I 

108TH CONGRESS 

2D SESSION H. R. 3974

To amend the Truth in Lending Act to impose restrictions and limitations 

on high-cost mortgages, to revise the permissible fees and charges on 

certain loans made, to prohibit unfair or deceptive practices by mortgage 

brokers and creditors, and to provide for public education and counseling 

about predatory lenders, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 16, 2004

Mr. MILLER of North Carolina (for himself and Mr. WATT) introduced the 

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

A BILL

To amend the Truth in Lending Act to impose restrictions 

and limitations on high-cost mortgages, to revise the 

permissible fees and charges on certain loans made, to 

prohibit unfair or deceptive practices by mortgage brokers and creditors, and to provide for public education 

and counseling about predatory lenders, 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; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Prohibit Predatory Lending Act’’. 
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1 (b) TABLE OF CONTENTS.—The table of contents for 

2 this Act is as follows:

Sec. 1. Short title; table of contents. 

Sec. 2. Definitions relating to high-cost mortgages. 

Sec. 3. Amendments to existing requirements for certain mortgages. 

Sec. 4. Additional requirements for certain mortgages. 

Sec. 5. Amendment to provision governing correction of errors. 

Sec. 6. Amendment relating to right of rescission. 

Sec. 7. Amendments to civil liability provisions. 

Sec. 8. Protections for all home loans. 

Sec. 9. Regulations.

3 SEC. 2. DEFINITIONS RELATING TO HIGH-COST MORT4 GAGES. 

5 (a) HIGH-COST MORTGAGE DEFINED.—Section 

6 103(aa) of the Truth in Lending Act (15 U.S.C. 

7 1602(aa)) is amended by striking all that precedes para8 graph (2) and inserting the following: 

9 ‘‘(aa) HIGH-COST MORTGAGE.—

10 ‘‘(1) DEFINITION.—

11 ‘‘(A) IN GENERAL.—The term ‘high-cost 

12 mortgage’, and a mortgage referred to in this 

13 subsection, means a consumer credit trans14 action that is secured by the consumer’s prin15 cipal dwelling, other than a reverse mortgage 

16 transaction, if—

17 ‘‘(i) in the case of a loan secured—

18 ‘‘(I) by a first mortgage on the 

19 consumer’s principal dwelling, the an20 nual percentage rate at consummation 

21 of the transaction will exceed by more 
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1 than 8 percentage points the yield on 

2 Treasury securities having comparable 

3 periods of maturity on the 15th day of 

4 the month immediately preceding the 

5 month in which the application for the 

6 extension of credit is received by the 

7 creditor; or 

8 ‘‘(II) by a subordinate or junior 

9 mortgage on the consumer’s principal 

10 dwelling, the annual percentage rate 

11 at consummation of the transaction 

12 will exceed by more than 10 percent13 age points the yield on Treasury secu14 rities having comparable periods of 

15 maturity on the 15th day of the 

16 month immediately preceding the 

17 month in which the application for the 

18 extension of credit is received by the 

19 creditor; 

20 ‘‘(ii) the total points and fees payable 

21 in connection with the loan exceed—

22 ‘‘(I) in the case of a loan for 

23 $20,000 or more, 5 percent of the 

24 total loan amount; or 
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1 ‘‘(II) in the case of a loan for 

2 less than $20,000, the lesser of 8 per3 cent of the total loan amount or 

4 $1,000; or 

5 ‘‘(iii) the loan documents permit the 

6 lender to charge or collect prepayment fees 

7 or penalties more than 30 months after the 

8 loan closing or such fees or penalties ex9 ceed, in the aggregate, more than 2 per10 cent of the amount prepaid. 

11 ‘‘(B) INTRODUCTORY RATES TAKEN INTO

12 ACCOUNT.—For purposes of subparagraph 

13 (A)(i), the annual percentage rate of interest 

14 shall be determined based on the following in15 terest rate: 

16 ‘‘(i) In the case of a fixed-rate loan in 

17 which the annual percentage rate will not 

18 vary during the term of the loan, the inter19 est rate in effect on the date of consumma20 tion of the transaction. 

