SEC. 122. RESIDENTIAL MORTGAGE LOAN ORIGINATION. 
(a) IN GENERAL.—Chapter 2 of the Truth in Lending 
Act (15 U.S.C. 1631 et seq.) is amended by inserting after 
section 129 the following new section: 
‘‘§ 129A. Residential mortgage loan origination 
‘‘(a) DUTY OF CARE.— 
‘‘(1) STANDARD.—Subject to regulations pre-
scribed under this subsection, each mortgage origi-
nator shall, in addition to the duties imposed by oth-
erwise applicable provisions of State or Federal 
law— 
‘‘(A) be qualified, registered, and, when re-
quired, licensed as a mortgage originator in ac-
cordance with applicable State or Federal law 
including subtitle A of title I of the Mortgage Re-
form and Anti-Predatory Lending Act of 2007; 
‘‘(B) with respect to each consumer seeking 
or inquiring about a residential mortgage loan, 
diligently work to present the consumer with a 
range of residential mortgage loan products for 
which the consumer likely qualifies and which 
are appropriate to the consumer’s existing cir-
cumstances, based on information known by, or 
obtained in good faith by, the originator; 
‘‘(C) make full, complete, and timely disclo-
sure to each such consumer of— 
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‘‘(i) the comparative costs and benefits 
of each residential mortgage loan product 
offered, discussed, or referred to by the origi-
nator; 
‘‘(ii) the nature of the originator’s rela-
tionship to the consumer (including the cost 
of the services to be provided by the origi-
nator and a statement that the mortgage 
originator is or is not acting as an agent 
for the consumer, as the case may be); and 
‘‘(iii) any relevant conflicts of interest; 
‘‘(D) certify to the creditor, with respect to 
any transaction involving a residential mortgage 
loan, that the mortgage originator has fulfilled 
all requirements applicable to the originator 
under this section with respect to the trans-
action; and 
‘‘(E) include the unique identifier of the 
originator provided by the Nationwide Mortgage 
Licensing System and Registry on all loan docu-
ments. 
‘‘(2) CLARIFICATION
OF
EXTENT
OF
DUTY
TO 
PRESENT
RANGE
OF
PRODUCTS
AND
APPROPRIATE 
PRODUCTS.— 
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‘‘(A) NO DUTY TO OFFER PRODUCTS FOR 
WHICH
ORIGINATOR
IS
NOT
AUTHORIZED
TO 
TAKE AN APPLICATION.—Paragraph (1)(B) shall 
not be construed as requiring— 
‘‘(i) a mortgage originator to present 
to any consumer any specific residential 
mortgage loan product that is offered by a 
creditor which does not accept consumer re-
ferrals from, or consumer applications sub-
mitted by or through, such originator; or 
‘‘(ii) a creditor to offer products that 
the creditor does not offer to the general 
public. 
‘‘(B) APPROPRIATE
LOAN
PRODUCT.—For 
purposes of paragraph (1)(B), a residential 
mortgage loan shall be presumed to be appro-
priate for a consumer if— 
‘‘(i) the mortgage originator deter-
mines in good faith, based on then existing 
information and without undergoing a full 
underwriting process, that the consumer has 
a reasonable ability to repay and receives a 
net tangible benefit (as determined in ac-
cordance with regulations prescribed under 
section 129B(a)); and 
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‘‘(ii) the loan does not have predatory 
characteristics or effects (such as equity 
stripping and excessive fees and abusive 
terms) as determined in accordance with 
regulations prescribed under paragraph (4). 
‘‘(3) RULES OF CONSTRUCTION.—No provision of 
this subsection shall be construed as— 
‘‘(A) creating an agency or fiduciary rela-
tionship between a mortgage originator and a 
consumer if the originator does not hold himself 
or herself out as such an agent or fiduciary; or 
‘‘(B) restricting a mortgage originator from 
holding himself or herself out as an agent or fi-
duciary of a consumer subject to any additional 
duty, requirement, or limitation applicable to 
agents or fiduciaries under any Federal or State 
law. 
‘‘(4) REGULATIONS.— 
‘‘(A) IN
GENERAL.—The Federal banking 
agencies, in consultation with the Secretary and 
the Commission, shall jointly prescribe regula-
tions to— 
‘‘(i) further define the duty established 
under paragraph (1); 
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‘‘(ii) implement the requirements of 
this subsection; 
‘‘(iii) establish the time period within 
which any disclosure required under para-
graph (1) shall be made to the consumer; 
and 
‘‘(iv) establish such other requirements 
for any mortgage originator as such regu-
latory agencies may determine to be appro-
priate to meet the purposes of this sub-
section. 
‘‘(B) COMPLEMENTARY
AND
NONDUPLICA-
TIVE DISCLOSURES.—The agencies referred to in 
subparagraph (A) shall endeavor to make the re-
quired disclosures to consumers under this sub-
section complementary and nonduplicative with 
other disclosures for mortgage consumers to the 
extent such efforts— 
‘‘(i) are practicable; and 
‘‘(ii) do not reduce the value of any 
such disclosure to recipients of such disclo-
sures. 
‘‘(5) COMPLIANCE
PROCEDURES
REQUIRED.— 
The Federal banking agencies shall prescribe regula-
tions requiring depository institutions to establish 
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and maintain procedures reasonably designed to as-
sure and monitor the compliance of such depository 
institutions, the subsidiaries of such institutions, and 
the employees of such institutions or subsidiaries with 
the requirements of this section and the registration 
procedures established under section 106 of the Mort-
gage Reform and Anti-Predatory Lending Act of 
2007.’’. 
(b) CLERICAL AMENDMENT.—The table of sections for 
chapter 2 of the Truth in Lending Act is amended by insert-
ing after the item relating to section 129 the following new 
item: 
‘‘129A. Residential mortgage loan origination.’’. 
SEC. 123. ANTI-STEERING. 
Section 129A of the Truth in Lending Act (as added 
by section 122(a)) is amended by inserting after subsection 
(a) the following new subsection: 
‘‘(b) PROHIBITION ON STEERING INCENTIVES.— 
‘‘(1) IN GENERAL.—No mortgage originator may 
receive from any person, and no person may pay to 
any mortgage originator, directly or indirectly, any 
incentive compensation (including yield spread pre-
mium) that is based on, or varies with, the terms 
(other than the amount of principal) of any loan that 
is not a qualified mortgage (as defined in section 
129B(c)(3)). 
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‘‘(2) ANTI-STEERING
REGULATIONS.—The Fed-
eral banking agencies, in consultation with the Sec-
retary and the Commission, shall jointly prescribe 
regulations to prohibit— 
‘‘(A) mortgage originators from steering 
any consumer to a residential mortgage loan 
that— 
‘‘(i) the consumer lacks a reasonable 
ability to repay; 
‘‘(ii) does not provide the consumer 
with a net tangible benefit; or 
‘‘(iii) has predatory characteristics or 
effects (such as equity stripping, excessive 
fees, or abusive terms); 
‘‘(B) mortgage originators from steering 
any consumer from a residential mortgage loan 
for which the consumer is qualified that is a 
qualified 
mortgage 
(as 
defined 
in 
section 
129B(c)(3)) to a residential mortgage loan that 
is not a qualified mortgage; and 
‘‘(C) abusive or unfair lending practices 
that promote disparities among consumers of 
equal credit worthiness but of different race, eth-
nicity, gender, or age. 
