1412 
minister or enforce laws related to the regulation of 
public accounting firms.’’. 
(b) AVAILABILITY TO SHARE INFORMATION.—Sec-
tion 105(b)(5) of the Sarbanes-Oxley Act of 2002 (15 
U.S.C. 7215(b)(5)) is amended by adding at the end the 
following: 
‘‘(C) AVAILABILITY
TO
FOREIGN
OVER-
SIGHT
AUTHORITIES.—When in the Board’s 
discretion it is necessary to accomplish the pur-
poses of this Act or to protect investors, and 
without the loss of its status as confidential and 
privileged in the hands of the Board, all infor-
mation referred to in subparagraph (A) that re-
lates to a public accounting firm within the in-
spection authority, or other regulatory or law 
enforcement jurisdiction, of a foreign auditor 
oversight authority may be made available to 
the foreign auditor oversight authority if the 
foreign auditor oversight authority provides 
such assurances of confidentiality as the Board 
determines appropriate.’’. 
(c) 
CONFORMING
AMENDMENT.—Section 
105(b)(5)(A) of the Sarbanes-Oxley Act of 2002 (15 
U.S.C. 7215(b)(5)(A)) is amended by striking ‘‘subpara-
graph (B)’’ and inserting ‘‘subparagraphs (B) and (C)’’.
1413 
SEC. 7603. EXPANSION OF AUDIT INFORMATION TO BE PRO-
DUCED AND EXCHANGED WITH FOREIGN 
COUNTERPARTS. 
Section 106 of the Sarbanes-Oxley Act of 2002 (15 
U.S.C. 7216) is amended— 
(1) by amending subsection (b) to read as fol-
lows: 
‘‘(b) PRODUCTION OF DOCUMENTS.— 
‘‘(1) PRODUCTION BY FOREIGN FIRMS.—If a 
foreign public accounting firm issues an audit re-
port, performs audit work, conducts interim reviews, 
or performs material services upon which a reg-
istered public accounting firm relies in the conduct 
of an audit or interim review, the foreign public ac-
counting firm shall produce its audit work papers 
and all other documents related to any such audit 
work or interim review to the Commission or the 
Board when requested by the Commission or the 
Board and the foreign public accounting firm shall 
be subject to the jurisdiction of the courts of the 
United States for purposes of enforcement of any re-
quest of such documents. 
‘‘(2) OTHER
PRODUCTION.—Any registered 
public accounting firm that relies, in whole or in 
part, on the work of a foreign public accounting firm
1414 
in issuing an audit report, performing audit work, or 
conducting an interim review, shall— 
‘‘(A) produce the foreign public accounting 
firm’s audit work papers and all other docu-
ments related to any such work in response to 
a request for production by the Commission or 
the Board; and 
‘‘(B) secure the agreement of any foreign 
public accounting firm to such production, as a 
condition of its reliance on the work of that for-
eign public accounting firm.’’; 
(2) by redesignating subsection (d) as sub-
section (g); and 
(3) by inserting after subsection (c) the fol-
lowing new subsections: 
‘‘(d) SERVICE OF REQUESTS OR PROCESS.—Any for-
eign public accounting firm that performs work for a do-
mestically registered public accounting firm shall furnish 
to the domestically firm a written irrevocable consent and 
power of attorney that designates the domestic firm as an 
agent upon whom may be served any process, pleadings, 
or other papers in any action brought to enforce this sec-
tion. Any foreign public accounting firm that issues an 
audit report, performs audit work, performs interim re-
views, or performs other material services upon which a
1415 
registered public accounting firm relies in the conduct of 
an audit or interim review, shall designate to the Commis-
sion or the Board an agent in the United States upon 
whom may be served any process, pleading, or other pa-
pers in any action brought to enforce this section or any 
request by the Commission or the Board under this sec-
tion. 
‘‘(e) SANCTIONS.—A willful refusal to comply, in 
whole in or in part, with any request by the Commission 
or the Board under this section, shall be a violation of 
this Act. 
‘‘(f) OTHER MEANS OF SATISFYING PRODUCTION 
OBLIGATIONS.—Notwithstanding any other provision of 
this section, the staff of the Commission or Board may 
allow foreign public accounting firms subject to this sec-
tion to meet production obligations under this section 
though alternate means, such as through foreign counter-
parts of the Commission or Board.’’. 
SEC. 7604. CONFORMING AMENDMENT RELATED TO REG-
ISTRATION. 
Section 102(b)(3)(A) of the Sarbanes-Oxley Act of 
2002 (15 U.S.C. 7212(b)(3)(A)) is amended by striking 
‘‘by the Board’’ and inserting ‘‘by the Commission or the 
Board’’.
1416 
SEC. 7605. FAIR FUND AMENDMENTS. 
Section 308 of the Sarbanes-Oxley Act of 2002 (15 
U.S.C. 7246(a)) is amended— 
(1) by amending subsection (a) to read as fol-
lows: 
‘‘(a) CIVIL PENALTIES TO BE USED FOR THE RE-
LIEF OF VICTIMS.—If in any judicial or administrative ac-
tion brought by the Commission under the securities laws 
(as such term is defined in section 3(a)(47) of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), the 
Commission obtains a civil penalty against any person for 
a violation of such laws or the rules and regulations there-
under, or such person agrees in settlement of any such 
action to such civil penalty, the amount of such civil pen-
alty or settlement shall, on the motion or at the direction 
of the Commission, be added to and become part of a 
disgorgement fund or other fund established for the ben-
efit of the victims of such violation.’’; 
(2) in subsection (b), by— 
(A) striking ‘‘for a disgorgement fund de-
scribed in subsection (a)’’ and inserting ‘‘for a 
disgorgement fund or other fund described in 
subsection (a)’’; and 
(B) striking ‘‘in the disgorgement fund’’ 
and inserting ‘‘in such fund’’; and 
(3) by striking subsection (e).
1417 
SEC. 7606. EXEMPTION FOR NONACCELERATED FILERS. 
(a) EXEMPTION.—Section 404 of the Sarbanes-Oxley 
Act of 2002 is amended by adding at the end the fol-
lowing: 
‘‘(c) EXEMPTION
FOR SMALLER ISSUERS.—Sub-
section (b) shall not apply with respect to any audit report 
prepared for an issuer that is not an accelerated filer with-
in the meaning Rule 12b–2 of the Commission (17 CFR 
240.12b–2).’’. 
(b) STUDY.—The Securities and Exchange Commis-
sion shall conduct a study to determine how the Commis-
sion could reduce the burden of complying with section 
404(b) of the Sarbanes-Oxley Act of 2002 for companies 
whose market capitalization is between $75,000,000 and 
$250,000,000 for the relevant reporting period while 
maintaining investor protections for such companies. The 
study shall also consider whether any such methods of re-
ducing the compliance burden or a complete exemption for 
such companies from compliance with such section would 
encourage companies to list on exchanges in the United 
States in their initial public offerings. Not later than 9 
months after the date of the enactment of this subtitle, 
the Commission shall transmit a report of such study to 
Congress.
1418 
SEC. 7607. WHISTLEBLOWER PROTECTION AGAINST RETAL-
IATION BY A SUBSIDIARY OF AN ISSUER. 
Section 1514A(a) of title 18, United States Code, is 
amended by inserting ‘‘including any subsidiary or affil-
iate whose financial information is included in the consoli-
dated financial statements of such company,’’ after ‘‘(15 
U.S.C. 78o(d)),’’. 
SEC. 7608. CONGRESSIONAL ACCESS TO INFORMATION. 
Section 101 of the Sarbanes-Oxley Act of 2002 is 
amended by adding at the end the following: 
‘‘(i) CONGRESSIONAL ACCESS TO INFORMATION.— 
Nothing in this section shall prevent the Board from re-
sponding to requests for reports from the Committee’s 
specified under subsection (h) about the activities or pro-
grams of the Board, provided that any confidential infor-
mation contained therein shall be subject to the provisions 
of section 105(b)(5).’’. 
SEC. 7609. CREATION OF OMBUDSMAN FOR THE PCAOB. 
(a) OMBUDSMAN.—Title I of the Sarbanes-Oxley Act 
of 2002 (15 U.S.C. 7211 et seq.), as amended by section 
7601(a)(1), is further amended by adding at the end the 
following new section: 
‘‘SEC. 111. OMBUDSMAN. 
‘‘(a) ESTABLISHMENT REQUIRED.—Not later than 
180 days after the date of enactment of the Investor Pro-
tection Act, the Board shall appoint an ombudsman for
1419 
the Board. The Ombudsman shall report directly to the 
Chairman. 
‘‘(b) DUTIES OF OMBUDSMAN.—The ombudsman ap-
pointed in accordance with subsection (a) for the Board 
shall— 
‘‘(1) act as a liaison between the Board and— 
‘‘(A) any registered public accounting firm 
or issuer with respect to issues or disputes con-
cerning the preparation or issuance of any audit 
report with respect to that issuer; and 
‘‘(B) any affected registered public ac-
counting firm or issuer with respect to— 
‘‘(i) any problem such firm or issuer 
may have in dealing with the Board result-
ing from the regulatory activities of the 
Board, particularly with regard to the im-
plementation of section 404; and 
‘‘(ii) issues caused by the relationships 
of registered public accounting firms and 
issuers generally; 
‘‘(2) assure that safeguards exist to encourage 
complainants to come forward and to preserve con-
fidentiality; and
1420 
‘‘(3) carry out such activities, and any other ac-
tivities assigned by the Board, in accordance with 
guidelines prescribed by the Board.’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions in section 1(b) of such Act is amended, by inserting 
after the item relating to section 110 (as added by section 
601(a)(2)) the following new item: 
‘‘Sec. 111. Ombudsman.’’. 
SEC. 7610. AUDITING OVERSIGHT BOARD. 
The Sarbanes-Oxley Act of 2002 is amended— 
(1) in section 2(a)(5), by striking ‘‘Public Com-
pany Accounting Oversight Board’’ and inserting 
‘‘Auditing Oversight Board’’; 
(2) in section 101(a), by striking ‘‘Public Com-
pany Accounting Oversight Board’’ and inserting 
‘‘Auditing Oversight Board’’; and 
(3) in the heading of title I, by striking ‘‘PUB-
LIC COMPANY ACCOUNTING OVER-
SIGHT BOARD’’ and inserting ‘‘AUDITING 
OVERSIGHT BOARD’’. 
PART 7—SENIOR INVESTMENT PROTECTION 
SEC. 7701. FINDINGS. 
Congress finds that— 
(1) many seniors are targeted by salespersons 
and advisers using misleading certifications and pro-
fessional designations;
1421 
(2) many certifications and professional des-
ignations used by salespersons and advisers rep-
resent limited training or expertise, and may in fact 
be of no value with respect to advising seniors on fi-
nancial and estate planning matters, and far too 
often, such designations are obtained simply by at-
tending a weekend seminar and passing an open 
book, multiple choice test; 
(3) many seniors have lost their life savings be-
cause salespersons and advisers holding a misleading 
designation have steered them toward products that 
were unsuitable for them, given their retirement 
needs and life expectancies; 
(4) seniors have a right to clearly know whether 
they are working with a qualified adviser who under-
stands the products and is working in their best in-
terest or a self-interested salesperson or adviser ad-
vocating particular products; and 
(5) many existing State laws and enforcement 
measures addressing the use of certifications, profes-
sional designations, and suitability standards in sell-
ing financial products to seniors are inadequate to 
protect senior investors from salespersons and advis-
ers using such designations.
1422 
SEC. 7702. DEFINITIONS. 
For purposes of this part: 
(1) MISLEADING
DESIGNATION.—The term 
‘‘misleading designation’’— 
(A) means the use of a purported certifi-
cation, professional designation, or other cre-
dential, that indicates or implies that a sales-
person or adviser has special certification or 
training in advising or servicing seniors; and 
(B) does not include any legitimate certifi-
cation, professional designation, license, or 
other credential, if— 
(i) it has been offered by an academic 
institution having regional accreditation; or 
(ii) it meets the standards for certifi-
cations, licenses, and professional designa-
tions outlined by the North American Se-
curities Administrators Association (in this 
part referred to as the ‘‘NASAA’’) Model 
Rule on the Use of Senior-Specific Certifi-
cations and Professional Designations, as 
in effect on the date of the enactment of 
this subtitle, or any successor thereto, or it 
was issued by or obtained from any State. 
(2) FINANCIAL PRODUCT.—The term ‘‘financial 
product’’ means securities, insurance products (in-
1423 
cluding insurance products which pay a return, 
whether fixed or variable), and bank and loan prod-
ucts. 
(3) 
MISLEADING
OR
FRAUDULENT
MAR-
KETING.—The term ‘‘misleading or fraudulent mar-
keting’’ means the use of a misleading designation 
when selling to or advising a senior about the sale 
of a financial product. 
(4) SENIOR.—The term ‘‘senior’’ means any in-
dividual who has attained the age of 62 years or 
more. 
(5) STATE.—The term ‘‘State’’ means each of 
the 50 States, the District of Columbia, and the un-
incorporated territories of Puerto Rico and the U.S. 
Virgin Islands. 
SEC. 7703. GRANTS TO STATES FOR ENHANCED PROTEC-
TION OF SENIORS FROM BEING MISLED BY 
FALSE DESIGNATIONS. 
(a) GRANT PROGRAM.—The Securities and Exchange 
Commission (in this part referred to as the ‘‘Commis-
sion’’)— 
(1) shall establish a program in accordance with 
this part to provide grants to States— 
(A) to investigate and prosecute misleading 
and fraudulent marketing practices; or
1424 
(B) to develop educational materials and 
training aimed at reducing misleading and 
fraudulent marketing of financial products to-
ward seniors; and 
(2) may establish such performance objectives, 
reporting requirements, and application procedures 
for States and State agencies receiving grants under 
this part as the Commission determines are nec-
essary to carry out and assess the effectiveness of 
the program under this part. 
(b) USE OF GRANT AMOUNTS.—A grant under this 
part may be used (including through subgrants) by the 
State or the appropriate State agency designated by the 
State— 
(1) to fund additional staff to identify, inves-
tigate, and prosecute (through civil, administrative, 
or criminal enforcement actions) cases involving mis-
leading or fraudulent marketing of financial prod-
ucts to seniors; 
(2) to fund technology, equipment, and training 
for regulators, prosecutors, and law enforcement in 
order to identify salespersons and advisers who tar-
get seniors through the use of misleading designa-
tions;
1425 
(3) to fund technology, equipment, and training 
for prosecutors to increase the successful prosecution 
of those targeting seniors with the use of misleading 
designations; 
(4) to provide educational materials and train-
ing to regulators on the appropriateness of the use 
of designations by salespersons and advisers of fi-
nancial products; 
(5) to provide educational materials and train-
ing to seniors to increase their awareness and under-
standing of designations; and 
(6) to develop comprehensive plans to combat 
misleading or fraudulent marketing of financial 
products to seniors. 
(c) GRANT REQUIREMENTS.— 
(1) MAXIMUM.—The amount of a grant under 
this part may not exceed $1,000,000 per fiscal year 
per State, if all requirements of paragraphs (2), (3), 
(4), and (5) are met. Such amount shall be limited 
to $250,000 per fiscal year per State in any case in 
which the State meets the requirements of— 
(A) paragraphs (2) and (3), but not each 
of paragraphs (4) and (5); or 
(B) paragraphs (4) and (5), but not each 
of paragraphs (2) and (3).
1426 
(2) STANDARD DESIGNATION RULES FOR SECU-
RITIES.—A State shall have adopted rules on the ap-
propriate use of designations in the offer or sale of 
securities or investment advice, which shall meet or 
exceed the minimum requirements of the NASAA 
Model Rule on the Use of Senior-Specific Certifi-
cations and Professional Designations, as in effect 
on the date of the enactment of this subtitle, or any 
successor thereto. 
(3) SUITABILITY RULES FOR SECURITIES.—A 
State shall have adopted standard rules on the suit-
ability requirements in the sale of securities, which 
shall, to the extent practicable, conform to the min-
imum requirements on suitability imposed by self- 
regulatory organization rules under the securities 
laws (as defined in section 3 of the Securities Ex-
change Act of 1934). 
(4) APPLICATION
OF
FIDUCIARY
DUTY
FOR 
PERSONALIZED INVESTMENT ADVICE ABOUT SECURI-
TIES.—Nothing in this section shall diminish in any 
manner nor supersede the standard of conduct appli-
cable to all brokers, dealers and investment advisers 
providing personalized investment advice about secu-
rities as set forth in section 7103 of this Act.
1427 
(5) STANDARD DESIGNATION RULES FOR IN-
SURANCE PRODUCTS.—A State shall have adopted 
standard rules on the appropriate use of designa-
tions in the sale of insurance products, which shall 
meet or exceed minimum requirements of the Na-
tional Association of Insurance Commissioners 
Model Regulation on the Use of Senior-Specific Cer-
tifications and Professional Designations in the Sale 
of Life Insurance and Annuities, as in effect on the 
date of the enactment of this subtitle, or any suc-
cessor thereto. 
(6) SUITABILITY AND SUPERVISION RULES FOR 
ANNUITY PRODUCTS.—A State shall have adopted 
rules that govern suitability requirements in the sale 
of annuities which shall meet or exceed the min-
imum requirements established by the National As-
sociation of Insurance Commissioners Suitability in 
Annuity Transactions Model Regulation in effect on 
the date of the enactment of this Act, or any suc-
cessor thereto. 
SEC. 7704. APPLICATIONS. 
To be eligible for a grant under this part, the State 
or appropriate State agency shall submit to the Commis-
sion a proposal to use the grant money to protect seniors 
from misleading or fraudulent marketing techniques in the
1428 
offer and sale of financial products, which application 
shall— 
(1) identify the scope of the problem; 
(2) describe how the proposed program will help 
to protect seniors from misleading or fraudulent 
marketing in the sale of financial products, includ-
ing, at a minimum— 
(A) by proactively identifying seniors who 
are victims of misleading and fraudulent mar-
keting in the offer and sale of financial prod-
ucts; 
(B) how the proposed program can assist 
in the investigation and prosecution of those 
using misleading or fraudulent marketing in the 
offer and sale of financial products to seniors; 
and 
(C) how the proposed program can help 
discourage and reduce future cases of mis-
leading or fraudulent marketing in the offer 
and sale of financial products to seniors; and 
(3) describe how the proposed program is to be 
integrated with other existing State efforts.
1429 
SEC. 7705. LENGTH OF PARTICIPATION. 
A State receiving a grant under this part shall be 
provided assistance funds for a period of 3 years, after 
which the State may reapply for additional funding. 
SEC. 7706. AUTHORIZATION OF APPROPRIATIONS. 
There are authorized to be appropriated to carry out 
this part, $16,000,000 for each of the fiscal years 2011 
through 2015. 
PART 8—REGISTRATION OF MUNICIPAL 
FINANCIAL ADVISORS 
SEC. 7801. MUNICIPAL FINANCIAL ADVISER REGISTRATION 
REQUIREMENT. 
(a) IN GENERAL.—The Securities Exchange Act of 
1934 (as amended by section 3204) is amended by insert-
ing after section 15F (15 U.S.C. 78o–7) the following new 
section: 
‘‘SEC. 15G. MUNICIPAL FINANCIAL ADVISER REGISTRATION 
REQUIREMENT. 
‘‘(a)(1)(A) It shall be unlawful for any person to 
make use of the mails or any means or instrumentality 
of interstate commerce to act as a municipal financial ad-
viser unless such person is registered as a municipal finan-
cial adviser in accordance with subsection (b). 
‘‘(B) Subparagraph (A) shall not apply to a natural 
person associated with a municipal financial adviser, as
1430 
long as such adviser is registered in accordance with sub-
section (b) and is not a natural person. 
‘‘(2) The Commission, by rule or order, as it deems 
consistent with the public interest and the protection of 
investors, may conditionally or unconditionally exempt 
from paragraph (1) of this section any municipal financial 
adviser or class of municipal financial advisers specified 
in such rule or order. 
‘‘(b)(1) A municipal financial adviser may be reg-
istered by filing with the Commission an application for 
registration in such form and containing such information 
and documents concerning such municipal financial ad-
viser and any persons associated with such municipal fi-
nancial adviser as the Commission, by rule, may prescribe 
as necessary or appropriate in the public interest or for 
the protection of investors. Within 45 days of the date of 
the filing of such application (or within such longer period 
as to which the applicant consents), the Commission 
shall— 
‘‘(A) by order grant registration; or 
‘‘(B) institute proceedings to determine whether reg-
istration should be denied. Such proceedings shall include 
notice of the grounds for denial under consideration and 
opportunity for hearing and shall be concluded within 120 
days of the date of the filing of the application for reg-
1432 
the protection of investors. The grant or denial of registra-
tion to such an applicant shall be in accordance with the 
procedures set forth in paragraph (1) of this subsection. 
If the Commission grants such registration, the registra-
tion shall terminate on the 45th day after the effective 
date thereof, unless prior thereto the successor shall, in 
accordance with such rules and regulations as the Com-
mission may prescribe, adopt the application for registra-
tion as its own. 
‘‘(3) Any provision of this title (other than section 
5 and subsection (a) of this section) which prohibits any 
act, practice, or course of business if the mails or any 
means or instrumentality of interstate commerce is used 
in connection therewith shall also prohibit any such act, 
practice, or course of business by any registered municipal 
financial adviser or any person acting on behalf of such 
a municipal financial adviser, irrespective of any use of 
the mails or any means or instrumentality of interstate 
commerce in connection therewith. 
‘‘(4) The Commission, by order, shall censure, place 
limitations on the activities, functions, or operations of, 
suspend for a period not exceeding 12 months, or revoke 
the registration of any municipal financial adviser if it 
finds, on the record after notice and opportunity for hear-
ing, that such censure, placing of limitations, suspension,
1433 
or revocation is in the public interest and that such munic-
ipal financial adviser, whether prior or subsequent to be-
coming such, or any person associated with such municipal 
financial adviser, whether prior or subsequent to becoming 
so associated— 
‘‘(A) has willfully made or caused to be made 
in any application for registration or report required 
to be filed with the Commission or with any other 
appropriate regulatory agency under this title, or in 
any proceeding before the Commission with respect 
to registration, any statement which was at the time 
and in the light of the circumstances under which it 
was made false or misleading with respect to any 
material fact, or has omitted to state in any such 
application or report any material fact which is re-
quired to be stated therein; 
‘‘(B) has been convicted within 10 years pre-
ceding the filing of any application for registration 
or at any time thereafter of any felony or mis-
demeanor or of a substantially equivalent crime by 
a foreign court of competent jurisdiction which the 
Commission finds— 
‘‘(i) involves the purchase or sale of any 
security, the taking of a false oath, the making 
of a false report, bribery, perjury, burglary, any
1434 
substantially equivalent activity however de-
nominated by the laws of the relevant foreign 
government, or conspiracy to commit any such 
offense; 
‘‘(ii) arises out of the conduct of the busi-
ness of a municipal financial adviser, broker, 
dealer, municipal securities dealer, government 
securities broker, government securities dealer, 
investment adviser, bank, insurance company, 
fiduciary, transfer agent, nationally recognized 
statistical rating organization, foreign person 
performing a function substantially equivalent 
to any of the above, or entity or person required 
to be registered under the Commodity Ex-
change Act (7 U.S.C. 1 et seq.) or any substan-
tially equivalent foreign statute or regulation; 
‘‘(iii) involves the larceny, theft, robbery, 
extortion, forgery, counterfeiting, fraudulent 
concealment, embezzlement, fraudulent conver-
sion, or misappropriation of funds, or securities, 
or substantially equivalent activity however de-
nominated by the laws of the relevant foreign 
government; or 
‘‘(iv) involves the violation of section 152, 
1341, 1342, or 1343 or chapter 25 or 47 of
1435 
title 18, United States Code, or a violation of 
a substantially equivalent foreign statute; 
‘‘(C) is permanently or temporarily enjoined by 
order, judgment, or decree of any court of competent 
jurisdiction from acting as a municipal financial ad-
viser, investment adviser, underwriter, broker, deal-
er, municipal securities dealer, government securities 
broker, government securities dealer, transfer agent, 
nationally recognized statistical rating organization, 
foreign person performing a function substantially 
equivalent to any of the above, or entity or person 
required to be registered under the Commodity Ex-
change Act or any substantially equivalent foreign 
statute or regulation, or as an affiliated person or 
employee of any investment company, bank, insur-
ance company, foreign entity substantially equivalent 
to any of the above, or entity or person required to 
be registered under the Commodity Exchange Act or 
any substantially equivalent foreign statute or regu-
lation or from engaging in or continuing any con-
duct or practice in connection with any such activity, 
or in connection with the purchase or sale of any se-
curity; 
‘‘(D) has willfully violated any provision of the 
Securities Act of 1933, the Investment Advisers Act
1436 
of 1940, the Investment Company Act of 1940, the 
Commodity Exchange Act, this title, the rules or 
regulations under any of such statutes, or the rules 
of the Municipal Securities Rulemaking Board, or is 
unable to comply with any such provision; 
‘‘(E) has willfully aided, abetted, counseled, 
commanded, induced, or procured the violation by 
any other person of any provision of the Securities 
Act of 1933, the Investment Advisers Act of 1940, 
the Investment Company Act of 1940, the Com-
modity Exchange Act, this title, the rules or regula-
tions under any of such statutes, or the rules of the 
Municipal Securities Rulemaking Board, or has 
failed reasonably to supervise, with a view to pre-
venting violations of the provisions of such statutes, 
rules, and regulations, another person who commits 
such a violation, if such other person is subject to 
his supervision. For the purposes of this subpara-
graph, no person shall be deemed to have failed rea-
sonably to supervise any other person, if— 
‘‘(i) there have been established proce-
dures, and a system for applying such proce-
dures, which would reasonably be expected to 
prevent and detect, insofar as practicable, any 
such violation by such other person; and
1437 
‘‘(ii) such person has reasonably dis-
charged the duties and obligations incumbent 
upon him by reason of such procedures and sys-
tem without reasonable cause to believe that 
such procedures and system were not being 
complied with; 
‘‘(F) is subject to any order of the Commission 
barring or suspending the right of the person to be 
associated with a municipal financial adviser; 
‘‘(G) has been found by a foreign financial reg-
ulatory authority to have— 
‘‘(i) made or caused to be made in any ap-
plication for registration or report required to 
be filed with a foreign financial regulatory au-
thority, or in any proceeding before a foreign fi-
nancial regulatory authority with respect to reg-
istration, any statement that was at the time 
and in the light of the circumstances under 
which it was made false or misleading with re-
spect to any material fact, or has omitted to 
state in any application or report to the foreign 
financial regulatory authority any material fact 
that is required to be stated therein; 
‘‘(ii) violated any foreign statute or regula-
tion regarding transactions in securities, or con-
1438 
tracts of sale of a commodity for future deliv-
ery, traded on or subject to the rules of a con-
tract market or any board of trade; or 
‘‘(iii) aided, abetted, counseled, com-
manded, induced, or procured the violation by 
any person of any provision of any statutory 
provisions enacted by a foreign government, or 
rules or regulations thereunder, empowering a 
foreign financial regulatory authority regarding 
transactions in securities, or contracts of sale of 
a commodity for future delivery, traded on or 
subject to the rules of a contract market or any 
board of trade, or has been found, by a foreign 
financial regulatory authority, to have failed 
reasonably to supervise, with a view to pre-
venting violations of such statutory provisions, 
rules, and regulations, another person who com-
mits such a violation, if such other person is 
subject to his supervision; or 
‘‘(H) is subject to any final order of a State se-
curities commission (or any agency or officer per-
forming like functions), State authority that super-
vises or examines banks, savings associations, or 
credit unions, State insurance commission (or any 
agency or office performing like functions), an ap-
1439 
propriate Federal banking agency (as defined in sec-
tion 3 of the Federal Deposit Insurance Act (12 
U.S.C. 1813(q))), or the National Credit Union Ad-
ministration, that— 
‘‘(i) bars such person from association with 
an entity regulated by such commission, author-
ity, agency, or officer, or from engaging in the 
business of securities, insurance, banking, sav-
ings association activities, or credit union activi-
ties; or 
‘‘(ii) constitutes a final order based on vio-
lations of any laws or regulations that prohibit 
fraudulent, manipulative, or deceptive conduct. 
‘‘(5) Pending final determination whether any reg-
istration under this subsection shall be revoked, the Com-
mission, by order, may suspend such registration, if such 
suspension appears to the Commission, after notice and 
opportunity for hearing, to be necessary or appropriate in 
the public interest or for the protection of investors. Any 
registered municipal financial adviser may, upon such 
terms and conditions as the Commission deems necessary 
or appropriate in the public interest or for the protection 
of investors, withdraw from registration by filing a written 
notice of withdrawal with the Commission. If the Commis-
sion finds that any registered municipal financial adviser
1440 
is no longer in existence or has ceased to do business as 
a municipal financial adviser, the Commission, by order, 
shall cancel the registration of such municipal financial 
adviser. 
‘‘(6)(A) With respect to any person who is associated, 
who is seeking to become associated, or, at the time of 
the alleged misconduct, who was associated or was seeking 
to become associated with a municipal financial adviser, 
the Commission, by order, shall censure, place limitations 
on the activities or functions of such person, or suspend 
for a period not exceeding 12 months, or bar such person 
from being associated with a broker, dealer, investment 
adviser, municipal securities dealer, transfer agent, na-
tionally recognized statistical rating organization, or mu-
nicipal financial adviser, if the Commission finds, on the 
record after notice and opportunity for a hearing, that 
such censure, placing of limitations, suspension, or bar is 
in the public interest and that such person— 
‘‘(i) has committed or omitted any act, or is 
subject to an order or finding, enumerated in sub-
paragraph (A), (D), (E), (G), or (H) of paragraph 
(4) of this subsection; 
‘‘(ii) has been convicted of any offense specified 
in subparagraph (B) of such paragraph (4) within
1441 
10 years of the commencement of the proceedings 
under this paragraph; or 
‘‘(iii) is enjoined from any action, conduct, or 
practice specified in subparagraph (C) of such para-
graph (4). 
‘‘(B) It shall be unlawful— 
‘‘(i) for any person as to whom an order under 
subparagraph (A) is in effect, without the consent of 
the Commission, willfully to become, or to be, associ-
ated with a municipal financial adviser in contraven-
tion of such order; or 
‘‘(ii) for any municipal financial adviser to per-
mit such a person, without the consent of the Com-
mission, to become or remain, a person associated 
with the municipal financial adviser in contravention 
of such order, if such municipal financial adviser 
knew, or in the exercise of reasonable care should 
have known, of such order. 
‘‘(7) No registered municipal financial adviser shall 
act as such unless it meets such standards of operational 
capability and such municipal financial adviser and all 
natural persons associated with such municipal financial 
adviser meet such standards of training, experience, com-
petence, and such other qualifications as the Commission 
finds necessary or appropriate in the public interest or for
1442 
the protection of investors. The Commission shall establish 
such standards by rules and regulations, which may— 
‘‘(A) specify that all or any portion of such 
standards shall be applicable to any class of munic-
ipal financial advisers and persons associated with 
municipal financial advisers; 
‘‘(B) require persons in any such class to pass 
tests prescribed in accordance with such rules and 
regulations, which tests shall, with respect to any 
class of partners, officers, or supervisory employees 
(which latter term may be defined by the Commis-
sion’s rules and regulations) engaged in the manage-
ment of the municipal financial adviser, include 
questions relating to bookkeeping, accounting, super-
vision of employees, maintenance of records, and 
other appropriate matters; and 
‘‘(C) provide that persons in any such class 
other than municipal financial advisers and partners, 
officers, and supervisory employees of municipal fi-
nancial advisers, may be qualified solely on the basis 
of compliance with such standards of training and 
such other qualifications as the Commission finds 
appropriate. 
The Commission, by rule, may prescribe reasonable fees 
and charges to defray its costs in carrying out this para-
1443 
graph, including, but not limited to, fees for any test ad-
ministered by it or under its direction. 
‘‘(c)(1)(A) No municipal financial adviser shall make 
use of the mails or any means or instrumentality of inter-
state commerce in connection with which such municipal 
financial adviser engages in any fraudulent, deceptive, or 
manipulative act or practice or violates such rules and reg-
ulations regarding conflicts of interest or fair practices, 
including but not limited to rules and regulations related 
to political contributions, as the Commission shall pre-
scribe in the public interest or for the protection of inves-
tors or to maintain fair and orderly markets. 
‘‘(B) The Commission shall, for the purposes of this 
paragraph as the Commission finds necessary or appro-
priate in the public interest or for the protection of inves-
tors, by rules and regulations define, and prescribe means 
reasonably designed to prevent, such acts and practices 
as are fraudulent, deceptive, or manipulative. 
‘‘(2) If the Commission finds, after notice and oppor-
tunity for a hearing, that any person subject to the provi-
sions of this section or any rule or regulation thereunder 
has failed to comply with any such provision, rule, or regu-
lation in any material respect, the Commission may pub-
lish its findings and issue an order requiring such person, 
and any person who was a cause of the failure to comply
1444 
due to an act or omission the person knew or should have 
known would contribute to the failure to comply, to com-
ply, or to take steps to effect compliance, with such provi-
sion or such rule or regulation thereunder upon such 
terms and conditions and within such time as the Commis-
sion may specify in such order. 
‘‘(d) Every registered municipal financial adviser 
shall establish, maintain, and enforce written policies and 
procedures reasonably designed, taking into consideration 
the nature of such municipal financial adviser’s business, 
to prevent the misuse in violation of this title, or the rules 
or regulations thereunder, of material, nonpublic informa-
tion by such municipal financial adviser or any person as-
sociated with such municipal financial adviser. The Com-
mission, as it deems necessary or appropriate in the public 
interest or for the protection of investors, shall adopt rules 
or regulations to require specific policies or procedures 
reasonably designed to prevent misuse in violation of this 
title (or the rules or regulations thereunder) of material, 
nonpublic information. 
‘‘(e) A municipal financial adviser and any person as-
sociated with such municipal financial adviser shall be 
deemed to have a fiduciary duty to any municipal securi-
ties issuer for whom such municipal financial adviser acts 
as a municipal financial adviser. A municipal financial ad-
1445 
viser may not engage in any act, practice, or course of 
business which is not consistent with a municipal financial 
adviser’s fiduciary duty. The Commission shall, for the 
purposes of this paragraph, by rules and regulations de-
fine, and prescribe means reasonably designed to prevent, 
such acts, practices, and courses of business as are not 
consistent with a municipal financial adviser’s fiduciary 
duty to its clients.’’. 
(b) DEFINITION.—Section 3(a) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78c(a)) (as amended by 
section 3201(6)) is amended by adding at the end the fol-
lowing new paragraphs: 
‘‘(78) MUNICIPAL FINANCIAL ADVISER.— 
‘‘(A) The term ‘municipal financial adviser’ 
means a person who, for compensation, engages 
in the business of— 
‘‘(i) providing advice to a municipal 
securities issuer with respect to— 
‘‘(I) the issuance or proposed 
issuance of securities, including any 
remarketing of municipal securities 
directly or indirectly by or on behalf 
of a municipal securities issuer;
1446 
‘‘(II) the investment of proceeds 
from securities issued by such munic-
ipal securities issuer; 
‘‘(III) the hedging of any risks 
associated with subclause (I) or (II), 
including advice as to swap agree-
ments (as defined in section 206A of 
the Gramm-Leach-Bliley Act regard-
less of whether the counterparties 
constitute eligible contract partici-
pants); or 
‘‘(IV) preparation of disclosure 
documents in connection with the 
issuance, proposed issuance, or pre-
vious issuance of securities issued by 
a municipal securities issuer, includ-
ing, without limitation, official state-
ments and documents prepared in 
connection with a written agreement 
or contract for the benefit of holders 
of such securities described in section 
240.15c2–12 of title 17, Code of Fed-
eral Regulations; 
‘‘(ii) assisting a municipal securities 
issuer in selecting or negotiating guaran-
1447 
teed investment contracts or other invest-
ment products; or 
‘‘(iii) assisting any municipal securi-
ties issuer in the primary offering of secu-
rities not involving a public offering. 
‘‘(B) Such term does not include— 
‘‘(i) an attorney, if the attorney is of-
fering advice or providing services that are 
of a traditional legal nature; 
‘‘(ii) a nationally recognized statistical 
rating organization to the extent it is in-
volved in the process of developing credit 
ratings; 
‘‘(iii) a registered broker-dealer when 
acting as an underwriter, as such term is 
defined in section 2(a)(11) of the Securi-
ties Act of 1933 (15 U.S.C. 77b(a)(11)); 
‘‘(iv) a State or any political subdivi-
sion thereof; or 
‘‘(v) the independent accountant that 
audits the financial statements of the mu-
nicipal securities issuer. 
‘‘(79) MUNICIPAL
SECURITIES
ISSUER.—The 
term ‘municipal securities issuer’ means—
1448 
‘‘(A) any entity that has the ability to 
issue a security the interest on which is exclud-
able from gross income under section 103 of the 
Internal Revenue Code of 1986 and the regula-
tions thereunder; or 
‘‘(B) any person who receives the proceeds 
generated from the issuance of municipal secu-
rities. 
‘‘(80) PERSON ASSOCIATED WITH A MUNICIPAL 
FINANCIAL ADVISER; ASSOCIATED PERSON OF A MU-
NICIPAL FINANCIAL ADVISER.—The term ‘person as-
sociated with a municipal financial adviser’ or ‘asso-
ciated person of a municipal financial adviser’ means 
any partner, officer, director, or branch manager of 
such municipal financial adviser (or any person oc-
cupying a similar status or performing similar func-
tions), any person directly or indirectly controlling, 
controlled by, or under common control with such 
municipal financial adviser, or any employee of such 
municipal financial adviser, except that any person 
associated with a municipal financial adviser whose 
functions are solely clerical or ministerial shall not 
be included in the meaning of such term for pur-
poses of section 15G(b) (other than paragraph (6) 
thereof).’’.
1449 
SEC. 7802. CONFORMING AMENDMENTS. 
(a) SECURITIES EXCHANGE ACT OF 1934 .—The Se-
curities Exchange Act of 1934 is amended— 
(1) in section 15(b)(4)(B)(ii) (15 U.S.C. 
78o(b)(4)(B)(ii)), by inserting ‘‘municipal finance 
adviser,’’ after ‘‘nationally recognized statistical rat-
ing organization,’’; 
(2) 
in 
section 
15(b)(4)(C) 
(15 
U.S.C. 
78o(b)(4)(C)), by inserting ‘‘municipal finance ad-
viser,’’ after ‘‘nationally recognized statistical rating 
organization,’’; and 
(3) in section 17(a)(1) (15 U.S.C. 78q(a)(1)), 
by inserting ‘‘registered municipal financial adviser,’’ 
after ‘‘nationally recognized statistical rating organi-
zation,’’. 
(b) INVESTMENT COMPANY ACT OF 1940.—The In-
vestment Company Act of 1940 is amended— 
(1) in section 2(a) (15 U.S.C. 80a–2(a)), by in-
serting at the end the following new paragraph: 
‘‘(54) The term ‘municipal finance adviser’ has 
the same meaning as in section 3 of the Securities 
Exchange Act of 1934.’’; 
(2) in section 9(a)(1) (15 U.S.C. 80a–9(a)(1)), 
by inserting ‘‘municipal finance adviser,’’ after 
‘‘credit rating agency,’’; and
1450 
(3) in section 9(a)(2) (15 U.S.C. 80a–9(a)(2)), 
by inserting ‘‘municipal finance adviser,’’ after 
‘‘credit rating agency,’’. 
(c) INVESTMENT ADVISERS ACT OF 1940.—The In-
vestment Advisers Act of 1940 is amended— 
(1) in section 202(a) (15 U.S.C. 80b–2(a)), by 
inserting at the end the following new paragraph: 
‘‘(31) The term ‘municipal finance adviser’ has 
the same meaning as in section 3 of the Securities 
Exchange Act of 1934.’’; 
(2) in section 203(e)(2)(B) (15 U.S.C. 80b– 
3(e)(2)(B)), by inserting ‘‘municipal finance ad-
viser,’’ after ‘‘credit rating agency,’’; and 
(3) in section 203(e)(4) (15 U.S.C. 80b– 
3(e)(4)) is amended by inserting ‘‘municipal finance 
adviser,’’ after ‘‘credit rating agency,’’. 
SEC. 7803. EFFECTIVE DATES. 
(a) IN GENERAL.—The amendments made by this 
part shall take effect 30 days after the date of the enact-
ment of this subtitle. 
(b) EFFECTIVE DATE
AND REQUIREMENTS
FOR 
REGULATIONS.—Notwithstanding subsection (a), the Se-
curities and Exchange Commission shall, within 120 days 
after the date of the enactment of this subtitle, publish 
for notice and public comment such regulations as are ini-
1451 
tially required to implement this part, and shall take final 
action with respect to such regulations not later than 270 
days after the date of enactment of this subtitle. 
(c) REGISTRATION DATE.—No person may continue 
to act as a municipal financial adviser, as such term is 
defined in section 3(a)(65) of the Securities Exchange Act 
of 1934 (as added by this part), after 30 days after the 
date the regulations described in subsection (b) become 
effective unless such person has been registered as re-
quired by the amendment made by section 7701 of this 
part. 
TITLE VI—FEDERAL INSURANCE 
OFFICE 
SEC. 8001. SHORT TITLE. 
This title may be cited as the ‘‘Federal Insurance Of-
fice Act of 2009’’. 
SEC. 8002. FEDERAL INSURANCE OFFICE ESTABLISHED. 
(a) ESTABLISHMENT OF OFFICE.—Subchapter I of 
chapter 3 of title 31, United States Code, is amended— 
(1) by transferring and inserting section 312 
after section 313; 
(2) by redesignating sections 313 and 312 (as 
so transferred) as sections 312 and 315, respec-
tively; and
1452 
(3) by inserting after section 312 (as so redes-
ignated) the following new sections: 
‘‘SEC. 313. FEDERAL INSURANCE OFFICE. 
‘‘(a) ESTABLISHMENT OF OFFICE.—There is estab-
lished the Federal Insurance Office as an office in the De-
partment of the Treasury. 
‘‘(b) LEADERSHIP.—The Office shall be headed by a 
Director, who shall be appointed by the Secretary of the 
Treasury. The position of such Director shall be a career 
reserved position in the Senior Executive Service. 
‘‘(c) FUNCTIONS.— 
‘‘(1) AUTHORITY PURSUANT TO DIRECTION OF 
SECRETARY.—The Office shall have the authority, 
pursuant to the direction of the Secretary, as fol-
lows: 
‘‘(A) To monitor the insurance industry to 
gain expertise. 
‘‘(B) To identify issues or gaps in the reg-
ulation of insurers that could contribute to a 
systemic crisis in the insurance industry or the 
United States financial system. 
‘‘(C) To monitor the extent to which tradi-
tionally underserved communities and con-
sumers, minorities (as such term is defined in 
24 section 1204(c) of the Financial Institutions
1453 
Reform, Recovery, and Enforcement Act of 
1989 (12 U.S.C. 1811 note)), and low- and 
moderate-income persons have access to afford-
able insurance products regarding all lines of 
insurance, except health insurance. 
‘‘(D) To recommend to the Financial Serv-
ices Oversight Council that it designate an in-
surer, including its affiliates, as an entity sub-
ject to stricter standards. 
‘‘(E) To assist the Secretary in admin-
istering the Terrorism Insurance Program es-
tablished in the Department of the Treasury 
under the Terrorism Risk Insurance Act of 
2002 (15 U.S.C. 6701 note). 
‘‘(F) To coordinate Federal efforts and de-
velop Federal policy on prudential aspects of 
international insurance matters, including rep-
resenting the United States as appropriate in 
the International Association of Insurance Su-
pervisors or any successor organization and as-
sisting the Secretary in negotiating covered 
agreements. 
‘‘(G) To determine, in accordance with 
subsection (f), whether State insurance meas-
ures are preempted by covered agreements.
1454 
‘‘(H) To consult with the States regarding 
insurance matters of national importance and 
prudential insurance matters of international 
importance. 
‘‘(I) To perform such other related duties 
and authorities as may be assigned to it by the 
Secretary. 
‘‘(2) ADVISORY FUNCTIONS.—The Office shall 
advise the Secretary on major domestic and pruden-
tial international insurance policy issues. 
‘‘(3) ADVISORY
CAPACITY
ON
COUNCIL.—The 
Director shall serve in an advisory capacity on the 
Financial Services Oversight Council established 
under the Financial Stability Improvement Act of 
2009. 
‘‘(d) SCOPE.—The authority of the Office shall ex-
tend to all lines of insurance except health insurance, as 
determined by the Secretary in coordination with the Sec-
retary of the Department of Health and Human Services 
based on section 2791 of the Public Health Service Act 
(42 U.S.C. 300gg–91). 
‘‘(e) GATHERING OF INFORMATION.— 
‘‘(1) GENERAL.—In carrying out its functions 
under subsection (c), the Office may request, receive, 
and collect data, including financial data, and infor-
1455 
mation on and from the insurance industry and in-
surers, enter into information-sharing agreements, 
analyze and disseminate data and information, and 
issue reports regarding all lines of insurance except 
health insurance. 
‘‘(2) COLLECTION OF INFORMATION FROM IN-
SURERS AND AFFILIATES.—Except as provided in 
paragraph (3) and subject to paragraph (4), the Of-
fice may require an insurer, or affiliate of an in-
surer, to submit such data or information that the 
Office may reasonably require in carrying out its 
functions under subsection (c). Notwithstanding sub-
section (p) and for the purposes of this paragraph 
only, the term ‘insurer’ means any entity that writes 
insurance or reinsures risks and issues contracts or 
policies in one or more States. 
‘‘(3) EXCEPTION FOR SMALL INSURERS.—Para-
graph (2) shall not apply with respect to any insurer 
or affiliate thereof that meets a minimum size 
threshold that may be established by the Office by 
order or rule. Such threshold shall be appropriate to 
the particular request and need for the data or in-
formation. 
‘‘(4) ADVANCE
COORDINATION.—Before col-
lecting any data or information under paragraph (2)
1456 
from an insurer, or affiliate of an insurer, the Office 
shall coordinate with each relevant Federal agency 
and State insurance regulator (or other relevant 
Federal or State regulatory agency, if any, in the 
case of an affiliate of an insurer) and any publicly 
available sources to determine if the information to 
be collected is available from, or may be obtained in 
a timely manner by, such Federal agency or State 
insurance regulator, individually or collectively, other 
regulatory agency, or publicly available sources. If 
the Director determines that such data or informa-
tion is available, or may be obtained in a timely 
manner, from such an agency, regulator, regulatory 
agency, or source, the Director shall obtain the data 
or information from such agency, regulator, regu-
latory agency, or source. If the Director determines 
that such data or information is not so available, the 
Director may collect such data or information from 
an insurer (or affiliate) only if the Director complies 
with the requirements of subchapter I of chapter 35 
of title 44, United States Code (relating to Federal 
information policy; commonly known as the Paper-
work Reduction Act) in collecting such data or infor-
mation. Notwithstanding any other provision of law, 
each such relevant Federal agency and State insur-
1457 
ance regulator or other Federal or State regulatory 
agency is authorized to provide to the Office such 
data or information. 
‘‘(5) CONFIDENTIALITY.— 
‘‘(A) The submission of any non-publicly 
available data and information to the Office 
under this subsection shall not constitute a 
waiver of, or otherwise affect, any privilege aris-
ing under Federal or State law (including the 
rules of any Federal or State Court) to which 
the data or information is otherwise subject. 
‘‘(B) Any requirement under Federal or 
State law to the extent otherwise applicable, or 
any requirement pursuant to a written agree-
ment in effect between the original source of 
any non-publicly available data or information 
and the source of such data or information to 
the Office, regarding the privacy or confiden-
tiality of any data or information in the posses-
sion of the source to the Office, shall continue 
to apply to such data or information after the 
data or information has been provided pursuant 
to this subsection to the Office. 
‘‘(C) Any data or information obtained by 
the Office may be made available to State in-
1458 
surance regulators individually or collectively 
through an information sharing agreement that 
shall comply with applicable Federal law and 
that shall not constitute a waiver of, or other-
wise affect, any privilege under Federal or 
State law (including the rules of any Federal or 
State Court) to which the data or information 
is otherwise subject. 
‘‘(D) Section 552 of title 5, United States 
Code, shall apply to any data or information 
submitted by an insurer or affiliate of an in-
surer. 
‘‘(f) PREEMPTION
OF STATE INSURANCE MEAS-
URES.— 
‘‘(1) STANDARD.—A State insurance measure 
shall be preempted pursuant to this section or sec-
tion 314 if, and only to the extent that the Director 
determines, in accordance with this subsection, that 
the measure— 
‘‘(A) directly results in less favorable treat-
ment of a non-United States insurer domiciled 
in a foreign jurisdiction that is subject to a cov-
ered agreement than a United States insurer 
domiciled, licensed, admitted, or otherwise au-
thorized in that State; and
1459 
‘‘(B) is inconsistent with a covered agree-
ment that is entered into on a date after the 
date of the enactment of this Act. 
‘‘(2) DETERMINATION.— 
‘‘(A) NOTICE
OF
POTENTIAL
INCONSIST-
ENCY.—Before making any determination of in-
consistency, the Director shall— 
‘‘(i) notify and consult with the appro-
priate State regarding any potential incon-
sistency or preemption; 
‘‘(ii) notify and consult with the 
United States Trade Representative re-
garding any potential inconsistency or pre-
emption; 
‘‘(iii) cause to be published in the 
Federal Register notice of the issue re-
garding the potential inconsistency or pre-
emption, including a description of each 
State insurance measure at issue and any 
applicable covered agreement; 
‘‘(iv) provide interested parties a rea-
sonable opportunity to submit written com-
ments to the Office; 
‘‘(v) consider the effect of preemption 
on—
1460 
‘‘(I) the protection of policy-
holders and policy claimants; 
‘‘(II) the maintenance of the 
safety, soundness, integrity, and fi-
nancial responsibility of any entity in-
volved in the business of insurance or 
insurance operations; 
‘‘(III) ensuring the integrity and 
stability of the United States financial 
system; and 
‘‘(IV) the creation of a gap or 
void in financial or market conduct 
regulation of any entity involved in 
the business of insurance or insurance 
operations in the United States; and 
‘‘(vi) consider any comments received. 
The Director shall provide the notifications re-
quired under clauses (i), (ii), and (iii) contem-
poraneously. 
‘‘(B) SCOPE OF REVIEW.—For purposes of 
this section, the Director’s determination of 
State insurance measures shall be limited to the 
subject matter of the prudential measures ap-
plicable to the business of insurance contained 
within the covered agreement involved.
1461 
‘‘(C) NOTICE OF DETERMINATION OF IN-
CONSISTENCY.—Upon making any determina-
tion of inconsistency, the Director shall— 
‘‘(i) notify the appropriate State of 
the determination and the extent of the in-
consistency; 
‘‘(ii) establish a reasonable period of 
time, which shall not be shorter than 90 
days, before the determination shall be-
come effective; and 
‘‘(iii) notify the Committee on Finan-
cial Services of the House of Representa-
tives and the Committee on Banking, 
Housing, and Urban Affairs of the Senate 
of the inconsistency. 
‘‘(3) NOTICE OF EFFECTIVENESS.—Upon the 
conclusion of the period referred to in paragraph 
(2)(C)(ii), if the basis for the determination of in-
consistency still exists, the determination shall be-
come effective and the Director shall— 
‘‘(A) cause to be published notice in the 
Federal Register that the preemption has be-
come effective, as well as the effective date; and 
‘‘(B) notify the appropriate State.
1462 
‘‘(4) LIMITATION.—No State may enforce a 
State insurance measure to the extent that it has 
been preempted under this subsection. 
‘‘(g) APPLICABILITY
OF ADMINISTRATIVE PROCE-
DURE ACT.—Determinations of inconsistency pursuant to 
subsection (f)(2) shall be subject to the applicable provi-
sions of subchapter II of chapter 5 of title 5, United 
States Code (relating to administrative procedure), and 
chapter 7 of such title (relating to judicial review), except 
that in any action for judicial review of a determination 
of inconsistency, the court shall determine the matter de 
novo. 