21 ‘‘(ii) In the case of a loan in which 

22 the rate of interest varies solely in accord23 ance with an index, the interest rate deter24 mined by adding the index rate in effect on 

25 the date of consummation of the trans-
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1 action to the maximum margin permitted 

2 at any time during the loan agreement. 

3 ‘‘(iii) In the case of any other loan in 

4 which the rate may vary at any time dur5 ing the term of the loan for any reason, 

6 the interest charged on the loan at the 

7 maximum rate that may be charged during 

8 the term of the loan.’’. 

9 (b) ADJUSTMENT OF PERCENTAGE POINTS.—Section 

10 103(aa)(2) of the Truth in Lending Act (15 U.S.C. 

11 1602(aa)(2)) is amended by striking subparagraph (B) 

12 and inserting the following new subparagraph: 

13 ‘‘(B) An increase or decrease under sub14 paragraph (A)—

15 ‘‘(i) may not result in the number of 

16 percentage points referred to in paragraph 

17 (1)(A)(i)(I) being less than 6 percentage 

18 points or greater than 10 percentage 

19 points; and 

20 ‘‘(ii) may not result in the number of 

21 percentage points referred to in paragraph 

22 (1)(A)(i)(II) being less than 8 percentage 

23 points or greater than 12 percentage 

24 points.’’. 

25 (c) POINTS AND FEES DEFINED.—
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1 (1) IN GENERAL.—Section 103(aa)(4) of the 

2 Truth in Lending Act (15 U.S.C. 1602(aa)(4)) is 

3 amended—

4 (A) by striking subparagraph (B) and in5 serting the following: 

6 ‘‘(B) all compensation paid directly or indi7 rectly by a consumer or creditor to a mortgage 

8 broker from any source, including a mortgage 

9 broker that originates a loan in the name of the 

10 broker in a table-funded transaction;’’; 

11 (B) in subparagraph (C)(ii), by striking 

12 ‘‘and’’ after the semicolon at the end; 

13 (C) by redesignating subparagraph (D) as 

14 subparagraph (G); and 

15 (D) by inserting after subparagraph (C) 

16 the following new subparagraphs: 

17 ‘‘(D) premiums or other charges payable at 

18 or before closing for any credit life, credit dis19 ability, credit unemployment, or credit property 

20 insurance, or any other accident, loss-of-income, 

21 life or health insurance, or any payments di22 rectly or indirectly for any debt cancellation or 

23 suspension agreement or contract, except that 

24 insurance premiums or debt cancellation or sus25 pension fees calculated and paid in full on a 
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1 monthly basis shall not be considered financed 

2 by the creditor; 

3 ‘‘(E) except as provided in subsection (cc), 

4 the maximum prepayment fees and penalties 

5 which may be charged or collected under the 

6 terms of the loan documents; 

7 ‘‘(F) all prepayment fees or penalties that 

8 are incurred by the borrower if the loan refi9 nances a previous loan made or currently held 

10 by the same creditor or an affiliate of the cred11 itor; and’’. 

12 (2) CALCULATION OF POINTS AND FEES FOR

13 OPEN-END LOANS.—Section 103(aa) of the Truth in 

14 Lending Act (15 U.S.C. 1602(aa)) is amended—

15 (A) by redesignating paragraph (5) as 

16 paragraph (6); and 

17 (B) by inserting after paragraph (4) the 

18 following new paragraph: 

19 ‘‘(5) CALCULATION OF POINTS AND FEES FOR

20 OPEN-END LOANS.—In the case of open-end loans, 

21 points and fees shall be calculated, for purposes of 

22 this section and section 129, by adding the total 

23 points and fees known at or before closing, including 

24 the maximum prepayment penalties which may be 

25 charged or collected under the terms of the loan doc-
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1 uments, plus the minimum additional fees the con2 sumer would be required to pay to draw down an 

3 amount equal to the total credit line.’’. 

