

13 State where the creditor, or servicer, if not the cred14 itor, is located. 

15 ‘‘(2) ADMINISTRATION.—Except as provided in 

16 this section or regulations prescribed under this sec17 tion, an escrow or impound account subject to this 

18 section shall be administered in accordance with—

19 ‘‘(A) the Real Estate Settlement Proce20 dures Act of 1974 and regulations prescribed 

21 under such Act; and 

22 ‘‘(B) the law of the State where the real 

23 property securing the consumer credit trans24 action is located. 
95

•HR 1295 IH 

1 ‘‘(3) PAYMENT OF INTEREST.—Each creditor 

2 shall pay interest to the consumer on the amount 

3 held in any impound, trust, or escrow account that 

4 is subject to this section in the manner as prescribed 

5 by applicable Federal or State law. 

6 ‘‘(e) DISCLOSURES RELATING TO ESCROW OR IM7 POUND ACCOUNT.—

8 ‘‘(1) IN GENERAL.—In the case of any im9 pound, trust, or escrow account that is subject to 

10 this section, the creditor shall disclose by written no11 tice to the consumer within 3 business days before 

12 the consummation of the consumer credit trans13 action giving rise to such account the following in14 formation: 

15 ‘‘(A) The fact that an escrow or impound 

16 account will be established at consummation of 

17 the transaction. 

18 ‘‘(B) The amount required at closing to 

19 initially fund the escrow or impound account. 

20 ‘‘(C) The amount in the initial year of the 

21 estimated taxes and hazard insurance pre22 miums. 

23 ‘‘(D) The estimated monthly amount pay24 able for taxes and hazard insurance. 
96

•HR 1295 IH 

1 ‘‘(E) The fact that if the consumer chooses 

2 to terminate the account after 5 years, the con3 sumer will become responsible for the payment 

4 of all taxes and hazard insurance on the prop5 erty unless a new escrow or impound account is 

6 established. 

7 ‘‘(2) REGULATIONS.—The Board shall prescribe 

8 by regulation the contents of the notice required in 

9 paragraph (1) no later than 90 days after the date 

10 of the enactment of the Responsible Lending Act. 

11 ‘‘(f) HAZARD INSURANCE DEFINED.—For purposes 

12 of this section, the term ‘hazard insurance’ shall have the 

13 same meaning as provided under the law of the State 

14 where the real property securing the consumer credit 

15 transaction is located. 

16 ‘‘(g) EXCLUSIONS.—

17 ‘‘(1) NOT INCLUDED IN POINTS AND FEES.—

18 Amounts paid for escrow, trust, or impound ac19 counts in accordance with this section shall not be 

20 treated as points or fees under section 103(aa). 

21 ‘‘(2) EXCLUSIONS BY BOARD.—The Board may 

22 exclude, by regulation, any category or type of loan 

23 from the requirements of this section.’’. 

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

25 for chapter 2 of the Truth in Lending Act is amended 
97

•HR 1295 IH 

1 by inserting after the item relating to section 129 the fol2 lowing new item:

‘‘129B. Escrow or impound accounts relating to certain consumer credit transactions.’’.

3 SEC. 302. DISCLOSURE NOTICE REQUIRED FOR CON4 SUMERS WHO OPT OUT OF ESCROW SERV5 ICES. 

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

7 by section 301 of this title) is amended by adding at the 

8 end the following new subsection: 

9 ‘‘(h) DISCLOSURE NOTICE REQUIRED FOR CON10 SUMERS WHO OPT OUT OF ESCROW SERVICES.—

11 ‘‘(1) IN GENERAL.—If an impound, trust, or 

12 other type of account for the payment of property 

13 taxes, insurance premiums, or other purposes relat14 ing to property securing a consumer credit trans15 action is not established in connection with the 

16 transaction, or if a consumer chooses, at any time 

17 after such an account is established in connection 

18 with any such transaction, to close such account, the 

19 creditor shall provide a timely and clearly written 

20 disclosure to the consumer that advises the con21 sumer of the responsibilities of the consumer and 

22 implications for the consumer in the absence of any 

23 such account, including—
98

•HR 1295 IH 

1 ‘‘(A) information concerning any applicable 

2 fees associated with either the nonestablishment 

3 of any such account at the time of the trans4 action, or any subsequent closure of any such 

5 account; 

6 ‘‘(B) clear and prominent notice that the 

7 consumer is responsible for personally and di8 rectly paying the non-escrowed items, in addi9 tion to paying the mortgage loan payment, in 

10 the absence of any such account; and 

11 ‘‘(C) a clear explanation of the con12 sequences of any failure to pay non-escrowed 

13 items, including the possible requirement for di14 rect placement of insurance by the creditor and 

15 the potentially higher cost (including any poten16 tial commission payments to the servicer) or re17 duced coverage for the consumer in the event of 

18 any such creditor-placed insurance. 