‘‘(h) REGULATIONS, POLICIES, AND PROCEDURES.— 
The Secretary may issue orders, regulations, policies and 
procedures to implement this section. 
‘‘(i) CONSULTATION.—The Director shall consult 
with State insurance regulators, individually and collec-
tively, to the extent the Director determines appropriate, 
in carrying out the functions of the Office. 
‘‘(j) SAVINGS PROVISIONS.—Nothing in this section 
shall— 
‘‘(1) preempt any State insurance measure that 
governs any insurer’s rates, premiums, underwriting 
or sales practices, or State coverage requirements
1463 
for insurance, or to the application of the antitrust 
laws of any State to the business of insurance; 
‘‘(2) preempt any State insurance measure gov-
erning the capital or solvency of an insurer, except 
to the extent that such State insurance measure di-
rectly results in less favorable treatment of a non- 
United States insurer than a United States insurer; 
‘‘(3) be construed to alter, amend, or limit the 
responsibility of the Consumer Financial Protection 
Agency; 
‘‘(4) preempt any State insurance measure be-
cause of inconsistency with any agreement that is 
not a covered agreement (as such term in defined in 
subsection (p)); or 
‘‘(5) affect the preemption of any State insur-
ance measure otherwise inconsistent with and pre-
empted by Federal law. 
‘‘(k) RETENTION OF EXISTING STATE REGULATORY 
AUTHORITY.—Nothing in this section or section 314 shall 
be construed to establish a general supervisory or regu-
latory authority of the Office or the Department of the 
Treasury over the business of insurance. 
‘‘(l) RETENTION OF AUTHORITY OF FEDERAL FI-
NANCIAL REGULATORY AGENCIES.—Nothing in this sec-
tion or section 314 shall be construed to limit the author-
1464 
ity of any Federal financial regulatory agency, including 
the authority to develop and coordinate policy, negotiate, 
and enter into agreements with foreign governments, au-
thorities, regulators, and multi-national regulatory com-
mittees and to preempt State measures to affect uni-
formity with international regulatory agreements. 
‘‘(m) RETENTION
OF
AUTHORITY
OF
UNITED 
STATES TRADE REPRESENTATIVE.—Nothing in this sec-
tion or section 314 shall be construed to affect the author-
ity of the Office of the United States Trade Representative 
pursuant to section 141 of the Trade Act of 1974 (19 
U.S.C. 2171) or any other provision of law, including au-
thority over the development and coordination of United 
States international trade policy and the administration 
of the United States trade agreements program. 
‘‘(n) REPORTS TO CONGRESS.— 
‘‘(1) ANNUAL REPORT.—Beginning September 
30, 2011, the Director shall submit a report on or 
before September 30 of each calendar year to the 
President and to the Committees on Financial Serv-
ices and Ways and Means of the House of Rep-
resentatives and the Committees on Banking, Hous-
ing, and Urban Affairs and Finance of the Senate 
on the insurance industry, any actions taken by the
1465 
office pursuant to subsection (f) (regarding preemp-
tion of inconsistent State insurance measures). 
‘‘(2) OTHER REPORTS.—The Director shall sub-
mit to the President and the Committees referred to 
in paragraph (1) any other information or reports as 
deemed relevant by the Director or as requested by 
the Chairman or Ranking Member of any of such 
Committees. 
‘‘(o) USE OF EXISTING RESOURCES.—To carry out 
this section, the Office may employ personnel, facilities, 
and other Department of the Treasury resources available 
to the Secretary and the Secretary shall dedicate specific 
personnel to the Office. 
‘‘(p) DEFINITIONS.—For purposes of this section and 
section 314, the following definitions shall apply: 
‘‘(1) AFFILIATE.—The term ‘affiliate’ means, 
with respect to an insurer, any person that controls, 
is controlled by, or is under common control with the 
insurer. 
‘‘(2) COVERED
AGREEMENT.—The term ‘cov-
ered agreement’ means a written bilateral or multi-
lateral recognition agreement that— 
‘‘(A) is entered into between the United 
States and one or more foreign governments, 
authorities, or regulatory entities; and
1466 
‘‘(B) provides for recognition of prudential 
measures with respect to the business of insur-
ance or reinsurance that achieves a level of pro-
tection for insurance or reinsurance consumers 
that is substantially equivalent to the level of 
protection achieved under State insurance or re-
insurance regulation. 
‘‘(3) DETERMINATION
OF
INCONSISTENCY.— 
The term ‘determination of inconsistency’ means a 
determination that a State insurance measure is pre-
empted under subsection (f). 
‘‘(4) FEDERAL FINANCIAL REGULATORY AGEN-
CY.—The term ‘Federal financial regulatory agency’ 
means the Department of the Treasury, the Board 
of Governors of the Federal Reserve System, the Of-
fice of the Comptroller of the Currency, the Office 
of Thrift Supervision, the Securities and Exchange 
Commission, the Commodity Futures Trading Com-
mission, the Federal Deposit Insurance Corporation, 
the Federal Housing Finance Agency, or the Na-
tional Credit Union Administration. 
‘‘(5) INSURER.—The term ‘insurer’ means any 
person engaged in the business of insurance, includ-
ing reinsurance.
1467 
‘‘(6) NON-UNITED STATES INSURER.—The term 
‘non-United States insurer’ means an insurer that is 
organized under the laws of a jurisdiction other than 
a State, but does not include any United States 
branch of such an insurer. 
‘‘(7) OFFICE.—The term ‘Office’ means the 
Federal Insurance Office established by this section. 
‘‘(8) SECRETARY.—The term ‘Secretary’ means 
the Secretary of the Treasury. 
‘‘(9) STATE.—The term ‘State’ means any 
State, commonwealth, territory, or possession of the 
United States, the District of Columbia, the Com-
monwealth of Puerto Rico, the Commonwealth of the 
Northern Mariana Islands, American Samoa, Guam, 
or the United States Virgin Islands. 
‘‘(10) STATE INSURANCE MEASURE.—The term 
‘State insurance measure’ means any State law, reg-
ulation, administrative ruling, bulletin, guideline, or 
practice relating to or affecting prudential measures 
applicable to insurance or reinsurance. 
‘‘(11) STATE
INSURANCE
REGULATOR.—The 
term ‘State insurance regulator’ means any State 
regulatory authority responsible for the supervision 
of insurers.
1468 
‘‘(12) UNITED
STATES
INSURER.—The term 
‘United States insurer’ means— 
‘‘(A) an insurer that is organized under 
the laws of a State; or 
‘‘(B) a United States branch of a non- 
United States insurer. 
‘‘(q) AUTHORIZATION OF APPROPRIATIONS.—There 
are authorized to be appropriated for the Office such sums 
as may be necessary for each fiscal year. 
‘‘SEC. 314. COVERED AGREEMENTS. 
‘‘(a) AUTHORITY.—The Secretary and the United 
States Trade Representative are authorized, jointly, to ne-
gotiate and enter into covered agreements on behalf of the 
United States. 
‘‘(b) REQUIREMENTS
FOR
CONSULTATION
WITH 
CONGRESS.— 
‘‘(1) IN GENERAL.—Before initiating negotia-
tions to enter into a covered agreement under sub-
section (a), during such negotiations, and before en-
tering into any such agreement, the Secretary and 
the United States Trade Representative shall jointly 
consult with the Committee on Financial Services 
and the Committee on Ways and Means of the 
House of Representatives and the Committee on
1469 
Banking, Housing, and Urban Affairs and the Com-
mittee on Finance of the Senate. 
‘‘(2) SCOPE.—The consultation described in 
paragraph (1) shall include consultation with respect 
to— 
‘‘(A) the nature of the agreement; 
‘‘(B) how and to what extent the agree-
ment will achieve the applicable purposes, poli-
cies, priorities, and objectives of section 313 
and this section; and 
‘‘(C) the implementation of the agreement, 
including the general effect of the agreement on 
existing State laws. 
‘‘(c) SUBMISSION
AND LAYOVER PROVISIONS.—A 
covered agreement under subsection (a) may enter into 
force with respect to the United States only if— 
‘‘(1) the Secretary and the United States Trade 
Representative jointly submit to the congressional 
committees specified in subsection (b)(1), on a day 
on which both Houses of Congress are in session, a 
copy of the final legal text of the agreement; and 
‘‘(2) a period of 90 calendar days beginning on 
the date on which the copy of the final legal text of 
the agreement is submitted to the congressional 
committees under paragraph (1) has expired.’’.
1470 
(b) DUTIES OF SECRETARY.—Section 321(a) of title 
31, United States Code, is amended— 
(1) in paragraph (7), by striking ‘‘and’’ at the 
end; 
(2) in paragraph (8)(C), by striking the period 
at the end and inserting ‘‘; and’’; and 
(3) by adding at the end the following new 
paragraph: 
‘‘(9) advise the President on major domestic 
and international prudential policy issues in connec-
tion with all lines of insurance except health insur-
ance.’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for subchapter I of chapter 3 of title 31, United States 
Code, is amended by striking the item relating to section 
312 and inserting the following new items: 
‘‘Sec. 312. Terrorism and Financial Intelligence. 
‘‘Sec. 313. Federal Insurance Office. 
‘‘Sec. 314. Covered agreements. 
‘‘Sec. 315. Continuing in office.’’. 
SEC. 8003. REPORT ON GLOBAL REINSURANCE MARKET. 
Not later than September 30, 2011, the Director of 
the Federal Insurance Office appointed under section 
313(b) of title 31, United States Code (as amended by 
section 8002(a)(3) of this title) shall submit to the Com-
mittee on Financial Services of the House of Representa-
tives and the Committee on Banking, Housing, and Urban
1471 
Affairs of the Senate a report describing the breadth and 
scope of the global reinsurance market and the critical role 
such market plays in supporting insurance in the United 
States. 
SEC. 8004. STUDY ON MODERNIZATION AND IMPROVEMENT 
OF INSURANCE REGULATION IN THE UNITED 
STATES. 
(a) STUDY.—The Director of the Federal Insurance 
Office appointed under section 313(b) of title 31, United 
States Code (as amended by section 8002(a)(3) of this 
title) shall conduct a study on how to modernize and im-
prove the system of insurance regulation in the United 
States. Such study shall include consideration of the fol-
lowing: 
(1) Effective systemic risk regulation with re-
spect to insurance. 
(2) Strong capital standards and an appro-
priate match between capital allocation and liabil-
ities for all risk. 
(3) Meaningful and consistent consumer protec-
tion for insurance products and practices. 
(4) Increased national uniformity through ei-
ther a Federal charter or effective action by the 
States.
1472 
(5) Improved regulation of insurance companies 
and affiliates on a consolidated basis, including af-
filiates outside of the traditional insurance business. 
(6) International coordination. 
(7) Geographic disparities in access to and cost 
of insurance products. 
(b) REPORT.—Not later than 1 year after the date 
of the enactment of this Act, the Director shall submit 
to the Committee on Financial Services of the House of 
Representatives and the Committee on Banking, Housing, 
and Urban Affairs of the Senate a report containing— 
(1) the results of the study conducted under 
subsection (a); and 
(2) any Federal or State legislative, administra-
tive, or regulatory recommendations that the Direc-
tor considers appropriate with respect to such study 
to modernize and improve the system of insurance 
regulation in the United States. 
(c) CONSULTATION.—In carrying out subsections (a) 
and (b), the Director shall consult with State insurance 
commissioners, consumer organizations, representatives of 
the insurance industry, policyholders, and other persons, 
as the Director considers appropriate.
1473 
SEC. 8005. SENSE OF CONGRESS REGARDING SIMPLIFIED 
MORTGAGE CONTRACT SUMMARIES. 
It is the sense of Congress that mortgage lenders 
should provide loan applicants with a simplified summary 
of their loan contracts, including an easy-to-read list of 
the basic loan terms, payment information, the existence 
of prepayment penalties or balloon payments, and escrow 
information. 
TITLE VII—MORTGAGE REFORM 
AND ANTI-PREDATORY LEND-
ING ACT 
SEC. 9000. SHORT TITLE; DESIGNATION AS ENUMERATED 
CONSUMER LAW. 
(a) SHORT TITLE.—This title may be cited as the 
‘‘Mortgage Reform and Anti-Predatory Lending Act’’. 
(b) DESIGNATION AS ENUMERATED CONSUMER LAW 
UNDER THE PURVIEW OF THE CONSUMER FINANCIAL 
PROTECTION AGENCY.—Subtitles A, B, C, and E and sec-
tions 9501, 9502, and 9506, and the amendments made 
by such subtitles and sections, shall be enumerated con-
sumer laws, as defined in section 4002(16), and come 
under the purview of the Consumer Financial Protection 
Agency for purposes of title IV, including the transfer of 
functions and personnel under subtitle F of title IV and 
the savings provisions of such subtitle.
1474 
Subtitle A—Residential Mortgage 
Loan Origination Standards 
SEC. 9001. DEFINITIONS. 
Section 103 of the Truth in Lending Act (15 U.S.C. 
1602) is amended by adding at the end the following new 
subsection: 
‘‘(cc) DEFINITIONS RELATING TO MORTGAGE ORIGI-
NATION AND RESIDENTIAL MORTGAGE LOANS.— 
‘‘(1) COMMISSION.—Unless otherwise specified, 
the term ‘Commission’ means the Federal Trade 
Commission. 
‘‘(2) FEDERAL BANKING AGENCIES.—The term 
‘Federal banking agencies’ means the Board of Gov-
ernors of the Federal Reserve System, the Comp-
troller of the Currency, the Director of the Office of 
Thrift Supervision, the Federal Deposit Insurance 
Corporation, and the National Credit Union Admin-
istration Board. All rule writing by the ‘Federal 
banking agencies’ as designated by the Mortgage 
Reform and Anti-Predatory Lending Act will be co-
ordinated through the Financial Institutions Exam-
ination Council in consultation with the Chairman of 
the State Liaison Committee. 
‘‘(3) 
MORTGAGE
ORIGINATOR.—The 
term 
‘mortgage originator’—
1475 
‘‘(A) means any person who, for direct or 
indirect compensation or gain, or in the expec-
tation of direct or indirect compensation or 
gain— 
‘‘(i) takes a residential mortgage loan 
application; 
‘‘(ii) assists a consumer in obtaining 
or applying to obtain a residential mort-
gage loan; or 
‘‘(iii) offers or negotiates terms of a 
residential mortgage loan; 
‘‘(B) includes any person who represents 
to the public, through advertising or other 
means of communicating or providing informa-
tion (including the use of business cards, sta-
tionery, brochures, signs, rate lists, or other 
promotional items), that such person can or will 
provide any of the services or perform any of 
the activities described in subparagraph (A); 
‘‘(C) does not include any person who is (i) 
not otherwise described in subparagraph (A) or 
(B) and who performs purely administrative or 
clerical tasks on behalf of a person who is de-
scribed in any such subparagraph, or (ii) an 
employee of a retailer of manufactured homes
1476 
who is not described in clause (i) or (iii) of sub-
paragraph (A) and who does not advise a con-
sumer on loan terms (including rates, fees, and 
other costs); 
‘‘(D) does not include a person or entity 
that only performs real estate brokerage activi-
ties and is licensed or registered in accordance 
with applicable State law, unless such person or 
entity is compensated for performing such bro-
kerage activities by a lender, a mortgage 
broker, or other mortgage originator or by any 
agent of such lender, mortgage broker, or other 
mortgage originator; 
‘‘(E) does not include, with respect to a 
residential mortgage loan, a person, estate, or 
trust that provides mortgage financing for the 
sale of 1 property in any 36-month period, pro-
vided that such loan— 
‘‘(i) is fully amortizing; 
‘‘(ii) is with respect to a sale for 
which the seller determines in good faith 
and documents that the buyer has a rea-
sonable ability to repay the loan; 
‘‘(iii) has a fixed rate or an adjustable 
rate that is adjustable after 5 or more
1477 
years, subject to reasonable annual and 
lifetime limitations on interest rate in-
creases; and 
‘‘(iv) meets any other criteria the 
Federal banking agencies may prescribe; 
and 
‘‘(F) does not include a servicer or servicer 
employees, agents and contractors, including 
but not limited to those who offer or negotiate 
terms of a residential mortgage loan for pur-
poses of renegotiating, modifying, replacing and 
subordinating principal of existing mortgages 
where borrowers are behind in their payments, 
in default or have a reasonable likelihood of 
being in default or falling behind. 
‘‘(4) NATIONWIDE MORTGAGE LICENSING SYS-
TEM AND REGISTRY.—The term ‘Nationwide Mort-
gage Licensing System and Registry’ has the same 
meaning as in the Secure and Fair Enforcement for 
Mortgage Licensing Act of 2008. 
‘‘(5) OTHER DEFINITIONS RELATING TO MORT-
GAGE
ORIGINATOR.—For purposes of this sub-
section, a person ‘assists a consumer in obtaining or 
applying to obtain a residential mortgage loan’ by, 
among other things, advising on residential mort-
1478 
gage loan terms (including rates, fees, and other 
costs), preparing residential mortgage loan packages, 
or collecting information on behalf of the consumer 
with regard to a residential mortgage loan. 
‘‘(6) RESIDENTIAL
MORTGAGE
LOAN.—The 
term ‘residential mortgage loan’ means any con-
sumer credit transaction that is secured by a mort-
gage, deed of trust, or other equivalent consensual 
security interest on a dwelling or on residential real 
property that includes a dwelling, other than a con-
sumer credit transaction under an open end credit 
plan or, for purposes of sections 129B and 129C 
and section 128(a) (16), (17), and (18), and 128(f) 
and any regulations promulgated thereunder, an ex-
tension of credit relating to a plan described in sec-
tion 101(53D) of title 11, United States Code. 
