H. R. 4173—775 
effect for a residence of the applicable size, as 
of the date of such interest rate set, pursuant 
to the 6th sentence of section 305(a)(2) the Federal 
Home Loan Mortgage Corporation Act (12 U.S.C. 
1454(a)(2)); and 
‘‘(III) by 3.5 or more percentage points, in the 
case of a subordinate lien residential mortgage 
loan. 
‘‘(2) PUBLICATION OF AVERAGE PRIME OFFER RATE AND APR 
THRESHOLDS.—The Board— 
‘‘(A) shall publish, and update at least weekly, average 
prime offer rates; 
‘‘(B) may publish multiple rates based on varying types 
of mortgage transactions; and 
‘‘(C) shall adjust the thresholds established under sub-
clause (I), (II), and (III) of paragraph (1)(B)(ii) as necessary 
to reflect significant changes in market conditions and 
to effectuate the purposes of the Mortgage Reform and 
Anti-Predatory Lending Act. 
‘‘(3) PHASED-OUT PENALTIES ON QUALIFIED MORTGAGES.— 
A qualified mortgage (as defined in subsection (b)(2)) may not 
contain terms under which a consumer must pay a prepayment 
penalty for paying all or part of the principal after the loan 
is consummated in excess of the following limitations: 
‘‘(A) During the 1-year period beginning on the date 
the loan is consummated, the prepayment penalty shall 
not exceed an amount equal to 3 percent of the outstanding 
balance on the loan. 
‘‘(B) During the 1-year period beginning after the 
period described in subparagraph (A), the prepayment pen-
alty shall not exceed an amount equal to 2 percent of 
the outstanding balance on the loan. 
‘‘(C) During the 1-year period beginning after the 1- 
year period described in subparagraph (B), the prepayment 
penalty shall not exceed an amount equal to 1 percent 
of the outstanding balance on the loan. 
‘‘(D) After the end of the 3-year period beginning on 
the date the loan is consummated, no prepayment penalty 
may be imposed on a qualified mortgage. 
‘‘(4) OPTION FOR NO PREPAYMENT PENALTY REQUIRED.—A 
creditor may not offer a consumer a residential mortgage loan 
product that has a prepayment penalty for paying all or part 
of the principal after the loan is consummated as a term of 
the loan without offering the consumer a residential mortgage 
loan product that does not have a prepayment penalty as a 
term of the loan. 
‘‘(d) SINGLE PREMIUM CREDIT INSURANCE PROHIBITED.—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, any credit life, credit disability, credit unemploy-
ment, or credit property insurance, or any other accident, loss- 
of-income, life, or health insurance, or any payments directly or 
indirectly for any debt cancellation or suspension agreement or 
contract, except that—
H. R. 4173—776 
‘‘(1) insurance premiums or debt cancellation or suspension 
fees calculated and paid in full on a monthly basis shall not 
be considered financed by the creditor; and 
‘‘(2) this subsection shall not apply to credit unemployment 
insurance for which the unemployment insurance premiums 
are reasonable, the creditor receives no direct or indirect com-
pensation in connection with the unemployment insurance pre-
miums, and the unemployment insurance premiums are paid 
pursuant to another insurance contract and not paid to an 
affiliate of the creditor. 
‘‘(e) ARBITRATION.— 
‘‘(1) IN GENERAL.—No residential mortgage loan and no 
extension of credit under an open end consumer credit plan 
secured by the principal dwelling of the consumer may include 
terms which require arbitration or any other nonjudicial proce-
dure as the method for resolving any controversy or settling 
any claims arising out of the transaction. 
‘‘(2) POST-CONTROVERSY
AGREEMENTS.—Subject to para-
graph (3), paragraph (1) shall not be construed as limiting 
the right of the consumer and the creditor or any assignee 
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 ACTION.—No provi-
sion of any residential mortgage loan or of any extension of 
credit under an open end consumer credit plan secured by 
the principal dwelling of the consumer, and no other agreement 
between the consumer and the creditor relating to the residen-
tial mortgage loan or extension of credit referred to in para-
graph (1), shall be applied or interpreted so as to bar a con-
sumer from bringing an action in an appropriate district court 
of the United States, or any other court of competent jurisdic-
tion, 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. 
‘‘(f) MORTGAGES WITH NEGATIVE AMORTIZATION.—No creditor 
may extend credit to a borrower in connection with a consumer 
credit transaction under an open or closed end consumer credit 
plan secured by a dwelling 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 extension 
of credit, result in negative amortization unless, before such trans-
action 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 amortization; 
‘‘(B) describes negative amortization in such manner 
as the Board shall prescribe; 
‘‘(C) negative amortization increases the outstanding 
principal balance of the account; and 
‘‘(D) negative amortization reduces the consumer’s 
equity in the dwelling or real property; and 
‘‘(2) in the case of a first-time borrower with respect to 
a residential mortgage loan that is not a qualified mortgage, 
the first-time borrower provides the creditor with sufficient
H. R. 4173—777 
documentation to demonstrate that the consumer received 
homeownership counseling from organizations or counselors 
certified by the Secretary of Housing and Urban Development 
as competent to provide such counseling.’’. 
(b) CONFORMING AMENDMENT RELATING TO ENFORCEMENT.— 
Section 108(a) of the Truth in Lending Act (15 U.S.C. 1607(a)) 
is amended by inserting after paragraph (6) the following new 
paragraph: 
‘‘(7) sections 21B and 21C of the Securities Exchange Act 
of 1934, in the case of a broker or dealer, other than a depository 
institution, by the Securities and Exchange Commission.’’. 
