I
106TH CONGRESS
2D SESSION
H. R. 4213
To provide expanded substantive protections for especially vulnerable con-
sumers against abusive mortgage lending practices and to streamline
the framework regulating mortgage originations.
IN THE HOUSE OF REPRESENTATIVES
APRIL 6, 2000
Mr. NEY introduced the following bill; which was referred to the Committee
on Banking and Financial Services
A BILL
To provide expanded substantive protections for especially
vulnerable consumers against abusive mortgage lending
practices and to streamline the framework regulating
mortgage originations.
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 ‘‘Consumer Mortgage
Protection Act of 2000.’’
SEC. 2. FINDINGS AND PURPOSE.
(a) FINDINGS.—The Congress finds that—
(1) especially vulnerable consumers are not ade-
quately protected by current Federal law from the
abusive practices of a few participants in the resi-
dential mortgage industry;
(2) additional legislation is necessary and ap-
propriate to ensure that such consumers are better
protected against abusive lending practices; and
(3) there is a need to streamline the framework
regulating mortgage originations.
(b) PURPOSE.—The purpose of this Act is—
(1) to establish additional substantive protec-
tions for certain especially vulnerable consumers;
(2) to ensure that such consumers are able to
protect the equity in their homes;
(3) to initiate the process of streamlining the
regulatory framework for mortgage originations; and
(4) to clarify mortgage broker compensation.
SEC. 3. AMENDMENTS TO THE TRUTH IN LENDING ACT.
(a) SECTION 103(aa)(1)(A).—Section 103(aa)(1)(A)
of the Truth in Lending Act (15 U.S.C. 1602(aa)(1)(A))
is amended by striking ‘‘by more than 10 percentage
points’’ and by striking ‘‘creditor; or’’ and inserting the
following: ‘‘creditor by more than—
‘‘(i) 8 percentage points, in the case of a trans-
action secured by a first-lien security interest in the
property; or
‘‘(ii) 9 percentage points, in the case of a trans-
action secured by a subordinate-lien security interest
in the property; or’’.
(b) 
SECTION
103(aa)(1)(B)(i).—Section
103(aa)(1)(B)(i) of the Truth in Lending Act (15 U.S.C.
1602(aa)(1)(B)(i)) is amended by striking ‘‘8 percent’’
and inserting ‘‘6 percent, in the case of a transaction se-
cured by a first-lien security interest in the property, or
7 percent, in the case of a transaction secured by a subor-
dinate-lien security interest in the property’’.
(c) SECTION 103(aa)(4).—Section 103(aa)(4) of the
Truth in Lending Act (15 U.S.C. 1602(aa)(4)) is amended
by striking ‘‘For purposes of paragraph (1)(B),’’ and in-
serting ‘‘For purposes of paragraph (1)(B) and section
129(h) of this Act’’.
(d) SECTION 103(aa)(5).—Section 103(aa)(5) of the
Truth in Lending Act (15 U.S.C. 1602(aa)(5)) is amended
by inserting after ‘‘extension of credit’’ the following: ‘‘,
except as provided in section 129(h) of this Act’’.
(e) SECTION 129.—Section 129 of the Truth in
Lending Act (15 U.S.C. 1639) is amended by striking sub-
sections (a) and (b), redesignating subsections (c) through
(i) as subsections (a) through (g), respectively, and redes-
ignating subsections (j) through (l) as subsections (m)
through (o), respectively.
(f)(1) SECTION 129(a)(2).—Section 129(a)(2) of the
Truth in Lending Act (15 U.S.C. 1639(a)(2)), as redesig-
nated by subsection (e), is amended by striking subpara-
graphs (A) and (B) and inserting the following:
‘‘(A) the amount of the penalty does not
exceed 3 percent of the total loan amount, if
the prepayment occurs during the 1-year period
beginning on the date on which the mortgage is
consummated;
‘‘(B) the amount of the penalty does not
exceed 2 percent of the total loan amount, if
the prepayment occurs during the 1-year period
beginning on the date of expiration of the 1-
year period identified in subparagraph (A);
‘‘(C) the amount of the penalty does not
exceed 1 percent of the total loan amount, if
the prepayment occurs during the 1-year period
beginning on the date of the expiration of the
1-year period identified in subparagraph (B);’’,
and by redesignating subparagraphs (C) and (D) as sub-
paragraphs (D) and (E), respectively.