‘‘(7) SECRETARY.—The term ‘Secretary’, when 
used in connection with any transaction or person 
involved with a residential mortgage loan, means the 
Secretary of Housing and Urban Development. 
‘‘(8) SECURITIZATION
VEHICLE.—The term 
‘securitization vehicle’ means a trust, corporation, 
partnership, limited liability entity, special purpose 
entity, or other structure that—
1479 
‘‘(A) is the issuer, or is created by the 
issuer, of mortgage pass-through certificates, 
participation certificates, mortgage-backed secu-
rities, or other similar securities backed by a 
pool of assets that includes residential mortgage 
loans; and 
‘‘(B) holds such loans. 
‘‘(9) SECURITIZER.—The term ‘securitizer’ 
means the person that transfers, conveys, or assigns, 
or causes the transfer, conveyance, or assignment of, 
residential mortgage loans, including through a spe-
cial purpose vehicle, to any securitization vehicle, ex-
cluding any trustee that holds such loans solely for 
the benefit of the securitization vehicle. 
‘‘(10) SERVICER.—The term ‘servicer’ has the 
same meaning as in section 6(i)(2) of the Real Es-
tate Settlement Procedures Act of 1974.’’. 
SEC. 9002. RESIDENTIAL MORTGAGE LOAN ORIGINATION. 
(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 the following new section: 
‘‘§ 129B. Residential mortgage loan origination 
‘‘(a) FINDING AND PURPOSE.— 
‘‘(1) FINDING.—The Congress finds that eco-
nomic stabilization would be enhanced by the protec-
1480 
tion, limitation, and regulation of the terms of resi-
dential mortgage credit and the practices related to 
such credit, while ensuring that responsible, afford-
able mortgage credit remains available to consumers. 
‘‘(2) PURPOSE.—It is the purpose of this sec-
tion and section 129C to assure that consumers are 
offered and receive residential mortgage loans on 
terms that reasonably reflect their ability to repay 
the loans and that are understandable and not un-
fair, deceptive or abusive. 
‘‘(b) 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 and, when required, reg-
istered and licensed as a mortgage originator in 
accordance with applicable State or Federal 
law, including the Secure and Fair Enforcement 
for Mortgage Licensing Act of 2008; 
‘‘(B) with respect to each consumer seek-
ing or inquiring about a residential mortgage 
loan, diligently work to present the consumer 
with a range of residential mortgage loan prod-
1481 
ucts for which the consumer likely qualifies and 
which are appropriate to the consumer’s exist-
ing circumstances, based on information known 
by, or obtained in good faith by, the originator; 
‘‘(C) make full, complete, and timely dis-
closure to each such consumer in writing, the 
receipt and understanding of which shall be ac-
knowledged by the signature of the mortgage 
originator and the consumer, of— 
‘‘(i) the comparative costs and bene-
fits of each residential mortgage loan prod-
uct offered, discussed, or referred to by the 
originator (and such comparative costs and 
benefits for each such product shall be pre-
sented side by side and the disclosures for 
each such product shall have equal promi-
nence); 
‘‘(ii) the nature of the originator’s re-
lationship to the consumer (including the 
cost of the services to be provided by the 
originator and a statement that the mort-
gage originator is or is not acting as an 
agent for the consumer, as the case may 
be); and
1482 
‘‘(iii) any relevant conflicts of interest 
between the originator and the consumer; 
‘‘(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 on all loan documents any 
unique identifier of the mortgage originator 
provided by the Nationwide Mortgage Licensing 
System and Registry. 
‘‘(2) CLARIFICATION OF EXTENT OF DUTY TO 
PRESENT RANGE OF PRODUCTS AND APPROPRIATE 
PRODUCTS.— 
‘‘(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 
referrals from, or consumer applications
1483 
submitted 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, in 
the case of a refinancing of an existing res-
idential mortgage loan, receives a net tan-
gible benefit, as determined in accordance 
with regulations prescribed under sub-
sections (a) and (b) of section 129C; and 
‘‘(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).
1484 
‘‘(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 fiduciary of a consumer subject to any addi-
tional duty, requirement, or limitation applica-
ble 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 reg-
ulations to— 
‘‘(i) further define the duty estab-
lished under paragraph (1); 
‘‘(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
1485 
‘‘(iv) establish such other require-
ments for any mortgage originator as such 
regulatory agencies may determine to be 
appropriate to meet the purposes of this 
subsection. 
‘‘(B) COMPLEMENTARY AND NONDUPLICA-
TIVE DISCLOSURES.—The agencies referred to 
in subparagraph (A) shall endeavor to make the 
required disclosures to consumers under this 
subsection 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 
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 subsidi-
aries with the requirements of this section and the 
registration procedures established under section
1486 
1507 of the Secure and Fair Enforcement for Mort-
gage Licensing Act of 2008.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for chapter 2 of the Truth in Lending Act is amended 
by inserting after the item relating to section 129 the fol-
lowing new items: 
‘‘129A. Fiduciary duty of servicers of pooled residential mortgages. 
‘‘129B. Residential mortgage loan origination.’’. 
SEC. 9003. PROHIBITION ON STEERING INCENTIVES. 
Section 129B of the Truth in Lending Act (as added 
by section 102(a)) is amended by inserting after sub-
section (b) the following new subsection: 
‘‘(c) PROHIBITION ON STEERING INCENTIVES.— 
‘‘(1) IN GENERAL.—For any mortgage loan, the 
total amount of direct and indirect compensation 
from all sources permitted to a mortgage originator 
may not vary based on the terms of the loan (other 
than the amount of the principal). 
‘‘(2) RESTRUCTURING OF FINANCING ORIGINA-
TION FEE.— 
‘‘(A) IN
GENERAL.—For any mortgage 
loan, a mortgage originator may not arrange 
for a consumer to finance through rate any 
origination fee or cost except bona fide third 
party settlement charges not retained by the 
creditor or mortgage originator.
1487 
‘‘(B) EXCEPTION.—Notwithstanding para-
graph subparagraph (A), a mortgage originator 
may arrange for a consumer to finance through 
rate an origination fee or cost if— 
‘‘(i) the mortgage originator does not 
receive any other compensation from the 
consumer except the compensation that is 
financed through rate; and 
‘‘(ii) the mortgage is a qualified mort-
gage. 
‘‘(3) REGULATIONS.—The Federal banking 
agencies, in consultation with the Secretary 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 (in accordance with regula-
tions prescribed under section 129C(a)); 
‘‘(ii) in the case of a refinancing of a 
residential mortgage loan, does not provide 
the consumer with a net tangible benefit 
(in accordance with regulations prescribed 
under section 129C(b)); or
1488 
‘‘(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 
129C(c)(3)) to a residential mortgage loan that 
is not a qualified mortgage; 
‘‘(C) abusive or unfair lending practices 
that promote disparities among consumers of 
equal credit worthiness but of different race, 
ethnicity, gender, or age; 
‘‘(D) mortgage originators from assessing 
excessive points and fees (as such term is de-
scribed under section 103(aa)(4) of the Truth 
in Lending Act (15 U.S.C. 1602(aa)(4))) to a 
consumer for the origination of a residential 
mortgage loan based on such consumer’s deci-
sion to finance all or part of the payment 
through the rate for such points and fees; and 
‘‘(E) mortgage originators from— 
‘‘(i) mischaracterizing the credit his-
tory of a consumer or the residential mort-
gage loans available to a consumer;
1489 
‘‘(ii) mischaracterizing or suborning 
the mischaracterization of the appraised 
value of the property securing the exten-
sion of credit; or 
‘‘(iii) if unable to suggest, offer, or 
recommend to a consumer a loan that is 
not more expensive than a loan for which 
the consumer qualifies, discouraging a con-
sumer from seeking a home mortgage loan 
secured by a consumer’s principal dwelling 
from another mortgage originator. 
‘‘(4) RULES OF CONSTRUCTION.—No provision 
of this subsection shall be construed as— 
‘‘(A) permitting any yield spread premium 
or other similar compensation that would, for 
any mortgage loan, permit the total amount of 
direct and indirect compensation from all 
sources permitted to a mortgage originator to 
vary based on the terms of the loan (other than 
the amount of the principal); 
‘‘(B) affecting the mechanism for pro-
viding the total amount of direct and indirect 
compensation permitted to a mortgage origi-
nator;
1490 
‘‘(C) limiting or affecting the amount of 
compensation received by a creditor upon the 
sale of a consummated loan to a subsequent 
purchaser; 
‘‘(D) restricting a consumer’s ability to fi-
nance, at the option of the consumer, including 
through principal or rate, any origination fees 
or costs permitted under this subsection, or the 
mortgage originator’s ability to receive such 
fees or costs (including compensation) from any 
person, so long as such fees or costs were lim-
ited by agreement with the consumer and were 
fully and clearly disclosed to the consumer ear-
lier in the application process as required by 
129B(b)(1)(C)(i) and do not vary based on the 
terms of the loan (other than the amount of the 
principal) or the consumer’s decision about 
whether to finance such fees or costs; or 
‘‘(E) prohibiting incentive payments to a 
mortgage originator based on the number of 
residential mortgage loans originated within a 
specified period of time.’’.
1491 
SEC. 9004. LIABILITY. 
Section 129B of the Truth in Lending Act is amend-
ed by inserting after subsection (c) (as added by section 
103) the following new subsection: 
‘‘(d) 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 applied with respect to any such failure 
by substituting ‘mortgage originator’ for ‘creditor’ 
each place such term appears in each such sub-
section. 
‘‘(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 the greater of actual damages or 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 residen-
tial mortgage loan involved in the violation, plus the 
costs to the consumer of the action, including a rea-
sonable attorney’s fee.’’.
1492 
SEC. 9005. REGULATIONS. 
(a) DISCRETIONARY REGULATORY AUTHORITY.— 
Section 129B of the Truth in Lending Act is amended 
by inserting after subsection (d) (as added by section 104) 
the following new subsection: 
‘‘(e) DISCRETIONARY REGULATORY AUTHORITY.— 
‘‘(1) IN GENERAL.—The Federal banking agen-
cies shall, by regulations issued jointly, prohibit or 
condition terms, acts or practices relating to residen-
tial mortgage loans that the agencies find to be abu-
sive, unfair, deceptive, predatory, inconsistent with 
reasonable underwriting standards, necessary or 
proper to ensure that responsible, affordable mort-
gage credit remains available to consumers in a 
manner consistent with the purposes of this section 
and section 129B, necessary or proper to effectuate 
the purposes of this section and section 129C, to 
prevent circumvention or evasion thereof, or to facili-
tate compliance with such sections, or are not in the 
interest of the borrower. 
‘‘(2) APPLICATION.—The regulations prescribed 
under paragraph (1) shall be applicable to all resi-
dential mortgage loans and shall be applied in the 
same manner as regulations prescribed under section 
105.
1493 
‘‘(f) Section 129B and any regulations promulgated 
thereunder do not apply to an extension of credit relating 
to a plan described in section 101(53D) of title 11, United 
States Code.’’. 
(b) EFFECTIVE DATE.—The regulations required or 
authorized to be prescribed under this subtitle or the 
amendments made by this subtitle— 
(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. 
(c) TECHNICAL AND CONFORMING AMENDMENTS.— 
Section 129(l)(2) of the Truth in Lending Act (15 U.S.C. 
1639(l)(2)) is amended by inserting ‘‘referred to in section 
103(aa)’’ after ‘‘loans’’ each place such term appears. 
SEC. 9006. STUDY OF SHARED APPRECIATION MORTGAGES. 
(a) STUDY.—The Secretary of Housing and Urban 
Development, in consultation with the Secretary of the 
Treasury and other relevant agencies, shall conduct a com-
prehensive study to determine prudent statutory and regu-
latory requirements sufficient to provide for the wide-
spread use of shared appreciation mortgages to strengthen 
local housing markets, provide new opportunities for af-
1494 
fordable homeownership, and enable homeowners at risk 
of foreclosure to refinance or modify their mortgages. 
(b) REPORT.—Not later than the expiration of the 
6-month period beginning on the date of the enactment 
of this Act, the Secretary of Housing and Urban Develop-
ment shall submit a report to the Congress on the results 
of the study, which shall include recommendations for the 
regulatory and legislative requirements referred to in sub-
section (a). 
Subtitle B—Minimum Standards 
For Mortgages 
SEC. 9101. ABILITY TO REPAY. 
(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 129B (as added by section 102(a)) the fol-
lowing new section: 
‘‘§ 129C. 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 cred-
itor may make a residential mortgage loan unless 
the creditor makes a reasonable and good faith de-
termination based on verified and documented infor-
1495 
mation 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, 
insurance, 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 com-
bined payments of all loans on the same dwelling ac-
cording to the terms of those loans and all applicable 
taxes, insurance, and assessments. 
‘‘(3) BASIS
FOR
DETERMINATION.—A deter-
mination under this subsection of a consumer’s abil-
ity to repay a residential mortgage loan shall include 
consideration of the consumer’s credit history, cur-
rent income, expected income the consumer is rea-
sonably assured of receiving, current obligations, 
debt-to-income ratio, employment status, and other 
financial resources other than the consumer’s equity 
in the dwelling or real property that secures repay-
ment of the loan.
1496 
‘‘(4) INCOME VERIFICATION.—In order to safe-
guard against fraudulent reporting, any consider-
ation of a consumer’s income history in making a 
determination under this subsection shall include the 
verification of such income by the use of— 
‘‘(A) Internal Revenue Service transcripts 
of tax returns provided by a third party; or 
‘‘(B) such other similar method that quick-
ly and effectively verifies income documentation 
by a third party as the Federal banking agen-
cies may jointly prescribe. 
‘‘(5) NONSTANDARD LOANS.— 
‘‘(A) VARIABLE RATE LOANS THAT DEFER 
REPAYMENT
OF
ANY
PRINCIPAL
OR
INTER-
EST.—For purposes of determining, under this 
subsection, a consumer’s ability to repay a vari-
able rate residential mortgage loan that allows 
or requires the consumer to defer the repay-
ment of any principal or interest, the creditor 
shall use a fully amortizing repayment schedule. 
‘‘(B) INTEREST-ONLY
LOANS.—For pur-
poses of determining, under this subsection, a 
consumer’s ability to repay a residential mort-
gage loan that permits or requires the payment 
of interest only, the creditor shall use the pay-
1497 
ment amount required to amortize the loan by 
its final maturity. 
‘‘(C) CALCULATION FOR NEGATIVE AMOR-
TIZATION.—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 month-
ly 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 
payment, unless the loan contract requires 
more rapid repayment (including balloon 
payment), in which case the calculation 
shall be made (I) in accordance with regu-
lations prescribed by the Federal banking 
agencies, with respect to any loan which
1498 
has an annual percentage rate that does 
not exceed the average prime offer rate for 
a comparable transaction, as of the date 
the interest rate is set, by 1.5 or more per-
centage points for a first lien residential 
mortgage loan; and by 3.5 or more per-
centage points for a subordinate lien resi-
dential mortgage loan; or (II) using the 
contract’s repayment schedule, with re-
spect to a loan which has an annual per-
centage rate, as of the date the interest 
rate is set, that is at least 1.5 percentage 
points above the average prime offer rate 
for a first lien residential mortgage loan; 
and 3.5 percentage points above the aver-
age prime offer rate for a subordinate lien 
residential mortgage loan; and 
‘‘(iii) the interest rate over the entire 
term of the loan is a fixed rate equal to the 
fully indexed rate at the time of the loan 
closing, without considering the introduc-
tory rate. 
‘‘(E) REFINANCE OF HYBRID LOANS WITH 
CURRENT LENDER.—In considering any appli-
cation for refinancing an existing hybrid loan
1499 
by the creditor into a standard loan to be made 
by the same creditor in any case in which the 
sole net-tangible benefit to the mortgagor would 
be a reduction in monthly payment and the 
mortgagor has not been delinquent on any pay-
ment on the existing hybrid loan, the creditor 
may— 
‘‘(i) consider the mortgagor’s good 
standing on the existing mortgage; 
‘‘(ii) consider if the extension of new 
credit would prevent a likely default should 
the original mortgage reset and give such 
concerns a higher priority as an acceptable 
underwriting practice; and 
‘‘(iii) offer rate discounts and other 
favorable terms to such mortgagor that 
would be available to new customers with 
high credit ratings based on such under-
writing practice. 
‘‘(6) FULLY-INDEXED
RATE
DEFINED.—For 
purposes of this subsection, the term ‘fully indexed 
rate’ means the index rate prevailing on a residential 
mortgage loan at the time the loan is made plus the 
margin that will apply after the expiration of any in-
troductory interest rates.
1500 
‘‘(7) REVERSE
MORTGAGES.—This subsection 
shall not apply with respect to any reverse mort-
gage’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for chapter 2 of the Truth in Lending Act is amended 
by inserting after the item relating to section 129B (as 
added by section 102(b)) the following new item: 
‘‘129C. Minimum standards for residential mortgage loans.’’. 
SEC. 9102. NET TANGIBLE BENEFIT FOR REFINANCING OF 
RESIDENTIAL MORTGAGE LOANS. 
Section 129C of the Truth in Lending Act (as added 
by section 9101(a)) is amended by inserting after sub-
section (a) the following new subsection: 
‘‘(b) NET TANGIBLE BENEFIT FOR REFINANCING OF 
RESIDENTIAL MORTGAGE LOANS.— 
‘‘(1) IN GENERAL.—In accordance with regula-
tions prescribed under paragraph (3), no creditor 
may extend credit in connection with any residential 
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 infor-
mation known by or obtained in good faith by the 
creditor, that the refinanced loan will provide a net 
tangible benefit to the consumer.
