126 
those most vulnerable with respect to residential 
mortgage loans (such as elderly persons, persons 
facing language barriers, low-income persons, mi-
norities, and other potentially vulnerable con-
sumers), regarding home mortgages, mortgage refi-
nancing, home equity loans, home repair loans, and 
where appropriate by region, any requirements and 
costs associated with obtaining flood or other dis-
aster-specific insurance coverage.’’. 
(b) CONFORMING AMENDMENTS
TO GRANT PRO-
GRAM
FOR HOMEOWNERSHIP COUNSELING ORGANIZA-
TIONS.—Section 106(c)(5)(A)(ii) of the Housing and 
Urban 
Development 
Act 
of 
1968 
(12 
U.S.C. 
1701x(c)(5)(A)(ii)) is amended— 
(1) in subclause (III), by striking ‘‘and’’ at the 
end; 
(2) in subclause (IV) by striking the period at 
the end and inserting ‘‘; and’’; and 
(3) by inserting after subclause (IV) the fol-
lowing new subclause: 
‘‘(V) notify the housing or mort-
gage applicant of the availability of 
mortgage software systems provided 
pursuant to subsection (g)(3).’’.
127 
SEC. 404. GRANTS FOR HOUSING COUNSELING ASSIST-
ANCE. 
Section 106(a) of the Housing and Urban Develop-
ment Act of 1968 (12 U.S.C. 1701x(a)(3)) is amended 
by adding at the end the following new paragraph: 
‘‘(4) HOMEOWNERSHIP AND RENTAL COUNSELING 
ASSISTANCE.— 
‘‘(A) IN GENERAL.—The Secretary shall make 
financial assistance available under this paragraph 
to HUD-approved housing counseling agencies and 
State housing finance agencies. 
‘‘(B) QUALIFIED
ENTITIES.—The Secretary 
shall establish standards and guidelines for eligibility 
of organizations (including governmental and non-
profit organizations) to receive assistance under this 
paragraph, in accordance with subparagraph (D). 
‘‘(C) DISTRIBUTION.—Assistance made avail-
able under this paragraph shall be distributed in a 
manner that encourages efficient and successful 
counseling programs and that ensures adequate dis-
tribution of amounts for rural areas having tradi-
tionally low levels of access to such counseling serv-
ices, including areas with insufficient access to the 
Internet. In distributing such assistance, the Sec-
retary may give priority consideration to entities
128 
serving areas with the highest home foreclosure 
rates. 
‘‘(D) LIMITATION ON DISTRIBUTION OF ASSIST-
ANCE.— 
‘‘(i) IN GENERAL.—None of the amounts 
made available under this paragraph shall be 
distributed to— 
‘‘(I) any organization which has been 
convicted for a violation under Federal law 
relating to an election for Federal office; or 
‘‘(II) any organization which employs 
applicable individuals. 
‘‘(ii) DEFINITION OF APPLICABLE INDIVID-
UALS.—In this subparagraph, the term ‘appli-
cable individual’ means an individual who— 
‘‘(I) is— 
‘‘(aa) employed by the organiza-
tion in a permanent or temporary ca-
pacity; 
‘‘(bb) contracted or retained by 
the organization; or 
‘‘(cc) acting on behalf of, or with 
the express or apparent authority of, 
the organization; and
129 
‘‘(II) has been convicted for a viola-
tion under Federal law relating to an elec-
tion for Federal office. 
‘‘(E) GRANTMAKING PROCESS.—In making as-
sistance available under this paragraph, the Sec-
retary shall consider appropriate ways of stream-
lining and improving the processes for grant applica-
tion, review, approval, and award. 
‘‘(F) AUTHORIZATION
OF
APPROPRIATIONS.— 
There 
are 
authorized 
to 
be 
appropriated 
$45,000,000 for each of fiscal years 2009 through 
2012 for— 
‘‘(i) the operations of the Office of Hous-
ing Counseling of the Department of Housing 
and Urban Development; 
‘‘(ii) the responsibilities of the Director of 
Housing Counseling under paragraphs (2) 
through (5) of subsection (g); and 
‘‘(iii) assistance pursuant to this para-
graph for entities providing homeownership and 
rental counseling.’’. 
SEC. 405. REQUIREMENTS TO USE HUD-CERTIFIED COUN-
SELORS UNDER HUD PROGRAMS. 
Section 106(e) of the Housing and Urban Develop-
ment Act of 1968 (12 U.S.C. 1701x(e)) is amended—
130 
(1) by striking paragraph (1) and inserting the 
following new paragraph: 
‘‘(1) REQUIREMENT FOR ASSISTANCE.—An or-
ganization may not receive assistance for counseling 
activities under subsection (a)(1)(iii), (a)(2), (a)(4), 
(c), or (d) of this section, or under section 101(e), 
unless the organization, or the individuals through 
which the organization provides such counseling, has 
been certified by the Secretary under this subsection 
as competent to provide such counseling.’’; 
(2) in paragraph (2)— 
(A) by inserting ‘‘and for certifying organi-
zations’’ before the period at the end of the 
first sentence; and 
(B) in the second sentence by striking ‘‘for 
certification’’ and inserting ‘‘, for certification 
of an organization, that each individual through 
which the organization provides counseling shall 
demonstrate, and, for certification of an indi-
vidual,’’; 
(3) in paragraph (3), by inserting ‘‘organiza-
tions and’’ before ‘‘individuals’’; 
(4) by redesignating paragraph (3) as para-
graph (5); and
131 
(5) by inserting after paragraph (2) the fol-
lowing new paragraphs: 
‘‘(3) REQUIREMENT UNDER HUD PROGRAMS.— 
Any homeownership counseling or rental housing 
counseling (as such terms are defined in subsection 
(g)(1)) required under, or provided in connection 
with, any program administered by the Department 
of Housing and Urban Development shall be pro-
vided only by organizations or counselors certified by 
the Secretary under this subsection as competent to 
provide such counseling. 
‘‘(4) OUTREACH.—The Secretary shall take 
such actions as the Secretary considers appropriate 
to ensure that individuals and organizations pro-
viding homeownership or rental housing counseling 
are aware of the certification requirements and 
standards of this subsection and of the training and 
certification programs under subsection (f).’’. 
SEC. 406. STUDY OF DEFAULTS AND FORECLOSURES. 
The Secretary of Housing and Urban Development 
shall conduct an extensive study of the root causes of de-
fault and foreclosure of home loans, using as much empir-
ical data as are available. The study shall also examine 
the role of escrow accounts in helping prime and nonprime 
borrowers to avoid defaults and foreclosures, and the role
132 
of computer registries of mortgages, including those used 
for trading mortgage loans. Not later than 12 months 
after the date of the enactment of this Act, the Secretary 
shall submit to the Congress a preliminary report regard-
ing the study. Not later than 24 months after such date 
of enactment, the Secretary shall submit a final report re-
garding the results of the study, which shall include any 
recommended legislation relating to the study, and rec-
ommendations for best practices and for a process to iden-
tify populations that need counseling the most. 