(2) SECTION 129(a)(2)(D).—Section 129(a)(2)(D) of
the Truth in Lending Act (15 U.S.C. 1639(a)(2)(D)), as
redesignated by subsection (e) and paragraph (1), is
amended by striking ‘‘5-year period’’ and inserting
‘‘3-year period’’.
(g) SECTION 129(e).—Section 129(e) of the Truth in
Lending Act (15 U.S.C. 1639(e)), as redesignated by sub-
section (e), is amended by striking ‘‘more than 2’’ and
inserting ‘‘any’’.
(h) SECTION 129(h).—Section 129 of the Truth in
Lending Act (15 U.S.C. 1639) is amended by inserting
after section 129(g), as redesignated by subsection (e), the
following:
‘‘(h) RESTRICTIONS ON THE CHARGING OF CLOSING
COSTS.—A creditor shall not make a mortgage referred
to in section 103(aa) the proceeds of which will be used
to pay the outstanding balance of an existing mortgage
referred to in section 103(aa) within 1 year of the date
of consummation of such existing mortgage, unless—
‘‘(1) all points and fees, imposed directly or in-
directly by the creditor in connection with the trans-
action, are calculated solely on the basis of the new
advances received by the borrower in connection with
the refinancing; or
‘‘(2) the annual percentage rate of the refinance
loan is lower by 2 or more percentage points than
the annual percentage rate of the existing mort-
gage.’’.
(i) SECTION 129(i).—Section 129 of the Truth in
Lending Act (15 U.S.C. 1639) is amended by inserting
after section 129(h), as created by subsection (h), the fol-
lowing:
‘‘(i) NO ENCOURAGEMENT OF DEFAULT.—A creditor
shall not recommend to a consumer, at any time in connec-
tion with the making of a mortgage referred to in section
103(aa), that the consumer fail to make any payment as
and when due and payable under the terms of any existing
debt obligation of the consumer.’’.
(j) SECTION 129(j).—Section 129 of the Truth in
Lending Act (15 U.S.C. 1639) is amended by inserting
after section 129(i), as created by subsection (i), the fol-
lowing:
‘‘(j) REPORTING OF PAYMENT HISTORY.—A creditor
shall report both favorable and unfavorable payment his-
tory information relating to any consumer of a mortgage
referred to in section 103(aa) to a nationally recognized
credit bureau at least quarterly each year.’’.
(k) SECTION 129(k).—Section 129 of the Truth in
Lending Act (15 U.S.C. 1639) is amended by inserting
after section 129(j), as created by subsection (j), the fol-
lowing:
‘‘(k) NO PROFIT FROM FORECLOSURE.—A creditor
shall not profit monetarily from the sale at foreclosure of
any property securing a mortgage referred to in section
103(aa), whether directly from such a foreclosure sale or
indirectly through a resale after the purchase of the prop-
erty by the creditor at such a foreclosure sale.’’.
(l) SECTION 129(l).—Section 129 of the Truth in
Lending Act (15 U.S.C. 1639) is amended by inserting
after section 129(k), as created by subsection (k), the fol-
lowing:
‘‘(l) PROVIDING A STATEMENT OF THE AMOUNT OF
SATISFACTION.—Upon receipt of a written or oral request,
a creditor or any subsequent assignee who holds a mort-
gage referred to in section 103(aa) shall provide a written
statement setting forth the amounts necessary to pay in
full and satisfy the debt obligation of a mortgage referred
to in section 103(aa) within 3 business days of receipt of
the request.’’.
(n) SECTION 130(b).—Section 130(b) of the Truth
in Lending Act (15 U.S.C. 1640(b)) is amended by strik-
ing all after ‘‘the creditor or assignee notifies the person
concerned of the error and’’ and inserting ‘‘the creditor
or assignee—
‘‘(1) in the case of a failure to comply con-
sisting of a finance charge or annual percentage rate
actually disclosed that is lower than that which
should have been disclosed, makes whatever adjust-
ments in the appropriate account are necessary to
ensure that the person will not be required to pay
an amount in excess of the charge actually disclosed,
or the dollar equivalent of the annual percentage
rate actually disclosed, whichever is lower; or
‘‘(2) in the case of any other failure to comply,
executes and offers to the person for execution a le-
gally effective instrument that modifies the under-
lying transaction such that the failure to comply is
eliminated.’’.