1501 
‘‘(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 refinanced 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 consumer. 
‘‘(3) NET
TANGIBLE
BENEFIT.—The Federal 
banking agencies shall jointly prescribe regulations 
defining the term ‘net tangible benefit’ for purposes 
of this subsection.’’. 
SEC. 9103. SAFE HARBOR AND REBUTTABLE PRESUMPTION. 
Section 129C of the Truth in Lending Act is amend-
ed by inserting after subsection (b) (as added by section 
9102) the following new subsection: 
‘‘(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.
1502 
‘‘(2) DEFINITIONS.—For purposes of this sub-
section, the following definitions shall apply: 
‘‘(A) QUALIFIED
MORTGAGE.—The term 
‘qualified mortgage’ means any residential 
mortgage loan— 
‘‘(i) that does not allow a consumer to 
defer repayment of principal or interest, or 
is not otherwise deemed a ‘non-traditional 
mortgage’ under guidance, advisories, or 
regulations prescribed by the Federal 
Banking Agencies; 
‘‘(ii) that does not provide for a re-
payment schedule that results in negative 
amortization at any time; 
‘‘(iii) for which the terms are fully 
amortizing and which does not result in a 
balloon payment, where a ‘balloon pay-
ment’ is a scheduled payment that is more 
than twice as large as the average of ear-
lier scheduled payments; 
‘‘(iv) which has an annual percentage 
rate that does not exceed the average 
prime offer rate for a comparable trans-
action, as of the date the interest rate is 
set—
1503 
‘‘(I) by 1.5 or more percentage 
points, in the case of a first lien resi-
dential mortgage loan having a origi-
nal principal obligation amount that is 
equal to or less than the amount of 
the maximum limitation on the origi-
nal principal obligation of mortgage in 
effect for a residence of the applicable 
size, as of the date of such interest 
rate set, pursuant to the sixth sen-
tence of section 305(a)(2) the Federal 
Home Loan Mortgage Corporation 
Act (12 U.S.C. 1454(a)(2)); 
‘‘(II) by 2.5 or more percentage 
points, in the case of a first lien resi-
dential mortgage loan having a origi-
nal principal obligation amount that is 
more than the amount of the max-
imum limitation on the original prin-
cipal obligation of mortgage in effect 
for a residence of the applicable size, 
as of the date of such interest rate 
set, pursuant to the sixth sentence of 
section 305(a)(2) the Federal Home
1504 
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; 
‘‘(v) for which the income and finan-
cial resources relied upon to qualify the ob-
ligors on the loan are verified and docu-
mented; 
‘‘(vi) in the case of a fixed rate loan, 
for which the underwriting process is based 
on a payment schedule that fully amortizes 
the loan over the loan term and takes into 
account all applicable taxes, insurance, and 
assessments; 
‘‘(vii) in the case of an adjustable rate 
loan, for which the underwriting is based 
on the maximum rate permitted under the 
loan during the first seven years, and a 
payment schedule that fully amortizes the 
loan over the loan term and takes into ac-
count all applicable taxes, insurance, and 
assessments; 
‘‘(viii) that does not cause the con-
sumer’s total monthly debts, including
1505 
amounts under the loan, to exceed a per-
centage established by regulation of the 
consumer’s monthly gross income or such 
other maximum percentage of such income 
as may be prescribed by regulation under 
paragraph (4), and such rules shall also 
take into consideration the consumer’s in-
come available to pay regular expenses 
after payment of all installment and revolv-
ing debt; 
‘‘(ix) for which the total points and 
fees payable in connection with the loan do 
not exceed 2 percent of the total loan 
amount, where ‘points and fees’ means 
points and fees as defined by Section 
103(aa)(4) of the Truth in Lending Act 
(15 U.S.C. 1602(aa)(4)); and 
‘‘(x) for which the term of the loan 
does not exceed 30 years, except as such 
term may be extended under paragraph 
(4). 
‘‘(B) AVERAGE PRIME OFFER RATE.—The 
term ‘average prime offer rate’ means an an-
nual percentage rate that is derived from aver-
age interest rates, points, and other loan pric-
1506 
ing terms currently offered to consumers by a 
representative sample of creditors for mortgage 
transactions that have low risk pricing charac-
teristics. 
‘‘(C) REVERSE
MORTGAGES.—For pur-
poses of this subsection, the term ‘qualified 
mortgage’ includes any reverse mortgage that is 
insured by the Federal Housing Administration 
or complies with the condition established in 
subparagraph (A)(iv). 
‘‘(3) 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 of 1.50 
percentage points in paragraph (2)(A)(iv)(I), 
2.50 
percentage 
points 
in 
paragraph 
(2)(A)(iv)(II), and 3.50 percentage points in 
paragraph (2)(A)(v)(III), as necessary to reflect 
significant changes in market conditions and to 
effectuate the purposes of the Mortgage Reform 
and Anti-Predatory Lending Act. 
‘‘(4) REGULATIONS.—
1507 
‘‘(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.— 
‘‘(i) IN GENERAL.—The Federal bank-
ing agencies may jointly prescribe regula-
tions that revise, add to, or subtract from 
the criteria that define a qualified mort-
gage upon a finding that such regulations 
are necessary or proper to ensure that re-
sponsible, affordable mortgage credit re-
mains available to consumers in a manner 
consistent with the purposes of this sec-
tion, necessary and appropriate to effec-
tuate the purposes of this section and sec-
tion 129B, to prevent circumvention or 
evasion thereof, or to facilitate compliance 
with such sections. 
‘‘(ii) LOAN
DEFINITION.—The fol-
lowing agencies shall, in consultation with 
the Federal banking agencies, prescribe 
rules defining the types of loans they in-
sure, guarantee or administer, as the case 
may be, that are Qualified Mortgages for
1508 
purposes of subsection (c)(1)(A) upon a 
finding that such rules are consistent with 
the purposes of this section and section 
129B, to prevent circumvention or evasion 
thereof, or to facilitate compliance with 
such sections— 
‘‘(I) The Department of Housing 
and Urban Development, with regard 
to mortgages insured under title II of 
the National Housing Act (12 U.S.C. 
1707 et seq.); 
‘‘(II) The Secretary of Veterans 
Affairs, with regard to a loan made or 
guaranteed by the Secretary of Vet-
erans Affairs; 
‘‘(III) The Secretary of Agri-
culture, with regard loans guaranteed 
by the Secretary of Agriculture pursu-
ant to 42 U.S.C. 1472(h); 
‘‘(IV) The Federal Housing Fi-
nance Agency, with regard to loans 
meeting the conforming loan stand-
ards of the Federal National Mort-
gage Corporation or the Federal
1509 
Home Loan Mortgage Corporation; 
and 
‘‘(V) The Rural Housing Service, 
with regard to loans insured by the 
Rural Housing Service.’’. 
SEC. 9104. LIABILITY. 
Section 129C of the Truth in Lending Act is amend-
ed by inserting after subsection (c) (as added by section 
9103) 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 (9), a civil action may 
be maintained against a creditor for a violation 
of subsection (a) or (b) with respect to a resi-
dential 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-
1510 
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, acting in good 
faith, 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 residen-
tial 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
EXEMP-
TION.—No assignee or securitizer of a residential 
mortgage loan that has exercised reasonable due dili-
gence in complying with the requirements of sub-
sections (a) and (b), consistent with reasonable due 
diligence practices prescribed by the Federal banking
1511 
agencies, shall be liable under paragraph (2) with re-
spect to such loan if, no later than 90 days after the 
receipt of notification from the consumer that the 
loan violates subsection (a) or (b), the assignee or 
securitizer provides a cure so that the loan satisfies 
the requirements of subsections (a) and (b). 
‘‘(4) ABSENT PARTIES.— 
‘‘(A) 
ABSENT
CREDITOR.—Notwith-
standing the exemption provided in paragraph 
(3), if the creditor with respect to a residential 
mortgage loan made in violation of subsection 
(a) or (b) has ceased to exist as a matter of law 
or has filed for bankruptcy protection under 
title 11, United States Code, or has had a re-
ceiver, conservator, or liquidating agent ap-
pointed, a consumer may maintain a civil action 
against an assignee to cure the residential 
mortgage loan, plus the costs and reasonable 
attorney’s fees incurred in obtaining such rem-
edy. 
‘‘(B) ABSENT CREDITOR AND ASSIGNEE.— 
Notwithstanding the exemption provided in 
paragraph (3), if the creditor with respect to a 
residential mortgage loan made in violation of 
subsection (a) or (b) and each assignee of such
1512 
loan have ceased to exist as a matter of law or 
have filed for bankruptcy protection under title 
11, United States Code, or have had receivers, 
conservators, or liquidating agents appointed, 
the consumer may maintain the civil action re-
ferred to in subparagraph (A) against the 
securitizer. 
‘‘(5) CURE
DEFINED.—For purposes of this 
subsection, the term ‘cure’ means, with respect to a 
residential 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 sat-
isfy the requirements of subsections (a) and (b) and 
the payment of such additional costs as the obligor 
may have incurred in connection with obtaining a 
cure of the loan, including a reasonable attorney’s 
fee. 
‘‘(6) DISAGREEMENT OVER CURE.—If any cred-
itor, assignee, or securitizer and a consumer fail to 
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
1513 
‘‘(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). 
‘‘(7) INABILITY TO PROVIDE OR OBTAIN RE-
SCISSION.—If a creditor, assignee, or securitizer 
cannot provide, or a consumer cannot obtain, 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. 
‘‘(8) NO CLASS ACTIONS AGAINST ASSIGNEE OR 
SECURITIZER
UNDER
PARAGRAPH (2).—Only indi-
vidual actions may be brought against an assignee 
or securitizer of a residential mortgage loan for a 
violation of subsection (a) or (b). 
‘‘(9) STATUTE OF LIMITATIONS.—The liability 
of a creditor, assignee, or securitizer under this sub-
1514 
section shall apply in any original action against a 
creditor under paragraph (1) or an assignee or 
securitizer under paragraph (2) which is brought be-
fore— 
‘‘(A) in the case of any residential mort-
gage loan other than a loan to which subpara-
graph (B) applies, the end of the 3-year period 
beginning on the date the loan is consummated; 
or 
‘‘(B) in the case of a residential mortgage 
loan that provides for a fixed interest rate for 
an introductory period and then resets or ad-
justs to a variable rate or that provides for a 
nonamortizing payment schedule and then con-
verts to an amortizing payment schedule, the 
earlier of— 
‘‘(i) the end of the 1-year period be-
ginning on the date of such reset, adjust-
ment, or conversion; or 
‘‘(ii) the end of the 6-year period be-
ginning on the date the loan is con-
summated. 
‘‘(10) TRUSTEES, POOLS, AND INVESTORS IN 
POOLS EXCLUDED.—In the case of residential mort-
gage loans acquired or aggregated for the purpose of
1515 
including such loans in a pool of assets held for the 
purpose of issuing or selling instruments rep-
resenting interests in such pools including through a 
securitization vehicle, the terms ‘assignee’ and 
‘securitizer’, as used in this section, do not include 
the securitization vehicle, any trustee that holds 
such loans solely for the benefit of 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. 
‘‘(e) OBLIGATION OF SECURITIZERS, AND PRESERVA-
TION OF BORROWER REMEDIES.— 
‘‘(1) OBLIGATION
TO
RETAIN
ACCESS.—Any 
securitizer of a residential mortgage loan sold or to 
be sold as part of a securitization vehicle shall, in 
any document or contract providing for the transfer, 
conveyance, 
or 
the 
establishment 
of 
such 
securitization vehicle, reserve the right and preserve 
the ability— 
‘‘(A) to identify and obtain access to any 
such loan; 
‘‘(B) to acquire any such loan in the event 
of a violation of subsection (a) or (b) of this 
section; and
1516 
‘‘(C) to provide to the consumer any and 
all remedies provided for under this title for 
any violation of this title. 
‘‘(2) ADDITIONAL DAMAGES.—Any creditor, as-
signee, or securitizer of a residential mortgage loan 
that is subject to a remedy under subsection (d) and 
has failed to comply with paragraph (1) shall be 
subject to additional exemplary or punitive damages 
not to exceed the original principal balance of such 
loan. 
‘‘(3) CONTACT
INFORMATION
NOTICE.—The 
servicer with respect to a residential mortgage loan 
shall provide a written notice to a consumer identi-
fying the name and contact information of the cred-
itor or any assignee or securitizer who should be 
contacted by the consumer for any reason con-
cerning the consumer’s rights with respect to the 
loan. Such notice shall be provided— 
‘‘(A) upon request of the consumer; 
‘‘(B) whenever there is a change in owner-
ship of a residential mortgage loan; or 
‘‘(C) on a regular basis, not less than an-
nually. 
‘‘(f) RULES TO ESTABLISH PROCESS.—The Board 
shall promulgate rules to govern the rescission process es-
1517 
tablished for violations of subsections (a) and (b) of this 
section. Such rules shall provide that notice given to a 
servicer or holder is sufficient notice regardless of the 
identity of the party or the parties liable under this title.’’. 
SEC. 9105. DEFENSE TO FORECLOSURE. 
Section 129C of the Truth in Lending Act is amend-
ed by inserting after subsection (f) (as added by section 
9104) the following new subsections: 
‘‘(g) 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 ju-
dicial 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 foreclosure or counterclaim to such fore-
closure 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) and the consumer would have 
had a valid basis for such an action if it had 
been brought before the end of such period, the
1518 
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 assignee 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 designees, subject to the rights of the con-
sumer described in this subsection, to effect a rescis-
sion or cure.’’. 
SEC. 9106. ADDITIONAL STANDARDS AND REQUIREMENTS. 
(a) IN GENERAL.—Section 129C of the Truth in 
Lending Act is amended by inserting after subsection (g) 
(as added by section 9105) the following new subsections: 
‘‘(h) PROHIBITION ON CERTAIN PREPAYMENT PEN-
ALTIES.— 
‘‘(1) PROHIBITED ON CERTAIN LOANS.—A resi-
dential mortgage loan that is not a ‘qualified mort-
gage’ may not contain terms under which a con-
sumer must pay a prepayment penalty for paying all 
or part of the principal after the loan is con-
summated. For purposes of this subsection, a ‘quali-
1519 
fied mortgage’ may not include a residential mort-
gage loan that has an adjustable rate. 
‘‘(2) PHASED-OUT
PENALTIES
ON
QUALIFIED 
MORTGAGES.—A qualified mortgage (as defined in 
subsection (c)) may not contain terms under which 
a consumer must pay a prepayment penalty for pay-
ing all or part of the principal after the loan is con-
summated in excess of the following limitations: 
‘‘(A) During the 1-year period beginning 
on the date the loan is consummated, the pre-
payment 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 penalty 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 subpara-
graph (B), the prepayment penalty shall not ex-
ceed an amount equal to 1 percent of the out-
standing balance on the loan. 
‘‘(D) After the end of the 3-year period be-
ginning on the date the loan is consummated,
1520 
no prepayment penalty may be imposed on a 
qualified mortgage. 
‘‘(3) OPTION FOR NO PREPAYMENT PENALTY 
REQUIRED.—A creditor may not offer a consumer a 
residential mortgage loan product that has a prepay-
ment 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 mort-
gage loan product that does not have a prepayment 
penalty as a term of the loan. 
‘‘(i) 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 dis-
ability, credit unemployment or credit property insurance, 
or any other accident, loss-of-income, life or health insur-
ance, or any payments directly or indirectly for any debt 
cancellation or suspension agreement or contract, except 
that— 
‘‘(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
1521 
‘‘(2) this subsection shall not apply to credit 
unemployment insurance for which the unemploy-
ment insurance premiums are reasonable, the cred-
itor receives no direct or indirect compensation 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. 
‘‘(j) ARBITRATION.— 
‘‘(1) IN
GENERAL.—No residential mortgage 
loan and no extension of credit under an open end 
consumer credit plan secured by the principal dwell-
ing of the consumer, other than a reverse mortgage, 
may include terms which require arbitration or any 
other nonjudicial procedure as the method for resolv-
ing any controversy or settling any claims arising 
out of the transaction. 
‘‘(2) POST-CONTROVERSY AGREEMENTS.—Sub-
ject to paragraph (3), paragraph (1) shall not be 
construed as limiting the right of the consumer and 
the creditor, any assignee, or any securitizer to 
agree to arbitration or any other nonjudicial proce-
dure as the method for resolving any controversy at 
any time after a dispute or claim under the trans-
action arises.
1522 
‘‘(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 
consumer credit plan secured by the principal dwell-
ing of the consumer (other than a reverse mort-
gage), and no other agreement between the con-
sumer 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 ap-
propriate district court of the United States, or any 
other court of competent jurisdiction, pursuant to 
section 130 or any other provision of law, for dam-
ages or other relief in connection with any alleged 
violation of this section, any other provision of this 
title, or any other Federal law. 
‘‘(k) MORTGAGES
WITH
NEGATIVE
AMORTIZA-
TION.—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 dwell-
ing, other than a reverse mortgage, that provides or per-
mits a payment plan that may, at any time over the term 
of the extension of credit, result in negative amortization 
unless, before such transaction is consummated—
1523 
‘‘(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 
consumer’s equity in the dwelling or real prop-
erty; 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 documentation to dem-
onstrate that the consumer received homeownership 
counseling from organizations or counselors certified 
by the Secretary of Housing and Urban Develop-
ment as competent to provide such counseling.’’. 