4 (d) HIGH COST MORTGAGE LENDER.—Section 

5 103(f) of the Truth in Lending Act (15 U.S.C. 1602(f)) 

6 is amended by striking the last sentence and inserting the 

7 following new sentence: ‘‘Any person who originates or 

8 brokers 2 or more mortgages referred to in subsection (aa) 

9 in any 12-month period, any person who originates 1 or 

10 more such mortgages through a mortgage broker in any 

11 12 month period, or, in connection with a table funding 

12 transaction of such a mortgage, and any person to whom 

13 the obligation is initially assigned at or after settlement 

14 shall be considered to be a creditor for purposes of this 

15 title.’’. 

16 (e) BONA FIDE DISCOUNT LOAN DISCOUNT POINTS

17 AND PREPAYMENT PENALTIES.—Section 103 of the 

18 Truth in Lending Act (15 U.S.C. 1602) is amended by 

19 adding at the end the following new subsection: 

20 ‘‘(cc) BONA FIDE DISCOUNT POINTS AND PREPAY21 MENT PENALTIES.—For the purposes of determining the 

22 amount of points and fees for purposes of subsection (aa), 

23 either the amounts described in paragraphs (1) or (4) of 

24 the following paragraphs, but not both, may be excluded: 
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1 ‘‘(1) EXCLUSION OF BONAFIDE DISCOUNT

2 POINTS.—The discount points described in 1 of the 

3 following subparagraphs shall be excluded from de4 termining the amounts of points and fees with re5 spect to a high-cost mortgage for purposes of sub6 section (aa): 

7 ‘‘(A) Up to and including 2 bona fide dis8 count points payable by the borrower in connec9 tion with the mortgage, but only if the interest 

10 rate from which the mortgage’s interest rate 

11 will be discounted does not exceed by more than 

12 1 percentage point the required net yield for a 

13 90-day standard mandatory delivery commit14 ment for a reasonably comparable loan from ei15 ther the Federal National Mortgage Association 

16 or the Federal Home Loan Mortgage Corpora17 tion, whichever is greater. 

18 ‘‘(B) Unless 2 bona fide discount points 

19 have been excluded under subparagraph (A), up 

20 to and including 1 bona fide discount points 

21 payable by the borrower in connection with the 

22 mortgage, but only if the interest rate from 

23 which the mortgage’s interest rate will be dis24 counted does not exceed by more than 2 per25 centage points the required net yield for a 90-
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1 day standard mandatory delivery commitment 

2 for a reasonably comparable loan from either 

3 the Federal National Mortgage Association or 

4 the Federal Home Loan Mortgage Corporation, 

5 whichever is greater. 

6 ‘‘(2) DEFINITION.—For purposes of paragraph 

7 (1), the term ‘bona fide discount points’ means loan 

8 discount points which are knowingly paid by the con9 sumer for the purpose of reducing, and which in fact 

10 result in a bona fide reduction of, the interest rate 

11 or time-price differential applicable to the mortgage. 

12 ‘‘(3) EXCEPTION FOR INTEREST RATE REDUC13 TIONS INCONSISTENT WITH INDUSTRY NORMS.— 

14 Paragraph (1) shall not apply to discount points 

15 used to purchase an interest rate reduction unless 

16 the amount of the interest rate reduction purchased 

17 is reasonably consistent with established industry 

18 norms and practices for secondary mortgage market 

19 transactions. 

20 ‘‘(4) ALLOWANCE OF CONVENTIONAL PREPAY21 MENT PENALTY.—Subsection (aa)(1)(4)(E) shall not 

22 apply so as to include a prepayment penalty or fee 

23 that is authorized by law other than this title and 

24 may be imposed pursuant to the terms of a high-cost 
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1 mortgage (or other consumer credit transaction se2 cured by the consumer’s principal dwelling) if—

3 ‘‘(A) the annual percentage rate applicable 

4 with respect to such mortgage or transaction 

5 (as determined for purposes of subsection 

6 (aa)(1)(A)(i))—

7 ‘‘(i) in the case of a first mortgage on 

8 the consumer’s principal dwelling, does not 

9 exceed by more than 2 percentage points 

10 the yield on Treasury securities having 

11 comparable periods of maturity on the 

12 15th day of the month immediately pre13 ceding the month in which the application 

