I

107TH CONGRESS

1ST SESSION H. R. 1053

To amend the Equal Credit Opportunity Act and the Home Mortgage Disclosure Act of 1975 to reduce the disparate impact of predatory lending

on minorities, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 15, 2001

Mr. LAFALCE (for himself, Mr. GUTIERREZ, Ms. LEE, Mrs. JONES of Ohio,

Mr. CAPUANO, Mr. CLAY, Mr. HINCHEY, and Ms. SCHAKOWSKY) introduced the following bill; which was referred to the Committee on Financial Services

A BILL

To amend the Equal Credit Opportunity Act and the Home

Mortgage Disclosure Act of 1975 to reduce the disparate

impact of predatory lending on minorities, and for other

purposes.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Equal Credit Enhance5 ment and Neighborhood Protection Act of 2001’’.
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1 SEC. 2. COMBATING DISCRIMINATORY STEERING AND RE2 VERSE REDLINING.

3 (a) DISCRIMINATORY STEERING AND REVERSE RED4 LINING PROHIBITED.—Section 701 of the Equal Credit

5 Opportunity Act (15 U.S.C. 1691) is amended—

6 (1) by striking ‘‘(a) It shall be unlawful’’ and

7 inserting ‘‘(a) IN GENERAL.—It shall be unlawful’’;

8 (2) by redesignating subsections (b), (c), (d),

9 and (e) as subsections (d), (e), (f), and (g), respec10 tively; and

11 (3) by inserting after subsection (a) the fol12 lowing new subsections:

13 ‘‘(b) MOST FAVORABLE CREDIT TERMS.—

14 ‘‘(1) IN GENERAL.—It shall be unlawful for a

15 creditor to fail to extend credit to an applicant

16 under the most favorable terms available from the

17 creditor, or an affiliate of the creditor, for which the

18 applicant qualifies.

19 ‘‘(2) AFFILIATE DEFINED.—For purposes of

20 this subsection, the term ‘affiliate’ has the same

21 meaning given such term in section 2(k) of the Bank

22 Holding Company Act of 1956.

23 ‘‘(c) TARGETING HIGH-COST MORTGAGES PROHIB24 ITED.—

25 ‘‘(1) IN GENERAL.—It shall be unlawful for any

26 creditor to adversely target an applicant or group of
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1 applicants on the basis of race, color, religion, na2 tional origin, sex, marital status or age, with respect

3 to a high cost mortgage.

4 ‘‘(2) HIGH COST MORTGAGE DEFINED.—

5 ‘‘(A) IN GENERAL.—For purposes of this

6 title, the term ‘high cost mortgage’ means a

7 consumer credit transaction—

8 ‘‘(i) that is secured by the consumer’s

9 principal dwelling, other than a reverse

10 mortgage transaction; and

11 ‘‘(ii) the terms of which are described

12 in at least 1 of the following subclauses:

13 ‘‘(I) The transaction is secured

14 by a first mortgage on the consumer’s

15 principal dwelling and the annual per16 centage rate on the credit, at the con17 summation of the transaction, will ex18 ceed by more than 6 percentage

19 points the yield on Treasury securities

20 having comparable periods of maturity

21 on the 15th day of the month imme22 diately preceding the month in which

23 the application for the extension of

24 credit is received by the creditor;
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1 ‘‘(II) The transaction is secured

2 by a junior or subordinate mortgage

3 on the consumer’s principal dwelling

4 and the annual percentage rate on the

5 credit, at the consummation of the

6 transaction, will exceed by more than

7 8 percentage points the yield on

8 Treasury securities having comparable

9 periods of maturity on the 15th day of

10 the month immediately preceding the

11 month in which the application for the

12 extension of credit is received by the

13 creditor.

14 ‘‘(III) The total points and fees

15 payable on the transaction will exceed

16 the greater of 5 percent of the total

17 loan amount or $1,000.

18 ‘‘(B) INTRODUCTORY RATES NOT TAKEN

19 INTO ACCOUNT.—If the terms of any consumer

20 credit transaction that is secured by the con21 sumer’s principal dwelling offer, for any initial

22 or introductory period, an annual percentage

23 rate of interest which—

24 ‘‘(i) is less than the annual percentage

25 rate of interest which will apply after the
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1 end of such initial or introductory period;

2 or

3 ‘‘(ii) in the case of an annual percent4 age rate which varies in accordance with

5 an index, which is less than the current

6 annual percentage rate under the index

7 which will apply after the end of such pe8 riod,

9 the annual percentage rate of interest that shall

10 be taken into account for purposes of sub11 clauses (I) and (II) of subparagraph (A)(ii)

12 shall be the rate described in clause (i) or (ii)

13 of this subparagraph rather than any rate in ef14 fect during the initial or introductory period.