19 ‘‘(2) REGULATIONS.—The Board shall prescribe 

20 such regulations as are necessary to implement the 

21 requirements of this subsection in final form before 

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

23 date of the enactment of the Responsible Lending 

24 Act.’’. 
99

•HR 1295 IH 

1 SEC. 303. MORTGAGE SERVICING CLARIFICATION. 

2 (a) IN GENERAL.—The Fair Debt Collection Prac3 tices Act (15 U.S.C. 1692 et seq.) is amended—

4 (1) by redesignating section 818 as section 819; 

5 and 

6 (2) by inserting after section 817 the following 

7 new section: 

8 ‘‘§ 818. Mortgage servicer exemption 

9 ‘‘(a) EXEMPTION.—A covered mortgage servicer who, 

10 whether by assignment, sale or transfer, becomes the per11 son responsible for servicing federally related mortgage 

12 loans secured by first liens that include loans that were 

13 in default at the time such person became responsible for 

14 the servicing of such federally related mortgage loans shall 

15 be exempt from the requirements of section 807(11) in 

16 connection with the collection of any debt arising from 

17 such defaulted federally related mortgage loans. 

18 ‘‘(b) DEFINITIONS.—For purposes of this section, the 

19 following definitions shall apply: 

20 ‘‘(1) COVERED MORTGAGE SERVICER.—The 

21 term ‘covered mortgage servicer’ means any servicer 

22 of federally related mortgage loans secured by first 

23 liens—

24 ‘‘(A) who is also a debt collector; and 

25 ‘‘(B) for whom the collection of delinquent 

26 debts is incidental to the servicer’s primary 
100

•HR 1295 IH 

1 function of servicing current federally related 

2 mortgage loans. 

3 ‘‘(2) FEDERALLY RELATED MORTGAGE LOAN.—

4 The term ‘federally related mortgage loan’ has the 

5 meaning given to such term in section 3(1) of the 

6 Real Estate Settlement Procedures Act of 1974, ex7 cept that, for purposes of this section, such term in8 cludes only loans secured by first liens. 

9 ‘‘(3) PERSON.—The term ‘person’ has the 

10 meaning given to such term in section 3(5) of the 

11 Real Estate Settlement Procedures Act of 1974. 

12 ‘‘(4) SERVICER; SERVICING.—The terms 

13 ‘servicer’ and ‘servicing’ have the meanings given to 

14 such terms in section 6(i) of the Real Estate Settle15 ment Procedures Act of 1974.’’. 

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

17 for the Fair Debt Collection Practices Act (15 U.S.C. 

18 1692 et seq.) is amended—

19 (1) by redesignating the item relating to section 

20 818 as section 819; and 

21 (2) by inserting after the item relating to sec22 tion 817 the following new item:

‘‘818. Mortgage servicer exemption.’’.
101

•HR 1295 IH 

1 SEC. 304. REAL ESTATE SETTLEMENT PROCEDURES ACT OF 

2 1974 AMENDMENTS. 

3 (a) SERVICER PROHIBITIONS.—Section 6 of the Real 

4 Estate Settlement Procedures Act of 1974 (12 U.S.C. 

5 2605) is amended by adding at the end the following new 

6 subsection: 

7 ‘‘(k) SERVICER PROHIBITIONS.—A servicer of a fed8 erally related mortgage shall not—

9 ‘‘(1) force place insurance unless there is a rea10 sonable basis to believe the borrower has failed to 

11 comply with the loan contract’s requirements to 

12 maintain property insurance; 

13 ‘‘(2) charge fees for responding to valid quali14 fied written requests under this section; 

15 ‘‘(3) fail to take timely action to respond to a 

16 borrower’s requests to correct errors relating to allo17 cation of payments, final balances for purposes of 

18 paying off the loan, or avoiding foreclosure, or other 

19 standard servicer’s duties; 

20 ‘‘(4) fail to respond within 10 business days to 

21 a request from a borrower to provide the identity, 

22 address and other relevant information about the 

23 owner assignee of the loan; or 

24 ‘‘(5) fail to comply with any other obligation 

25 found by the Secretary to be appropriate to carry 

26 out the consumer protection purposes of this Act.’’. 
102

•HR 1295 IH 

1 (b) INCREASE IN PENALTY AMOUNTS.—Section 6(f) 

2 of the Real Estate Settlement Procedures Act of 1974 (12 

3 U.S.C. 2605(f)) is amended—

4 (1) in paragraphs (1)(B) and (2)(B), by strik5 ing ‘‘$1,000’’ each place such term appears and in6 serting ‘‘$2,000’’; and 

7 (2) in paragraph (2)(B)(i), by striking 

8 ‘‘$500,000’’ and inserting ‘‘$1,000,000’’. 