SEC. 407. DEFAULT AND FORECLOSURE DATABASE. 
(a) ESTABLISHMENT.—The Secretary of Housing 
and Urban Development, in consultation with the Federal 
agencies responsible for regulation of banking and finan-
cial institutions involved in residential mortgage lending 
and servicing, shall establish and maintain a database of 
information on foreclosures and defaults on mortgage 
loans for one- to four-unit residential properties and shall 
make such information publicly available. 
(b) CENSUS TRACT DATA.—Information in the data-
base shall be collected, aggregated, and made available on 
a census tract basis. 
(c) REQUIREMENTS.—Information collected and 
made available through the database shall include—
133 
(1) the number and percentage of such mort-
gage loans that are delinquent by more than 30 
days; 
(2) the number and percentage of such mort-
gage loans that are delinquent by more than 90 
days; 
(3) the number and percentage of such prop-
erties that are real estate-owned; 
(4) number and percentage of such mortgage 
loans that are in the foreclosure process; 
(5) the number and percentage of such mort-
gage loans that have an outstanding principal obli-
gation amount that is greater than the value of the 
property for which the loan was made; and 
(6) such other information as the Secretary 
considers appropriate. 
SEC. 408. DEFINITIONS FOR COUNSELING-RELATED PRO-
GRAMS. 
Section 106 of the Housing and Urban Development 
Act of 1968 (12 U.S.C. 1701x), as amended by the pre-
ceding provisions of this title, is further amended by add-
ing at the end the following new subsection: 
‘‘(h) DEFINITIONS.—For purposes of this section: 
‘‘(1) NONPROFIT
ORGANIZATION.—The term 
‘nonprofit organization’ has the meaning given such
134 
term in section 104(5) of the Cranston-Gonzalez Na-
tional 
Affordable 
Housing 
Act 
(42 
U.S.C. 
12704(5)), except that subparagraph (D) of such 
section shall not apply for purposes of this section. 
‘‘(2) STATE.—The term ‘State’ means each of 
the several States, the Commonwealth of Puerto 
Rico, the District of Columbia, the Commonwealth 
of the Northern Mariana Islands, Guam, the Virgin 
Islands, American Samoa, the Trust Territories of 
the Pacific, or any other possession of the United 
States. 
‘‘(3) UNIT
OF
GENERAL
LOCAL
GOVERN-
MENT.—The term ‘unit of general local government’ 
means any city, county, parish, town, township, bor-
ough, village, or other general purpose political sub-
division of a State. 
‘‘(4) HUD-APPROVED COUNSELING AGENCY.— 
The term ‘HUD-approved counseling agency’ means 
a private or public nonprofit organization that is— 
‘‘(A) exempt from taxation under section 
501(c) of the Internal Revenue Code of 1986; 
and 
‘‘(B) certified by the Secretary to provide 
housing counseling services.
135 
‘‘(5) STATE HOUSING FINANCE AGENCY.—The 
term ‘State housing finance agency’ means any pub-
lic body, agency, or instrumentality specifically cre-
ated under State statute that is authorised to fi-
nance activities designed to provide housing and re-
lated facilities throughout an entire State through 
land acquisition, construction, or rehabilitation.’’. 
SEC. 409. ACCOUNTABILITY AND TRANSPARENCY FOR 
GRANT RECIPIENTS. 
Section 106 of the Housing and Urban Development 
Act of 1968 (12 U.S.C. 1701x), as amended by the pre-
ceding provisions of this title, is further amended by add-
ing at the end the following: 
‘‘(i) ACCOUNTABILITY FOR RECIPIENTS OF COVERED 
ASSISTANCE.— 
‘‘(1) TRACKING
OF
FUNDS.—The Secretary 
shall— 
‘‘(A) develop and maintain a system to en-
sure that any organization or entity that re-
ceives any covered assistance uses all amounts 
of covered assistance in accordance with this 
section or section 216 of the Mortgage Reform 
and Anti-Predatory Lending Act, as applicable, 
the regulations issued under this section or 
such section 216, as applicable, and any re-
136 
quirements or conditions under which such 
amounts were provided; and 
‘‘(B) require any organization or entity, as 
a condition of receipt of any covered assistance, 
to agree to comply with such requirements re-
garding covered assistance as the Secretary 
shall establish, which shall include— 
‘‘(i) appropriate periodic financial and 
grant activity reporting, record retention, 
and audit requirements for the duration of 
the covered assistance to the organization 
or entity to ensure compliance with the 
limitations and requirements of this section 
or section 216 of the Mortgage Reform 
and Anti-Predatory Lending Act, as appli-
cable, the regulations under this section or 
such section 216, as applicable, and any 
requirements or conditions under which 
such amounts were provided; and 
‘‘(ii) any other requirements that the 
Secretary determines are necessary to en-
sure appropriate administration and com-
pliance. 
‘‘(2) MISUSE OF FUNDS.—If any organization 
or entity that receives any covered assistance is de-
137 
termined by the Secretary to have used any covered 
assistance in a manner that is materially in violation 
of this section or section 216 of the Mortgage Re-
form and Anti-Predatory Lending Act, as applicable, 
the regulations issued under this section or such sec-
tion 216, as applicable, or any requirements or con-
ditions under which such assistance was provided— 
‘‘(A) the Secretary shall require that, with-
in 12 months after the determination of such 
misuse, the organization or entity shall reim-
burse the Secretary for such misused amounts 
and return to the Secretary any such amounts 
that remain unused or uncommitted for use; 
and 
‘‘(B) such organization or entity shall be 
ineligible, at any time after such determination, 
to apply for or receive any further covered as-
sistance. 
The remedies under this paragraph are in addition 
to any other remedies that may be available under 
law. 
‘‘(3) COVERED ASSISTANCE.—For purposes of 
this subsection, the term ‘covered assistance’ means 
any grant or other financial assistance provided 
under—
138 
‘‘(A) this section; or 
‘‘(B) section 216 of the Mortgage Reform 
and Anti-Predatory Lending Act.’’. 
SEC. 410. UPDATING AND SIMPLIFICATION OF MORTGAGE 
INFORMATION BOOKLET. 