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‘‘(3) RULES OF CONSTRUCTION.—No provision of 
this subsection shall be construed as— 
‘‘(A) limiting or affecting the ability of a 
mortgage originator to sell residential mortgage 
loans to subsequent purchasers; 
‘‘(B) restricting a consumer’s ability to fi-
nance origination fees to the extent that such fees 
were fully disclosed to the consumer earlier in 
the application process and do not vary based on 
the terms of the loan or the consumer’s decision 
about whether to finance such fees; or 
‘‘(C) prohibiting incentive payments to a 
mortgage originator based on the number of resi-
dential mortgage loans originated within a spec-
ified period of time.’’. 
SEC. 124. LIABILITY. 
Section 129A of the Truth in Lending Act is amended 
by inserting after subsection (b) (as added by section 123) 
the following new subsection: 
‘‘(c) LIABILITY FOR VIOLATIONS.— 
‘‘(1) IN GENERAL.—For purposes of providing a 
cause of action for any failure by a mortgage origi-
nator to comply with any requirement imposed under 
this section and any regulation prescribed under this 
section, subsections (a) and (b) of section 130 shall be 
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applied with respect to any such failure by sub-
stituting ‘mortgage originator’ for ‘creditor’ each 
place such term appears in each such subsection 
‘‘(2) MAXIMUM.—The maximum amount of any 
liability of a mortgage originator under paragraph 
(1) to a consumer for any violation of this section 
shall not exceed an amount equal to 3 times the total 
amount of direct and indirect compensation or gain 
accruing to the mortgage originator in connection 
with the residential mortgage loan involved in the 
violation, plus the costs to the consumer of the action, 
including a reasonable attorney’s fee.’’. 
SEC. 125. REGULATIONS. 
The regulations required or authorized to be prescribed 
under this title or the amendments made by this title— 
(1) shall be prescribed in final form before the 
end of the 12-month period beginning on the date of 
the enactment of this Act; and 
(2) shall take effect not later than 18 months 
after the date of the enactment of this Act. 
TITLE II—MINIMUM STANDARDS 
FOR MORTGAGES 
SEC. 201. ABILITY TO REPAY. 
(a) IN GENERAL.—Chapter 2 of the Truth in Lending 
Act (15 U.S.C. 1631 et seq.) is amended by inserting after 
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section 129A (as added by section 122(a)) the following new 
section: 
‘‘§ 129B. Minimum standards for residential mortgage 
loans 
‘‘(a) ABILITY TO REPAY.— 
‘‘(1) IN GENERAL.—In accordance with regula-
tions prescribed jointly by the Federal banking agen-
cies, in consultation with the Commission, no creditor 
may make a residential mortgage loan unless the 
creditor makes a reasonable and good faith deter-
mination based on verified and documented informa-
tion that, at the time the loan is consummated, the 
consumer has a reasonable ability to repay the loan, 
according to its terms, and all applicable taxes, in-
surance, and assessments. 
‘‘(2) MULTIPLE LOANS.—If the creditor knows, 
or has reason to know, that 1 or more residential 
mortgage loans secured by the same dwelling will be 
made to the same consumer, the creditor shall make 
a reasonable and good faith determination, based on 
verified and documented information, that the con-
sumer has a reasonable ability to repay the combined 
payments of all loans on the same dwelling according 
to the terms of those loans and all applicable taxes, 
insurance, and assessments. 
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‘‘(3) BASIS FOR DETERMINATION.—A determina-
tion under this subsection of a consumer’s ability to 
repay a residential mortgage loan shall be based on 
consideration of the consumer’s credit history, current 
income, expected income the consumer is reasonably 
assured of receiving, current obligations, debt-to-in-
come ratio, employment status, and other financial 
resources other than the consumer’s equity in the 
dwelling or real property that secures repayment of 
the loan. 
‘‘(4) NONSTANDARD LOANS.— 
‘‘(A) VARIABLE RATE LOANS THAT DEFER 
REPAYMENT OF ANY PRINCIPAL OR INTEREST.— 
For purposes of determining, under this sub-
section, a consumer’s ability to repay a variable 
rate residential mortgage loan that allows or re-
quires the consumer to defer the repayment of 
any principal or interest, the creditor shall take 
into consideration a fully amortizing repayment 
schedule. 
‘‘(B) INTEREST-ONLY LOANS.—For purposes 
of determining, under this subsection, a con-
sumer’s ability to repay a residential mortgage 
loan that permits or requires the payment of in-
terest only, the creditor shall take into consider-
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ation the payment amount required to amortize 
the loan by its final maturity. 
‘‘(C) CALCULATION FOR NEGATIVE AMORTI-
ZATION.—In making any determination under 
this subsection, a creditor shall also take into 
consideration any balance increase that may ac-
crue from any negative amortization provision. 
‘‘(D) CALCULATION
PROCESS.—For pur-
poses of making any determination under this 
subsection, a creditor shall calculate the monthly 
payment amount for principal and interest on 
any residential mortgage loan by assuming— 
‘‘(i) the loan proceeds are fully dis-
bursed on the date of the consummation of 
the loan; 
‘‘(ii) the loan is to be repaid in sub-
stantially equal monthly amortizing pay-
ments for principal and interest over the 
entire term of the loan with no balloon pay-
ment, unless the loan contract requires more 
rapid repayment (including balloon pay-
ment), in which case the contract’s repay-
ment schedule shall be used in this calcula-
tion; and 
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mortgage loan that involves a refinancing of a prior 
existing residential mortgage loan unless the creditor 
reasonably and in good faith determines, at the time 
the loan is consummated and on the basis of informa-
tion known by or obtained in good faith by the cred-
itor, that the refinanced loan will provide a net tan-
gible benefit to the consumer. 
‘‘(2) CERTAIN LOANS PROVIDING NO NET TAN-
GIBLE BENEFIT.—A residential mortgage loan that 
involves a refinancing of a prior existing residential 
mortgage loan shall not be considered to provide a net 
tangible benefit to the consumer if the costs of the refi-
nanced loan, including points, fees and other charges, 
exceed the amount of any newly advanced principal 
without any corresponding changes in the terms of the 
refinanced loan that are advantageous to the con-
sumer. 
‘‘(3) NET
TANGIBLE
BENEFIT.—The Federal 
banking agencies shall jointly prescribe regulations 
defining the term ‘net tangible benefit’ for purposes of 
this subsection.’’. 
SEC. 203. SAFE HARBOR AND REBUTTABLE PRESUMPTION. 
Section 129B of the Truth in Lending Act is amended 
by inserting after subsection (b) (as added by section 202) 
the following new subsection: 
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‘‘(c) PRESUMPTION OF ABILITY TO REPAY AND NET 
TANGIBLE BENEFIT.— 
‘‘(1) IN GENERAL.—Any creditor with respect to 
any residential mortgage loan, and any assignee or 
securitizer of such loan, may presume that the loan 
has met the requirements of subsections (a) and (b), 
if the loan is a qualified mortgage or a qualified safe 
harbor mortgage. 
‘‘(2) REBUTTABLE
PRESUMPTION.—Any pre-
sumption established under paragraph (1) with re-
spect to any residential mortgage loan shall be rebut-
table only— 
‘‘(A) against the creditor of such loan; and 
‘‘(B) if such loan is a qualified safe harbor 
mortgage. 
