I

105TH CONGRESS

1ST SESSION H. R. 607

To amend the Truth in Lending Act to require notice of cancellation rights

with respect to private mortgage insurance which is required by a creditor

as a condition for entering into a residential mortgage transaction, and

for other purposes.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 5, 1997

Mr. HANSEN (for himself, Mr. BAKER, Mr. KENNEDY of Massachusetts, Mr.

CALVERT, Mr. WAXMAN, Ms. RIVERS, Mr. SAWYER, Mr. EVANS, Mr.

BOUCHER, Ms. FURSE, and Mr. FROST) introduced the following bill;

which was referred to the Committee on Banking and Financial Services

A BILL

To amend the Truth in Lending Act to require notice of

cancellation rights with respect to private mortgage insurance which is required by a creditor as a condition

for entering into a residential mortgage transaction, 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 ‘‘Homeowners Insur5 ance Protection Act’’.
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1 SEC. 2. NOTIFICATION OF CANCELLATION RIGHTS FOR PRI2 VATE MORTGAGE INSURANCE.

3 (a) IN GENERAL.—Chapter 2 of the Truth in Lend4 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting

5 after section 125 the following new section:

6 ‘‘SEC. 126. NOTIFICATION OF CANCELLATION RIGHTS FOR

7 PRIVATE MORTGAGE INSURANCE.

8 ‘‘(a) NOTICE OF RIGHT OR LACK OF RIGHT TO CAN9 CEL.—If a consumer is required to obtain and maintain

10 private mortgage insurance as a condition for entering

11 into a residential mortgage transaction, the creditor shall

12 disclose, in writing at the time the transaction is entered

13 into, whether or not the private mortgage insurance may

14 be canceled by the consumer at any time while the mort15 gage is outstanding.

16 ‘‘(b) INFORMATION REQUIRED TO BE DISCLOSED IF

17 INSURANCE IS CANCELABLE.—If private mortgage insur18 ance is required for a residential mortgage transaction and

19 may be canceled by the consumer at any time while the

20 mortgage is outstanding, the creditor shall disclose in

21 writing the following information at the time the trans22 action is entered into:

23 ‘‘(1) IDENTIFYING INFORMATION.—Such infor24 mation as may be necessary to permit the consumer

25 to communicate with the creditor and any subse26 quent servicer of the mortgage.
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1 ‘‘(2) CONDITIONS ON CANCELLATION.—Any

2 condition required to be met before the private mort3 gage insurance may be canceled by the consumer, in4 cluding the following:

5 ‘‘(A) If a condition for canceling the pri6 vate mortgage insurance is based on a mini7 mum ratio between the principal on the loan re8 maining outstanding and either the original or

9 the current value of the property securing the

10 loan, such ratio.

11 ‘‘(B) Information relating to any require12 ment for an appraisal of the property as a con13 dition for the cancellation of the insurance.

14 ‘‘(C) Information relating to the time re15 quired for canceling the insurance.

16 ‘‘(3) CANCELLATION PROCEDURES.—The proce17 dures required to be followed by the consumer in

18 canceling the private mortgage insurance.

19 ‘‘(c) INFORMATION REQUIRED TO BE DISCLOSED

20 WITH EACH PERIODIC STATEMENT.—If a consumer is re21 quired to obtain and maintain private mortgage insurance

22 as a condition for entering into a residential mortgage
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1 transaction, the person servicing the mortgage shall in2 clude in or with each written statement of account pro3 vided to the consumer after December 31, 1997, while

4 such insurance is in effect, but not less than annually—

5 ‘‘(1) the information required to be disclosed

6 under subsection (b); or

7 ‘‘(2) a clear and conspicuous written statement

8 containing—

9 ‘‘(A) a statement that the consumer may

10 be able to cancel the private mortgage insur11 ance (if such is the case); and

12 ‘‘(B) an address and telephone number

13 which the consumer may use to contact the

14 creditor or the person servicing the mortgage to

15 determine whether the consumer has the right

16 to cancel the private mortgage insurance and, if

17 so, the conditions and procedures for canceling

18 such insurance.

19 ‘‘(d) NOTICE REQUIREMENT.—If a consumer main20 tains private mortgage insurance in connection with a resi21 dential mortgage transaction the original principal of

22 which exceeded 80 percent of the appraised value of the

23 residence (as of the date of the transaction), the person

24 servicing the mortgage shall send a letter to the consumer

25 containing the information required to be disclosed under
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1 paragraphs (2) and (3) of subsection (b) and subsection

2 (c)(2) when the principal outstanding on the mortgage

3 first becomes equal to or less than the amount which is

4 80 percent of the appraised value of the residence (as of

5 the date of the transaction).

6 ‘‘(e) NOTICES FURNISHED WITHOUT COST TO THE

7 CONSUMER.—No fee or other cost may be imposed on any

8 consumer with respect to the provision of any notice or

9 information to the consumer pursuant to this section.

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

11 following definitions shall apply:

12 ‘‘(1) MORTGAGE INSURANCE.—The term ‘mort13 gage insurance’ means insurance, including any

14 mortgage guaranty insurance, against the nonpay15 ment of, or default on, a mortgage or loan involved

16 in a residential mortgage transaction.

17 ‘‘(2) PRIVATE MORTGAGE INSURANCE.—The

18 term ‘private mortgage insurance’ means mortgage

19 insurance other than mortgage insurance made

20 available under the National Housing Act, title 38 of

21 the United States Code, or title V of the National

22 Housing Act of 1949.’’.

23 (b) AMENDMENT RELATING TO LIABILITY FOR VIO24 LATIONS.—Section 130(a) of the Truth in Lending Act

25 (15 U.S.C. 1640(a)) is amended by adding at the end the
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1 following new sentence: ‘‘In the case of any failure make

2 any disclosure required under section 126, paragraph (1)

3 shall be applied by substituting ‘3 times the amount of

4 any actual damage’ for ‘any actual damage’.

5 (c) SCOPE OF APPLICABILITY.—The amendments

6 made by subsections (a) and (b) shall apply with respect

7 to residential mortgage transactions entered into after the

8 date of the enactment of this Act.

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

10 for chapter 2 of the Truth in Lending Act (15 U.S.C.

11 1631 et seq.) is amended by striking the item relating to

12 section 126 and inserting the following new item:

‘‘126. Notification of cancellation rights for private mortgage insurance.’’.

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