15 ‘‘(3) NO NEGATIVE IMPLICATION.—No provi16 sion of this subsection shall be construed as prohib17 iting a nonprofit entity or government agency from

18 promoting a program that enhances the availability

19 of mortgage credit on fair terms, as defined in regu20 lations that the Secretary shall prescribe, to under21 served persons and communities.’’.

22 (b) ENHANCED GENERAL DAMAGES FOR REVERSE

23 REDLINING.—Section 706 of the Equal Credit Oppor24 tunity Act (15 U.S.C. 1691e) is amended—
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1 (1) by striking ‘‘(a) Any creditor’’ and inserting

2 ‘‘(a) ACTUAL DAMAGES.—Any creditor’’;

3 (2) by striking ‘‘(b) Any creditor’’ and inserting

4 ‘‘(b) GENERAL DAMAGES.—

5 ‘‘(1) IN GENERAL.—Any creditor’’; and

6 (3) by adding at the end of subsection (b) the

7 following new paragraph:

8 ‘‘(2) PUNITIVE DAMAGES FOR REVERSE RED9 LINING.—Any creditor, other than a government or

10 governmental subdivision or agency, who fails to

11 comply with any requirement imposed under sub12 section (b) or (c) of section 701 shall be liable—

13 ‘‘(A) to the aggrieved applicant for puni14 tive damages in an amount not greater than

15 $20,000, in addition to any actual damages

16 provided in subsection (a) of this section; and

17 ‘‘(B) except in the case of a class action

18 the total recovery under this paragraph shall

19 not exceed the greater of—

20 ‘‘(i) the amount determined by multi21 plying the maximum amount of liability

22 under subparagraph (A) for such failure to

23 comply in an individual action by the num24 ber of members of the certified class; or
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1 ‘‘(ii) the amount equal to 2 percent of

2 the net worth of the creditor.’’.

3 SEC. 3. APPLICABILITY OF EQUAL CREDIT OPPORTUNITY

4 ACT TO REQUESTS FOR PREAPPROVALS.

5 Section 702(b) of the Equal Credit Opportunity Act

6 (15 U.S.C. 1691a(b)) is amended by inserting the fol7 lowing before the period at the end: ‘‘and includes any per8 son who requests a written commitment from a creditor

9 for a home purchase loan, even if the person requests a

10 commitment to be issued subject to the identification of

11 a suitable property or other condition’’.

12 SEC. 4. PROHIBITION ON CERTAIN REGULATORY EXEMP13 TIONS UNDER THE HOME MORTGAGE DIS14 CLOSURE ACT OF 1977.

15 Section 304 of the Home Mortgage Disclosure Act

16 of 1975 (12 U.S.C. 2803) is amended by adding at the

17 end the following new subsection:

18 ‘‘(n) PROHIBITION ON REGULATORY EXEMPTIONS

19 FROM REPORTING REQUIREMENTS.—Subject to sub20 section (i)—

21 ‘‘(1) no provision of this title may be construed

22 as authorizing the Board, the Secretary, or any

23 other Federal agency to exempt any depository insti24 tution from the requirements of this title; and
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1 ‘‘(2) any exemption from the requirements of

2 this title provided in any regulation, such as the ex3 emption provided in Appendix A to part 203 of the

4 Code of Federal Regulations for lending institutions

5 described in section 303(2)(B) whose total dollar

6 amount of purchase loans originated in any year did

7 not exceed 10 percent of the total dollar amount of

8 all loan originations by such institution in such year,

9 shall cease to be effective as of the date of the enact10 ment of the Equal Credit Enhancement and Neigh11 borhood Protection Act.’’.

12 SEC. 5. ADDITIONAL DISCLOSURES UNDER THE HOME

13 MORTGAGE DISCLOSURE ACT OF 1977.

14 (a) REASON FOR DENIAL.—Paragraph (4) of section

15 304(b) of the Home Mortgage Disclosure Act of 1975 (12

16 U.S.C. 2803(b)(4)) is amended by inserting ‘‘(and the rea17 sons for denial of a loan in the case of completed applica18 tion, as appropriate)’’ after ‘‘completed applications’’.