9 (c) DECREASE IN RESPONSE TIMES.—Section 6(e) of 

10 the Real Estate Settlement Procedures Act of 1974 (12 

11 U.S.C. 2605(e)) is amended—

12 (1) in paragraph (1)(A), by striking ‘‘20 days’’ 

13 and inserting ‘‘15 days’’; 

14 (2) in paragraph (2), by striking ‘‘60 days’’ and 

15 inserting ‘‘30 days’’; and 

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

17 paragraph: 

18 ‘‘(4) LIMITED EXTENSION OF RESPONSE

19 TIME.—The 30-day period described in paragraph 

20 (2) may be extended for not more than 30 days if, 

21 before the end of such 30-day period, the servicer 

22 notifies the borrower of the extension and the rea23 sons for the delay in responding.’’. 

24 (d) REQUESTS FOR PAY-OFF AMOUNTS.—Section 

25 6(e) of the Real Estate Settlement Procedures Act of 1974 
103

•HR 1295 IH 

1 (12 U.S.C. 2605(e)) is amended by inserting after para2 graph (4) (as added by subsection (c) of this section) the 

3 following new paragraph: 

4 ‘‘(5) REQUESTS FOR PAY-OFF AMOUNTS.—A 

5 creditor or servicer shall send a payoff balance with6 in 7 business days of receipt of a written request for 

7 such balance from or on behalf of the borrower by 

8 first-class mail.’’. 

9 (e) PROMPT REFUND OF ESCROW ACCOUNTS UPON

10 PAYOFF.—Section 6(g) of the Real Estate Settlement 

11 Procedures Act of 1974 (12 U.S.C. 2605(g)) is amended 

12 by adding at the end the following new sentence: ‘‘Any 

13 balance in any such account at the time the loan is paid 

14 off shall be promptly returned to the borrower.’’. 

15 SEC. 305. MORTGAGE SERVICING STUDIES REQUIRED. 

16 (a) MORTGAGE SERVICING FRAUD.—

17 (1) STUDY.—The Secretary of Housing and 

18 Urban Development, in consultation with the Board 

19 of Governors of the Federal Reserve System and the 

20 Federal Trade Commission, shall conduct a com21 prehensive study on mortgage servicing fraud. 

22 (2) ISSUES TO BE INCLUDED.—In addition to 

23 other issues the Secretary, Board, and Commission 

24 may determine to be appropriate and possibly perti-
104

•HR 1295 IH 

1 nent to the study conducted under paragraph (1), 

2 the study shall include the following issues: 

3 (A) A survey of the industry in order to 

4 examine the issue of the timely posting of pay5 ments by servicers. 

6 (B) The use of force placed insurance. 

7 (C) The employment of daily interest when 

8 payments are made after a due date. 

9 (D) The charging of late fees on the entire 

10 outstanding principal. 

11 (E) The charging of interest on servicing 

12 fees. 

13 (F) The utilization of abusive collection 

14 practices. 

15 (G) The charging of prepayment penalties 

16 when not authorized by either the note or law. 

17 (H) The employment of unconscionable 

18 forbearance agreements. 

19 (I) Foreclosure abuses. 

20 (3) REPORT.—Before the end of the 18-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 
105

•HR 1295 IH 

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 Board 

6 of Governors of the Federal Reserve System and the 

7 Federal Trade Commission, shall conduct a com8 prehensive study on means to improve the best prac9 tices of the mortgage servicing industry, and Federal 

10 and State laws governing such industry. 

11 (2) REPORT.—Before the end of the 24-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. 
106

•HR 1295 IH 

1 TITLE IV—APPRAISAL 

2 ACTIVITIES 

3 SEC. 401. PROPERTY APPRAISAL REQUIREMENTS. 

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

5 1639) is amended by inserting after subsection (y) (as 

6 added by section 201 of this Act) the following new sub7 section: 

8 ‘‘(z) PROPERTY APPRAISAL REQUIREMENTS.—

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

10 credit in the form of a higher-cost mortgage to any 

11 consumer without first obtaining a written appraisal 

12 of the property to be mortgaged prepared in accord13 ance with the requirements of this subsection. 

14 ‘‘(2) APPRAISAL REQUIREMENTS.—

15 ‘‘(A) PHYSICAL INSPECTION.—An ap16 praisal of property to be secured by a higher17 cost mortgage does not meet the requirement of 

18 this subsection unless it is performed by a 

19 qualified appraiser who conducts a physical in20 spection of the mortgaged property. 