(b) CONFORMING AMENDMENT RELATING TO EN-
FORCEMENT.—Section 108(a) of the Truth in Lending
1524 
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-DEFI-
CIENCY PROTECTION.—Section 129C of the Truth in 
Lending Act is amended by inserting after subsection (k) 
(as added by subsection (a) of this section) the following 
new subsection (and designated succeeding subsections ac-
cordingly): 
‘‘(l) PROTECTION AGAINST LOSS
OF ANTI-DEFI-
CIENCY PROTECTION.— 
‘‘(1) DEFINITION.—For purposes of this sub-
section, 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
1525 
upon consummation will be, subject to protection 
under an anti-deficiency law, the creditor or mort-
gage originator shall provide a written notice to the 
consumer describing the protection provided by the 
anti-deficiency law and the significance for the con-
sumer 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 con-
sumer, 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 origi-
nator shall provide a written notice to the consumer 
describing the protection provided by the anti-defi-
ciency 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 (l) (as added by 
subsection (c)) the following new subsection:
1526 
‘‘(m) 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 be-
comes a creditor— 
‘‘(1) the creditor’s policy regarding the accept-
ance of partial payments; and 
‘‘(2) if partial payments are accepted, how such 
payments will be applied to such mortgage and if 
such payments will be placed in escrow.’’. 
SEC. 9107. RULE OF CONSTRUCTION. 
Except as otherwise expressly provided in section 
129B or 129C of the Truth in Lending Act (as added by 
this subtitle), 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 per-
son under any other provision of the Truth in Lending 
Act or any other provision of Federal or State law. 
SEC. 9108. EFFECT ON STATE LAWS. 
(a) IN GENERAL.—Except as provided in subsection 
(b), section 129C(d) of the Truth in Lending Act (as 
added by section 9104) shall supersede any State law to 
the extent that it provides additional remedies against any 
assignee, securitizer, or securitization vehicle for a viola-
1527 
tion of subsection (a) or (b) of section 129C of such Act 
or any other State law the terms of which address the 
specific subject matter of subsection (a) (determination of 
ability to repay) or (b) (requirement of a net tangible ben-
efit) of section 129C of such Act, and the remedies de-
scribed in section 129C(d) shall constitute the sole rem-
edies against any assignee, securitizer, or securitization 
vehicle for such violations. 
(b) RULES OF CONSTRUCTION.—No provision of this 
section shall be construed as limiting— 
(1) the application of any State law, or the 
availability of remedies under such law, against a 
creditor for a particular residential mortgage loan 
regardless of whether such creditor also acts as an 
assignee, securitizer, or securitization vehicle for 
such loan; 
(2) the application of any State law, or the 
availability of remedies under such law, against an 
assignee, securitizer, or securitization vehicle under 
State law, other than a provision of such law the 
terms of which address the specific subject matter of 
subsection (a) (determination of ability to repay) or 
(b) (requirement of a net tangible benefit) of section 
129C of such Act;
1528 
(3)(A) the application of any State law, or the 
availability of remedies under such law, against an 
assignee, securitizer or securitization vehicle for its 
participation in or direction of the credit or under-
writing decisions of a creditor relating to the making 
of a residential mortgage loan; or 
(B) the ability of a consumer to assert any 
rights against or obtain any remedies from an as-
signee, securitizer or securitization vehicle with re-
spect to a residential mortgage loan as a defense to 
foreclosure under section 129C(g); 
(4) the availability of any equitable remedies, 
including injunctive relief, under State law; or 
(5) notwithstanding paragraph (2), the avail-
ability of any remedies under State law against any 
assignee, securitizer or securitization vehicle that— 
(A) are in addition to those remedies pro-
vided for in section 129C; and 
(B) were in effect on the date of enactment 
of this Act. 
SEC. 9109. REGULATIONS. 
Regulations required or authorized to be prescribed 
under this subtitle or the amendments made by this sub-
title—
1529 
(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. 
SEC. 9110. 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 
amended— 
(1) by striking ‘‘$100’’ and inserting ‘‘$200’’; 
(2) 
by 
striking 
‘‘$1,000’’ 
and 
inserting 
‘‘$2,000’’; and 
(3) 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 sub-
sequent 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
1530 
any other court of competent jurisdiction, before the 
end of the 3-year period beginning on the date of the 
occurrence of the violation.’’. 
SEC. 9111. LENDER RIGHTS IN THE CONTEXT OF BOR-
ROWER DECEPTION. 
Section 130 of the Truth in Lending Act is amended 
by adding at the end the following new subsection: 
‘‘(k) EXEMPTION FROM LIABILITY AND RESCISSION 
IN CASE OF BORROWER FRAUD OR DECEPTION.—In ad-
dition to any other remedy available by law or contract, 
no creditor, assignee, or securitizer shall be liable to an 
obligor under this section, nor shall it be subject to the 
right of rescission of any obligor under 129B, if such obli-
gor, or co-obligor, knowingly, or willfully and with actual 
knowledge furnished material information known to be 
false for the purpose of obtaining such residential mort-
gage loan.’’. 
SEC. 9112. SIX-MONTH NOTICE REQUIRED BEFORE RESET 
OF HYBRID ADJUSTABLE RATE MORTGAGES. 
(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 128 the following new section: 
‘‘§ 128A. Reset of hybrid adjustable rate mortgages 
‘‘(a) HYBRID ADJUSTABLE RATE MORTGAGES DE-
FINED.—For purposes of this section, the term ‘hybrid ad-
1531 
justable rate mortgage’ means a consumer credit trans-
action secured by the consumer’s principal residence with 
a fixed interest rate for an introductory period that ad-
justs or resets to a variable interest rate after such period. 
‘‘(b) NOTICE OF RESET AND ALTERNATIVES.—Dur-
ing the 1-month period that ends 6 months before the date 
on which the interest rate in effect during the introductory 
period of a hybrid adjustable rate mortgage adjusts or 
resets to a variable interest rate or, in the case of such 
an adjustment or resetting that occurs within the first 6 
months after consummation of such loan, at consumma-
tion, the creditor or servicer of such loan shall provide a 
written notice, separate and distinct from all other cor-
respondence to the consumer, that includes the following: 
‘‘(1) Any index or formula used in making ad-
justments to or resetting the interest rate and a 
source of information about the index or formula. 
‘‘(2) An explanation of how the new interest 
rate and payment would be determined, including an 
explanation of how the index was adjusted, such as 
by the addition of a margin. 
‘‘(3) A good faith estimate, based on accepted 
industry standards, of the creditor or servicer of the 
amount of the monthly payment that will apply after
1532 
the date of the adjustment or reset, and the assump-
tions on which this estimate is based. 
‘‘(4) A list of alternatives consumers may pur-
sue before the date of adjustment or reset, and de-
scriptions of the actions consumers must take to 
pursue these alternatives, including— 
‘‘(A) refinancing; 
‘‘(B) renegotiation of loan terms; 
‘‘(C) payment forbearances; and 
‘‘(D) pre-foreclosure sales. 
‘‘(5) The names, addresses, telephone numbers, 
and Internet addresses of counseling agencies or 
programs reasonably available to the consumer that 
have been certified or approved and made publicly 
available by the Secretary of Housing and Urban 
Development or a State housing finance authority 
(as defined in section 1301 of the Financial Institu-
tions Reform, Recovery, and Enforcement Act of 
1989). 
‘‘(6) The address, telephone number, and Inter-
net address for the State housing finance authority 
(as so defined) for the State in which the consumer 
resides.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for chapter 2 of the Truth in Lending Act is amended
1533 
by inserting after the item relating to section 128 the fol-
lowing new item: 
‘‘128A. Reset of hybrid adjustable rate mortgages.’’. 
SEC. 9113. REQUIRED DISCLOSURES. 
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 a variable rate residential 
mortgage loan for which an escrow or impound ac-
count will be established for the payment of all ap-
plicable 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 
monthly 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, 
insurance, and assessments.
1534 
‘‘(17) In the case of a residential mortgage 
loan, the aggregate amount of settlement charges for 
all settlement services provided in connection with 
the loan, the amount of charges that are included in 
the loan and the amount of such charges the bor-
rower must pay at closing, the approximate amount 
of the wholesale rate of funds in connection with the 
loan, and the aggregate amount of other fees or re-
quired payments in connection with the loan. 
‘‘(18) In the case of a residential mortgage 
loan, the aggregate amount of fees paid to the mort-
gage originator in connection with the loan, the 
amount of such fees paid directly by the consumer, 
and any additional amount received by the originator 
from the creditor. 
‘‘(19) In the case of a residential mortgage 
loan, the total amount of interest that the consumer 
will pay over the life of the loan as a percentage of 
the principal of the loan. Such amount shall be com-
puted assuming the consumer makes each monthly 
payment in full and on-time, and does not make any 
over-payments.’’.
1535 
SEC. 9114. DISCLOSURES REQUIRED IN MONTHLY STATE-
MENTS 
FOR 
RESIDENTIAL 
MORTGAGE 
LOANS. 
Section 128 of the Truth in Lending Act (15 U.S.C. 
1638) is amended by adding at the end the following new 
subsection: 
‘‘(f) PERIODIC
STATEMENTS
FOR
RESIDENTIAL 
MORTGAGE LOANS.— 
‘‘(1) IN GENERAL.—The creditor, assignee, or 
servicer with respect to any residential mortgage 
loan shall transmit to the obligor, for each billing 
cycle, a statement setting forth each of the following 
items, to the extent applicable, in a conspicuous and 
prominent manner: 
‘‘(A) The amount of the principal obliga-
tion under the mortgage. 
‘‘(B) The current interest rate in effect for 
the loan. 
‘‘(C) The date on which the interest rate 
may next reset or adjust. 
‘‘(D) The amount of any prepayment fee 
to be charged, if any. 
‘‘(E) A description of any late payment 
fees.
1536 
‘‘(F) A telephone number and electronic 
mail address that may be used by the obligor to 
obtain information regarding the mortgage. 
‘‘(G) The names, addresses, telephone 
numbers, and Internet addresses of counseling 
agencies or programs reasonably available to 
the consumer that have been certified or ap-
proved and made publicly available by the Sec-
retary of Housing and Urban Development or a 
State housing finance authority (as defined in 
section 1301 of the Financial Institutions Re-
form, Recovery, and Enforcement Act of 1989). 
‘‘(H) Such other information as the Board 
may prescribe in regulations. 
‘‘(2) DEVELOPMENT AND USE OF STANDARD 
FORM.—The Federal banking agencies shall jointly 
develop and prescribe a standard form for the disclo-
sure required under this subsection, taking into ac-
count that the statements required may be trans-
mitted in writing or electronically.’’. 
SEC. 9115. LEGAL ASSISTANCE FOR FORECLOSURE-RE-
LATED ISSUES. 
(a) ESTABLISHMENT.—The Secretary of Housing 
and Urban Development (hereafter in this section referred 
to as the ‘‘Secretary’’ shall establish a program for making
1537 
grants for providing a full range of foreclosure legal assist-
ance to low- and moderate-income homeowners and ten-
ants related to home ownership preservation, home fore-
closure prevention, and tenancy associated with home fore-
closure. 
(b) COMPETITIVE ALLOCATION.—The Secretary shall 
allocate amounts made available for grants under this sec-
tion to State and local legal organizations on the basis 
of a competitive process. For purposes of this subsection 
‘‘State and local legal organizations’’ are those State and 
local organizations whose primary business or mission is 
to provide legal assistance. 
(c) PRIORITY
TO CERTAIN AREAS.—In allocating 
amounts in accordance with subsection (b), the Secretary 
shall give priority consideration to State and local legal 
organizations that are operating in the 100 metropolitan 
statistical areas (as that term is defined by the Director 
of the Office of Management and Budget) with the highest 
home foreclosure rates. 
(d) LEGAL ASSISTANCE.— 
(1) IN GENERAL.—Any State or local legal or-
ganization that receives financial assistance pursu-
ant to this section may use such amounts only to as-
sist—
1538 
(A) homeowners of owner-occupied homes 
with mortgages in default, in danger of default, 
or subject to or at risk of foreclosure; and 
(B) tenants at risk of or subject to eviction 
as a result of foreclosure of the property in 
which such tenant resides. 
(2) COMMENCE
USE
WITHIN
DAYS.—Any 
State or local legal organization that receives finan-
cial assistance pursuant to this section shall begin 
using any financial assistance received under this 
section within 90 days after receipt of the assist-
ance. 
(3) PROHIBITION
ON
CLASS
ACTIONS.—No 
funds provided to a State or local legal organization 
under this section may be used to support any class 
action litigation. 
(4) LIMITATION ON LEGAL ASSISTANCE.—Legal 
assistance funded with amounts provided under this 
section shall be limited to mortgage-related default, 
eviction, or foreclosure proceedings, without regard 
to whether such foreclosure is judicial or nonjudicial. 
(5) EFFECTIVE
DATE.—Notwithstanding sec-
tion 9116, this subsection shall take effect on the 
date of the enactment of this Act.
1539 
(e) LIMITATION
ON
DISTRIBUTION
OF
ASSIST-
ANCE.— 
(1) IN GENERAL.—None of the amounts made 
available under this section shall be distributed to— 
(A) any organization which has been con-
victed for a violation under Federal law relating 
to an election for Federal office; or 
(B) any organization which employs appli-
cable individuals. 
(2) DEFINITION
OF
APPLICABLE
INDIVID-
UALS.—In this subsection, the term ‘‘applicable indi-
vidual’’ means an individual who— 
(A) is— 
(i) employed by the organization in a 
permanent or temporary capacity; 
(ii) contracted or retained by the or-
ganization; or 
(iii) acting on behalf of, or with the 
express or apparent authority of, the orga-
nization; and 
(B) has been convicted for a violation 
under Federal law relating to an election for 
Federal office. 
(f) AUTHORIZATION
OF APPROPRIATIONS.—There 
are authorized to be appropriated to the Secretary
1540 
$35,000,000 for each of fiscal years 2009 through 2012 
for grants under this section. 
SEC. 9116. EFFECTIVE DATE. 
The amendments made by this subtitle shall apply to 
transactions consummated on or after the effective date 
of the regulations specified in section 9109. 
SEC. 9117. REPORT BY THE GAO. 
(a) REPORT REQUIRED.—The Comptroller General 
shall conduct a study to determine the effects the enact-
ment of this Act will have on the availability and afford-
ability of credit for consumers, small businesses, home-
buyers, and mortgage lending, including the effect— 
(1) on the mortgage market for mortgages that 
are not within the safe harbor provided in the 
amendments made by this subtitle; 
(2) on the ability of prospective homebuyers to 
obtain financing; 
(3) on the ability of homeowners facing resets 
or adjustments to refinance—for example, do they 
have fewer refinancing options due to the unavail-
ability of certain loan products that were available 
before the enactment of this Act; 
(4) on minorities’ ability to access affordable 
credit compared with other prospective borrowers; 
(5) on home sales and construction;
1541 
(6) of extending the rescission right, if any, on 
adjustable rate loans and its impact on litigation; 
(7) of State foreclosure laws and, if any, an in-
vestor’s ability to transfer a property after fore-
closure; 
(8) of expanding the existing provisions of the 
Home Ownership and Equity Protection Act of 
1994; 
(9) of prohibiting prepayment penalties on 
high-cost mortgages; and 
(10) of establishing counseling services under 
the Department of Housing and Urban Development 
and offered through the Office of Housing Coun-
seling. 
(b) REPORT.—Before the end of the 1-year period be-
ginning on the date of the enactment of this Act, the 
Comptroller General shall submit a report to the Congress 
containing the findings and conclusions of the Comptroller 
General with respect to the study conducted pursuant to 
subsection (a). 
(c) EXAMINATION RELATED TO CERTAIN CREDIT 
RISK RETENTION PROVISIONS.—The report required by 
subsection (b) shall also include an analysis by the Comp-
troller General of the effect on the capital reserves and 
funding of lenders of credit risk retention provisions for
1542 
non-qualified mortgages, including an analysis of the ex-
ceptions 
and 
adjustments 
authorized 
in 
section 
129C(l)(3)(A) of the Truth in Lending Act and a rec-
ommendation on whether a uniform standard is needed. 
(d) ANALYSIS OF CREDIT RISK RETENTION PROVI-
SIONS.—The report required by subsection (b) shall also 
include— 
(1) an analysis by the Comptroller General of 
whether the credit risk retention provisions have sig-
nificantly reduced risks to the larger credit market 
of the repackaging and selling of securitized loans on 
a secondary market; and 
(2) recommendations to the Congress on adjust-
ments that should be made, or additional measures 
that should be undertaken. 
SEC. 9118. STATE ATTORNEY GENERAL ENFORCEMENT AU-
THORITY. 
Section 130(e) of the Truth in Lending Act (15 
U.S.C. 1640(e)) is amended by striking ‘‘section 129 may 
also’’ and inserting ‘‘section 129, 129B, or 129C of this 
Act may also’’.
1543 
Subtitle C—High-Cost Mortgages 
SEC. 9201. 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 para-
graph (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 trans-
action that is secured by the consumer’s prin-
cipal dwelling, other than a reverse mortgage 
transaction, 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 6.5 percentage points (8.5 per-
centage points, if the dwelling is per-
sonal property and the transaction is 
for less than $50,000) the average
1544 
prime offer rate, as defined in section 
129C(c)(2)(B), 
for 
a 
comparable 
transaction; 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 8.5 percent-
age points the average prime offer 
rate, 
as 
defined 
in 
section 
129C(c)(2)(B), 
for 
a 
comparable 
transaction; 
‘‘(ii) the total points and fees payable 
in connection with the transaction ex-
ceed— 
‘‘(I) in the case of a transaction 
for $20,000 or more, 5 percent of the 
total transaction amount; or 
‘‘(II) in the case of a transaction 
for less than $20,000, the lesser of 8 
percent 
of 
the 
total 
transaction 
amount or $1,000 (or such other dol-
lar amount as the Board shall pre-
scribe by regulation); or
1545 
‘‘(iii) the credit transaction documents 
permit the creditor to charge or collect pre-
payment fees or penalties more than 36 
months after the transaction closing or 
such fees or penalties exceed, in the aggre-
gate, more than 2 percent of the amount 
prepaid. 