19 (b) APR AND FEES.—Section 304(b) of the Home

20 Mortgage Disclosure Act of 1975 (12 U.S.C. 2803(b)) is

21 amended—

22 (1) by striking ‘‘and’’ at the end of paragraph

23 (3);

24 (2) by striking the period at the end of para25 graph (4) and inserting a semicolon; and
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1 (3) by adding at the end the following new

2 paragraph:

3 ‘‘(5) annual percentage rate (as determined

4 under section 107 of the Truth in Lending Act) of

5 mortgage loans, along with all costs of credit, which

6 shall include all finance charges (as determined

7 under section 106 of the Truth in Lending Act),

8 costs of all insurance premiums paid within 90 days

9 of a loan’s origination, fees and amounts imposed by

10 third party closing agents and all fees collected by

11 mortgage brokers, and an indication of whether a

12 loan is subject to the Homeownership Equity Protec13 tion Act of 1994, grouped according to census tract,

14 income level, racial characteristics and gender;’’.

15 (c) DEBT-TO-INCOME RATIO FOR CERTAIN LOANS.—

16 Section 304(b) of the Home Mortgage Disclosure Act of

17 1975 (12 U.S.C. 2803(b)) is amended by inserting after

18 paragraph (5) (as added by subsection (b)(3) of this sec19 tion) the following new paragraph:

20 ‘‘(6) for each mortgage loan, the ratio of the

21 mortgagor’s debt to the mortgagor’s income;’’.

22 (d) MANUFACTURED HOUSING.—Section 304(b) of

23 the Home Mortgage Disclosure Act of 1975 (12 U.S.C.

24 2803(b)) is amended by inserting after paragraph (6) (as
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1 added by subsection (c) of this section) the following new

2 paragraph:

3 ‘‘(7) for each mortgage loan, indication of

4 whether repayment of the loan is secured by a lien

5 on a manufactured home;’’.

6 (e) LOAN-TO-VALUE RATIO.—Section 304(b) of the

7 Home Mortgage Disclosure Act of 1975 (12 U.S.C.

8 2803(b)) is amended by inserting after paragraph (7) (as

9 added by subsection (d) of this section) the following new

10 paragraph:

11 ‘‘(8) for each mortgage loan, the ratio of the

12 value of the real estate (including a manufactured

13 home, as appropriate) that secures repayment of the

14 loan to the principal amount of the loan at the time

15 of origination; and’’

16 (f) RACE, AGE, AND GENDER OF ALL APPLI17 CANTS.—Section 304(b) of the Home Mortgage Disclosure

18 Act of 1975 (12 U.S.C. 2803(b)) is amended by inserting

19 after paragraph (8) (as added by subsection (e) of this

20 section) the following new paragraph:

21 ‘‘(9) for each completed application, including

22 applications taken by telephone or electronically, the

23 racial characteristics, age, and gender of each appli24 cant.’’
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1 (g) INVOLVEMENT OF MORTGAGE BROKERS.—Sec2 tion 304(b) of the Home Mortgage Disclosure Act of 1975

3 (12 U.S.C. 2803(b)) is amended by inserting after para4 graph (9) (as added by subsection (f) of this section) the

5 following new paragraph:

6 ‘‘(9) the number and dollar amounts of mort7 gage loans and loan applications (whether completed

8 or not) with respect to which a mortgage broker (as

9 defined in regulations prescribed under the Real Es10 tate Settlement Procedures Act of 1974) was in11 volved at any stage of the loan process.’’.

12 (h) TECHNICAL AND CONFORMING AMENDMENTS.—

13 Section 304(h) of the Home Mortgage Disclosure Act of

14 1975 (12 U.S.C. 2803(b)) is amended by striking ‘‘sub15 section (b)(4)’’ each place such term appears and inserting

16 ‘‘paragraph (4), (5), (6), (7), (8), (9), or (10) of sub17 section (b)’’.

18 SEC. 6. DISCLOSURE OF PARENT COMPANY.

19 Section 304 of the Home Mortgage Disclosure Act

20 of 1975 (12 U.S.C. 2803) is amended by inserting after

21 subsection (n) (as added by section 4 of this Act) the fol22 lowing new subsection:

23 ‘‘(o) OBLIGATION TO IDENTIFY PARENT.—

24 ‘‘(1) IN GENERAL.—In each disclosure and sub25 mission required by this title, each depository insti-
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1 tution shall clearly identify the company that con2 trols the depository institution and any affiliate of

3 the depository institution that makes mortgage loans

4 or provides financing for such loans.