21 ‘‘(B) SECOND APPRAISAL UNDER CERTAIN

22 CIRCUMSTANCES.—

23 ‘‘(i) IN GENERAL.—If the purpose of 

24 the higher-cost mortgage is to finance the 

25 purchase or acquisition of the mortgaged 
107

•HR 1295 IH 

1 property from a person within 180 days of 

2 the purchase or acquisition of such prop3 erty by that person at a price that was 

4 lower than the current sale price of the 

5 property, the creditor shall obtain a second 

6 appraisal from a second qualified appraiser 

7 that supports the current sale price of the 

8 property. 

9 ‘‘(ii) NO COST TO CONSUMER.—The 

10 cost of any second appraisal required 

11 under clause (i) may not be charged to the 

12 consumer. 

13 ‘‘(C) QUALIFIED APPRAISER DEFINED.—

14 For purposes of this subsection, the term 

15 ‘qualified appraiser’ means a person who—

16 ‘‘(i) is certified or licensed by the 

17 State in which property to be appraised is 

18 located; and 

19 ‘‘(ii) performs each appraisal in con20 formity with the Uniform Standards of 

21 Professional Appraisal Practice and Title 

22 XI of the Financial Institutions Reform, 

23 Recovery, and Enforcement Act of 1989, 

24 and the regulations prescribed under such 
108

•HR 1295 IH 

1 title, as in effect on the date of the ap2 praisal. 

3 ‘‘(3) FREE COPY OF APPRAISAL.—A creditor 

4 shall provide 1 copy of each appraisal conducted in 

5 accordance with this subsection in connection with a 

6 higher-cost mortgage to the consumer without 

7 charge. 

8 ‘‘(4) 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. 402. AMENDMENTS RELATING TO APPRAISAL SUB14 COMMITTEE OF FIEC, APPRAISER INDEPEND15 ENCE, AND APPROVED APPRAISER EDU16 CATION. 

17 (a) 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 by inserting ‘‘in detail the 

21 activities of the Appraisal Subcommittee and’’ after 

22 ‘‘which describes’’. 

23 (b) OPEN MEETINGS.—Section 1104(b) of the Fi24 nancial Institutions Reform, Recovery, and Enforcement 

25 Act of 1989 (12 U.S.C. 3333(b)) is amended by inserting 
109

•HR 1295 IH 

1 ‘‘in public session after notice to the general public’’ after 

2 ‘‘shall meet’’. 

3 (c) REGULATIONS.—Section 1106 of the Financial 

4 Institutions Reform, Recovery, and Enforcement Act of 

5 1989 (12 U.S.C. 3335) is amended by inserting ‘‘prescribe 

6 regulations after notice and opportunity for comment,’’ 

7 after ‘‘hold hearings’’. 

8 (d) CRITERIA.—Section 1116 of the Financial Insti9 tutions Reform, Recovery, and Enforcement Act of 1989 

10 (12 U.S.C. 3345) is amended—

11 (1) in subsection (c), by inserting ‘‘whose cri12 teria for the licensing of a real estate appraiser cur13 rently meet or exceed the minimum criteria issued 

14 by the Appraiser Qualifications Board of The Ap15 praiser Foundation for the licensing of real estate 

16 appraisers’’ before the period at the end; and 

17 (2) by striking subsection (e). 

18 (e) TEMPORARY PRACTICE.—Section 1122(a)(1) of 

19 the Financial Institutions Reform, Recovery, and Enforce20 ment Act of 1989 (12 U.S.C. 3351(a)(1)) is amended—

21 (1) by striking subparagraph (A); 

22 (2) by redesignating subparagraphs (B) and 

23 (C) as subparagraphs (A) and (B), respectively; and 

24 (3) by moving the left margin of such subpara25 graphs 2 ems to the right. 
110

•HR 1295 IH 

1 (f) RECIPROCITY.—Subsection (b) of section 1122 of 

2 the Financial Institutions Reform, Recovery, and Enforce3 ment Act of 1989 (12 U.S.C. 3351(b)) is amended to read 

4 as follows: 

5 ‘‘(b) RECIPROCITY.—A State appraiser certifying or 

6 licensing agency shall issue a reciprocal certification or li7 cense for an individual from another State when— 

8 ‘‘(1) the appraiser licensing and certification 

9 program of such other State is in compliance with 

10 the provisions of this title; and 

11 ‘‘(2) the appraiser holds a valid certification 

12 from a State whose requirements for certification or 

13 licensing meet the requirements for certification and 

14 licensing as established by the Appraiser Qualifica15 tions Board of The Appraisal Foundation.’’. 