‘‘(3) DEFINITIONS.—For purposes of this section 
the following definitions shall apply: 
‘‘(A) MOST RECENT CONVENTIONAL MORT-
GAGE RATE.—The term ‘most recent conventional 
mortgage rate’ means the contract interest rate 
on commitments for fixed-rate first mortgages 
most recently published in the Federal Reserve 
Statistical Release on selected interest rates 
(daily or weekly), and commonly referred to as 
the H.15 release (or any successor publication), 
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in the week preceding a date of determination for 
purposes of applying this subsection. 
‘‘(B) QUALIFIED
MORTGAGE.—The term 
‘qualified mortgage’ means— 
‘‘(i) any residential mortgage loan that 
constitutes a first lien on the dwelling or 
real property securing the loan and either— 
‘‘(I) has an annual percentage 
rate that does not equal or exceed the 
yield on securities issued by the Sec-
retary of the Treasury under chapter 
31 of title 31, United States Code, that 
bear comparable periods of maturity 
by more than 3 percentage points; or 
‘‘(II) has an annual percentage 
rate that does not equal or exceed the 
most recent conventional mortgage 
rate, or such other annual percentage 
rate as may be established by regula-
tion under paragraph (6), by more 
than 175 basis points; 
‘‘(ii) any residential mortgage loan 
that is not the first lien on the dwelling or 
real property securing the loan and either— 
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‘‘(I) has an annual percentage 
rate that does not equal or exceed the 
yield on securities issued by the Sec-
retary of the Treasury under chapter 
31 of title 31, United States Code, that 
bear comparable periods of maturity 
by more than 5 percentage points; or 
‘‘(II) has an annual percentage 
rate that does not equal or exceed the 
most recent conventional mortgage 
rate, or such other annual percentage 
rate as may be established by regula-
tion under paragraph (6), by more 
than 375 basis points; and 
‘‘(iii) a loan made or guaranteed by 
the Secretary of Veterans Affairs. 
‘‘(C) QUALIFIED
SAFE
HARBOR
MORT-
GAGE.—The term ‘qualified safe harbor mort-
gage’ means any residential mortgage loan— 
‘‘(i) for which the income and finan-
cial resources of the consumer are verified 
and documented; 
‘‘(ii) for which the residential mortgage 
loan underwriting process is based on the 
fully-indexed rate, and takes into account 
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all applicable taxes, insurance, and assess-
ments; 
‘‘(iii) which does not provide for a re-
payment schedule that results in negative 
amortization at any time; 
‘‘(iv) meets such other requirements as 
may be established by regulation; and 
‘‘(v) for which any of the following fac-
tors apply with respect to such loan: 
‘‘(I) 
The 
periodic 
payment 
amount for principal and interest are 
fixed for a minimum of 5 years under 
the terms of the loan. 
‘‘(II) In the case of a variable rate 
loan, the annual percentage rate varies 
based on a margin that is less than 3 
percent over a single generally accepted 
interest rate index that is the basis for 
determining the rate of interest for the 
mortgage. 
‘‘(III) The loan does not cause the 
consumer’s total monthly debts, includ-
ing amounts under the loan, to exceed 
a percentage established by regulation 
of his or her monthly gross income or 
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such other maximum percentage of 
such income as may be prescribed by 
regulation under paragraph (6). 
‘‘(4) 
DETERMINATION
OF
COMPARISON
TO 
TREASURY SECURITIES.— 
‘‘(A) IN
GENERAL.—Without regard to 
whether a residential mortgage loan is subject to 
or reportable under the Home Mortgage Disclo-
sure Act of 1975 and subject to subparagraph 
(B), the difference between the annual percentage 
rate of such loan and the yield on securities 
issued by the Secretary of the Treasury under 
chapter 31 of title 31, United States Code, hav-
ing comparable periods of maturity shall be de-
termined using the same procedures and methods 
of calculation applicable to loans that are subject 
to the reporting requirements under the Home 
Mortgage Disclosure Act of 1975. 
‘‘(B) 
DATE
OF
DETERMINATION
OF 
YIELD.—The yield on the securities referred to in 
subparagraph (A) shall be determined, for pur-
poses of such subparagraph and paragraph (3) 
with respect to any residential mortgage loan, as 
of the 15th day of the month preceding the 
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month in which a completed application is sub-
mitted for such loan. 
‘‘(5) APR IN CASE OF INTRODUCTORY OFFER.— 
For purposes of making a determination of whether 
a residential mortgage loan that provides for a fixed 
interest rate for an introductory period and then 
resets or adjusts to a variable rate is a qualified 
mortgage, the determination of the annual percentage 
rate, as determined in accordance with regulations 
prescribed by the Board under section 107, shall be 
based on the greater of the introductory rate and the 
fully indexed rate of interest. 
‘‘(6) REGULATIONS.— 
‘‘(A) IN
GENERAL.—The Federal banking 
agencies shall jointly prescribe regulations to 
carry out the purposes of this subsection. 
‘‘(B) REVISION
OF
SAFE
HARBOR
CRI-
TERIA.—The Federal banking agencies may 
jointly prescribe regulations that revise, add to, 
or subtract from the criteria that define a quali-
fied mortgage and a qualified safe harbor mort-
gage to the extent necessary and appropriate to 
effectuate the purposes of this subsection, to pre-
vent circumvention or evasion of this subsection, 
or to facilitate compliance with this subsection. 
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‘‘(7) RULE OF CONSTRUCTION.—No provision of 
this subsection may be construed as implying that a 
residential mortgage loan may be presumed to violate 
subsection (a) or (b) if such loan is not a qualified 
mortgage or a qualified safe harbor mortgage.’’. 
SEC. 204. LIABILITY. 
Section 129B of the Truth in Lending Act is amended 
by inserting after subsection (c) (as added by section 203) 
the following new subsection: 
‘‘(d) LIABILITY FOR VIOLATIONS.— 
‘‘(1) IN GENERAL.— 
‘‘(A) RESCISSION.—In addition to any 
other liability under this title for a violation by 
a creditor of subsection (a) or (b) (for example 
under section 130) and subject to the statute of 
limitations in paragraph (7), a civil action may 
be maintained against a creditor for a violation 
of subsection (a) or (b) with respect to a residen-
tial mortgage loan for the rescission of the loan, 
and such additional costs as the obligor may 
have incurred as a result of the violation and in 
connection with obtaining a rescission of the 
loan, including a reasonable attorney’s fee. 
‘‘(B) CURE.—A creditor shall not be liable 
for rescission under subparagraph (A) with re-
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spect to a residential mortgage loan if, no later 
than 90 days after the receipt of notification 
from the consumer that the loan violates sub-
section (a) or (b), the creditor provides a cure. 
‘‘(2) LIMITED ASSIGNEE AND SECURITIZER LI-
ABILITY.—Notwithstanding sections 125(e) and 131 
and except as provided in paragraph (3), a civil ac-
tion which may be maintained against a creditor 
with respect to a residential mortgage loan for a vio-
lation of subsection (a) or (b) may be maintained 
against any assignee or securitizer of such residential 
mortgage loan, who has acted in good faith, for the 
following liabilities only: 
‘‘(A) Rescission of the loan. 