Section 5 of the Real Estate Settlement Procedures 
Act of 1974 (12 U.S.C. 2604) is amended— 
(1) in the section heading, by striking ‘‘SPE-
CIAL’’ and inserting ‘‘HOME BUYING’’; 
(2) by striking subsections (a) and (b) and in-
serting the following new subsections: 
‘‘(a) PREPARATION AND DISTRIBUTION.—The Sec-
retary shall prepare, at least once every 5 years, a booklet 
to help consumers applying for federally related mortgage 
loans to understand the nature and costs of real estate 
settlement services. The Secretary shall prepare the book-
let in various languages and cultural styles, as the Sec-
retary determines to be appropriate, so that the booklet 
is understandable and accessible to homebuyers of dif-
ferent ethnic and cultural backgrounds. The Secretary 
shall distribute such booklets to all lenders that make fed-
erally related mortgage loans. The Secretary shall also dis-
tribute to such lenders lists, organized by location, of 
homeownership counselors certified under section 106(e) 
of the Housing and Urban Development Act of 1968 (12
139 
U.S.C. 1701x(e)) for use in complying with the require-
ment under subsection (c) of this section. 
‘‘(b) CONTENTS.—Each booklet shall be in such form 
and detail as the Secretary shall prescribe and, in addition 
to such other information as the Secretary may provide, 
shall include in plain and understandable language the fol-
lowing information: 
‘‘(1) A description and explanation of the na-
ture and purpose of the costs incident to a real es-
tate settlement or a federally related mortgage loan. 
The description and explanation shall provide gen-
eral information about the mortgage process as well 
as specific information concerning, at a minimum— 
‘‘(A) balloon payments; 
‘‘(B) prepayment penalties; 
‘‘(C) the advantages of prepayment; and 
‘‘(D) the trade-off between closing costs 
and the interest rate over the life of the loan. 
‘‘(2) An explanation and sample of the uniform 
settlement statement required by section 4. 
‘‘(3) A list and explanation of lending practices, 
including those prohibited by the Truth in Lending 
Act or other applicable Federal law, and of other un-
fair practices and unreasonable or unnecessary
140 
charges to be avoided by the prospective buyer with 
respect to a real estate settlement. 
‘‘(4) A list and explanation of questions a con-
sumer obtaining a federally related mortgage loan 
should ask regarding the loan, including whether the 
consumer will have the ability to repay the loan, 
whether the consumer sufficiently shopped for the 
loan, whether the loan terms include prepayment 
penalties or balloon payments, and whether the loan 
will benefit the borrower. 
‘‘(5) An explanation of the right of rescission as 
to certain transactions provided by sections 125 and 
129 of the Truth in Lending Act. 
‘‘(6) A brief explanation of the nature of a vari-
able rate mortgage and a reference to the booklet 
entitled ‘Consumer Handbook on Adjustable Rate 
Mortgages’, published by the Board of Governors of 
the Federal Reserve System pursuant to section 
226.19(b)(1) of title 12, Code of Federal Regula-
tions, or to any suitable substitute of such booklet 
that such Board of Governors may subsequently 
adopt pursuant to such section. 
‘‘(7) A brief explanation of the nature of a 
home equity line of credit and a reference to the
141 
pamphlet required to be provided under section 
127A of the Truth in Lending Act. 
‘‘(8) Information about homeownership coun-
seling services made available pursuant to section 
106(a)(4) of the Housing and Urban Development 
Act of 1968 (12 U.S.C. 1701x(a)(4)), a rec-
ommendation that the consumer use such services, 
and notification that a list of certified providers of 
homeownership counseling in the area, and their 
contact information, is available. 
‘‘(9) An explanation of the nature and purpose 
of escrow accounts when used in connection with 
loans secured by residential real estate and the re-
quirements under section 10 of this Act regarding 
such accounts. 
‘‘(10) An explanation of the choices available to 
buyers of residential real estate in selecting persons 
to provide necessary services incidental to a real es-
tate settlement. 
‘‘(11) An explanation of a consumer’s respon-
sibilities, liabilities, and obligations in a mortgage 
transaction. 
‘‘(12) An explanation of the nature and purpose 
of real estate appraisals, including the difference be-
tween an appraisal and a home inspection.
142 
‘‘(13) Notice that the Office of Housing of the 
Department of Housing and Urban Development has 
made publicly available a brochure regarding loan 
fraud and a World Wide Web address and toll-free 
telephone number for obtaining the brochure. 
The booklet prepared pursuant to this section shall take 
into consideration differences in real estate settlement pro-
cedures that may exist among the several States and terri-
tories of the United States and among separate political 
subdivisions within the same State and territory.’’; 
(3) in subsection (c), by inserting at the end 
the following new sentence: ‘‘Each lender shall also 
include with the booklet a reasonably complete or 
updated list of homeownership counselors who are 
certified pursuant to section 106(e) of the Housing 
and Urban Development Act of 1968 (12 U.S.C. 
1701x(e)) and located in the area of the lender.’’; 
and 
(4) in subsection (d), by inserting after the pe-
riod at the end of the first sentence the following: 
‘‘The lender shall provide the HUD-issued booklet in 
the version that is most appropriate for the person 
receiving it.’’. 
SEC. 411. HOME INSPECTION COUNSELING. 
(a) PUBLIC OUTREACH.—
143 
(1) IN GENERAL.—The Secretary of Housing 
and Urban Development (in this section referred to 
as the ‘‘Secretary’’) shall take such actions as may 
be necessary to inform potential homebuyers of the 
availability and importance of obtaining an inde-
pendent home inspection. Such actions shall in-
clude— 
(A) publication of the HUD/FHA form 
HUD 92564–CN entitled ‘‘For Your Protec-
tion: Get a Home Inspection’’, in both English 
and Spanish languages; 
(B) publication of the HUD/FHA booklet 
entitled ‘‘For Your Protection: Get a Home In-
spection’’, in both English and Spanish lan-
guages; 
(C) development and publication of a HUD 
booklet entitled ‘‘For Your Protection—Get a 
Home Inspection’’ that does not reference 
FHA-insured homes, in both English and Span-
ish languages; and 
(D) publication of the HUD document en-
titled ‘‘Ten Important Questions To Ask Your 
Home Inspector’’, in both English and Spanish 
languages.
144 
(2) AVAILABILITY.—The Secretary shall make 
the materials specified in paragraph (1) available for 
electronic access and, where appropriate, inform po-
tential homebuyers of such availability through home 
purchase counseling public service announcements 
and toll-free telephone hotlines of the Department of 
Housing and Urban Development. The Secretary 
shall give special emphasis to reaching first-time and 
low-income homebuyers with these materials and ef-
forts. 
(3) UPDATING.—The Secretary may periodi-
cally update and revise such materials, as the Sec-
retary determines to be appropriate. 
(b) REQUIREMENT
FOR
FHA-APPROVED
LEND-
ERS.—Each mortgagee approved for participation in the 
mortgage insurance programs under title II of the Na-
tional Housing Act shall provide prospective homebuyers, 
at first contact, whether upon pre-qualification, pre-ap-
proval, or initial application, the materials specified in 
subparagraphs (A), (B), and (D) of subsection (a)(1). 