14 for the extension of credit is received by 

15 the creditor; or 

16 ‘‘(ii) in the case of a subordinate or 

17 junior mortgage on the consumer’s prin18 cipal dwelling, does not exceed by more 

19 than 4 percentage points the yield on such 

20 Treasury securities; and 

21 ‘‘(B) the total amount of any prepayment 

22 fees or penalties permitted under the terms of 

23 the high-cost mortgage or transaction does not 

24 exceed 2 percent of the amount prepaid.’’. 
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1 SEC. 3. AMENDMENTS TO EXISTING REQUIREMENTS FOR 

2 CERTAIN MORTGAGES. 

3 (a) PREPAYMENT PENALTY PROVISIONS.—Section 

4 129(c)(2) of the Truth in Lending Act (15 U.S.C. 

5 1639(c)(2)) is amended—

6 (1) by striking ‘‘and’’ after the semicolon at the 

7 end of subparagraph (C); 

8 (2) by redesignating subparagraph (D) as sub9 paragraph (E); and 

10 (3) by inserting after subparagraph (C) the fol11 lowing new subparagraph: 

12 ‘‘(D) the amount of the principal obliga13 tion of the mortgage exceeds the maximum 

14 principal obligation limitation (for the applica15 ble size residence) under section 203(b)(2) of 

16 the National Housing Act for the area in which 

17 the residence subject to the mortgage is located; 

18 and’’. 

19 (b) NO BALLOON PAYMENTS.—Section 129(e) of the 

20 Truth in Lending Act (15 U.S.C. 1639(e)) is amended to 

21 read as follows: 

22 ‘‘(e) NO BALLOON PAYMENTS.—No high-cost mort23 gage may contain a scheduled payment that is more than 

24 twice as large as the average of earlier scheduled pay25 ments. This subsection shall not apply when the payment 
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1 schedule is adjusted to the seasonal or irregular income 

2 of the consumer.’’. 

3 (c) NO LENDING WITHOUT DUE REGARD TO ABIL4 ITY TO REPAY.—Section 129(h) of the Truth in Lending 

5 Act (15 U.S.C. 1639(h)) is amended—

6 (1) by striking ‘‘PAYMENT ABILITY OF CON7 SUMER.—A creditor shall not’’ and inserting ‘‘PAY8 MENT ABILITY OF CONSUMER.—

9 ‘‘(1) PATTERN OR PRACTICE.—

10 ‘‘(A) IN GENERAL.—A creditor shall not’’; 

11 (2) by inserting after subparagraph (A) (as so 

12 designated by paragraph (1) of this subsection) the 

13 following new subparagraph: 

14 ‘‘(B) PRESUMPTION OF VIOLATION.—

15 There shall be a presumption that a creditor 

16 has violated this subsection if the creditor en17 gages in a pattern or practice of making high18 cost mortgages without verifying or docu19 menting the repayment ability of consumers 

20 with respect to such loans.’’; and 

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

22 paragraph: 

23 ‘‘(2) PROHIBITION ON EXTENDING CREDIT

24 WITHOUT REGARD TO PAYMENT ABILITY OF CON25 SUMER.—
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1 ‘‘(A) IN GENERAL.—A creditor may not 

2 extend credit to a consumer under a high-cost 

3 mortgage unless a reasonable creditor would be4 lieve at the time the loan is closed that the con5 sumer or consumers that are residing or will re6 side in the residence subject to the mortgage 

7 will be able to make the scheduled payments as8 sociated with the loan, based upon a consider9 ation of current and expected income, current 

10 obligations, employment status, and other fi11 nancial resources, other than equity in the resi12 dence. 