5 ‘‘(2) CONTROL DEFINED.—For purposes of this

6 subsection, the term ‘control’ shall have the same

7 meaning given such term in section 2 of the Bank

8 Holding Company Act of 1956.’’.

9 SEC. 7. APPLICATION INCLUDES REQUESTS FOR

10 PREAPPROVAL.

11 Section 303(3) of the Home Mortgage Disclosure Act

12 of 1975 (12 U.S.C. 2802(3)) is amended by inserting

13 ‘‘and includes any request for a written commitment from

14 a depository institution for a home purchase loan, even

15 if the applicant requests a commitment to be issued sub16 ject to the identification of a suitable property or other

17 condition’’ before the semicolon at the end.

18 SEC. 8. SANCTIONS AGAINST MORTGAGE LENDERS NOT AF19 FILIATED WITH DEPOSITORY INSTITUTIONS.

20 Section 305 of the Home Mortgage Disclosure Act

21 of 1975 (12 U.S.C. 2804) is amended—

22 (1) in subsection (b)—

23 (A) by inserting ‘‘and’’ after the semicolon

24 at the end of paragraph (2);
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1 (B) by striking ‘‘; and’’ at the end of para2 graph (3) and inserting a period; and

3 (C) by striking paragraph (4);

4 (2) by redesignating subsection (c) as sub5 section (e); and

6 (3) by inserting after subsection (b), the fol7 lowing new subsection:

8 ‘‘(c) POWERS OF THE SECRETARY OF HOUSING AND

9 URBAN DEVELOPMENT.—

10 ‘‘(1) IN GENERAL.—The Secretary of Housing

11 and Urban Development (hereafter in this sub12 section referred to as ‘the Secretary’) shall enforce

13 compliance with the requirements imposed under

14 this title with regard to other lending institutions

15 not described in subsection (b).

16 ‘‘(2) CIVIL MONEY PENALTIES.—Pursuant to

17 paragraph (1) of this subsection, the Secretary may

18 impose a civil money penalty for failure to comply

19 with the requirements of this Act.

20 ‘‘(3) AMOUNT OF PENALTY.—The amount of

21 the penalty, as determined by the Secretary, may

22 not exceed $5,000 for each violation, except that the

23 maximum penalty for all violations by any particular

24 lending institution during any 1-year period shall

25 not exceed $1,000,000.
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1 ‘‘(4) VIOLATIONS FOR WHICH PENALTY MAY BE

2 IMPOSED.—A civil money penalty may be imposed

3 for the late submission of a report, failure to submit

4 a report, submission of an illegible report, submis5 sion of an erroneous report, and failure to submit

6 corrections to a report that was illegible or erro7 neous.

8 ‘‘(5) AGENCY PROCEDURES.—

9 ‘‘(A) ESTABLISHMENT.—The Secretary

10 shall establish standards and procedures gov11 erning the imposition of civil money penalties

12 under this section. These standards and proce13 dures shall provide for the Secretary to make

14 the determination to impose the penalty or to

15 use in administrative entity (such as the Mort16 gagee Review Board, established pursuant to

17 section 202(c) of the National Housing Act) to

18 make the determination, shall provide for the

19 imposition of a penalty only after the lending

20 institution has been given an opportunity for a

21 hearing on a record, and may provide for review

22 by the Secretary of a determination on order, or

23 interlocutory ruling, arising from a hearing.

24 ‘‘(B) FINAL ORDERS.—If no hearing is re25 quested within 15 days of receipt of the notice
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1 of opportunity for hearing, the imposition of the

2 penalty shall constitute a final and

3 unappealable determination. If the Secretary re4 views the determination or order, the Secretary

5 may affirm, modify, or reverse that determina6 tion or order. If the Secretary does not review

7 the determination or order within 90 days of

8 the issuance of the determination or order, the

9 determination or order shall be final.

10 ‘‘(C) FACTORS IN DETERMINING AMOUNT

11 OF PENALTY.—In determining the amount of a

12 penalty under this subsection, consideration

13 shall be given to such factors as the gravity of

14 the offense, any history of prior offenses, ability

15 to pay the penalty, deterrence of future viola16 tions, and such other factors as the Secretary

17 may determine to be appropriate.

18 ‘‘(D) REVIEWABILITY OF IMPOSITION OF

19 PENALTY.—The Secretary’s determination or

20 order imposing a penalty under this subsection

21 shall not be subject to review, except as pro22 vided in this subsection.

