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.’’. 
TITLE IV—PROHIBITION ON 
ABUSIVE PRACTICES 
Subtitle A—Mortgage Servicing 
SEC. 401. 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 129A (as added by section 301(a) of this Act) 
the following new section: 
‘‘SEC. 129B. ESCROW OR IMPOUND ACCOUNTS RELATING 
TO 
CERTAIN 
CONSUMER 
CREDIT 
TRANS-
ACTIONS. 
‘‘(a) IN GENERAL.—A creditor, in connection with 
the formation or consummation of a subprime mortgage, 
shall establish, at the time of the consummation of such 
mortgage, an escrow or impound account for the payment 
of taxes and hazard insurance as provided in, and in ac-
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cordance with, this section, unless such an account already 
exists. 
‘‘(b) DURATION
OF ESCROW
OR IMPOUND AC-
COUNT.—An escrow or impound account established pur-
suant to this section, shall remain in existence for a min-
imum period of 5 years, unless the underlying mortgage 
is terminated. 
‘‘(c) ADMINISTRATION OF ESCROW OR IMPOUND AC-
COUNTS.—Except as may otherwise be provided for in this 
title or in regulations prescribed by the Board, escrow or 
impound accounts established pursuant to this section 
shall be established in an insured depository institution. 
‘‘(d) DISCLOSURES RELATING TO ESCROW OR IM-
POUND ACCOUNT.— 
‘‘(1) IN
GENERAL.—In the case of any im-
pound, trust, or escrow account that is subject to 
this section, the creditor shall disclose by written no-
tice to the consumer within 3 business days before 
the consummation of the consumer credit trans-
action giving rise to such account the following in-
formation: 
‘‘(A) The fact that an escrow or impound 
account will be established at consummation of 
the transaction. 
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‘‘(B) The amount required at closing to 
initially fund the escrow or impound account. 
‘‘(C) The amount in the initial year of the 
estimated taxes and hazard insurance pre-
miums. 
‘‘(D) The estimated monthly amount pay-
able for taxes and hazard insurance. 
‘‘(E) The fact that if the consumer chooses 
to terminate the account after 5 years, the con-
sumer will become responsible for the payment 
of all taxes and hazard insurance on the prop-
erty unless a new escrow or impound account is 
established. 
‘‘(2) REGULATIONS.—The Board shall prescribe 
by regulation the contents of the notice required in 
paragraph (1) no later than 90 days after the date 
of the enactment of the Fair Mortgage Practices Act 
of 2007. 
‘‘(e) HAZARD INSURANCE DEFINED.—For purposes 
of this section, the term ‘hazard insurance’ shall have the 
same meaning as provided under the law of the State 
where the real property securing the consumer credit 
transaction is located.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for chapter 2 of the Truth in Lending Act is amended 
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by inserting after the item relating to section 129A (as 
added by section 301(a) of this Act) the following new 
item: 
‘‘129B. Escrow or impound accounts relating to certain consumer credit trans-
actions.’’. 
SEC. 402. DISCLOSURE NOTICE REQUIRED FOR CON-
SUMERS WHO OPT OUT OF ESCROW SERV-
ICES. 
Section 129B of the Truth in Lending Act (as added 
by section 401(a) of this title) is amended by adding at 
the end the following new subsections: 
‘‘(g) DISCLOSURE NOTICE REQUIRED
FOR CON-
SUMERS WHO OPT OUT OF ESCROW SERVICES.— 
‘‘(1) IN GENERAL.—If an impound, trust, or 
other type of account for the payment of property 
taxes, insurance premiums, or other purposes relat-
ing to property securing a consumer credit trans-
action is not established in connection with any con-
sumer credit transaction secured by the principal 
dwelling of the consumer, or if a consumer chooses, 
at any time after such an account is established in 
connection with any such transaction, to close such 
account, the creditor shall provide a timely and 
clearly written disclosure to the consumer that ad-
vises the consumer of the responsibilities of the con-
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sumer and implications for the consumer in the ab-
sence of any such account, including— 
‘‘(A) information concerning any applicable 
fees associated with either the nonestablishment 
of any such account at the time of the trans-
action, or any subsequent closure of any such 
account; 
‘‘(B) clear and prominent notice that the 
consumer is responsible for personally and di-
rectly paying the non-escrowed items, in addi-
tion to paying the mortgage loan payment, in 
the absence of any such account; and 
‘‘(C) a clear explanation of the con-
sequences of any failure to pay non-escrowed 
items, including the possible requirement for di-
rect placement of insurance by the creditor and 
the potentially higher cost (including any poten-
tial commission payments to the servicer) or re-
duced coverage for the consumer in the event of 
any such creditor-placed insurance. 