13 ‘‘(B) PRESUMPTION OF ABILITY.—For 

14 purposes of this subsection, there shall be a re15 buttable presumption that a consumer is able to 

16 make the scheduled payments to repay the obli17 gation if, at the time the loan is consummated, 

18 the consumer’s total monthly debts, including 

19 amounts under the loan, do not exceed 50 per20 cent of his or her monthly gross income as 

21 verified by tax returns, payroll receipts, or other 

22 third-party income verification.’’. 
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1 SEC. 4. ADDITIONAL REQUIREMENTS FOR CERTAIN MORT2 GAGES. 

3 (a) ADDITIONAL REQUIREMENTS FOR CERTAIN

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

5 (15 U.S.C. 1639) is amended—

6 (1) by redesignating subsections (j), (k) and (l) 

7 as subsections (n), (o) and (p) respectively; and 

8 (2) by inserting after subsection (i) the fol9 lowing new subsections: 

10 ‘‘(j) RECOMMENDED DEFAULT.—No creditor shall 

11 recommend or encourage default on an existing loan or 

12 other debt prior to and in connection with the closing or 

13 planned closing of a high-cost mortgage that refinances 

14 all or any portion of such existing loan or debt. 

15 ‘‘(k) LATE FEES.—

16 ‘‘(1) IN GENERAL.—No lender may impose a 

17 late payment charge or fee in connection with a 

18 high-cost mortgage—

19 ‘‘(A) in an amount in excess of 4 percent 

20 of the amount of the payment past due; 

21 ‘‘(B) unless the loan documents specifically 

22 authorize the charge or fee; 

23 ‘‘(C) before the end of the 15-day period 

24 beginning on the date the payment is due, or in 

25 the case of a loan on which interest on each in26 stallment is paid in advance, before the end of 
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1 the 30-day period beginning on the date the 

2 payment is due; or 

3 ‘‘(D) more than once with respect to a sin4 gle late payment. 

5 ‘‘(2) COORDINATION WITH SUBSEQUENT LATE

6 FEES.—If a payment is otherwise a full payment for 

7 the applicable period and is paid on its due date or 

8 within an applicable grace period, and the only delin9 quency or insufficiency of payment is attributable to 

10 any late fee or delinquency charge assessed on any 

11 earlier payment, no late fee or delinquency charge 

12 may be imposed on such payment. 

13 ‘‘(3) FAILURE TO MAKE INSTALLMENT PAY14 MENT.—If, in the case of a loan agreement the 

15 terms of which provide that any payment shall first 

16 be applied to any past due principal balance, the 

17 borrower fails to make an installment payment and 

18 the borrower subsequently resumes making install19 ment payments but has not paid all past due install20 ments, the lender may impose a separate late pay21 ment charge or fee for any principal due (without 

22 deduction due to late fees or related fees) until the 

23 default is cured. 

24 ‘‘(l) ACCELERATION OF DEBT.—No high-cost mort25 gage may contain a provision which permits the creditor, 
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1 in its sole discretion, to accelerate the indebtedness. This 

2 provision shall not apply when repayment of the loan has 

3 been accelerated by default, pursuant to a due-on-sale pro4 vision, or pursuant to a material violation of some other 

5 provision of the loan documents unrelated to the payment 

6 schedule. 

7 ‘‘(m) RESTRICTION ON FINANCING POINTS AND

8 FEES.—No creditor may directly or indirectly finance, in 

9 connection with any high-cost mortgage, any of the fol10 lowing: 

11 ‘‘(1) Any prepayment fee or penalty payable by 

12 the borrower in a refinancing transaction if the lend13 er or an affiliate of the lender is the noteholder of 

14 the note being refinanced. 

15 ‘‘(2) Any points or fees.’’. 

16 (b) PROHIBITIONS ON EVASIONS.—Section 129 of 

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

18 by inserting after subsection (p) (as so redesignated by 

19 subsection (a)(1) of this section) the following new sub20 section: 

21 ‘‘(q) PROHIBITIONS ON EVASIONS, STRUCTURING OF

22 TRANSACTIONS, AND RECIPROCAL ARRANGEMENTS.—A 

23 creditor may not take any action in connection with a 

24 high-cost mortgage—
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1 ‘‘(1) to structure a loan transaction as an open2 end credit plan or another form of loan for the pur3 pose and with the intent of evading the provisions of 

4 this title; or 

5 ‘‘(2) to divide any loan transaction into sepa6 rate parts for the purpose and with the intent of 

7 evading provisions of this title.’’. 