23 ‘‘(6) JUDICIAL REVIEW OF AGENCY DETER24 MINATION.—
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1 ‘‘(A) IN GENERAL.—After exhausting all

2 administrative remedies established by the Sec3 retary under this subsection, a lending institu4 tion against whom the Secretary has imposed a

5 civil money penalty under this subsection may

6 obtain a review of the penalty as may be ad7 dressed in the notice of determination to impose

8 a penalty in the appropriate court of appeals of

9 the United States, by filing in such court, with10 in 20 days after the entry of such order or de11 termination, a written petition praying that the

12 Secretary’s determination or order be modified

13 or set aside in whole or in part.

14 ‘‘(B) OBJECTIONS NOT RAISED IN HEAR15 ING.—

16 ‘‘(i) IN GENERAL.—The court shall

17 not consider any objection that was not

18 raised in the hearing conducted pursuant

19 to this subsection unless a demonstration

20 is made of extraordinary circumstances

21 causing the failure to raise the objection.

22 ‘‘(ii) REMAND OF NEW EVIDENCE.—If

23 any party demonstrates to the satisfaction

24 of the court that additional evidence not

25 presented at the hearing is material and
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1 that there were reasonable grounds for the

2 failure to present such evidence at the

3 hearing, the court shall remand the matter

4 to the Secretary for consideration of the

5 additional evidence.

6 ‘‘(C) SCOPE OF REVIEW.—The decisions,

7 findings, and determinations of the Secretary

8 shall be reviewed pursuant to section 706 of

9 title 5, United States Code.

10 ‘‘(D) ORDER TO PAY PENALTY.—Notwith11 standing any other provision of law, in any such

12 review, the court shall have the power to order

13 payment of the penalty imposed by the Sec14 retary.

15 ‘‘(7) ACTION TO COLLECT PENALTY.—

16 ‘‘(A) ACTION BY ATTORNEY GENERAL.—If

17 a lending institution fails to comply with the

18 Secretary’s determination or order imposing a

19 civil money penalty under this subsection, after

20 the determination or order is no longer subject

21 to review as provided by this subsection, the

22 Secretary may request the Attorney General to

23 bring an action in an appropriate United States

24 district court to obtain a monetary judgment

25 against the lending institution.
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1 ‘‘(B) SCOPE OF REVIEW.—In such an ac2 tion, the validity and appropriateness of the

3 Secretary’s determination or order imposing the

4 penalty shall not be subject to review.

5 ‘‘(C) RECOVERY OF COSTS OF FEDERAL

6 ACTION.—The money judgment may, in the

7 court’s discretion, include the attorneys fees

8 and other expenses incurred by the United

9 States in connection with the action.

10 ‘‘(8) SETTLEMENT BY SECRETARY.—The Sec11 retary may compromise, modify, or remit any civil

12 money penalty which may be imposed under this

13 subsection.

14 ‘‘(9) REGULATIONS.—The Secretary shall issue

15 such regulations as the Secretary deems appropriate

16 to implement this subsection.

17 ‘‘(10) RETENTION AND USE OF PENALTIES.—

18 Notwithstanding any other provisions of law, all civil

19 money penalties collected under this subsection shall

20 be deposited in a revolving fund established by the

21 Secretary, to be available without fiscal year limita22 tion for enforcement of the requirements of this title

23 and for data improvement activities of the Secretary

24 in connection with the reporting requirements of this

25 title.’’.
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1 SEC. 9. ALTERNATIVE ENFORCEMENT BY STATES.

2 Section 305 of the Home Mortgage Disclosure Act

3 of 1975 (12 U.S.C. 2804) is amended by inserting after

4 subsection (c) (as added by section 8 of this Act) the fol5 lowing new subsection:

6 ‘‘(d) ALTERNATIVE ENFORCEMENT BY STATES.—

7 ‘‘(1) STATE REQUEST FOR ENFORCEMENT AC8 TION.—A State may request in writing that the Sec9 retary take an action permitted under subsection (c)

10 to enforce compliance with the Act by a depository

11 institution doing business within such State.

12 ‘‘(2) STATE ENFORCEMENT ACTION.—If the

13 Secretary fails to initiate any action requested by a

14 State in accordance with paragraph (1) within 30

15 days of receipt of such a request, the State shall

16 have the authority to bring an action against such

17 depository institution to impose any penalty per18 mitted under subsection (c).

19 ‘‘(3) VENUE.—An enforcement action under

20 paragraph (2) may be brought in any United States

21 district court in which such depository institution

22 does business within the State.’’.

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