‘‘(2) REGULATIONS.—The Board shall prescribe 
such regulations as are necessary to implement the 
requirements of this subsection in final form before 
the end of the 12-month period beginning on the 
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date of the enactment of the Fair Mortgage Prac-
tices Act of 2007. 
‘‘(h) PREEMPTION.—The provisions of this section 
requiring disclosures relating to impound, trust, or escrow 
accounts, including disclosures under subsection (g) to a 
consumer shall supersede the provisions of the law of any 
State relating to such disclosures.’’. 
Subtitle B—Nontraditional 
Mortgage Provisions 
SEC. 411. PREPAYMENT PENALTIES. 
Section 129A of the Truth in Lending Act (as added 
by section 301(a)) is amended by adding at the end the 
following new subsection: 
‘‘(b) LIMITATION ON PREPAYMENT PENALTIES FOR 
HYBRID ARMS.— 
‘‘(1) IN GENERAL.—In the case of a consumer 
credit transaction secured by the consumer’s prin-
cipal residence with a fixed interest rate for an in-
troductory period that resets to a variable interest 
rate after such period, the transaction may not con-
tain terms under which a consumer must pay a pre-
payment penalty for paying all or part of the prin-
cipal before the date on which the principal is due 
at any time after the beginning of the 120-day pe-
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riod ending on the date of the reset to a variable in-
terest rate. 
‘‘(2) PREEMPTION.—The provisions of this sec-
tion relating to prepayment penalties with respect to 
any consumer credit transaction secured by the con-
sumer’s principal residence with a fixed interest rate 
for an introductory period that resets to a variable 
interest rate after such period shall supersede the 
provisions of the law of any State relating to prepay-
ment penalties with respect to any such trans-
action.’’. 
SEC. 412. ABILITY TO REPAY. 
Section 129A of the Truth in Lending Act is amend-
ed by inserting after subsection (b) (as added by section 
411 of this subtitle) the following new subsection: 
‘‘(c) ABILITY TO REPAY.—The Board, in consulta-
tion with other Federal banking agencies (as defined in 
section 3 of the Federal Deposit Insurance Act), shall pre-
scribe regulations in accordance with section 105, or issue 
guidance, that encourages any creditor with respect to a 
consumer credit transaction secured by the consumer’s 
principal residence to evaluate the consumer’s ability to 
repay the transaction under the terms of the trans-
action.’’. 
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TITLE V—MORTGAGE FRAUD 
SEC. 
501. 
AUTHORIZATION 
OF 
APPROPRIATIONS 
FOR 
MORTGAGE FRAUD PREVENTION, INVESTIGA-
TION, AND PROSECUTION. 
For fiscal years 2008, 2009, 2010, 2011, and 2012, 
there are authorized to be appropriated to the Attorney 
General a total of $20,000,000, in addition to other 
amounts authorized to be appropriated to the Attorney 
General for any such fiscal year, for the purpose of en-
hancing the efforts of the Department of Justice and the 
Federal Bureau of Investigation to prevent, investigate, 
and prosecute mortgage fraud. 
TITLE VI—APPRAISAL 
ACTIVITIES 
SEC. 601. PROPERTY APPRAISAL REQUIREMENTS. 
Section 129A of the Truth in Lending Act is amend-
ed by inserting after subsection (c) (as added by section 
412 of this Act) the following new subsection: 
‘‘(d) PROPERTY APPRAISAL REQUIREMENTS.— 
‘‘(1) IN GENERAL.—A creditor may not extend 
credit in the form of a subprime mortgage to any 
consumer without first obtaining a written appraisal 
of the property to be mortgaged prepared in accord-
ance with the requirements of this subsection. 
‘‘(2) APPRAISAL REQUIREMENTS.— 
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‘‘(A) 
PHYSICAL
INSPECTION.—An 
ap-
praisal of property to be secured by a subprime 
mortgage does not meet the requirement of this 
subsection unless it is performed by a qualified 
appraiser who conducts a physical inspection of 
the mortgaged property. 
‘‘(B) SECOND APPRAISAL UNDER CERTAIN 
CIRCUMSTANCES.— 
‘‘(i) IN GENERAL.—If the purpose of 
the subprime mortgage is to finance the 
purchase or acquisition of the mortgaged 
property from a person within 180 days of 
the purchase or acquisition of such prop-
erty by that person at a price that was 
lower than the current sale price of the 
property, the creditor shall obtain a second 
appraisal from a second qualified appraiser 
that supports the current sale price of the 
property. 