8 (c) MODIFICATION OR DEFERRAL FEES.—Section 

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

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

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

13 ‘‘(r) MODIFICATION AND DEFERRAL FEES PROHIB14 ITED.—A creditor may not charge a consumer any fee to 

15 modify, renew, extend, or amend a high-cost mortgage, or 

16 to defer any payment due under the terms of such mort17 gage, unless the modification, renewal, extension or 

18 amendment results in a lower annual percentage rate on 

19 the mortgage for the consumer and then only if the 

20 amount of the fee is comparable to fees imposed for simi21 lar transactions in connection with consumer credit trans22 actions that are secured by a consumer’s principal dwell23 ing and are not high-cost mortgages.’’. 

24 (d) ARBITRATION AND FORUM SHOPPING.—Section 

25 129 of the Truth in Lending Act (15 U.S.C. 1639) is 
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1 amended by inserting after subsection (r) (as added by 

2 subsection (c) of this section) the following: 

3 ‘‘(s) ARBITRATION.—

4 ‘‘(1) IN GENERAL.—A high-cost mortgage may 

5 not include terms which require arbitration or any 

6 other nonjudicial procedure as the method for resolv7 ing any controversy or settling any claims arising 

8 out of the transaction. 

9 ‘‘(2) POST-CONTROVERSY AGREEMENTS.—Sub10 ject to paragraph (3), paragraph (1) shall not be 

11 construed as limiting the right of the consumer and 

12 the creditor to agree to arbitration or any other non13 judicial procedure as the method for resolving any 

14 controversy at any time after a dispute or claim 

15 under the transaction arises. 

16 ‘‘(3) NO WAIVER OF STATUTORY CAUSE OF AC17 TION.—No provision of any high-cost mortgage or 

18 any agreement between the consumer and the cred19 itor shall be applied or interpreted so as to bar a 

20 consumer from bringing an action in an appropriate 

21 district court of the United States, or any other 

22 court of competent jurisdiction, pursuant to section 

23 130 or any other provision of law, for damages or 

24 other relief in connection with any alleged violation 
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1 of this section, any other provision of this title, or 

2 any other Federal law.’’. 

3 (e) PAYOFF STATEMENT.—Section 129 of the Truth 

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

5 after subsection (s) (as added by subsection (d) of this 

6 section) the following new subsection: 

7 ‘‘(t) PAYOFF STATEMENT.—

8 ‘‘(1) FEES.—

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

10 subparagraph (B), no creditor or servicer may 

11 charge a fee for informing or transmitting to 

12 any person the balance due to pay off the out13 standing balance on a high-cost mortgage. 

14 ‘‘(B) TRANSACTION FEE.—When payoff in15 formation referred to in subparagraph (A) is 

16 provided by facsimile transmission or by a cou17 rier service, a creditor or servicer may charge a 

18 processing fee to cover the cost of such trans19 mission or service in an amount not to exceed 

20 an amount that is comparable to fees imposed 

21 for similar services provided in connection with 

22 consumer credit transactions that are secured 

23 by the consumer’s principal dwelling and are 

24 not high-cost mortgages. 
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1 ‘‘(C) FEE DISCLOSURE.—Prior to charging 

2 a transaction fee as provided in subparagraph 

3 (B), a creditor or servicer shall disclose that 

4 payoff balances are available for free pursuant 

5 to subparagraph (A). 

6 ‘‘(D) MULTIPLE REQUESTS.—If a creditor 

7 or servicer has provided payoff information re8 ferred to in subparagraph (A) without charge, 

9 other than the transaction fee allowed by sub10 paragraph (B), on 4 occasions during a cal11 endar year, the creditor or servicer may there12 after charge a reasonable fee for providing such 

13 information during the remainder of the cal14 endar year. 