(c) REQUIREMENTS
FOR HUD-APPROVED COUN-
SELING AGENCIES.—Each counseling agency certified 
pursuant by the Secretary to provide housing counseling 
services shall provide each of their clients, as part of the
145 
home purchase counseling process, the materials specified 
in subparagraphs (C) and (D) of subsection (a)(1). 
(d) TRAINING.—Training provided the Department 
of Housing and Urban Development for housing coun-
seling agencies, whether such training is provided directly 
by the Department or otherwise, shall include— 
(1) providing information on counseling poten-
tial homebuyers of the availability and importance of 
getting an independent home inspection; 
(2) providing information about the home in-
spection process, including the reasons for specific 
inspections such as radon and lead-based paint test-
ing; 
(3) providing information about advising poten-
tial homebuyers on how to locate and select a quali-
fied home inspector; and 
(4) review of home inspection public outreach 
materials of the Department. 
SEC. 412. WARNINGS TO HOMEOWNERS OF FORECLOSURE 
RESCUE SCAMS. 
(a) ASSISTANCE
TO NRC.—Notwithstanding any 
other provision of law, of any amounts made available for 
any fiscal year pursuant to section 106(a)(4)(F) of the 
Housing and Urban Development Act of 1968 (12 U.S.C. 
1701x(a)(4)(F)) (as added by section 404 of this Act), 10
146 
percent shall be used only for assistance to the Neighbor-
hood Reinvestment Corporation for activities, in consulta-
tion with servicers of residential mortgage loans, to pro-
vide notice to borrowers under such loans who are delin-
quent with respect to payments due under such loans that 
makes such borrowers aware of the dangers of fraudulent 
activities associated with foreclosure. 
(b) NOTICE.—The Neighborhood Reinvestment Cor-
poration, in consultation with servicers of residential mort-
gage loans, shall use the amounts provided pursuant to 
subsection (a) to carry out activities to inform borrowers 
under residential mortgage loans— 
(1) that the foreclosure process is complex and 
can be confusing; 
(2) that the borrower may be approached dur-
ing the foreclosure process by persons regarding sav-
ing their home and they should use caution in any 
such dealings; 
(3) that there are Federal Government and 
nonprofit agencies that may provide information 
about the foreclosure process, including the Depart-
ment of Housing and Urban Development; 
(4) that they should contact their lender imme-
diately, contact the Department of Housing and 
Urban Development to find a housing counseling
147 
agency certified by the Department to assist in 
avoiding foreclosure, or visit the Department’s 
website regarding tips for avoiding foreclosure; and 
(5) of the telephone number of the loan servicer 
or successor, the telephone number of the Depart-
ment of Housing and Urban Development housing 
counseling line, and the Uniform Resource Locators 
(URLs) for the Department of Housing and Urban 
Development websites for housing counseling and for 
tips for avoiding foreclosure. 
TITLE V—MORTGAGE SERVICING 
SEC. 501. ESCROW AND IMPOUND ACCOUNTS RELATING TO 
CERTAIN 
CONSUMER 
CREDIT 
TRANS-
ACTIONS. 
(a) IN GENERAL.—Chapter 2 of the Truth in Lend-
ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 
after section 129C (as added by section 201) the following 
new section: 
‘‘SEC. 129D. ESCROW OR IMPOUND ACCOUNTS RELATING 
TO 
CERTAIN 
CONSUMER 
CREDIT 
TRANS-
ACTIONS. 
‘‘(a) IN GENERAL.—Except as provided in subsection 
(b), (c), or (d) , a creditor, in connection with the forma-
tion or consummation of a consumer credit transaction se-
cured by a first lien on the principal dwelling of the con-
148 
sumer, other than a consumer credit transaction under an 
open end credit plan or a reverse mortgage, shall establish, 
before the consummation of such transaction, an escrow 
or impound account for the payment of taxes and hazard 
insurance, and, if applicable, flood insurance, mortgage in-
surance, ground rents, and any other required periodic 
payments or premiums with respect to the property or the 
loan terms, as provided in, and in accordance with, this 
section. 
‘‘(b) WHEN REQUIRED.—No impound, trust, or other 
type of account for the payment of property taxes, insur-
ance premiums, or other purposes relating to the property 
may be required as a condition of a real property sale con-
tract or a loan secured by a first deed of trust or mortgage 
on the principal dwelling of the consumer, other than a 
consumer credit transaction under an open end credit plan 
or a reverse mortgage, except when— 
‘‘(1) any such impound, trust, or other type of 
escrow or impound account for such purposes is re-
quired by Federal or State law; 
‘‘(2) a loan is made, guaranteed, or insured by 
a State or Federal governmental lending or insuring 
agency; 
‘‘(3) the transaction is secured by a first mort-
gage or lien on the consumer’s principal dwelling
149 
having an original principal obligation amount 
that— 
‘‘(A) does not exceed the amount of the 
maximum limitation on the original principal 
obligation of mortgage in effect for a residence 
of the applicable size, as of the date such inter-
est rate set, pursuant to the sixth sentence of 
section 305(a)(2) the Federal Home Loan 
Mortgage 
Corporation 
Act 
(12 
U.S.C. 
1454(a)(2)), and the annual percentage rate 
will exceed the average prime offer rate for a 
comparable transaction by 1.5 or more percent-
age points; or 
‘‘(B) exceeds the amount of the maximum 
limitation on the original principal obligation of 
mortgage in effect for a residence of the appli-
cable size, as of the date such interest rate set, 
pursuant to the sixth sentence of section 
305(a)(2) the Federal Home Loan Mortgage 
Corporation Act (12 U.S.C. 1454(a)(2)), and 
the annual percentage rate will exceed the aver-
age prime offer rate for a comparable trans-
action by 2.5 or more percentage points; or 
‘‘(4) so required pursuant to regulation.
150 
‘‘(c) DURATION OF MANDATORY ESCROW OR IM-
POUND ACCOUNT.—An escrow or impound account estab-
lished pursuant to subsection (b), shall remain in existence 
for a minimum period of 5 years, beginning with the date 
of the consummation of the loan, and until such borrower 
has sufficient equity in the dwelling securing the consumer 
credit transaction so as to no longer be required to main-
tain private mortgage insurance, or such other period as 
may be provided in regulations to address situations such 
as borrower delinquency, unless the underlying mortgage 
establishing the account is terminated. 
‘‘(d) LIMITED EXEMPTIONS FOR LOANS SECURED BY 
SHARES IN A COOPERATIVE AND FOR CERTAIN CONDO-
MINIUM UNITS.—Escrow accounts need not be established 
for loans secured by shares in a cooperative. Insurance 
premiums need not be included in escrow accounts for 
loans secured by condominium units, where the condo-
minium association has an obligation to the condominium 
unit owners to maintain a master policy insuring condo-
minium units. 