‘‘(ii) NO COST TO CONSUMER.—The 
cost of any second appraisal required 
under clause (i) may not be charged to the 
consumer. 
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‘‘(C) QUALIFIED
APPRAISER
DEFINED.— 
For purposes of this subsection, the term 
‘qualified appraiser’ means a person who— 
‘‘(i) is certified or licensed by the 
State in which property to be appraised is 
located; and 
‘‘(ii) performs each appraisal in con-
formity with the Uniform Standards of 
Professional Appraisal Practice and Title 
XI of the Financial Institutions Reform, 
Recovery, and Enforcement Act of 1989, 
and the regulations prescribed under such 
title, as in effect on the date of the ap-
praisal. 
‘‘(3) FREE
COPY
OF
APPRAISAL.—A creditor 
shall provide 1 copy of each appraisal conducted in 
accordance with this subsection in connection with a 
higher-cost mortgage to the consumer without 
charge. 
‘‘(4) VIOLATIONS.—In addition to any other li-
ability to any person under this title, a creditor 
found to have willfully failed to obtain an appraisal 
as required in this subsection shall be liable to the 
consumer for the sum of $2,000.’’. 
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SEC. 602. AMENDMENTS RELATING TO APPRAISAL SUB-
COMMITTEE OF FIEC, APPRAISER INDEPEND-
ENCE, 
AND 
APPROVED 
APPRAISER 
EDU-
CATION. 
(a) 
ANNUAL
REPORT
OF
APPRAISAL
SUB-
COMMITTEE.—Section 1103(a)(4) of Financial Institu-
tions Reform, Recovery, and Enforcement Act of 1989 (12 
U.S.C. 3332(a)(4)) is amended by inserting ‘‘in detail the 
activities of the Appraisal Subcommittee and’’ after 
‘‘which describes’’. 
(b) OPEN MEETINGS.—Section 1104(b) of the Fi-
nancial Institutions Reform, Recovery, and Enforcement 
Act of 1989 (12 U.S.C. 3333(b)) is amended by inserting 
‘‘in public session after notice to the general public’’ after 
‘‘shall meet’’. 
(c) REGULATIONS.—Section 1106 of the Financial 
Institutions Reform, Recovery, and Enforcement Act of 
1989 (12 U.S.C. 3335) is amended by inserting ‘‘prescribe 
regulations after notice and opportunity for comment,’’ 
after ‘‘hold hearings’’. 
(d) CRITERIA.—Section 1116 of the Financial Insti-
tutions Reform, Recovery, and Enforcement Act of 1989 
(12 U.S.C. 3345) is amended— 
(1) in subsection (c), by inserting ‘‘whose cri-
teria for the licensing of a real estate appraiser cur-
rently meet or exceed the minimum criteria issued 
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by the Appraiser Qualifications Board of The Ap-
praiser Foundation for the licensing of real estate 
appraisers’’ before the period at the end; and 
(2) by striking subsection (e). 
(e) TEMPORARY PRACTICE.—Section 1122(a)(1) of 
the Financial Institutions Reform, Recovery, and Enforce-
ment Act of 1989 (12 U.S.C. 3351(a)(1)) is amended— 
(1) by striking subparagraph (A); 
(2) by redesignating subparagraphs (B) and 
(C) as subparagraphs (A) and (B), respectively; and 
(3) by moving the left margin of such subpara-
graphs 2 ems to the right. 
(f) RECIPROCITY.—Subsection (b) of section 1122 of 
the Financial Institutions Reform, Recovery, and Enforce-
ment Act of 1989 (12 U.S.C. 3351(b)) is amended to read 
as follows: 
‘‘(b) RECIPROCITY.—A State appraiser certifying or 
licensing agency shall issue a reciprocal certification or li-
cense for an individual from another State when— 
‘‘(1) the appraiser licensing and certification 
program of such other State is in compliance with 
the provisions of this title; and 
‘‘(2) the appraiser holds a valid certification 
from a State whose requirements for certification or 
licensing meet the requirements for certification and 
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licensing as established by the Appraiser Qualifica-
tions Board of The Appraisal Foundation.’’. 
(g) CONSIDERATION OF PROFESSIONAL APPRAISAL 
DESIGNATIONS.—Section 1122(d) of the Financial Insti-
tutions Reform, Recovery, and Enforcement Act of 1989 
(12 U.S.C. 3351(d)) is amended by adding at the end the 
following new sentence: ‘‘Consideration may be given for 
professional appraisal designations conferred by spon-
soring organizations of The Appraisal Foundation as an 
indication of proficiency in addition to the criteria estab-
lished by certification or licensing.’’. 
(h) APPRAISER INDEPENDENCE.—Section 1122 of 
the Financial Institutions Reform, Recovery, and Enforce-
ment Act of 1989 (12 U.S.C. 3351) is amended by adding 
at the end the following new subsection: 
‘‘(g) APPRAISER INDEPENDENCE.— 
‘‘(1) IN GENERAL.—No mortgage lender, mort-
gage broker or mortgage banker, real estate broker, 
nor any other person with an interest in a real es-
tate transaction involving an appraisal shall improp-
erly influence or attempt to improperly influence, 
through coercion, extortion, or bribery, the develop-
ment, reporting, result, or review of a real estate ap-
praisal sought in connection with a mortgage loan. 
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‘‘(2) EXCEPTIONS.—The requirements of para-
graph (1) shall not be construed as prohibiting a 
mortgage lender, mortgage broker, mortgage banker, 
real estate broker, or any other person with an inter-
est in a real estate transaction from asking an ap-
praiser to provide 1 or more of the following serv-
ices: 
‘‘(A) 
Consider 
additional, 
appropriate 
property information. 
‘‘(B) Provide further detail, substantiation, 
or explanation for the appraiser’s value conclu-
sion. 
‘‘(C) Correct errors in the appraisal re-
port.’’. 
(i) APPRAISER EDUCATION.—Section 1122 of the Fi-
nancial Institutions Reform, Recovery, and Enforcement 
Act of 1989 (12 U.S.C. 3351) is amended by inserting 
after subsection (g) (as added by subsection (h) of this 
section) the following new subsection: 
‘‘(h) APPROVED EDUCATION.—A State certifying or 
licensing agency shall accept courses and seminars ap-
proved by the Appraiser Qualification Board’s Course Ap-
proval Program.’’. 
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SEC. 603. STUDY REQUIRED ON IMPROVEMENTS IN AP-
PRAISAL PROCESS AND COMPLIANCE PRO-
GRAMS. 
(a) STUDY.—The Comptroller General shall conduct 
a comprehensive study on possible improvements in the 
appraisal process generally, and specifically on the consist-
ency in and the effectiveness of, and possible improve-
ments in, State compliance efforts and programs in ac-
cordance with title XI of Financial Institutions Reform, 
Recovery, and Enforcement Act of 1989. 
(b) REPORT.—Before the end of the 18-month period 
beginning on the date of the enactment of this Act, the 
Comptroller General shall submit a report on the study 
under subsection (a) to the Committee on Financial Serv-
ices of the House of Representatives and the Committee 
on Banking, Housing, and Urban Affairs of the Senate, 
together with such recommendations for administrative or 
legislative action, at the Federal or State level, as the 
Comptroller General may determine to be appropriate. 
TITLE VII—INCENTIVES FOR 
BEST PRACTICES 
SEC. 701. CRA CREDIT FOR CERTAIN LENDER PRACTICES. 
Section 804 of the Community Reinvestment Act of 
1977 (12 U.S.C. 2903) is amended by adding at the end 
the following new subsection: 
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‘‘(d) EFFORTS
ON BEHALF
OF SUBPRIME BOR-
ROWERS.—In assessing and taking into account, under 
subsection (a), the record of a regulated financial institu-
tion, the appropriate Federal financial supervisory agency 
may consider as a factor, in accordance with such guide-
lines as the agency may issue, any of the following pro-
grams undertaken by the institution: 
‘‘(1) A program to provide or support the provi-
sion of home ownership or credit counseling to low- 
and moderate-income consumer borrowers through 
programs reasonably available to the consumer that 
have been certified or approved by the Secretary of 
Housing and Urban Development for such purpose. 
‘‘(2) A program to provide or support the provi-
sion of foreclosure-prevention counseling and other 
prevention efforts to low- and moderate-income con-
sumer borrowers through programs reasonably avail-
able to the consumer that have been certified or ap-
proved by the Secretary of Housing and Urban De-
velopment for such purpose. 
‘‘(3) A program to transition low- and mod-
erate-income consumer borrowers from higher-cost 
mortgage loans to lower-cost mortgage loans.’’. 
Æ 
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