SEC. 4. AMENDMENTS TO THE REAL ESTATE SETTLEMENT
PROCEDURES ACT.
(a) SECTION 4(a).—The second sentence of section
4(a) of the Real Estate Settlement Procedures Act (12
U.S.C. 2603(a)) is amended by striking ‘‘Such form shall
conspicuously and clearly itemize all charges imposed upon
the borrower and all charges imposed upon the seller in
connection with the settlement and’’ and inserting ‘‘Such
form shall conspicuously and clearly itemize all charges
imposed directly upon the borrower and all charges im-
posed directly upon the seller (whether paid outside of
closing or otherwise) in connection with the settlement.
This subsection shall not be construed to require that the
standard form shall itemize fees earned by any settlement
service provider in connection with the transaction to the
extent such fees are paid by the lender and reflect the
present value of interest yielded by the federally related
mortgage loan. Such form also’’.
(b) SECTION 5(b).—Section 5(b) of the Real Estate
Settlement Procedures Act (12 U.S.C. 2604(b)) is amend-
ed by striking ‘‘and’’ at the end of paragraph (4), striking
the period at the end of paragraph (5) and inserting
‘‘; and’’ and by adding after paragraph (5) the following:
‘‘(6) an explanation of the fact that a mortgage
broker may be compensated for its services provided
in connection with the federally related mortgage
loan with funds derived from (A) direct payments
made by the borrower, (B) payments made by the
lender that reflect the present value of interest yield-
ed by the federally related mortgage loan, or (C) a
combination of both the foregoing sources.’’.
(c)(1) SECTION 5(c).—Section 5(c) of the Real Es-
tate Settlement Procedures Act (12 U.S.C. 2604(c)) is
amended by striking ‘‘the borrower is likely to incur’’ and
inserting ‘‘likely to be imposed directly upon the bor-
rower’’.
(2) SECTION 5(c).—Section 5(c) of the Real Estate
Settlement Procedures Act (12 U.S.C. 2604(c)) is amend-
ed by inserting after paragraph (6) at the end thereof the
following: ‘‘The good faith estimate required by this sub-
section shall include the following statement in con-
spicuous type size: ‘If you obtain this loan, the lender will
have a mortgage on your home. You could lose your home,
and any money you have put into it, if you do not meet
your obligations under the loan.’ ’’.
SEC. 5. FEDERAL PREEMPTION.
(a) IN GENERAL.—No requirement or prohibition
may be imposed under the laws of any State with respect
to the subject matter covered by the amendments made
by this Act, including limitations or prohibitions in connec-
tion with high-cost or high-fee mortgage loans for which
it is perceived that consumers should be afforded addi-
tional substantive protections.
(b) INTERPRETATION.—In response to a request
from any person, the Board of Governors of the Federal
Reserve System or any official or employee of the Board
of Governors of the Federal Reserve System duly author-
ized by the Board, shall promptly issue an interpretation
which determines whether the specific State laws that are
identified in such request are preempted by operation of
subsection (a). Any interpretation issued under this sub-
section shall have the effect of law.
SEC. 6. EFFECTIVE DATE; IMPLEMENTING REGULATIONS.
(a) EFFECTIVE DATE.—This Act and the amend-
ments made by this Act shall take effect 6 months after
the date of its enactment.
(b) REGULATIONS BY THE BOARD.—The Board of
Governors of the Federal Reserve System shall make such
regulations as are necessary to implement the amend-
ments made by section 3 within 120 days after the date
of its enactment.
(c) REGULATIONS BY THE SECRETARY OF HOUSING
AND URBAN DEVELOPMENT.—The Secretary of Housing
and Urban Development shall make such regulations as
are necessary to implement the amendments made by sec-
tion 4 within 120 days after the date of its enactment.
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