‘‘(e) CLARIFICATION
ON ESCROW ACCOUNTS
FOR 
LOANS NOT MEETING STATUTORY TEST.—For mort-
gages not covered by the requirements of subsection (b), 
no provision of this section shall be construed as pre-
cluding the establishment of an impound, trust, or other
151 
type of account for the payment of property taxes, insur-
ance premiums, or other purposes relating to the prop-
erty— 
‘‘(1) on terms mutually agreeable to the parties 
to the loan; 
‘‘(2) at the discretion of the lender or servicer, 
as provided by the contract between the lender or 
servicer and the borrower; or 
‘‘(3) pursuant to the requirements for the 
escrowing of flood insurance payments for regulated 
lending institutions in section 102(d) of the Flood 
Disaster Protection Act of 1973. 
‘‘(f) ADMINISTRATION OF MANDATORY ESCROW OR 
IMPOUND ACCOUNTS.— 
‘‘(1) IN GENERAL.—Except as may otherwise 
be provided for in this title or in regulations pre-
scribed by the Board, escrow or impound accounts 
established pursuant to subsection (b) shall be estab-
lished in a federally insured depository institution. 
‘‘(2) ADMINISTRATION.—Except as provided in 
this section or regulations prescribed under this sec-
tion, an escrow or impound account subject to this 
section shall be administered in accordance with—
152 
‘‘(A) the Real Estate Settlement Proce-
dures Act of 1974 and regulations prescribed 
under such Act; 
‘‘(B) the Flood Disaster Protection Act of 
1973 and regulations prescribed under such 
Act; and 
‘‘(C) the law of the State, if applicable, 
where the real property securing the consumer 
credit transaction is located. 
‘‘(3) APPLICABILITY OF PAYMENT OF INTER-
EST.—If prescribed by applicable State or Federal 
law, each creditor shall pay interest to the consumer 
on the amount held in any impound, trust, or escrow 
account that is subject to this section in the manner 
as prescribed by that applicable State or Federal 
law. 
‘‘(4) PENALTY COORDINATION WITH RESPA.— 
Any action or omission on the part of any person 
which constitutes a violation of the Real Estate Set-
tlement Procedures Act of 1974 or any regulation 
prescribed under such Act for which the person has 
paid any fine, civil money penalty, or other damages 
shall not give rise to any additional fine, civil money 
penalty, or other damages under this section, unless
153 
the action or omission also constitutes a direct viola-
tion of this section. 
‘‘(g) DISCLOSURES RELATING TO MANDATORY ES-
CROW OR IMPOUND ACCOUNT.—In the case of any im-
pound, trust, or escrow account that is subject to this sec-
tion, the creditor shall disclose by written notice to the 
consumer at least 3 business days before the consumma-
tion of the consumer credit transaction giving rise to such 
account or in accordance with timeframes established in 
prescribed regulations the following information: 
‘‘(1) The fact that an escrow or impound ac-
count will be established at consummation of the 
transaction. 
‘‘(2) The amount required at closing to initially 
fund the escrow or impound account. 
‘‘(3) The amount, in the initial year after the 
consummation of the transaction, of the estimated 
taxes and hazard insurance, including flood insur-
ance, if applicable, and any other required periodic 
payments or premiums that reflects, as appropriate, 
either the taxable assessed value of the real property 
securing the transaction, including the value of any 
improvements on the property or to be constructed 
on the property (whether or not such construction
154 
will be financed from the proceeds of the trans-
action) or the replacement costs of the property. 
‘‘(4) The estimated monthly amount payable to 
be escrowed for taxes, hazard insurance (including 
flood insurance, if applicable) and any other re-
quired periodic payments or premiums. 
‘‘(5) The fact that, if the consumer chooses to 
terminate the account at the appropriate time in the 
future, the consumer will become responsible for the 
payment of all taxes, hazard insurance, and flood in-
surance, if applicable, as well as any other required 
periodic payments or premiums on the property un-
less a new escrow or impound account is established. 
‘‘(6) Such other information as the Federal 
banking agencies jointly determine necessary for the 
protection of the consumer. 
‘‘(h) DEFINITIONS.—For purposes of this section, the 
following definitions shall apply: 
‘‘(1) FLOOD INSURANCE.—The term ‘flood in-
surance’ means flood insurance coverage provided 
under the national flood insurance program pursu-
ant to the National Flood Insurance Act of 1968. 
‘‘(2) HAZARD INSURANCE.—The term ‘hazard 
insurance’ shall have the same meaning as provided 
for ‘hazard insurance’, ‘casualty insurance’, ‘home-
155 
owner’s insurance’, or other similar term under the 
law of the State where the real property securing the 
consumer credit transaction is located.’’. 
(b) IMPLEMENTATION.— 
(1) REGULATIONS.—The Board of Governors of 
the Federal Reserve System, the Comptroller of the 
Currency, the Director of the Office of Thrift Super-
vision, the Federal Deposit Insurance Corporation, 
the National Credit Union Administration Board, 
(hereafter in this Act referred to as the ‘‘Federal 
banking agencies’’) and the Federal Trade Commis-
sion shall prescribe, in final form, such regulations 
as determined to be necessary to implement the 
amendments made by subsection (a) before the end 
of the 180-day period beginning on the date of the 
enactment of this Act. 
(2) EFFECTIVE DATE.—The amendments made 
by subsection (a) shall only apply to covered mort-
gage loans consummated after the end of the 1-year 
period beginning on the date of the publication of 
final regulations in the Federal Register. 
(c) CLERICAL AMENDMENT.—The table of sections 
for chapter 2 of the Truth in Lending Act is amended 
by inserting after the item relating to section 129C (as 
added by section 201) the following new item:
156 
‘‘129D. Escrow or impound accounts relating to certain consumer credit trans-
actions.’’. 
SEC. 502. DISCLOSURE NOTICE REQUIRED FOR CON-
SUMERS WHO WAIVE ESCROW SERVICES. 
(a) IN GENERAL.—Section 129D of the Truth in 
Lending Act (as added by section 501) is amended by add-
ing at the end the following new subsection: 
‘‘(i) DISCLOSURE NOTICE REQUIRED
FOR CON-
SUMERS WHO WAIVE ESCROW SERVICES.— 
‘‘(1) IN GENERAL.—If— 
‘‘(A) an impound, trust, or other type of 
account for the payment of property taxes, in-
surance premiums, or other purposes relating to 
real property securing a consumer credit trans-
action is not established in connection with the 
transaction; or 
‘‘(B) a consumer chooses, and provides 
written notice to the creditor or servicer of such 
choice, at any time after such an account is es-
tablished in connection with any such trans-
action and in accordance with any statute, reg-
ulation, or contractual agreement, to close such 
account, 
the creditor or servicer shall provide a timely and 
clearly written disclosure to the consumer that ad-
vises the consumer of the responsibilities of the con-
158 
sumer in the event of any such creditor-placed 
insurance. 
‘‘(D) Such other information as the Fed-
eral banking agencies jointly determine nec-
essary for the protection of the consumer.’’. 