‘‘(B) Such additional costs as the obligor 
may have incurred as a result of the violation 
and in connection with obtaining a rescission of 
the loan, including a reasonable attorney’s fee. 
‘‘(3) ASSIGNEE AND SECURITIZER EXEMPTION.— 
No assignee or securitizer of a residential mortgage 
loan shall be liable under paragraph (2) with respect 
to such loan if— 
‘‘(A) no later than 90 days after the receipt 
of notification from the consumer that the loan 
violates subsection (a) or (b), the assignee or 
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securitizer provides a cure so that the loan satis-
fies the requirements of subsections (a) and (b); 
or 
‘‘(B) each of the following conditions are 
met: 
‘‘(i) The assignee or securitizer— 
‘‘(I) has a policy against buying 
residential mortgage loans other than 
qualified mortgages or qualified safe 
harbor mortgages (as defined in sub-
section (c)); 
‘‘(II) the policy is intended to 
verify seller or assignor compliance 
with the representations and warran-
ties required under clause (ii); and 
‘‘(III) in accordance with regula-
tions which the Federal banking agen-
cies and the Securities and Exchange 
Commission shall jointly prescribe, ex-
ercises reasonable due diligence to ad-
here to such policy in purchasing resi-
dential 
mortgage 
loans, 
including 
through adequate, thorough, and con-
sistently applied sampling procedures. 
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‘‘(ii) The contract under which such 
assignee or securitizer acquired the residen-
tial mortgage loan from a seller or assignor 
of the loan contains representations and 
warranties that the seller or assignor— 
‘‘(I) is not selling or assigning 
any residential mortgage loan which is 
not a qualified mortgage or a qualified 
safe harbor mortgage; or 
‘‘(II) is a beneficiary of a rep-
resentation and warranty from a pre-
vious seller or assignor to that effect, 
and the assignee or securitizer in good faith 
takes reasonable steps to obtain the benefit 
of such representation or warranty. 
‘‘(4) CURE DEFINED.—For purposes of this sub-
section, the term ‘cure’ means, with respect to a resi-
dential mortgage loan that violates subsection (a) or 
(b), the modification or refinancing, at no cost to the 
consumer, of the loan to provide terms that would 
have satisfied the requirements of subsection (a) and 
(b) if the loan had contained such terms as of the 
origination of the loan. 
‘‘(5) DISAGREEMENT OVER CURE.—If any cred-
itor, assignee, or securitizer and a consumer fail to 
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reach agreement on a cure with respect to a residen-
tial mortgage loan that violates subsection (a) or (b), 
or the consumer fails to accept a cure proffered by a 
creditor, assignee, or securitizer— 
‘‘(A) the creditor, assignee, or securitizer 
may provide the cure; and 
‘‘(B) the consumer may challenge the ade-
quacy of the cure during the 6-month period be-
ginning when the cure is provided. 
If the consumer’s challenge, under this paragraph, of 
a cure is successful, the creditor, assignee, or 
securitizer shall be liable to the consumer for rescis-
sion of the loan and such additional costs under 
paragraph (2). 
‘‘(6) INABILITY TO PROVIDE RESCISSION.—If a 
creditor, assignee, or securitizer cannot provide rescis-
sion under paragraph (1) or (2), the liability of such 
creditor, assignee, or securitizer shall be met by pro-
viding the financial equivalent of a rescission, to-
gether with such additional costs as the obligor may 
have incurred as a result of the violation and in con-
nection with obtaining a rescission of the loan, in-
cluding a reasonable attorney’s fee. 
‘‘(7) NO CLASS ACTIONS AGAINST ASSIGNEE OR 
SECURITIZER
UNDER
PARAGRAPH (2).—Only indi-
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‘‘(9) POOLS
AND
INVESTORS
IN
POOLS
EX-
CLUDED.—In the case of residential mortgage loans 
acquired or aggregated for the purpose of including 
such loans in a pool of assets held for the purpose of 
issuing or selling instruments representing interests 
in such pools including through a securitization vehi-
cle, the terms ‘assignee’ and ‘securitizer’, as used in 
this section, do not include the securitization vehicle, 
the pools of such loans or any original or subsequent 
purchaser of any interest in the securitization vehicle 
or any instrument representing a direct or indirect 
interest in such pool.’’. 
SEC. 205. DEFENSE TO FORECLOSURE. 
Section 129B of the Truth in Lending Act is amended 
by inserting after subsection (d) (as added by section 204) 
the following new subsection: 
‘‘(e) DEFENSE TO FORECLOSURE.—Notwithstanding 
any other provision of law— 
‘‘(1) when the holder of a residential mortgage 
loan or anyone acting for such holder initiates a judi-
cial or nonjudicial foreclosure— 
‘‘(A) a consumer who has the right to re-
scind under this section with respect to such loan 
against 
the 
creditor 
or 
any 
assignee 
or 
securitizer may assert such right as a defense to 
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foreclosure or counterclaim to such foreclosure 
against the holder, or 
‘‘(B) if the foreclosure proceeding begins 
after the end of the period during which a con-
sumer may bring an action for rescission under 
subsection (d), the consumer may seek actual 
damages incurred by reason of the violation 
which gave rise to the right of rescission, together 
with costs of the action, including a reasonable 
attorney’s fee against the creditor or any as-
signee or securitizer; and 
‘‘(2) such holder or anyone acting for such holder 
or any other applicable third party may sell, transfer, 
convey, or assign a residential mortgage loan to a 
creditor, any assignee, or any securitizer, or their des-
ignees, to effect a rescission or cure.’’. 
SEC. 206. ADDITIONAL STANDARDS AND REQUIREMENTS. 
(a) IN GENERAL.—Section 129B of the Truth in Lend-
ing Act is amended by inserting after subsection (e) (as 
added by section 205) the following new subsections: 
‘‘(f) PROHIBITION ON CERTAIN PREPAYMENT PEN-
ALTIES.— 
‘‘(1) PROHIBITED ON CERTAIN LOANS.—A resi-
dential mortgage loan that is not a qualified mort-
gage (as defined in subsection (c)) may not contain 
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terms under which a consumer must pay a prepay-
ment penalty for paying all or part of the principal 
after the loan is consummated. 
‘‘(2) PROHIBITED
AFTER
INITIAL
PERIOD
ON 
LOANS WITH A RESET.—A qualified mortgage with a 
fixed interest rate for an introductory period that ad-
justs or resets after such period may not contain 
terms under which a consumer must pay a prepay-
ment penalty for paying all or part of the principal 
after the beginning of the 3-month period ending on 
the date of the adjustment or reset. 
‘‘(g) SINGLE PREMIUM CREDIT INSURANCE PROHIB-
ITED.—No creditor may finance, directly or indirectly, in 
connection with any residential mortgage loan or with any 
extension of credit under an open end consumer credit plan 
secured by the principal dwelling of the consumer (other 
than a reverse mortgage), any credit life, credit disability, 
credit unemployment or credit property insurance, or any 
other accident, loss-of-income, life or health insurance, or 
any payments directly or indirectly for any debt cancella-
tion or suspension agreement or contract, except that insur-
ance premiums or debt cancellation or suspension fees cal-
culated and paid in full on a monthly basis shall not be 
considered financed by the creditor. 