15 ‘‘(2) PROMPT DELIVERY.—Payoff balances shall 

16 be provided within a reasonable time but in any 

17 event no more than 5 business days after receiving 

18 a request by a consumer or a person authorized by 

19 the consumer to obtain such information.’’. 

20 (f) PRE-LOAN COUNSELING REQUIRED.—Section 

21 129 of the Truth in Lending Act (15 U.S.C. 1639) is 

22 amended by inserting after subsection (t) (as added by 

23 subsection (e) of this section) the following new sub24 section: 

25 ‘‘(u) PRE-LOAN COUNSELING.—
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1 ‘‘(1) IN GENERAL.—A creditor may not extend 

2 credit to a consumer under a high-cost mortgage 

3 without first receiving certification from a counselor 

4 that is approved by the Secretary of Housing and 

5 Urban Development, or at the discretion of the Sec6 retary, a state housing finance authority, that the 

7 borrower has received counseling on the advisability 

8 of the loan transaction. Such counselor shall not be 

9 employed by the creditor or an affiliate of the cred10 itor or be affiliated with the creditor. 

11 ‘‘(2) DISCLOSURES REQUIRED PRIOR TO COUN12 SELING.—No counselor may certify that a borrower 

13 has received counseling on the advisability of the 

14 loan transaction unless the counselor can verify that 

15 the consumer has received each statement required 

16 (in connection with such loan) by section 129 of this 

17 title or by the Real Estate Settlement Procedures 

18 Act of 1974 with respect to the transaction. 

19 ‘‘(3) REGULATIONS.—The Secretary of Housing 

20 and Urban Development may prescribe such regula21 tions as the Secretary determines to be appropriate 

22 to carry out the requirements of paragraph (1).’’. 
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1 SEC. 5. AMENDMENT TO PROVISION GOVERNING CORREC2 TION OF ERRORS. 

3 (a) AMENDMENT TO PROVISION GOVERNING COR4 RECTION OF ERRORS.—Section 130(b) of the Truth in 

5 Lending Act (15 U.S.C. 1640(b)) is amended to read as 

6 follows: 

7 ‘‘(b) CORRECTION OF ERRORS.—A creditor has no li8 ability under this section or section 108 or 112 for any 

9 failure to comply with any requirement imposed under this 

10 chapter or chapter 5, if—

11 ‘‘(1) within 30 days of the loan closing and 

12 prior to the institution of any action, the borrower 

13 is notified of or discovers the violation, appropriate 

14 restitution is made, and whatever adjustments are 

15 necessary are made to the loan to either, at the 

16 choice of the borrower—

17 ‘‘(A) make the loan satisfy the require18 ments of this chapter; or 

19 ‘‘(B) change the terms of the loan in a 

20 manner beneficial to the borrower so that the 

21 loan will no longer be a high-cost mortgage; or 

22 ‘‘(2) within 60 days of the lender’s discovery or 

23 receipt of notification of an unintentional violation 

24 or bona fide error as described in subsection (c) and 

25 prior to the institution of any action, the borrower 

26 is notified of the compliance failure, appropriate res-
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1 titution is made, and whatever adjustments are nec2 essary are made to the loan to either, at the choice 

3 of the borrower—

4 ‘‘(A) make the loan satisfy the require5 ments of this chapter or 

6 ‘‘(B) change the terms of the loan in a 

7 manner beneficial so that the loan will no 

8 longer be a high-cost mortgage.’’. 

9 SEC. 6. AMENDMENT RELATING TO RIGHT OF RESCISSION. 

10 Section 130(e) of the Truth in Lending Act (15 

11 U.S.C. 1640(e)) is amended by inserting after the second 

12 sentence the following new sentence: ‘‘This subsection also 

13 shall not bar a person from asserting a right to rescission 

14 under section 125, in an action to collect the debt or as 

15 a defense to a judicial or nonjudicial foreclosure after the 

16 expiration of the time periods for affirmative actions set 

17 forth in this section and section 125.’’. 