(b) IMPLEMENTATION.— 
(1) REGULATIONS.—The Federal banking agen-
cies and the Federal Trade Commission shall pre-
scribe, in final form, such regulations as such agen-
cies determine to be necessary to implement the 
amendments made by subsection (a) before the end 
of the 180-day period beginning on the date of the 
enactment of this Act. 
(2) EFFECTIVE DATE.—The amendments made 
by subsection (a) shall only apply in accordance with 
the regulations established in paragraph (1) and be-
ginning on the date occurring 180-days after the 
date of the publication of final regulations in the 
Federal Register. 
SEC. 503. REAL ESTATE SETTLEMENT PROCEDURES ACT OF 
1974 AMENDMENTS. 
(a) SERVICER PROHIBITIONS.—Section 6 of the Real 
Estate Settlement Procedures Act of 1974 (12 U.S.C. 
2605) is amended by adding at the end the following new 
subsections:
159 
‘‘(k) SERVICER PROHIBITIONS.— 
‘‘(1) IN GENERAL.—A servicer of a federally re-
lated mortgage shall not— 
‘‘(A) obtain force-placed hazard insurance 
unless there is a reasonable basis to believe the 
borrower has failed to comply with the loan 
contract’s requirements to maintain property 
insurance; 
‘‘(B) charge fees for responding to valid 
qualified written requests (as defined in regula-
tions which the Secretary shall prescribe) under 
this section; 
‘‘(C) fail to take timely action to respond 
to a borrower’s requests to correct errors relat-
ing to allocation of payments, final balances for 
purposes of paying off the loan, or avoiding 
foreclosure, or other standard servicer’s duties; 
‘‘(D) fail to respond within 10 business 
days to a request from a borrower to provide 
the identity, address, and other relevant contact 
information about the owner assignee of the 
loan; or 
‘‘(E) fail to comply with any other obliga-
tion found by the Secretary, by regulation, to
160 
be appropriate to carry out the consumer pro-
tection purposes of this Act. 
‘‘(2) FORCE-PLACED
INSURANCE
DEFINED.— 
For purposes of this subsection and subsections (l) 
and (m), the term ‘force-placed insurance’ means 
hazard insurance coverage obtained by a servicer of 
a federally related mortgage when the borrower has 
failed to maintain or renew hazard insurance on 
such property as required of the borrower under the 
terms of the mortgage. 
‘‘(l) REQUIREMENTS
FOR FORCE-PLACED INSUR-
ANCE.—A servicer of a federally related mortgage shall 
not be construed as having a reasonable basis for obtain-
ing force-placed insurance unless the requirements of this 
subsection have been met. 
‘‘(1) WRITTEN
NOTICES
TO
BORROWER.—A 
servicer may not impose any charge on any borrower 
for force-placed insurance with respect to any prop-
erty securing a federally related mortgage unless— 
‘‘(A) the servicer has sent, by first-class 
mail, a written notice to the borrower con-
taining— 
‘‘(i) a reminder of the borrower’s obli-
gation to maintain hazard insurance on the
161 
property securing the federally related 
mortgage; 
‘‘(ii) a statement that the servicer 
does not have evidence of insurance cov-
erage of such property; 
‘‘(iii) a clear and conspicuous state-
ment of the procedures by which the bor-
rower may demonstrate that the borrower 
already has insurance coverage; and 
‘‘(iv) a statement that the servicer 
may obtain such coverage at the borrower’s 
expense if the borrower does not provide 
such demonstration of the borrower’s exist-
ing coverage in a timely manner; 
‘‘(B) the servicer has sent, by first-class 
mail, a second written notice, at least 30 days 
after the mailing of the notice under subpara-
graph (A) that contains all the information de-
scribed in each clause of such subparagraph; 
and 
‘‘(C) the servicer has not received from the 
borrower any demonstration of hazard insur-
ance coverage for the property securing the 
mortgage by the end of the 15-day period be-
162 
ginning on the date the notice under subpara-
graph (B) was sent by the servicer. 
‘‘(2) SUFFICIENCY
OF
DEMONSTRATION.—A 
servicer of a federally related mortgage shall accept 
any reasonable form of written confirmation from a 
borrower of existing insurance coverage, which shall 
include the existing insurance policy number along 
with the identity of, and contact information for, the 
insurance company or agent. 
‘‘(3) TERMINATION OF FORCE-PLACED INSUR-
ANCE.—Within 15 days of the receipt by a servicer 
of confirmation of a borrower’s existing insurance 
coverage, the servicer shall— 
‘‘(A) terminate the force-placed insurance; 
and 
‘‘(B) refund to the consumer all force- 
placed insurance premiums paid by the bor-
rower during any period during which the bor-
rower’s insurance coverage and the force-placed 
insurance coverage were each in effect, and any 
related fees charged to the consumer’s account 
with respect to the force-placed insurance dur-
ing such period. 
‘‘(4) CLARIFICATION WITH RESPECT TO FLOOD 
DISASTER PROTECTION ACT.—No provision of this
163 
section shall be construed as prohibiting a servicer 
from providing simultaneous or concurrent notice of 
a lack of flood insurance pursuant to section 102(e) 
of the Flood Disaster Protection Act of 1973. 
‘‘(m) LIMITATIONS ON FORCE-PLACED INSURANCE 
CHARGES.—All charges for force-placed insurance pre-
miums shall be bona fide and reasonable in amount.’’. 
(b) INCREASE IN PENALTY AMOUNTS.—Section 6(f) 
of the Real Estate Settlement Procedures Act of 1974 (12 
U.S.C. 2605(f)) is amended— 
(1) in paragraphs (1)(B) and (2)(B), by strik-
ing ‘‘$1,000’’ each place such term appears and in-
serting ‘‘$2,000’’; and 
(2) 
in 
paragraph 
(2)(B)(i), 
by 
striking 
‘‘$500,000’’ and inserting ‘‘$1,000,000’’. 
(c) DECREASE IN RESPONSE TIMES.—Section 6(e) of 
the Real Estate Settlement Procedures Act of 1974 (12 
U.S.C. 2605(e)) is amended— 
(1) in paragraph (1)(A), by striking ‘‘20 days’’ 
and inserting ‘‘5 days’’; 
(2) in paragraph (2), by striking ‘‘60 days’’ and 
inserting ‘‘30 days’’; and 
(3) by adding at the end the following new 
paragraph:
164 
‘‘(4) 
LIMITED
EXTENSION
OF
RESPONSE 
TIME.—The 30-day period described in paragraph 
(2) may be extended for not more than 15 days if, 
before the end of such 30-day period, the servicer 
notifies the borrower of the extension and the rea-
sons for the delay in responding.’’. 