(c) PROTECTION AGAINST LOSS
OF ANTI-DEFICIENCY PROTEC-
TION.—Section 129C of the Truth in Lending Act is amended by 
inserting after subsection (f) (as added by subsection (a)) the fol-
lowing new subsection: 
‘‘(g) PROTECTION AGAINST LOSS OF ANTI-DEFICIENCY PROTEC-
TION.— 
‘‘(1) DEFINITION.—For purposes of this subsection, the term 
‘anti-deficiency law’ means the law of any State which provides 
that, in the event of foreclosure on the residential property 
of a consumer securing a mortgage, the consumer is not liable, 
in accordance with the terms and limitations of such State 
law, for any deficiency between the sale price obtained on 
such property through foreclosure and the outstanding balance 
of the mortgage. 
‘‘(2) NOTICE AT TIME OF CONSUMMATION.—In the case of 
any residential mortgage loan that is, or upon consummation 
will be, subject to protection under an anti-deficiency law, the 
creditor or mortgage originator shall provide a written notice 
to the consumer describing the protection provided by the anti- 
deficiency law and the significance for the consumer of the 
loss of such protection before such loan is consummated. 
‘‘(3) NOTICE BEFORE REFINANCING THAT WOULD CAUSE LOSS 
OF PROTECTION.—In the case of any residential mortgage loan 
that is subject to protection under an anti-deficiency law, if 
a creditor or mortgage originator provides an application to 
a consumer, or receives an application from a consumer, for 
any type of refinancing for such loan that would cause the 
loan to lose the protection of such anti-deficiency law, the 
creditor or mortgage originator shall provide a written notice 
to the consumer describing the protection provided by the anti- 
deficiency law and the significance for the consumer of the 
loss of such protection before any agreement for any such 
refinancing is consummated.’’. 
(d) POLICY REGARDING ACCEPTANCE OF PARTIAL PAYMENT.— 
Section 129C of the Truth in Lending Act is amended by inserting 
after subsection (g) (as added by subsection (c)) the following new 
subsection: 
‘‘(h) POLICY REGARDING ACCEPTANCE OF PARTIAL PAYMENT.— 
In the case of any residential mortgage loan, a creditor shall disclose 
prior to settlement or, in the case of a person becoming a creditor 
with respect to an existing residential mortgage loan, at the time 
such person becomes a creditor— 
‘‘(1) the creditor’s policy regarding the acceptance of partial 
payments; and
H. R. 4173—778 
‘‘(2) if partial payments are accepted, how such payments 
will be applied to such mortgage and if such payments will 
be placed in escrow. 
‘‘(i) TIMESHARE
PLANS.—This section and any regulations 
promulgated under this section do not apply to an extension of 
credit relating to a plan described in section 101(53D) of title 
11, United States Code.’’. 
SEC. 1415. RULE OF CONSTRUCTION. 
Except as otherwise expressly provided in section 129B or 129C 
of the Truth in Lending Act (as added by this title), no provision 
of such section 129B or 129C 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. 1416. AMENDMENTS TO CIVIL LIABILITY PROVISIONS. 
(a) INCREASE IN AMOUNT OF CIVIL MONEY PENALTIES FOR CER-
TAIN VIOLATIONS.—Section 130(a) of the Truth in Lending Act (15 
U.S.C. 1640(a)) is amended— 
(1) in paragraph (2)(A)(ii)— 
(A) by striking ‘‘$100’’ and inserting ‘‘$200’’; and 
(B) by striking ‘‘$1,000’’ and inserting ‘‘$2,000’’; 
(2) in paragraph (2)(B), by striking ‘‘$500,000’’ and inserting 
‘‘$1,000,000’’; and 
(3) in paragraph (4), by inserting ‘‘, paragraph (1) or (2) 
of section 129B(c), or section 129C(a)’’ after ‘‘section 129’’. 
(b) STATUTE OF LIMITATIONS EXTENDED FOR SECTION 129 VIOLA-
TIONS.—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 action’’ and 
inserting ‘‘Except as provided in the subsequent sentence, any 
action’’; and 
(2) by inserting after the first sentence the following new 
sentence: ‘‘Any action under this section with respect to any 
violation of section 129, 129B, or 129C may be brought in 
any United States district court, or in any other court of com-
petent jurisdiction, before the end of the 3-year period beginning 
on the date of the occurrence of the violation.’’. 
SEC. 1417. LENDER RIGHTS IN THE CONTEXT OF BORROWER DECEP-
TION. 
Section 130 of the Truth in Lending Act (15 U.S.C. 1640) 
is amended by adding after subsection (k) (as added by this title) 
the following new subsection: 
‘‘(l) EXEMPTION FROM LIABILITY AND RESCISSION IN CASE OF 
BORROWER FRAUD OR DECEPTION.—In addition to any other remedy 
available by law or contract, no creditor or assignee shall be liable 
to an obligor under this section, if such obligor, or co-obligor has 
been convicted of obtaining by actual fraud such residential mort-
gage loan.’’. 
SEC. 1418. SIX-MONTH NOTICE REQUIRED BEFORE RESET OF HYBRID 
ADJUSTABLE RATE MORTGAGES. 
(a) IN GENERAL.—Chapter 2 of the Truth in Lending Act (15 
U.S.C. 1631 et seq.) is amended by inserting after section 128 
the following new section: