I 
110TH CONGRESS 
1ST SESSION H. R. 3081 
To amend the Truth in Lending Act to protect consumers from certain 
practices in connection with the origination of consumer credit trans-
actions secured by the consumer’s principal dwelling, and for other pur-
poses. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 18, 2007 
Mr. ELLISON (for himself, Mr. CLAY, Mr. CLEAVER, Mr. JOHNSON of Geor-
gia, Ms. LEE, Ms. MCCOLLUM of Minnesota, Mr. OBERSTAR, Mr. WALZ 
of Minnesota, and Ms. WOOLSEY) introduced the following bill; which was 
referred to the Committee on Financial Services 
A BILL 
To amend the Truth in Lending Act to protect consumers 
from certain practices in connection with the origination 
of consumer credit transactions secured by the con-
sumer’s principal dwelling, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Fairness for Home-
owners Act of 2007’’. 
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SEC. 2. ORIGINATIONS OF CONSUMER CREDIT TRANS-
ACTIONS SECURED BY THE CONSUMER’S 
PRINCIPAL DWELLING. 
(a) IN GENERAL.—The Truth in Lending Act (15 
U.S.C. 1601 et seq.) is amended by inserting after section 
129 the following new section: 
‘‘§ 129A. Originations of consumer credit transactions 
secured 
by 
the 
consumer’s 
principal 
dwelling 
‘‘(a) DEFINITIONS.—For purposes of this section, the 
following definitions shall apply: 
‘‘(1) FULLY INDEXED RATE.—The term ‘fully 
indexed rate’ equals the index rate prevailing at the 
time a consumer credit transaction secured by a con-
sumer’s principal dwelling is originated, plus the 
margin that will apply after the expiration of an in-
troductory interest rate. 
‘‘(2) MORTGAGE BROKER.—The term ‘mortgage 
broker’ means any person who is defined as a mort-
gage broker under applicable State law. 
‘‘(b) REQUIREMENTS FOR ORIGINATORS.— 
‘‘(1) ABILITY TO PAY.— 
‘‘(A) IN GENERAL.—No creditor or mort-
gage broker may make, provide, or arrange for 
any consumer credit transaction secured by a 
consumer’s principal dwelling without verifying 
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the consumer’s reasonable ability to pay the 
scheduled payments of the following, as applica-
ble: principal; interest; real estate taxes; home-
owner’s insurance, assessments, and mortgage 
insurance premiums. 
‘‘(B) VARIABLE INTEREST RATE.—In the 
case of any consumer credit transaction secured 
by a consumer’s principal dwelling for which 
the applicable annual percentage rate may vary 
over the life of the credit, the reasonable ability 
to pay shall be determined, for purposes of this 
paragraph, on the basis of a fully indexed rate 
plus 200 basis points and a repayment schedule 
which achieves full amortization over the life of 
the extension of credit. 
‘‘(C) VERIFICATION OF CONSUMER INCOME 
AND FINANCIAL RESOURCES.—In the case of 
any consumer credit transaction secured by a 
consumer’s principal dwelling, the income and 
financial resources of the consumer shall be 
verified for purposes of this paragraph by tax 
returns, payroll receipts, bank records, or other 
similarly reliable documents. 
‘‘(D) OTHER CRITERIA.—No provision of 
this paragraph shall be construed as prohibiting 
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reliance on criteria other than a consumer’s in-
come and financial resources to establish the 
reasonable ability of the consumer to repay any 
consumer credit transaction secured by the con-
sumer’s principal dwelling, to the extent such 
other criteria are also verified through reason-
ably reliable methods and documentation. 
‘‘(E) CONSUMER STATEMENT IS INSUFFI-
CIENT PROOF.—A statement by a consumer of 
the consumer’s income or financial resources 
shall not be sufficient to establish the existence 
of any income or financial resources when 
verifying the reasonable ability of the consumer 
to repay any consumer credit transaction se-
cured by the consumer’s principal dwelling, for 
purposes of this paragraph. 
‘‘(2) PROHIBITION ON STEERING.—No creditor 
or mortgage broker may make, provide, or arrange 
for any consumer credit transaction secured by a 
consumer’s principal dwelling that is of a lower in-
vestment grade if— 
‘‘(A) the consumer’s credit score; or 
‘‘(B) comparable underwriting data, in any 
case in which the creditor or mortgage broker 
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does not utilize credit scoring or a credit score 
for the consumer is unavailable, 
indicates that the borrower may qualify for a con-
sumer credit transaction, available from or through 
the creditor or mortgage broker, that is of a higher 
investment grade. 
‘‘(3) PROHIBITION ON PREPAYMENT PENALTIES 
FOR ARMS.— 
‘‘(A) IN
GENERAL.—In the case of any 
consumer credit transaction secured by a con-
sumer’s principal dwelling that provides for 
variable rates of interest on the credit extended 
under the transaction, the transaction may not 
contain terms under which a consumer must 
pay a prepayment penalty for paying all or part 
of the principal before the date on which the 
principal is due. 
‘‘(B) EXCLUSION
FOR
JUMBO
MORT-
GAGES.—Subparagraph (A) shall not apply to 
any consumer credit transaction secured by a 
consumer’s principal dwelling the principal 
amount (as defined in subsection (c)(2)) of 
which exceeds the maximum dollar amount limi-
tation (for a residence of the applicable size) on 
the amount of the principal obligation of a 
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mortgage for a 1- to 4-family residence that 
may be purchased by the Federal Home Loan 
Mortgage Corporation, as then in effect pursu-
ant to section 305(a)(2) of the Federal Home 
Loan Mortgage Corporation Act. 
‘‘(c) LIMITATION ON FINANCED POINTS, CHARGES, 
AND FEES.— 
‘‘(1) IN GENERAL.—No creditor or mortgage 
broker may, in connection with any consumer credit 
transaction secured by the consumer’s principal 
dwelling, include in the principal amount of such 
transaction any portion of any qualified finance 
charge in excess of the amount which is equal to 5 
percent of the principal amount of the transaction. 
‘‘(2) DEFINITIONS.—For purposes of this sub-
section, the following definitions shall apply: 
‘‘(A) QUALIFIED FINANCE CHARGE.—The 
term ‘qualified finance charge’ means the sum 
of— 
‘‘(i) the finance charge as determined 
under section 106, minus any interest and 
time price differential; and 
‘‘(ii) all compensation paid to a mort-
gage broker from any source in connection 
with this transaction. 
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‘‘(B) 
PRINCIPAL
AMOUNT.—The 
term 
‘principal amount’ means— 
‘‘(i) in the case of any consumer cred-
it transaction under an open end credit 
plan secured by the consumer’s principal 
dwelling, the maximum amount of credit 
that may be extended under the terms of 
such plan as determined without taking 
into account any amount included in deter-
mining the finance charge under section 
106; and 
‘‘(ii) in the case of any other con-
sumer credit transaction secured by a con-
sumer’s principal dwelling, the amount fi-
nanced (as defined in section 138(a)(2)). 
‘‘(3) PROHIBITION
ON
EXCESSIVE
FINANCE 
CHARGES.—No creditor or mortgage broker may, in 
connection with any consumer credit transaction se-
cured by the consumer’s principal dwelling, impose 
or receive any amount included in determining the 
qualified finance charge for such transaction that ex-
ceeds the amount which is equal to 5 percent of the 
principal amount of the transaction. 
‘‘(4) EXCEPTION.—This subsection shall not 
apply to any consumer credit transaction secured by 
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the consumer’s principal dwelling that is ensured or 
guaranteed by the Secretary of Housing and Urban 
Development, the Secretary of Veterans Affairs, or 
the Farmers Home Administration. 
‘‘(d) MORTGAGE BROKER DUTIES OF AGENCY.— 
‘‘(1) IN GENERAL.—Any mortgage broker act-
ing to obtain or arrange for any consumer credit 
transaction secured by the consumer’s principal 
dwelling shall be considered to have an agency rela-
tionship with the consumer in all cases by operation 
of law and shall comply with the following duties: 
‘‘(A) Mortgage brokers shall act in the 
consumer’s best interest and in the utmost good 
faith toward each consumer and shall not com-
promise a consumer’s right or interest in favor 
of another’s right or interest, including a right 
or interest of the mortgage broker. 
‘‘(B) A mortgage broker shall not accept, 
give, or charge any undisclosed compensation or 
realize any undisclosed remuneration, either 
through direct or indirect means, that inures to 
the benefit of the mortgage broker on an ex-
penditure made for the consumer. 
‘‘(C) Mortgage brokers shall carry out all 
lawful instructions given by the consumer. 
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‘‘(D) Mortgage brokers shall disclose to 
consumers all material facts of which the mort-
gage broker has knowledge which might reason-
ably affect the consumer’s rights, interests, or 
ability to receive the consumer’s intended ben-
efit from the consumer credit transaction, but 
not facts which are reasonably susceptible to 
the knowledge of the consumer. 
‘‘(E) Mortgage brokers shall use reason-
able care in performing duties. 
‘‘(F) Mortgage brokers shall account to a 
consumer for all the consumer’s money and 
property received as agent. 
‘‘(2) SCOPE.—The duty of agency between 
mortgage broker and consumer applies when the 
mortgage broker is acting in the capacity of mort-
gage broker providing mortgage brokerage services 
with respect to any consumer credit transaction se-
cured by the consumer’s principal dwelling for which 
the broker is not the creditor. 
‘‘(3) RULES OF CONSTRUCTION.— 
‘‘(A) FEES FOR SERVICES RENDERED.— 
No provision of this subsection shall be con-
strued as prohibiting a mortgage broker from 
contracting for or collecting a fee for services 
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rendered which had been disclosed to the con-
sumer in advance of the provision of such serv-
ices. 
‘‘(B) DUTY OF BROKER.—No provision of 
this subsection shall be construed as requiring 
a mortgage broker— 
‘‘(i) to obtain or arrange for any con-
sumer credit transaction secured by the 
consumer’s principal dwelling on behalf of 
a consumer that contains terms or condi-
tions not available to the mortgage broker 
in the mortgage broker’s usual course of 
business; or 
‘‘(ii) to obtain or arrange for any con-
sumer credit transaction secured by the 
consumer’s principal dwelling from a cred-
itor with whom the mortgage broker does 
not have a business relationship. 
‘‘(e) INDEPENDENT VERIFICATION
OF CONSUMER 
COUNSELING BEFORE REFINANCING SPECIAL MORT-
GAGES.— 
‘‘(1) IN GENERAL.—No creditor or mortgage 
broker may make, provide, or arrange for any con-
sumer credit transaction secured by the consumer’s 
principal dwelling all or a portion of the proceeds of 
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which are used to fully or partially pay off a special 
mortgage unless the borrower has obtained a written 
certification from an authorized independent loan 
counselor that the borrower has received counseling 
on the advisability of the transaction. 
‘‘(2) DEFINITIONS.—For purposes of this sec-
tion, the following definitions shall apply: 
‘‘(A) SPECIAL MORTGAGE.—The term ‘spe-
cial mortgage’ means any consumer credit 
transaction secured by the consumer’s principal 
dwelling that was originated, subsidized, fund-
ed, or guaranteed by or through a State, tribal, 
or local government, or nonprofit organization, 
that bears 1 or more of the following non-
standard payment terms which substantially 
benefit the consumer: 
‘‘(i) Payments vary with income. 
‘‘(ii) Payments of principal or interest 
are not required or can be deferred under 
specified conditions. 
‘‘(iii) Principal or interest is forgiv-
able under specified conditions. 
‘‘(iv) Either no interest or an annual 
interest rate of 2 percent or less is charged 
in connection with the loan. 
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‘‘(B) AUTHORIZED
LOAN
COUNSELOR.— 
The term ‘authorized independent loan coun-
selor’ means any nonprofit, third-party indi-
vidual or organization providing homebuyer 
education 
programs, 
foreclosure 
prevention 
services, mortgage loan counseling, or credit 
counseling that is certified by the Secretary of 
Housing and Urban Development, or certified 
by any State housing agency or nonprofit orga-
nization designated by such Secretary, for such 
purposes. 
‘‘(f) MINIMUM
FINANCIAL
REQUIREMENTS
FOR 
MORTGAGE BROKERS.—No mortgage broker may obtain 
or arrange for any consumer credit transaction secured 
by the consumer’s principal dwelling unless at all times 
the mortgage broker— 
‘‘(1) maintains a minimum net worth, net of in-
tangibles, of at least $500,000, as determined in ac-
cordance with generally accepted accounting prin-
ciples; or 
‘‘(2) maintains a surety bond or irrevocable let-
ter of credit in the amount of $50,000. 
‘‘(g) ENFORCEMENT.—For purposes of providing a 
cause of action for any failure by a mortgage broker to 
comply with any requirement imposed under this section, 
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