16 (g) CONSIDERATION OF PROFESSIONAL APPRAISAL

17 DESIGNATIONS.—Section 1122(d) of the Financial Insti18 tutions Reform, Recovery, and Enforcement Act of 1989 

19 (12 U.S.C. 3351(d)) is amended by adding at the end the 

20 following new sentence: ‘‘Consideration may be given for 

21 professional appraisal designations conferred by spon22 soring organizations of The Appraisal Foundation as an 

23 indication of proficiency in addition to the criteria estab24 lished by certification or licensing.’’. 
111

•HR 1295 IH 

1 (h) APPRAISER INDEPENDENCE.—Section 1122 of 

2 the Financial Institutions Reform, Recovery, and Enforce3 ment Act of 1989 (12 U.S.C. 3351) is amended by adding 

4 at the end the following new subsection: 

5 ‘‘(g) APPRAISER INDEPENDENCE.—

6 ‘‘(1) IN GENERAL.—No mortgage lender, mort7 gage broker or mortgage banker, real estate broker, 

8 nor any other person with an interest in a real es9 tate transaction involving an appraisal shall improp10 erly influence or attempt to improperly influence, 

11 through coercion, extortion, or bribery, the develop12 ment, reporting, result, or review of a real estate ap13 praisal 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, or any other person with an inter18 est in a real estate transaction from asking an ap19 praiser to provide 1 or more of the following serv20 ices: 

21 ‘‘(A) Consider additional, appropriate 

22 property information. 

23 ‘‘(B) Provide further detail, substantiation, 

24 or explanation for the appraiser’s value conclu25 sion. 
112

•HR 1295 IH 

1 ‘‘(C) Correct errors in the appraisal re2 port.’’. 

3 (i) APPRAISER EDUCATION.—Section 1122 of the Fi4 nancial Institutions Reform, Recovery, and Enforcement 

5 Act of 1989 (12 U.S.C. 3351) is amended by inserting 

6 after subsection (g) (as added by subsection (h) of this 

7 section) the following new subsection: 

8 ‘‘(h) APPROVED EDUCATION.—A State certifying or 

9 licensing agency shall accept courses and seminars ap10 proved by the Appraiser Qualification Board’s Course Ap11 proval Program.’’. 

12 SEC. 403. STUDY REQUIRED ON IMPROVEMENTS IN AP13 PRAISAL PROCESS AND COMPLIANCE PRO14 GRAMS. 

15 (a) STUDY.—The Comptroller General shall conduct 

16 a comprehensive study on possible improvements in the 

17 appraisal process generally, and specifically on the consist18 ency in and the effectiveness of, and possible improve19 ments in, State compliance efforts and programs in ac20 cordance with title XI of Financial Institutions Reform, 

21 Recovery, and Enforcement Act of 1989. 

22 (b) REPORT.—Before the end of the 18-month period 

23 beginning on the date of the enactment of this Act, the 

24 Comptroller General shall submit a report on the study 

25 under subsection (a) to the Committee on Financial Serv-
113

•HR 1295 IH 

1 ices of the House of Representatives and the Committee 

2 on Banking, Housing, and Urban Affairs of the Senate, 

3 together with such recommendations for administrative or 

4 legislative action, at the Federal or State level, as the 

5 Comptroller General may determine to be appropriate. 

6 TITLE V—REQUIREMENTS FOR 

7 MORTGAGE BROKERS 

8 Subtitle A—Licensing and 

9 Minimum Standards 

10 SEC. 501. STATE REGULATION OF MORTGAGE BROKERS. 

11 (a) IN GENERAL.—The Federal mortgage broker re12 quirements established pursuant to this title shall apply 

13 only with respect to States that, upon the expiration of 

14 the 3-year period beginning on the date of the enactment 

15 of this Act, have not enacted and do not have in effect 

16 uniform State laws and regulations described in subsection 

17 (b). 

18 (b) UNIFORM STATE LAWS.—

19 (1) IN GENERAL.—Laws and regulations de20 scribed in this subsection are laws and regulations 

21 that—

22 (A) require licensing for mortgage brokers; 

23 (B) require, as a condition of the issuance 

24 of a license, that an applicant submit a written 

25 application for a license; 
114

•HR 1295 IH 

1 (C) require, as a condition of the issuance 

2 of a license, that an applicant complete at least 

3 24 hours of education on primary and subordi4 nate mortgage financing and pass a written ex5 amination upon the completion of such training; 

6 (D) require a criminal background check 

7 to be performed on the applicant; 

8 (E) establish minimum testing standards 

9 for mortgage brokers; 

10 (F) require continuing education of mort11 gage brokers, including at least 12 hours of 

12 education on a biennial basis, a minimum of 2 

13 hours of which shall address ethics education; 

14 (G) require the public agency or official in 

15 the State that is responsible for the licensing of 

16 mortgage brokers to provide, directly or other17 wise to the national mortgage database estab18 lished under subtitle B, such information as 

19 may be necessary to ensure that such database 

20 is effective for the purposes for which it is es21 tablished; and 

22 (H) comply with such standards regarding 

23 uniformity of information submitted to the na24 tional database of mortgage brokers established 

25 under subtitle B as the Secretary of Housing 
115

•HR 1295 IH 

1 and Urban Development considers necessary to 

2 facilitate the operation of the database. 

3 (2) EXEMPTIONS.—For purposes of this sub4 section, the term ‘‘mortgage broker’’ has the mean5 ing provided in section 503(3), except that the laws 

6 and regulations of a State shall exempt from treat7 ment as mortgage brokers the following persons: 

8 (A) Any bank, savings bank, savings and 

9 loan association, or credit union organized 

10 under the laws of a State or the United States, 

11 or a subsidiary or affiliate of a bank, savings 

12 bank, savings and loan association, or credit 

13 union. 

14 (B) Any budget or debt counseling service, 

15 as defined by the Secretary, that is a nonprofit 

16 organization exempt from taxation under sec17 tion 501(c)(3) of the Internal Revenue Code of 

18 1986 (26 U.S.C. 501(c)(3)). 

19 (C) Any consumer reporting agency that is 

20 in substantial compliance with the Fair Credit 

21 Reporting Act (15 U.S.C. 1681 et seq.). 

22 (D) Any political subdivision, or any gov23 ernmental or other public entity, corporation, or 

24 agency, in or of the United States or any State. 
116

•HR 1295 IH 

1 (E) Any college or university, or entity 

2 that is controlled by a college or university, as 

3 determined by the Secretary. 

4 (F) Any person who—

5 (i) makes, services, buys, or sells 

6 mortgage loans; 

7 (ii) underwrites the loans; and 

8 (iii)(I) has been approved by the Sec9 retary of Housing and Urban Development 

10 as a nonsupervised mortgagee with partici11 pation in the direct endorsement program, 

12 but not including a mortgagee approved as 

13 a loan correspondent; 

14 (II) has been approved by the Federal 

15 National Mortgage Association as a seller 

16 or servicer; 

17 (III) has been approved by the Fed18 eral Home Loan Mortgage Corporation as 

19 a seller or servicer; 

20 (IV) has been approved by the Sec21 retary of Veterans Affairs as a nonsuper22 vised automatic lender, but not including a 

23 person approved by the Secretary as a non24 supervised lender, an agent of a nonsuper-
117

•HR 1295 IH 

1 vised automatic lender, or an agent of a 

2 nonsupervised lender; or 

3 (V) is a creditor (as defined in section 

4 103(f) of the Truth in Lending Act) who 

5 makes or invests in residential real estate 

6 loans aggregating more than $1,000,000 

7 per year, and irrespective of whether such 

8 creditor is licensed or supervised by an 

9 agency of a State. 

10 (G) Any person created solely for the pur11 pose of packaging and selling, as a unit of sale 

12 as investment securities, mortgage loans that 

13 are secured by an interest in real estate, if the 

14 person does not service the loans. 

15 (H) Any officer or employee of any of the 

16 persons described in a preceding subparagraph 

17 of this paragraph while such officer or employee 

18 is acting within the the scope of the office or 

19 employment. 

20 (c) DETERMINATION.—

21 (1) HUD DETERMINATION.—At the end of the 

22 3-year period beginning on the date of the enact23 ment of this Act, the Secretary of Housing and 

24 Urban Development shall determine, in consultation 

25 with the Federal banking agencies (as defined in 
118

•HR 1295 IH 

1 section 3 of the Federal Deposit Insurance Act) and 

2 the National Credit Union Administration, whether 

3 the uniformity necessary to comply with subsection 

4 (a) has been achieved. 

5 (2) JUDICIAL REVIEW.—The appropriate 

6 United States district court shall have exclusive ju7 risdiction over any challenge to the determination 

8 pursuant to paragraph (1) and such court shall 

9 apply the standards set forth in section 706 of title 

10 5, United States Code, when reviewing any such 

11 challenge. 