‘‘(h) ARBITRATION.— 
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‘‘(1) IN GENERAL.—No residential mortgage loan 
and no extension of credit under an open end con-
sumer credit plan secured by the principal dwelling 
of the consumer, other than a reverse mortgage, may 
include terms which require arbitration or any other 
nonjudicial procedure as the method for resolving any 
controversy or settling any claims arising out of the 
transaction. 
‘‘(2) POST-CONTROVERSY AGREEMENTS.—Subject 
to paragraph (3), paragraph (1) shall not be con-
strued as limiting the right of the consumer and the 
creditor, any assignee, or any securitizer to agree to 
arbitration or any other nonjudicial procedure as the 
method for resolving any controversy at any time 
after a dispute or claim under the transaction arises. 
‘‘(3) NO WAIVER OF STATUTORY CAUSE OF AC-
TION.—No provision of any residential mortgage loan 
or of any extension of credit under an open end con-
sumer credit plan secured by the principal dwelling 
of the consumer (other than a reverse mortgage), and 
no other agreement between the consumer and the 
creditor relating to the residential mortgage loan or 
extension of credit referred to in paragraph (1), shall 
be applied or interpreted so as to bar a consumer 
from bringing an action in an appropriate district 
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court of the United States, or any other court of com-
petent jurisdiction, pursuant to section 130 or any 
other provision of law, for damages or other relief in 
connection with any alleged violation of this section, 
any other provision of this title, or any other Federal 
law. 
‘‘(i) DUTY OF SECURITIZER TO RETAIN ACCESS TO 
LOANS.—Any securitizer shall reserve the right and pre-
serve an ability, in any document or contract establishing 
any pool of assets that includes any residential mortgage 
loan— 
‘‘(1) to identify and obtain access to any such 
loan in the pool; and 
‘‘(2) to provide for and obtain a remedy under 
this title for the obligor under any such loan. 
‘‘(j) EFFECT
OF FORECLOSURE
ON PREEXISTING 
LEASE.— 
‘‘(1) IN GENERAL.—In the case of any foreclosure 
on any dwelling or residential real property securing 
an extension of credit made under a contract entered 
into after the date of the enactment of the Mortgage 
Reform and Anti-Predatory Lending Act of 2007, any 
successor in interest in such property pursuant to the 
foreclosure shall assume such interest subject to— 
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‘‘(A) any bona fide lease made to a bona 
fide tenant entered into before the notice of fore-
closure; and 
‘‘(B) the rights of any bona fide tenant 
without a lease or with a lease terminable at will 
under State law and the provision, by the suc-
cessor in interest, of a notice to vacate to the ten-
ant at least 90 days before the effective date of 
the notice. 
‘‘(2) BONA FIDE LEASE OR TENANCY.—For pur-
poses of this section, a lease or tenancy shall be con-
sidered bona fide only if— 
‘‘(A) the lease or tenancy was the result of 
an arms-length transaction; or 
‘‘(B) the lease or tenancy requires the ten-
ant to pay rent that is not substantially less 
than fair market rent for the property. 
‘‘(k) MORTGAGES WITH NEGATIVE AMORTIZATION.— 
No creditor may extend credit to a first-time borrower in 
connection with a consumer credit transaction under an 
open or closed end consumer credit plan secured by a dwell-
ing or residential real property that includes a dwelling, 
other than a reverse mortgage, that provides or permits a 
payment plan that may, at any time over the term of the 
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extension of credit, result in negative amortization unless, 
before such transaction is consummated— 
‘‘(1) the creditor provides the consumer with a 
statement that— 
‘‘(A) the pending transaction will or may, 
as the case may be, result in negative amortiza-
tion; 
‘‘(B) describes negative amortization in 
such manner as the Federal banking agencies 
shall prescribe; 
‘‘(C) negative amortization increases the 
outstanding principal balance of the account; 
and 
‘‘(D) negative amortization reduces the con-
sumer’s equity in the dwelling or real property; 
and 
‘‘(2) the consumer provides the creditor with suf-
ficient documentation to demonstrate that the con-
sumer received homeownership counseling from orga-
nizations or counselors certified by the Secretary of 
Housing and Urban Development as competent to 
provide such counseling. 
‘‘(l) ANNUAL CONTACT INFORMATION.—At least once 
annually and whenever there is a change in ownership of 
a residential mortgage loan, the servicer with respect to a 
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residential mortgage loan shall provide a written notice to 
the consumer identifying the name of the creditor or any 
assignee or securitizer who should be contacted by the con-
sumer for any reason concerning the consumer’s rights with 
respect to the loan.’’. 
(b) CONFORMING AMENDMENT RELATING
TO EN-
FORCEMENT.—Section 108(a) of the Truth in Lending Act 
(15 U.S.C. 1607(a)) is amended by inserting after para-
graph (6) the following new paragraph: 
‘‘(7) sections 21B and 21C of the Securities Ex-
change Act of 1934, in the case of a broker or dealer, 
other than a depository institution, by the Securities 
and Exchange Commission.’’. 
SEC. 207. RULE OF CONSTRUCTION. 
Except as otherwise expressly provided in section 129A 
or 129B of the Truth in Lending Act (as added by this 
Act), no provision of such section 129A or 129B shall be 
construed as superseding, repealing, or affecting any duty, 
right, obligation, privilege, or remedy of any person under 
any other provision of the Truth in Lending Act or any 
other provision of Federal or State law. 
SEC. 208. EFFECT ON STATE LAWS. 
(a) IN GENERAL.—Section 129B(d) of the Truth in 
Lending Act (as added by section 204) shall supersede any 
State law that provides additional remedies against any 
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assignee, securitizer, or securitization vehicle, and the rem-
edies described in such section shall constitute the sole rem-
edies against any assignee, securitizer, or securitization ve-
hicle, for a violation of subsection (a) or (b) of section 129B 
of such Act (relating to ability to repay or net tangible ben-
efit) or any other State law arising out of or relating to 
the specific subject matter of subsection (a) or (b) of such 
section 129B. 
(b) RULE OF CONSTRUCTION.—No provision of this 
section shall be construed as limiting the application of any 
State law against a creditor. Nor shall any provision of 
this section be construed as limiting the application of any 
State 
law 
against 
any 
assignee, 
securitizer, 
or 
securitization vehicle that does not arise out of or relate 
to, or provide additional remedies in connection with, the 
specific subject matter of subsection (a) or (b) of section 
129B of the Truth in Lending Act. 
SEC. 209. REGULATIONS. 
Regulations required or authorized to be prescribed 
under this title or the amendments made by this title— 
(1) shall be prescribed in final form before the 
end of the 12-month period beginning on the date of 
the enactment of this Act; and 
(2) shall take effect not later than 18 months 
after the date of the enactment of this Act. 
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SEC. 210. AMENDMENTS TO CIVIL LIABILITY PROVISIONS. 
(a) INCREASE
IN AMOUNT
OF CIVIL MONEY PEN-
ALTIES FOR CERTAIN VIOLATIONS.—Section 130(a)(2) of 
the Truth in Lending Act (15 U.S.C. 1640(a)(2)) is amend-
ed— 
(1) by striking ‘‘$100’’ and inserting ‘‘$200’’; 
(2) by striking ‘‘$1,000’’ and inserting ‘‘$2,000’’; 
(3) by striking ‘‘$200’’ and inserting ‘‘$400’’; 
(4) by striking ‘‘$2,000’’ and inserting ‘‘$4,000’’; 
and 
(5) by striking ‘‘$500,000’’ and inserting 
‘‘$1,000,000’’. 
(b) STATUTE OF LIMITATIONS EXTENDED FOR SEC-
TION 129 VIOLATIONS.—Section 130(e) of the Truth in 
Lending Act (15 U.S.C. 1640(e)) is amended— 
(1) in the first sentence, by striking ‘‘Any ac-
tion’’ and inserting ‘‘Except as provided in the subse-
quent sentence, any action’’; and 
(2) by inserting after the first sentence the fol-
lowing new sentence: ‘‘Any action under this section 
with respect to any violation of section 129 may be 
brought in any United States district court, or in any 
other court of competent jurisdiction, before the end of 
the 3-year period beginning on the date of the occur-
rence of the violation.’’. 
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SEC. 211. REQUIRED DISCLOSURES. 
(a) ADDITIONAL INFORMATION.—Section 128(a) of 
Truth in Lending Act (15 U.S.C. 1638(a)) is amended by 
adding at the end the following new paragraphs: 
‘‘(16) In the case of an extension of credit that 
is secured by the dwelling of a consumer, under which 
the annual rate of interest is variable, or with respect 
to which the regular payments may otherwise be vari-
able, in addition to the other disclosures required 
under this subsection, the disclosures provided under 
this subsection shall state the maximum amount of 
the regular required payments on the loan, based on 
the maximum interest rate allowed, introduced with 
the following language in conspicuous type size and 
format: ‘Your payment can go as high as $ll’, the 
blank to be filled in with the maximum possible pay-
ment amount. 
‘‘(17) In the case of a residential mortgage loan 
for which an escrow or impound account will be es-
tablished for the payment of all applicable taxes, in-
surance, and assessments, the following statement: 
‘Your payments will be increased to cover taxes and 
insurance. In the first year, you will pay an addi-
tional $ll [insert the amount of the monthly pay-
ment to the account] every month to cover the costs 
of taxes and insurance.’. 
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‘‘(18) In the case of a variable rate residential 
mortgage loan for which an escrow or impound ac-
count will be established for the payment of all appli-
cable taxes, insurance, and assessments— 
‘‘(A) the amount of initial monthly pay-
ment due under the loan for the payment of 
principal and interest, and the amount of such 
initial monthly payment including the monthly 
payment deposited in the account for the pay-
ment of all applicable taxes, insurance, and as-
sessments; and 
‘‘(B) the amount of the fully indexed month-
ly payment due under the loan for the payment 
of principal and interest, and the amount of 
such fully indexed monthly payment including 
the monthly payment deposited in the account 
for the payment of all applicable taxes, insur-
ance, and assessments. 
‘‘(19) In the case of a residential mortgage loan, 
the aggregate amount of settlement charges for all set-
tlement services provided in connection with the loan, 
the amount of charges that are included in the loan 
and the amount of such charges the borrower must 
pay at closing, the approximate amount of the whole-
sale rate of funds in connection with the loan, and the 
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aggregate amount of other fees or required payments 
in connection with the loan. 
‘‘(20) In the case of a residential mortgage loan, 
the aggregate amount of fees paid to the mortgage 
originator in connection with the loan, the amount of 
such fees paid directly by the consumer, and any ad-
ditional amount received by the originator from the 
creditor based on the interest rate of the loan.’’. 
(b) TIMING.—Section 128(b) of the Truth in Lending 
Act (15 U.S.C. 1638(b)) is amended by adding at the end 
the following new paragraph: 
‘‘(4) RESIDENTIAL
MORTGAGE
LOAN
DISCLO-
SURES.—In the case of a residential mortgage loan, 
the information required to be disclosed under sub-
section (a) with respect to such loan shall be disclosed 
before the earlier of— 
‘‘(A) the time required under the first sen-
tence of paragraph (1); or 
‘‘(B) the end of the 3-day period beginning 
on the date the application for the loan from a 
consumer is received by the creditor.’’. 
(c) ENHANCED MORTGAGE LOAN DISCLOSURES.—Sec-
tion 128(b)(2) of the Truth in Lending Act (15 U.S.C. 
1638(b)(2)) is amended— 
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(1) by striking ‘‘(2) In the’’ and inserting the 
following: 
‘‘(2) MORTGAGE DISCLOSURES.— 
‘‘(A) IN GENERAL.—In the’’; 
(2) by striking ‘‘a residential mortgage trans-
action, as defined in section 103(w)’’ and inserting 
‘‘any extension of credit that is secured by the dwell-
ing of a consumer’’; 
(3) by striking ‘‘shall be made in accordance’’ 
and all that follows through ‘‘extended, or’’; 
(4) by striking ‘‘If the’’ and all that follows 
through the end of the paragraph and inserting the 
following new subparagraphs: 
‘‘(B) STATEMENT AND TIMING OF DISCLO-
SURES.—In the case of an extension of credit 
that is secured by the dwelling of a consumer, in 
addition to the other disclosures required by sub-
section (a), the disclosures provided under this 
paragraph shall state in conspicuous type size 
and format, the following: ‘You are not required 
to complete this agreement merely because you 
have received these disclosures or signed a loan 
application.’. 
‘‘(i) state in conspicuous type size and 
format, the following: ‘You are not required 
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to complete this agreement merely because 
you have received these disclosures or signed 
a loan application.’; and 
‘‘(ii) be furnished to the borrower not 
later than 7 business days before the date of 
consummation of the transaction, subject to 
subparagraph (D). 
‘‘(C) VARIABLE RATES OR PAYMENT SCHED-
ULES.—In the case of an extension of credit that 
is secured by the dwelling of a consumer, under 
which the annual rate of interest is variable, or 
with respect to which the regular payments may 
otherwise be variable, in addition to the other 
disclosures required by subsection (a), the disclo-
sures provided under this paragraph shall label 
the payment schedule as follows: ‘Payment 
Schedule: Payments Will Vary Based on Interest 
Rate Changes.’. 
‘‘(D) UPDATING
APR.—In any case in 
which the disclosure statement provided 7 busi-
ness days before the date of consummation of the 
transaction contains an annual percentage rate 
of interest that is no longer accurate, as deter-
mined under section 107(c), the creditor shall 
furnish an additional, corrected statement to the 
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borrower, not later than 3 business days before 
the date of consummation of the transaction.’’. 
SEC. 212. AUTHORIZATION OF APPROPRIATIONS. 
For fiscal years 2008, 2009, 2010, 2011, and 2012, 
there are authorized to be appropriated to the Attorney Gen-
eral a total of— 
(1) $31,250,000 to support the employment of 30 
additional agents of the Federal Bureau of Investiga-
tion and 2 additional dedicated prosecutors at the De-
partment of Justice to coordinate prosecution of mort-
gage fraud efforts with the offices of the United States 
Attorneys; and 
(2) $750,000 to support the operations of inter-
agency task forces of the Federal Bureau of Investiga-
tion in the areas with the 15 highest concentrations 
of mortgage fraud. 
SEC. 213. EFFECTIVE DATE. 
The amendments made by this title shall apply to 
transactions consummated on or after the effective date of 
the regulations specified in Section 209. 
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TITLE III—HIGH-COST 
MORTGAGES 
SEC. 301. DEFINITIONS RELATING TO HIGH-COST MORT-
GAGES. 
(a) 
HIGH-COST
MORTGAGE
DEFINED.—Section 
103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)) 
is amended by striking all that precedes paragraph (2) and 
inserting the following: 
‘‘(aa) HIGH-COST MORTGAGE.— 
‘‘(1) DEFINITION.— 
‘‘(A) IN
GENERAL.—The term ‘high-cost 
mortgage’, and a mortgage referred to in this 
subsection, means a consumer credit transaction 
that is secured by the consumer’s principal 
dwelling, other than a reverse mortgage trans-
action, if— 
‘‘(i) in the case of a credit transaction 
secured— 
‘‘(I) by a first mortgage on the 
consumer’s principal dwelling, the an-
nual percentage rate at consummation 
of the transaction will exceed by more 
than 8 percentage points the yield on 
Treasury securities having comparable 
periods of maturity on the 15th day of 
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the month immediately preceding the 
month in which the application for the 
extension of credit is received by the 
creditor; or 
‘‘(II) by a subordinate or junior 
mortgage on the consumer’s principal 
dwelling, the annual percentage rate at 
consummation of the transaction will 
exceed by more than 10 percentage 
points the yield on Treasury securities 
having comparable periods of maturity 
on the 15th day of the month imme-
diately preceding the month in which 
the application for the extension of 
credit is received by the creditor; 
‘‘(ii) the total points and fees payable 
in connection with the transaction exceed— 
‘‘(I) in the case of a transaction 
for $20,000 or more, 5 percent (8 per-
cent if the dwelling is personal prop-
erty) of the total transaction amount; 
or 
‘‘(II) in the case of a transaction 
for less than $20,000, the lesser of 8 
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(1) IN
GENERAL.—Section 103(aa)(4) of the 
Truth in Lending Act (15 U.S.C. 1602(aa)(4)) is 
amended— 
(A) by striking subparagraph (B) and in-
serting the following: 
‘‘(B) all compensation paid directly or in-
directly by a consumer or creditor to a mortgage 
broker from any source, including a mortgage 
originator that originates a loan in the name of 
the originator in a table-funded transaction;’’; 
(B) in subparagraph (C)(ii), by inserting 
‘‘except where applied to the charges set forth in 
section 106(e)(1) where a creditor may receive 
indirect compensation solely as a result of ob-
taining distributions of profits from an affiliated 
entity based on its ownership interest in compli-
ance with section 8(c)(4) of the Real Estate Set-
tlement Procedures Act of 1974’’ before the semi-
colon at the end; 
(C) in subparagraph (C)(iii), by striking ‘‘; 
and’’ and inserting ‘‘, except as provided for in 
clause (ii);’’; 
(D) by redesignating subparagraph (D) as 
subparagraph (G); and 
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(E) by inserting after subparagraph (C) the 
following new subparagraphs: 
‘‘(D) premiums or other charges payable at 
or before closing for any credit life, credit dis-
ability, credit unemployment, or credit property 
insurance, or any other accident, loss-of-income, 
life or health insurance, or any payments di-
rectly or indirectly for any debt cancellation or 
suspension agreement or contract, except that in-
surance premiums or debt cancellation or sus-
pension fees calculated and paid in full on a 
monthly basis shall not be considered financed 
by the creditor; 
‘‘(E) except as provided in subsection (cc), 
the maximum prepayment fees and penalties 
which may be charged or collected under the 
terms of the credit transaction; 
‘‘(F) all prepayment fees or penalties that 
are incurred by the consumer if the loan refi-
nances a previous loan made or currently held 
by the same creditor or an affiliate of the cred-
itor; and’’. 
(2) CALCULATION
OF
POINTS
AND
FEES
FOR 
OPEN-END
CONSUMER
CREDIT
PLANS.—Section 
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103(aa) of the Truth in Lending Act (15 U.S.C. 
1602(aa)) is amended— 
(A) by redesignating paragraph (5) as 
paragraph (6); and 
(B) by inserting after paragraph (4) the fol-
lowing new paragraph: 
‘‘(5) CALCULATION OF POINTS AND FEES FOR 
OPEN-END CONSUMER CREDIT PLANS.—In the case of 
open-end consumer credit plans, points and fees shall 
be calculated, for purposes of this section and section 
129, by adding the total points and fees known at or 
before closing, including the maximum prepayment 
penalties which may be charged or collected under the 
terms of the credit transaction, plus the minimum ad-
ditional fees the consumer would be required to pay 
to draw down an amount equal to the total credit 
line.’’. 
(d) HIGH COST MORTGAGE LENDER.—Section 103(f) 
of the Truth in Lending Act (15 U.S.C. 1602(f)) is amended 
by striking the last sentence and inserting the following new 
sentence: ‘‘Any person who originates or brokers 2 or more 
mortgages referred to in subsection (aa) in any 12-month 
period, any person who originates 1 or more such mortgages 
through a mortgage broker in any 12 month period, or, in 
connection with a table funding transaction of such a mort-
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gage, any person to whom the obligation is initially as-
signed at or after settlement shall be considered to be a cred-
itor for purposes of this title.’’. 
(e) BONA FIDE DISCOUNT LOAN DISCOUNT POINTS 
AND PREPAYMENT PENALTIES.—Section 103 of the Truth 
in Lending Act (15 U.S.C. 1602) is amended by inserting 
after subsection (cc) (as added by section 121) the following 
new subsection: 
‘‘(dd) BONA FIDE DISCOUNT POINTS AND PREPAY-
MENT PENALTIES.—For the purposes of determining the 
amount of points and fees for purposes of subsection (aa), 
either the amounts described in paragraphs (1) or (4) of 
the following paragraphs, but not both, may be excluded: 
‘‘(1) EXCLUSION
OF
BONA
FIDE
DISCOUNT 
POINTS.—The discount points described in 1 of the 
following subparagraphs shall be excluded from deter-
mining the amounts of points and fees with respect 
to a high-cost mortgage for purposes of subsection 
(aa): 
‘‘(A) Up to and including 2 bona fide dis-
count points payable by the consumer in connec-
tion with the mortgage, but only if the interest 
rate from which the mortgage’s interest rate will 
be discounted does not exceed by more than 1 
percentage point the required net yield for a 90- 
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day standard mandatory delivery commitment 
for a reasonably comparable loan from either the 
Federal National Mortgage Association or the 
Federal Home Loan Mortgage Corporation, 
whichever is greater. 
‘‘(B) Unless 2 bona fide discount points 
have been excluded under subparagraph (A), up 
to and including 1 bona fide discount point pay-
able by the consumer in connection with the 
mortgage, but only if the interest rate from 
which the mortgage’s interest rate will be dis-
counted does not exceed by more than 2 percent-
age points the required net yield for a 90-day 
standard mandatory delivery commitment for a 
reasonably comparable loan from either the Fed-
eral National Mortgage Association or the Fed-
eral Home Loan Mortgage Corporation, which-
ever is greater. 
‘‘(2) DEFINITION.—For purposes of paragraph 
(1), the term ‘bona fide discount points’ means loan 
discount points which are knowingly paid by the con-
sumer for the purpose of reducing, and which in fact 
result in a bona fide reduction of, the interest rate or 
time-price differential applicable to the mortgage. 
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‘‘(3) EXCEPTION FOR INTEREST RATE REDUC-
TIONS INCONSISTENT WITH INDUSTRY NORMS.—Para-
graph (1) shall not apply to discount points used to 
purchase an interest rate reduction unless the amount 
of the interest rate reduction purchased is reasonably 
consistent with established industry norms and prac-
tices for secondary mortgage market transactions. 
‘‘(4) ALLOWANCE
OF
CONVENTIONAL
PREPAY-
MENT PENALTY.—Subsection (aa)(1)(4)(E) shall not 
apply so as to include a prepayment penalty or fee 
that is authorized by law other than this title and 
may be imposed pursuant to the terms of a high-cost 
mortgage (or other consumer credit transaction se-
cured by the consumer’s principal dwelling) if— 
‘‘(A) the annual percentage rate applicable 
with respect to such mortgage or transaction (as 
determined 
for 
purposes 
of 
subsection 
(aa)(1)(A)(i))— 
‘‘(i) in the case of a first mortgage on 
the consumer’s principal dwelling, does not 
exceed by more than 2 percentage points the 
yield on Treasury securities having com-
parable periods of maturity on the 15th day 
of the month immediately preceding the 
month in which the application for the ex-
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tension of credit is received by the creditor; 
or 
‘‘(ii) in the case of a subordinate or 
junior mortgage on the consumer’s prin-
cipal dwelling, does not exceed by more than 
4 percentage points the yield on such Treas-
ury securities; and 
‘‘(B) the total amount of any prepayment 
fees or penalties permitted under the terms of the 
high-cost mortgage or transaction does not exceed 
2 percent of the amount prepaid.’’. 
SEC. 302. AMENDMENTS TO EXISTING REQUIREMENTS FOR 
CERTAIN MORTGAGES. 
(a) PREPAYMENT
PENALTY
PROVISIONS.—Section 
129(c)(2) of the Truth in Lending Act (15 U.S.C. 
1639(c)(2)) is amended— 
(1) by striking ‘‘and’’ after the semicolon at the 
end of subparagraph (C); 
(2) by redesignating subparagraph (D) as sub-
paragraph (E); and 
(3) by inserting after subparagraph (C) the fol-
lowing new subparagraph: 
‘‘(D) the amount of the principal obligation 
of the mortgage exceeds the maximum principal 
obligation limitation (for the applicable size resi-
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dence) under section 203(b)(2) of the National 
Housing Act for the area in which the residence 
subject to the mortgage is located; and’’. 
(b) NO BALLOON PAYMENTS.—Section 129(e) of the 
Truth in Lending Act (15 U.S.C. 1639(e)) is amended to 
read as follows: 
‘‘(e) NO BALLOON PAYMENTS.—No high-cost mortgage 
may contain a scheduled payment that is more than twice 
as large as the average of earlier scheduled payments. This 
subsection shall not apply when the payment schedule is 
adjusted to the seasonal or irregular income of the con-
sumer.’’. 
(c) NO LENDING WITHOUT DUE REGARD TO ABILITY 
TO REPAY.—Section 129(h) of the Truth in Lending Act 
(15 U.S.C. 1639(h)) is amended— 
(1) by striking ‘‘PAYMENT ABILITY
OF CON-
SUMER.—A creditor shall not’’ and inserting ‘‘PAY-
MENT ABILITY OF CONSUMER.— 
‘‘(1) PATTERN OR PRACTICE.— 
‘‘(A) IN GENERAL.—A creditor shall not’’; 
(2) by inserting after subparagraph (A) (as so 
designated by paragraph (1) of this subsection) the 
following new subparagraph: 
‘‘(B) PRESUMPTION OF VIOLATION.—There 
shall be a presumption that a creditor has vio-
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lated this subsection if the creditor engages in a 
pattern or practice of making high-cost mort-
gages without verifying or documenting the re-
payment ability of consumers with respect to 
such mortgages.’’; and 
(3) by adding at the end the following new para-
graph: 
‘‘(2) PROHIBITION ON EXTENDING CREDIT WITH-
OUT REGARD TO PAYMENT ABILITY OF CONSUMER.— 
‘‘(A) IN GENERAL.—A creditor may not ex-
tend credit to a consumer under a high-cost 
mortgage unless a reasonable creditor would be-
lieve at the time the mortgage is closed that the 
consumer or consumers that are residing or will 
reside in the residence subject to the mortgage 
will be able to make the scheduled payments as-
sociated with the mortgage, based upon a consid-
eration of current and expected income, current 
obligations, employment status, and other finan-
cial resources, other than equity in the residence. 
‘‘(B) PRESUMPTION OF ABILITY.—For pur-
poses of this subsection, there shall be a rebut-
table presumption that a consumer is able to 
make the scheduled payments to repay the obli-
gation if, at the time the high-cost mortgage is 
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consummated, the consumer’s total monthly 
debts, including amounts under the mortgage, do 
not exceed 50 percent of his or her monthly gross 
income as verified by tax returns, payroll re-
ceipts, or other third-party income verification.’’. 
SEC. 
303. 
ADDITIONAL 
REQUIREMENTS 
FOR 
CERTAIN 
MORTGAGES. 
(a) ADDITIONAL REQUIREMENTS FOR CERTAIN MORT-
GAGES.—Section 129 of the Truth in Lending Act (15 
U.S.C. 1639) is amended— 
(1) by redesignating subsections (j), (k) and (l) 
as subsections (n), (o) and (p) respectively; and 
(2) by inserting after subsection (i) the following 
new subsections: 
‘‘(j) RECOMMENDED DEFAULT.—No creditor shall rec-
ommend or encourage default on an existing loan or other 
debt prior to and in connection with the closing or planned 
closing of a high-cost mortgage that refinances all or any 
portion of such existing loan or debt. 
‘‘(k) LATE FEES.— 
‘‘(1) IN GENERAL.—No creditor may impose a 
late payment charge or fee in connection with a high- 
cost mortgage— 
‘‘(A) in an amount in excess of 4 percent of 
the amount of the payment past due; 
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‘‘(B) unless the loan documents specifically 
authorize the charge or fee; 
‘‘(C) before the end of the 15-day period be-
ginning on the date the payment is due, or in 
the case of a loan on which interest on each in-
stallment is paid in advance, before the end of 
the 30-day period beginning on the date the pay-
ment is due; or 
‘‘(D) more than once with respect to a sin-
gle late payment. 
‘‘(2) COORDINATION
WITH
SUBSEQUENT
LATE 
FEES.—If a payment is otherwise a full payment for 
the applicable period and is paid on its due date or 
within an applicable grace period, and the only de-
linquency or insufficiency of payment is attributable 
to any late fee or delinquency charge assessed on any 
earlier payment, no late fee or delinquency charge 
may be imposed on such payment. 
‘‘(3) FAILURE
TO
MAKE
INSTALLMENT
PAY-
MENT.—If, in the case of a loan agreement the terms 
of which provide that any payment shall first be ap-
plied to any past due principal balance, the consumer 
fails to make an installment payment and the con-
sumer subsequently resumes making installment pay-
ments but has not paid all past due installments, the 
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