(d) PROMPT REFUND OF ESCROW ACCOUNTS UPON 
PAYOFF.—Section 6(g) of the Real Estate Settlement 
Procedures Act of 1974 (12 U.S.C. 2605(g)) is amended 
by adding at the end the following new sentence: ‘‘Any 
balance in any such account that is within the servicer’s 
control at the time the loan is paid off shall be promptly 
returned to the borrower within 20 business days or cred-
ited to a similar account for a new mortgage loan to the 
borrower with the same lender.’’. 
SEC. 504. TRUTH IN LENDING ACT AMENDMENTS. 
(a) REQUIREMENTS
FOR PROMPT CREDITING
OF 
HOME LOAN PAYMENTS.—Chapter 2 of the Truth in 
Lending Act (15 U.S.C. 1631 et seq.) is amended by in-
serting after section 129E (as added by section 602) the 
following new section (and by amending the table of con-
tents accordingly):
165 
‘‘SEC. 129F. REQUIREMENTS FOR PROMPT CREDITING OF 
HOME LOAN PAYMENTS. 
‘‘(a) IN GENERAL.—In connection with a consumer 
credit transaction secured by a consumer’s principal dwell-
ing, no servicer shall fail to credit a payment to the con-
sumer’s loan account as of the date of receipt, except when 
a delay in crediting does not result in any charge to the 
consumer or in the reporting of negative information to 
a consumer reporting agency, except as required in sub-
section (b). 
‘‘(b) EXCEPTION.—If a servicer specifies in writing 
requirements for the consumer to follow in making pay-
ments, but accepts a payment that does not conform to 
the requirements, the servicer shall credit the payment as 
of 5 days after receipt.’’. 
(b) REQUESTS FOR PAYOFF AMOUNTS.—Chapter 2 
of such Act is further amended by inserting after section 
129F (as added by subsection (a)) the following new sec-
tion (and by amending the table of contents accordingly): 
‘‘SEC. 129G. REQUESTS FOR PAYOFF AMOUNTS OF HOME 
LOAN. 
‘‘A creditor or servicer of a home loan shall send an 
accurate payoff balance within a reasonable time, but in 
no case more than 7 business days, after the receipt of 
a written request for such balance from or on behalf of 
the borrower.’’.
166 
SEC. 505. ESCROWS INCLUDED IN REPAYMENT ANALYSIS. 
Section 128(b) of the Truth in Lending Act (15 
U.S.C. 1638(b)) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(4) REPAYMENT ANALYSIS REQUIRED TO IN-
CLUDE ESCROW PAYMENTS.— 
‘‘(A) IN
GENERAL.—In the case of any 
consumer credit transaction secured by a first 
mortgage or lien on the principal dwelling of 
the consumer, other than a consumer credit 
transaction under an open end credit plan or a 
reverse mortgage, for which an impound, trust, 
or other type of account has been or will be es-
tablished in connection with the transaction for 
the payment of property taxes, hazard and flood 
(if any) insurance premiums, or other periodic 
payments or premiums with respect to the 
property, the information required to be pro-
vided under subsection (a) with respect to the 
number, amount, and due dates or period of 
payments scheduled to repay the total of pay-
ments shall take into account the amount of 
any monthly payment to such account for each 
such repayment in accordance with section 
10(a)(2) of the Real Estate Settlement Proce-
dures Act of 1974.
167 
‘‘(B) ASSESSMENT
VALUE.—The amount 
taken into account under subparagraph (A) for 
the payment of property taxes, hazard and flood 
(if any) insurance premiums, or other periodic 
payments or premiums with respect to the 
property shall reflect the taxable assessed value 
of the real property securing the transaction 
after the consummation of the transaction, in-
cluding the value of any improvements on the 
property or to be constructed on the property 
(whether or not such construction will be fi-
nanced from the proceeds of the transaction), if 
known, and the replacement costs of the prop-
erty for hazard insurance, in the initial year 
after the transaction.’’. 
TITLE VI—APPRAISAL 
ACTIVITIES 
SEC. 601. PROPERTY APPRAISAL REQUIREMENTS. 
Chapter 2 of the Truth in Lending Act (15 U.S.C. 
1631 et seq.) is amended by inserting after 129G (as 
added by section 504) the following new section: 
‘‘SEC. 129H PROPERTY APPRAISAL REQUIREMENTS. 
‘‘(a) IN GENERAL.—A creditor may not extend credit 
in the form of a subprime mortgage to any consumer with-
out first obtaining a written appraisal of the property to
168 
be mortgaged prepared in accordance with the require-
ments of this section. 
‘‘(b) APPRAISAL REQUIREMENTS.— 
‘‘(1) PHYSICAL PROPERTY VISIT.—An appraisal 
of property to be secured by a subprime mortgage 
does not meet the requirement of this section unless 
it is performed by a qualified appraiser who con-
ducts a physical property visit of the interior of the 
mortgaged property. 
‘‘(2) SECOND APPRAISAL UNDER CERTAIN CIR-
CUMSTANCES.— 
‘‘(A) IN GENERAL.—If the purpose of a 
subprime mortgage is to finance the purchase 
or acquisition of the mortgaged property from 
a person within 180 days of the purchase or ac-
quisition of such property by that person at a 
price that was lower than the current sale price 
of the property, the creditor shall obtain a sec-
ond appraisal from a different qualified ap-
praiser. The second appraisal shall include an 
analysis of the difference in sale prices, changes 
in market conditions, and any improvements 
made to the property between the date of the 
previous sale and the current sale.
169 
‘‘(B) NO COST TO APPLICANT.—The cost 
of any second appraisal required under sub-
paragraph (A) may not be charged to the appli-
cant. 
‘‘(3) QUALIFIED
APPRAISER
DEFINED.—For 
purposes of this section, the term ‘qualified ap-
praiser’ means a person who— 
‘‘(A) is, at a minimum, certified or licensed 
by the State in which the property to be ap-
praised is located; and 
‘‘(B) performs each appraisal in con-
formity with the Uniform Standards of Profes-
sional Appraisal Practice and title XI of the Fi-
nancial Institutions Reform, Recovery, and En-
forcement Act of 1989, and the regulations pre-
scribed under such title, as in effect on the date 
of the appraisal. 
‘‘(c) FREE COPY OF APPRAISAL.—A creditor shall 
provide 1 copy of each appraisal conducted in accordance 
with this section in connection with a subprime mortgage 
to the applicant without charge, and at least 3 days prior 
to the transaction closing date. 
‘‘(d) CONSUMER NOTIFICATION.—At the time of the 
initial mortgage application, the applicant shall be pro-
vided with a statement by the creditor that any appraisal
170 
prepared for the mortgage is for the sole use of the cred-
itor, and that the applicant may choose to have a separate 
appraisal conducted at their own expense. 
‘‘(e) VIOLATIONS.—In addition to any other liability 
to any person under this title, a creditor found to have 
willfully failed to obtain an appraisal as required in this 
section shall be liable to the applicant or borrower for the 
sum of $2,000. 