12 (d) CONTINUED APPLICATION.—If, at any time, the 

13 Secretary determines that a State no longer has in effect 

14 laws and regulations described in subsection (a) or the 

15 uniformity necessary to comply with subsection (a) no 

16 longer exists with respect to a State, the Federal mortgage 

17 broker requirements shall take effect with respect to such 

18 State 2 years after the date on which such determination 

19 was made, unless the State has in effect such laws or regu20 lations, or the uniformity necessary to comply with sub21 section (a) is satisfied, before the expiration of such 2-

22 year period. 

23 (e) MONITORING.—The Secretary shall monitor the 

24 laws and regulations of the States governing the matters 
119

•HR 1295 IH 

1 referred to in subsection (a) for purposes of making deter2 minations under subsection (d). 

3 SEC. 502. FEDERAL MORTGAGE BROKER REQUIREMENTS. 

4 (a) IN GENERAL.—Not later than 3 years after the 

5 date of the enactment of this Act, the Secretary of Hous6 ing and Urban Development shall, by regulation and in 

7 consultation with the Federal banking agencies (as defined 

8 in section 3 of the Federal Deposit Insurance Act) and 

9 the National Credit Union Administration, establish Fed10 eral mortgage broker requirements under this section that 

11 meet the requirements established in section 501(b)(1). 

12 (b) RULEMAKING.—The regulations required under 

13 subsection (a) shall be issued after notice and opportunity 

14 for public comment pursuant to the provisions of section 

15 553 of title 5, United States Code (notwithstanding sub16 sections (a)(2), (b)(B), and (d)(3) of such section). 

17 SEC. 503. DEFINITIONS. 

18 For purposes of this title, the following definitions 

19 shall apply: 

20 (1) BUYER.—The term ‘‘buyer’’ means an indi21 vidual who is solicited to purchase, or who pur22 chases, the services of a mortgage broker for pur23 poses other than obtaining a business loan. 
120

•HR 1295 IH 

1 (2) MORTGAGE.—The term ‘‘mortgage’’ means 

2 any indebtedness secured by a deed of trust, security 

3 deed, or other lien on real property. 

4 (3) MORTGAGE BROKER.—The term ‘‘mortgage 

5 broker’’ means a person who engages for compensa6 tion, either directly or indirectly, in the acceptance 

7 of applications for mortgage loans for others, solici8 tation of mortgage loans on behalf of borrowers, or 

9 negotiation of terms or conditions of loans on behalf 

10 of borrowers or lenders. 

11 (4) SECRETARY.—The term ‘‘Secretary’’ means 

12 the Secretary of Housing and Urban Development. 

13 Subtitle B—Database of Licensed 

14 Mortgage Brokers 

15 SEC. 511. ESTABLISHMENT. 

16 (a) IN GENERAL.—The Secretary of Housing and 

17 Urban Development (hereafter in this subtitle referred to 

18 as the ‘‘Secretary’’) shall provide for the establishment 

19 and maintenance of a national database of mortgage bro20 kers. 

21 (b) ADMINISTRATION.—The Secretary shall either 

22 maintain and administrate the database established under 

23 this subtitle or enter into a contract with a private regu24 latory organization to maintain and administrate the data25 base. The Secretary shall consult with the American Asso-
121

•HR 1295 IH 

1 ciation of Residential Mortgage Regulators, the Con2 ference of State Bank Supervisors, and other appropriate 

3 organizations in determining the information to be main4 tained in the database and, if the Secretary provides for 

5 any other organization to maintain and administrate the 

6 database, in selecting such organization. 

7 (c) COMPETITIVELY PROCURED CONTRACT.—If the 

8 Secretary decides to select a private regulatory organiza9 tion to maintain and administrate the database, the Sec10 retary shall enter into any contract for administration of 

11 the database using competitive procedures (as such term 

12 is defined in section 4 of the Office of Federal Procure13 ment Policy Act). 

14 (d) PERFORMANCE REVIEW.—The Secretary—

15 (1) shall periodically review the performance of 

16 any organization serving as administrator of the 

17 database; and 

18 (2) may replace any such other organization 

19 with another qualified organization, pursuant to 

20 competitive procedures if the Secretary determines 

21 in writing that the organization serving as adminis22 trator is not fulfilling the terms of the contract or 

23 upon the expiration of the contract. 
122

•HR 1295 IH 

1 SEC. 512. DATABASE. 

2 The national database of mortgage brokers main3 tained pursuant to this title shall—

4 (1) include a listing of each person licensed 

5 under State law or regulation or under Federal 

6 mortgage broker requirements under section 502 to 

7 act as a mortgage broker; 

8 (2) make available to the public information re9 garding complaints made, and final disciplinary and 

10 enforcement actions taken, against each licensed 

11 mortgage broker; 