18 SEC. 7. AMENDMENTS TO CIVIL LIABILITY PROVISIONS. 

19 (a) INCREASE IN AMOUNT OF CIVIL MONEY PEN20 ALTIES FOR CERTAIN VIOLATIONS.—Section 130(a) of 

21 the Truth in Lending Act (15 U.S.C. 1640(a)) is amend22 ed, in the matter preceding paragraph (1), by striking ‘‘an 

23 amount equal to the sum’’ and inserting ‘‘an amount equal 

24 to twice the sum’’. 
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1 (b) STATUTE OF LIMITATIONS EXTENDED FOR SEC2 TION 129 VIOLATIONS.—Section 130(e) of the Truth in 

3 Lending Act (15 U.S.C. 1640(e)) (as amended by section 

4 6 of this Act) is amended—

5 (1) in the first sentence, by striking ‘‘Any ac6 tion’’ and inserting ‘‘Except as provided in the sub7 sequent sentence, any action’’; and 

8 (2) by inserting after the first sentence the fol9 lowing new sentence: ‘‘Any action under this section 

10 with respect to any violation of section 129 may be 

11 brought in any United States district court, or in 

12 any other court of competent jurisdiction, before the 

13 end of the 3-year period beginning on the date of the 

14 occurrence of the violation.’’. 

15 SEC. 8. PROTECTIONS FOR ALL HOME LOANS. 

16 (a) IN GENERAL.—Chapter 2 of the Truth in Lend17 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 

18 after section 129 the following new section: 

19 ‘‘§ 129A Protections for all home loans 

20 ‘‘(a) FLIPPING.—

21 ‘‘(1) IN GENERAL.—No creditor may knowingly 

22 or intentionally engage in the unfair act or practice 

23 of flipping. 

24 ‘‘(2) FLIPPING DEFINED.—For purposes of this 

25 subsection, the term ‘flipping’ means the making of 
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1 a loan or extension of credit to a consumer which re2 finances an existing mortgage when the new loan or 

3 extension of credit does not have reasonable, tan4 gible net benefit to the consumer considering all of 

5 the circumstances, including the terms of both the 

6 new and the refinanced loans or credit, the cost of 

7 the new loan or credit, and the consumer’s cir8 cumstances. 

9 ‘‘(3) TANGIBLE NET BENEFIT.—The Board 

10 may prescribe regulations, in the discretion of the 

11 Board, defining the term ‘tangible net benefit’ for 

12 purposes of this subsection. 

13 ‘‘(b) SINGLE PREMIUM CREDIT INSURANCE PROHIB14 ITED.—No creditor may finance, directly or indirectly, in 

15 connection with any consumer credit transaction that is 

16 secured by the consumer’s principal dwelling, any credit 

17 life, credit disability, credit unemployment or credit prop18 erty insurance, or any other accident, loss-of-income, life 

19 or health insurance, or any payments directly or indirectly 

20 for any debt cancellation or suspension agreement or con21 tract, except that insurance premiums or debt cancellation 

22 or suspension fees calculated and paid in full on a monthly 

23 basis shall not be considered financed by the creditor.’’. 

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

25 for chapter 2 of the Truth in Lending Act is amended 
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1 by inserting after the item relating to section 129 the fol2 lowing new item:

‘‘129A Protections for all home loans.’’.

3 SEC. 9. REGULATIONS. 

4 (a) IN GENERAL.—The Board of Governors of the 

5 Federal Reserve System shall publish regulations imple6 menting this Act and the amendments made by this Act 

7 in final form before the end of the 6-month period begin8 ning on the date of enactment of this Act. 

9 (b) CONSUMER MORTGAGE EDUCATION.—

10 (1) REGULATIONS.—The Board may prescribe 

11 regulations requiring or encouraging creditors to 

12 provide consumer mortgage education to prospective 

13 customers or direct such customers to qualified con14 sumer mortgage education or counseling programs 

15 in the vicinity of the residence of the consumer. 

16 (2) COORDINATION WITH STATE LAW.—No re17 quirement established by the Board pursuant to 

18 paragraph (1) shall be construed as affecting or su19 perseding any requirement under the law of any 

20 State with respect to consumer mortgage counseling 

21 or education.

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