‘‘(f) SUBPRIME MORTGAGE DEFINED.—For purposes 
of this section, the term ‘subprime mortgage’ means a res-
idential mortgage loan secured by a principal dwelling with 
an annual percentage rate that exceeds the average prime 
offer rate for a comparable transaction, as of the date the 
interest rate is set— 
‘‘(1) by 1.5 or more percentage points, in the 
case of a first lien residential mortgage loan having 
an original principal obligation amount that does not 
exceed the amount of the maximum limitation on the 
original principal obligation of mortgage in effect for 
a residence of the applicable size, as of the date of 
such interest rate set, pursuant to the sixth sentence 
of section 305(a)(2) the Federal Home Loan Mort-
gage Corporation Act (12 U.S.C. 1454(a)(2)); 
‘‘(2) by 2.5 or more percentage points, in the 
case of a first lien residential mortgage loan having
171 
an original principal obligation amount that exceeds 
the amount of the maximum limitation on the origi-
nal principal obligation of mortgage in effect for a 
residence of the applicable size, as of the date of 
such interest rate set, pursuant to the sixth sentence 
of section 305(a)(2) the Federal Home Loan Mort-
gage Corporation Act (12 U.S.C. 1454(a)(2)); and 
‘‘(3) by 3.5 or more percentage points for a 
subordinate lien residential mortgage loan.’’. 
SEC. 602. UNFAIR AND DECEPTIVE PRACTICES AND ACTS 
RELATING TO CERTAIN CONSUMER CREDIT 
TRANSACTIONS. 
(a) IN GENERAL.—Chapter 2 of the Truth in Lend-
ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 
after section 129D (as added by section 501(a)) the fol-
lowing new section: 
‘‘SEC. 129E. UNFAIR AND DECEPTIVE PRACTICES AND ACTS 
RELATING TO CERTAIN CONSUMER CREDIT 
TRANSACTIONS. 
‘‘(a) IN GENERAL.—It shall be unlawful, in extending 
credit or in providing any services for a consumer credit 
transaction secured by the principal dwelling of the con-
sumer, to engage in any unfair or deceptive act or practice 
as described in or pursuant to regulations prescribed 
under this section.
172 
‘‘(b) APPRAISAL INDEPENDENCE.—For purposes of 
subsection (a), unfair and deceptive practices shall in-
clude— 
‘‘(1) any appraisal of a property offered as se-
curity for repayment of the consumer credit trans-
action that is conducted in connection with such 
transaction in which a person with an interest in the 
underlying transaction compensates, coerces, extorts, 
colludes, instructs, induces, bribes, or intimidates a 
person conducting or involved in an appraisal, or at-
tempts, to compensate, coerce, extort, collude, in-
struct, induce, bribe, or intimidate such a person, 
for the purpose of causing the appraised value as-
signed, under the appraisal, to the property to be 
based on any factor other than the independent 
judgment of the appraiser; 
‘‘(2) 
mischaracterizing, 
or 
suborning 
any 
mischaracterization of, the appraised value of the 
property securing the extension of the credit; 
‘‘(3) seeking to influence an appraiser or other-
wise to encourage a targeted value in order to facili-
tate the making or pricing of the transaction; and 
‘‘(4) withholding or threatening to withhold 
timely payment for an appraisal report or for ap-
praisal services rendered.
173 
‘‘(c) EXCEPTIONS.—The requirements of subsection 
(b) shall not be construed as prohibiting a mortgage lend-
er, mortgage broker, mortgage banker, real estate broker, 
appraisal management company, employee of an appraisal 
management company, consumer, or any other person 
with an interest in a real estate transaction from asking 
an appraiser to provide 1 or more of the following services: 
‘‘(1) Consider additional, appropriate property 
information, including the consideration of addi-
tional comparable properties to make or support an 
appraisal. 
‘‘(2) Provide further detail, substantiation, or 
explanation for the appraiser’s value conclusion. 
‘‘(3) Correct errors in the appraisal report. 
‘‘(d) PROHIBITIONS ON CONFLICTS OF INTEREST.— 
No certified or licensed appraiser conducting, and no ap-
praisal management company procuring or facilitating, an 
appraisal in connection with a consumer credit transaction 
secured by the principal dwelling of a consumer may have 
a direct or indirect interest, financial or otherwise, in the 
property or transaction involving the appraisal. 
‘‘(e) MANDATORY REPORTING.—Any mortgage lend-
er, mortgage broker, mortgage banker, real estate broker, 
appraisal management company, employee of an appraisal 
management company, or any other person involved in a
174 
real estate transaction involving an appraisal in connection 
with a consumer credit transaction secured by the prin-
cipal dwelling of a consumer who has a reasonable basis 
to believe an appraiser is failing to comply with the Uni-
form Standards of Professional Appraisal Practice, is vio-
lating applicable laws, or is otherwise engaging in uneth-
ical or unprofessional conduct, shall refer the matter to 
the applicable State appraiser certifying and licensing 
agency. 
‘‘(f) NO EXTENSION OF CREDIT.—In connection with 
a consumer credit transaction secured by a consumer’s 
principal dwelling, a creditor who knows, at or before loan 
consummation, of a violation of the appraisal independ-
ence standards established in subsections (b) or (d) shall 
not extend credit based on such appraisal unless the cred-
itor documents that the creditor has acted with reasonable 
diligence to determine that the appraisal does not materi-
ally misstate or misrepresent the value of such dwelling. 
‘‘(g) RULEMAKING PROCEEDINGS.—The Board, the 
Comptroller of the Currency, the Director of the Office 
of Thrift Supervision, the Federal Deposit Insurance Cor-
poration, the National Credit Union Administration 
Board, and the Federal Trade Commission— 
‘‘(1) shall, for purposes of this section, jointly 
prescribe regulations no later than 180 days after
175 
the date of the enactment of this section, and where 
such regulations have an effective date of no later 
than 1 year after the date of the enactment of this 
section, defining with specificity acts or practices 
which are unfair or deceptive in the provision of 
mortgage lending services for a consumer credit 
transaction secured by the principal dwelling of the 
consumer or mortgage brokerage services for such a 
transaction and defining any terms in this section or 
such regulations; and 
‘‘(2) may jointly issue interpretive guidelines 
and general statements of policy with respect to un-
fair or deceptive acts or practices in the provision of 
mortgage lending services for a consumer credit 
transaction secured by the principal dwelling of the 
consumer and mortgage brokerage services for such 
a transaction, within the meaning of subsections (a), 
(b), (c), (d), (e), and (f). 
‘‘(h) PENALTIES.— 
‘‘(1) FIRST VIOLATION.—In addition to the en-
forcement provisions referred to in section 130, each 
person who violates this section shall forfeit and pay 
a civil penalty of not more than $10,000 for each 
day any such violation continues.