12 (3) make available to the Secretary of Housing 

13 and Urban Development and to each public agency 

14 or official in a State responsible for licensing or test15 ing under the laws or regulations referred to in sec16 tion 501(b) such information regarding mortgage 

17 brokers as the Secretary, by regulation, considers 

18 appropriate for the Secretary and such agencies and 

19 officials to carry out their functions regarding regu20 lation, licensing, or testing of mortgage brokers, in21 cluding information regarding employment histories 

22 and criminal backgrounds of mortgage brokers; 

23 (4) make available to persons employing or 

24 using the services of mortgage brokers such informa25 tion regarding mortgage brokers as the Secretary, by 

26 regulation, considers appropriate; and 
123

•HR 1295 IH 

1 (5) provide for the maintenance of such other 

2 information as the Secretary considers appropriate. 

3 SEC. 513. FEES. 

4 The Secretary may provide for the national database 

5 of mortgage brokers to charge reasonable fees to cover 

6 costs of maintaining and providing access to information 

7 from the database to the extent such fees are not charged 

8 to the general public. 

9 SEC. 514. CONFIDENTIALITY OF INFORMATION. 

10 (a) IN GENERAL.—

11 (1) DATABASE.—Except as otherwise provided 

12 in this section, any requirement under Federal or 

13 State law regarding the privacy or confidentiality of 

14 any information or material in the possession of the 

15 Secretary or any other organization serving as the 

16 administrator of the database, and any privilege 

17 arising under Federal or State law (including the 

18 rules of any Federal or State court) with respect to 

19 such information or material, shall continue to apply 

20 to such information or material after the informa21 tion or material has been disclosed to the database. 

22 (2) NONAPPLICABILITY OF CERTAIN REQUIRE23 MENTS.—Information or material that is subject to 

24 a privilege or confidentiality under any other para25 graph of this subsection shall not be subject to—
124

•HR 1295 IH 

1 (A) disclosure under any Federal or State 

2 law governing the disclosure to the public of in3 formation held by an officer or an agency of the 

4 Federal Government or the respective State; or 

5 (B) subpoena or discovery, or admission 

6 into evidence, in any private civil action or ad7 ministrative process, 

8 unless with respect to any privilege held by the Sec9 retary with respect to such information or material, 

10 the participant waives, in whole or in part, in the 

11 discretion of the participant, such privilege. 

12 (b) PREEMPTION OF STATE LAW.—Any State law, 

13 including any State open record law, relating to the disclo14 sure of confidential supervisory information or any infor15 mation or material described in subsection (a) that is in16 consistent with subsection (a) shall be superseded by the 

17 requirements of such provision to the extent State law pro18 vides less confidentiality or a weaker privilege. 

19 SEC. 515. LIABILITY PROVISIONS. 

20 (a) NO LIABILITY FOR GOOD-FAITH DISCLO21 SURES.—Any State official or agency, or employee thereof, 

22 shall not be subject to any civil action or proceeding for 

23 monetary damages by reason of the good-faith action or 

24 omission of any officer or employee, while acting within 

25 the scope of office or employment, relating to collecting, 
125

•HR 1295 IH 

1 furnishing, or disseminating of information concerning 

2 persons who are mortgage brokers or are applying for li3 censing as mortgage brokers, whether directly or through 

4 the national database established under this subtitle. 

5 (b) CRIMINAL LIABILITY FOR INTENTIONAL UNLAW6 FUL DISCLOSURES.—

7 (1) IN GENERAL.—It shall be unlawful to will8 fully disclose to any person any information con9 cerning any person who is a mortgage broker or is 

10 applying for licensing as a mortgage broker knowing 

11 the disclosure to be in violation of any provision of 

12 this title—

13 (A) requiring the confidentiality of such in14 formation; or 

15 (B) establishing a privilege from disclosure 

16 for such information that has not been waived 

17 by the Secretary and the person who is a mort18 gage broker or is applying for licensing as a 

19 mortgage broker. 

20 (2) PENALTY.—Notwithstanding section 3571 

21 of title 18, United States Code, any person who vio22 lates paragraph (1) shall be fined an amount not to 

23 exceed the greater of $100,000 or the amount of the 

24 actual damages sustained by any person as a result 
126

•HR 1295 IH 

1 of such violation, or imprisoned not more than 5 

2 years, or both. 

3 (c) FULL, CONTINUED PROTECTION UNDER THE SO4 CALLED ‘‘FEDERAL TORT CLAIMS ACT’’.—No provision 

5 of this Act shall be construed as reducing or limiting any 

6 protection provided for any Federal agency, or any officer 

7 or employee of any Federal agency, under section 2679 

8 of title 28, United States Code.

Æ