‘‘(B) INTRODUCTORY RATES TAKEN INTO 
ACCOUNT.—For 
purposes 
of 
subparagraph 
(A)(i), the annual percentage rate of interest 
shall be determined based on the following in-
terest rate: 
‘‘(i) In the case of a fixed-rate trans-
action in which the annual percentage rate 
will not vary during the term of the loan, 
the interest rate in effect on the date of 
consummation of the transaction. 
‘‘(ii) In the case of a transaction in 
which the rate of interest varies solely in 
accordance with an index, the interest rate 
determined by adding the index rate in ef-
fect on the date of consummation of the 
transaction to the maximum margin per-
mitted at any time during the transaction 
agreement.
1546 
‘‘(iii) In the case of any other trans-
action in which the rate may vary at any 
time during the term of the loan for any 
reason, the interest charged on the trans-
action at the maximum rate that may be 
charged during the term of the trans-
action.’’. 
(b) ADJUSTMENT OF PERCENTAGE POINTS.—Section 
103(aa)(2) of the Truth in Lending Act (15 U.S.C. 
1602(aa)(2)) is amended by striking subparagraph (B) 
and inserting the following new subparagraph: 
‘‘(B) An increase or decrease under sub-
paragraph (A)— 
‘‘(i) may not result in the number of 
percentage points referred to in paragraph 
(1)(A)(i)(I) being less than 6 percentage 
points or greater than 10 percentage 
points; and 
‘‘(ii) may not result in the number of 
percentage points referred to in paragraph 
(1)(A)(i)(II) being less than 8 percentage 
points or greater than 12 percentage 
points.’’. 
(c) POINTS AND FEES DEFINED.—
1547 
(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 indi-
rectly by a consumer or creditor to a mortgage 
originator from any source, including a mort-
gage originator that originates a loan in the 
name of the creditor in a table-funded trans-
action;’’; 
(B) in subparagraph (C)(ii), by inserting 
‘‘except where applied to the charges set forth 
in section 106(e)(1) where a creditor may re-
ceive indirect compensation solely as a result of 
obtaining distributions of profits from an affili-
ated entity based on its ownership interest in 
compliance with section 8(c)(4) of the Real Es-
tate Settlement Procedures Act of 1974’’ before 
the semicolon 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
1548 
(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 
insurance 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
1549 
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 
following 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 col-
lected under the terms of the credit transaction, plus 
the minimum additional fees the consumer would be 
required to pay to draw down an amount equal to 
the total credit line.’’. 
(d) BONA
FIDE
DISCOUNT
LOAN
DISCOUNT 
POINTS.—Section 103 of the Truth in Lending Act (15 
U.S.C. 1602) is amended by inserting after subsection (cc) 
(as added by section 101) 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),
1550 
either the amounts described in paragraph (1) or (2) of 
the following paragraphs, but not both, shall be excluded: 
‘‘(1) Up to and including 2 bona fide discount 
points payable by the consumer in connection 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— 
‘‘(A) the required net yield for a 90-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; or 
‘‘(B) if secured by a personal property 
loan, the average rate on a loan in connection 
with which insurance is provided under title I 
of the National Housing Act (12 U.S.C. 1702 
et seq.). 
‘‘(2) Unless 2 bona fide discount points have 
been excluded under paragraph (1), up to and in-
cluding 1 bona fide discount point payable by the 
consumer in connection with the mortgage, but only 
if the interest rate from which the mortgage’s inter-
est rate will be discounted does not exceed by more 
than 2 percentage points—
1551 
‘‘(A) the required net yield for a 90-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; or 
‘‘(B) if secured by a personal property 
loan, the average rate on a loan in connection 
with which insurance is provided under title I 
of the National Housing Act (12 U.S.C. 1702 
et seq.). 
‘‘(3) For purposes of paragraph (1), the term 
‘bona fide discount points’ means loan discount 
points which are knowingly paid by the consumer 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. 
‘‘(4) Paragraphs (1) and (2) shall not apply to 
discount points used to purchase an interest rate re-
duction unless the amount of the interest rate reduc-
tion purchased is reasonably consistent with estab-
lished industry norms and practices for secondary 
mortgage market transactions.’’.
1552 
SEC. 9202. 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 hereby repealed. 
(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 mort-
gage may contain a scheduled payment that is more than 
twice as large as the average of earlier scheduled pay-
ments. This subsection shall not apply when the payment 
schedule is adjusted to the seasonal or irregular income 
of the consumer or in the case of a balance due under 
the customary terms of a reverse mortgage.’’. 
SEC. 9203. ADDITIONAL REQUIREMENTS FOR CERTAIN 
MORTGAGES. 
(a) ADDITIONAL
REQUIREMENTS
FOR
CERTAIN 
MORTGAGES.—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 fol-
lowing new subsections: 
‘‘(j) RECOMMENDED DEFAULT.—No creditor shall 
recommend or encourage default on an existing loan or
1553 
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; 
‘‘(B) unless the loan documents specifically 
authorize the charge or fee; 
‘‘(C) before the end of the 15-day period 
beginning 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 
payment 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 delin-
quency or insufficiency of payment is attributable to 
any late fee or delinquency charge assessed on any
1554 
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 applied to any past due principal balance, the 
consumer fails to make an installment payment and 
the consumer subsequently resumes making install-
ment payments but has not paid all past due install-
ments, the creditor may impose a separate late pay-
ment charge or fee for any principal due (without 
deduction due to late fees or related fees) until the 
default is cured. 
‘‘(l) ACCELERATION OF DEBT.—No high-cost mort-
gage may contain a provision which permits the creditor 
to accelerate the indebtedness, except when repayment of 
the loan has been accelerated by default in payment, or 
pursuant to a due-on-sale provision, or pursuant to a ma-
terial violation of some other provision of the loan docu-
ment unrelated to payment schedule. 
‘‘(m) RESTRICTION
ON FINANCING POINTS
AND 
FEES.—No creditor may directly or indirectly finance, in 
connection with any high-cost mortgage, any of the fol-
lowing:
1555 
‘‘(1) Any prepayment fee or penalty payable by 
the consumer in a refinancing transaction if the 
creditor or an affiliate of the creditor is the 
noteholder of the note being refinanced. 
‘‘(2) Any points or fees.’’. 
(b) PROHIBITIONS ON EVASIONS.—Section 129 of 
the Truth in Lending Act (15 U.S.C. 1639) is amended 
by inserting after subsection (p) (as so redesignated by 
subsection (a)(1)) the following new subsection: 
‘‘(q) PROHIBITIONS ON EVASIONS, STRUCTURING OF 
TRANSACTIONS, AND RECIPROCAL ARRANGEMENTS.—A 
creditor may not take any action in connection with a 
high-cost mortgage— 
‘‘(1) to structure a loan transaction as an open- 
end credit plan or another form of loan for the pur-
pose and with the intent of evading the provisions of 
this title; or 
‘‘(2) to divide any loan transaction into sepa-
rate parts for the purpose and with the intent of 
evading provisions of this title.’’. 
(c) MODIFICATION
OR DEFERRAL FEES.—Section 
129 of the Truth in Lending Act (15 U.S.C. 1639) is 
amended by inserting after subsection (q) (as added by 
subsection (b) of this section) the following new sub-
section:
1556 
‘‘(r) MODIFICATION AND DEFERRAL FEES PROHIB-
ITED.— 
‘‘(1) CREDITORS.—A creditor may not charge a 
consumer any fee to modify, renew, extend, or 
amend a high-cost mortgage, or to defer any pay-
ment due under the terms of such mortgage, unless 
the modification, renewal, extension or amendment 
results in a lower annual percentage rate on the 
mortgage for the consumer and then only if the 
amount of the fee is comparable to fees imposed for 
similar transactions in connection with consumer 
credit transactions that are secured by a consumer’s 
principal dwelling and are not high-cost mortgages. 
‘‘(2) THIRD PARTIES.—A third-party may not 
charge a consumer any fee to— 
‘‘(A) modify, renew, extend, or amend a 
high-cost mortgage, or defer any payment due 
under the terms of such mortgage; 
‘‘(B) negotiate with a creditor on behalf of 
a consumer, the modification, renewal, exten-
sion, or amendment of a high-cost mortgage; or 
‘‘(C) negotiate with a creditor on behalf of 
a consumer, the deferral of any payment due 
under the terms of such mortgage,
1557 
unless the modification renewal, extension or amend-
ment results in a significantly lower annual percent-
age rate on the mortgage, or a significant reduction 
in the amount of the outstanding principal on the 
mortgage, for the consumer and then only if the 
amount of the fee is comparable to fees imposed for 
similar transactions in connection with consumer 
credit transactions that are secured by a consumer’s 
principal dwelling and are not high-cost mortgages. 
‘‘(3) ENFORCEMENT.—Section 130 shall be ap-
plied for purposes of paragraph (2) by— 
‘‘(A) 
substituting 
‘third 
party’ 
for 
‘creditor’each place such term appears; and 
‘‘(B) substituting ‘any fee charged by a 
third party’ for ‘finance charge’ each place such 
term appears.’’. 
(d) PAYOFF STATEMENT.—Section 129 of the Truth 
in Lending Act (15 U.S.C. 1639) is amended by inserting 
after subsection (r) (as added by subsection (c) of this 
section) the following new subsection: 
‘‘(s) PAYOFF STATEMENT.— 
‘‘(1) FEES.— 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), no creditor or servicer may 
charge a fee for informing or transmitting to
1558 
any person the balance due to pay off the out-
standing balance on a high-cost mortgage. 
‘‘(B) TRANSACTION FEE.—When payoff in-
formation referred to in subparagraph (A) is 
provided by facsimile transmission or by a cou-
rier service, a creditor or servicer may charge a 
processing fee to cover the cost of such trans-
mission or service in an amount not to exceed 
an amount that is comparable to fees imposed 
for similar services provided in connection with 
consumer credit transactions that are secured 
by the consumer’s principal dwelling and are 
not high-cost mortgages. 
‘‘(C) FEE DISCLOSURE.—Prior to charging 
a transaction fee as provided in subparagraph 
(B), a creditor or servicer shall disclose that 
payoff balances are available for free pursuant 
to subparagraph (A). 
‘‘(D) MULTIPLE REQUESTS.—If a creditor 
or servicer has provided payoff information re-
ferred to in subparagraph (A) without charge, 
other than the transaction fee allowed by sub-
paragraph (B), on 4 occasions during a cal-
endar year, the creditor or servicer may there-
after charge a reasonable fee for providing such
1559 
information during the remainder of the cal-
endar year. 
‘‘(2) PROMPT DELIVERY.—Payoff balances shall 
be provided within 5 business days after receiving a 
request by a consumer or a person authorized by the 
consumer to obtain such information. 
‘‘(3) SERVICES
CONSIDERED
ASSIGNEE.—For 
the purposes of this subsection, a servicer shall be 
considered an assignee under the Truth in Lending 
Act.’’. 
(e) PRE-LOAN COUNSELING REQUIRED.—Section 
129 of the Truth in Lending Act (15 U.S.C. 1639) is 
amended by inserting after subsection (s) (as added by 
subsection (d) of this section) the following new sub-
section: 
‘‘(t) PRE-LOAN COUNSELING.— 
‘‘(1) IN GENERAL.—A creditor may not extend 
credit to a consumer under a high-cost mortgage 
without first receiving certification from a counselor 
that is approved by the Secretary of Housing and 
Urban Development, or at the discretion of the Sec-
retary, a State housing finance authority, that the 
consumer has received counseling on the advisability 
of the mortgage. Such counselor shall not be em-
1560 
ployed by the creditor or an affiliate of the creditor 
or be affiliated with the creditor. 
‘‘(2) DISCLOSURES REQUIRED PRIOR TO COUN-
SELING.—No counselor may certify that a consumer 
has received counseling on the advisability of the 
high-cost mortgage unless the counselor can verify 
that the consumer has received each statement re-
quired (in connection with such loan) by this section 
or the Real Estate Settlement Procedures Act of 
1974 with respect to the transaction. 
‘‘(3) REGULATIONS.—The Board may prescribe 
such regulations as the Board determines to be ap-
propriate to carry out the requirements of paragraph 
(1).’’. 
(f) FLIPPING PROHIBITED.—Section 129 of the 
Truth in Lending Act (15 U.S.C. 1639) is amended by 
inserting after subsection (t) (as added by subsection (e)) 
the following new subsection: 
‘‘(u) FLIPPING.— 
‘‘(1) IN GENERAL.—No creditor may knowingly 
or intentionally engage in the unfair act or practice 
of flipping in connection with a high-cost mortgage. 
‘‘(2) FLIPPING DEFINED.—For purposes of this 
subsection, the term ‘flipping’ means the making of 
a loan or extension of credit in the form a high-cost
1561 
mortgage to a consumer which refinances an existing 
mortgage when the new loan or extension of credit 
does not have reasonable, net tangible benefit (as de-
termined in accordance with regulations prescribed 
under section 129C(b)) to the consumer considering 
all of the circumstances, including the terms of both 
the new and the refinanced loans or credit, the cost 
of the new loan or credit, and the consumer’s cir-
cumstances. 
‘‘(v) CORRECTIONS
AND UNINTENTIONAL VIOLA-
TIONS.—A creditor or assignee in a high cost loan who, 
when acting in good faith, fails to comply with any re-
quirement under this section will not be deemed to have 
violated such requirement if the creditor or assignee estab-
lishes that either— 
‘‘(1) within 30 days of the loan closing and 
prior to the institution of any action, the consumer 
is notified of or discovers the violation, appropriate 
restitution is made, and whatever adjustments are 
necessary are made to the loan to either, at the 
choice of the consumer— 
‘‘(A) make the loan satisfy the require-
ments of this chapter; or 
‘‘(B) in the case of a high-cost mortgage, 
change the terms of the loan in a manner bene-
1562 
ficial to the consumer so that the loan will no 
longer be a high-cost mortgage; or 
‘‘(2) within 60 days of the creditor’s discovery 
or receipt of notification of an unintentional viola-
tion or bona fide error as described in subsection (c) 
and prior to the institution of any action, the con-
sumer is notified of the compliance failure, appro-
priate restitution is made, and whatever adjustments 
are necessary are made to the loan to either, at the 
choice of the consumer— 
‘‘(A) make the loan satisfy the require-
ments of this chapter; or 
‘‘(B) in the case of a high-cost mortgage, 
change the terms of the loan in a manner bene-
ficial so that the loan will no longer be a high- 
cost mortgage.’’. 
SEC. 9204. REGULATIONS. 
(a) IN GENERAL.—The Board of Governors of the 
Federal Reserve System shall publish regulations imple-
menting this subtitle and the amendments made by this 
subtitle in final form before the end of the 6-month period 
beginning on the date of the enactment of this Act. 
(b) CONSUMER MORTGAGE EDUCATION.— 
(1) REGULATIONS.—The Board of Governors of 
the Federal Reserve System may prescribe regula-
1563 
tions requiring or encouraging creditors to provide 
consumer mortgage education to prospective cus-
tomers or direct such customers to qualified con-
sumer mortgage education or counseling programs 
in the vicinity of the residence of the consumer. 
(2) COORDINATION WITH STATE LAW.—No re-
quirement established by the Board of Governors of 
the Federal Reserve System pursuant to paragraph 
(1) shall be construed as affecting or superseding 
any requirement under the law of any State with re-
spect to consumer mortgage counseling or education. 
SEC. 9205. EFFECTIVE DATE. 
The amendments made by this subtitle shall take ef-
fect at the end of the 6-month period beginning on the 
date of the enactment of this Act and shall apply to mort-
gages referred to in section 103(aa) of the Truth in Lend-
ing Act (15 U.S.C. 1602(aa)) for which an application is 
received by the creditor after the end of such period. 
Subtitle D—Office of Housing 
Counseling 
SEC. 9301. SHORT TITLE. 
This subtitle may be cited as the ‘‘Expand and Pre-
serve Home Ownership Through Counseling Act’’.
1564 
SEC. 9302. ESTABLISHMENT OF OFFICE OF HOUSING COUN-
SELING. 
Section 4 of the Department of Housing and Urban 
Development Act (42 U.S.C. 3533) is amended by adding 
at the end the following new subsection: 
‘‘(g) OFFICE OF HOUSING COUNSELING.— 
‘‘(1) ESTABLISHMENT.—There is established, 
in the Department, the Office of Housing Coun-
seling. 
‘‘(2) DIRECTOR.—There is established the posi-
tion of Director of Housing Counseling. The Direc-
tor shall be the head of the Office of Housing Coun-
seling and shall be appointed by, and shall report to, 
the Secretary. Such position shall be a career-re-
served position in the Senior Executive Service. 
‘‘(3) FUNCTIONS.— 
‘‘(A) IN
GENERAL.—The Director shall 
have primary responsibility within the Depart-
ment for all activities and matters relating to 
homeownership counseling and rental housing 
counseling, including— 
‘‘(i) research, grant administration, 
public outreach, and policy development re-
lating to such counseling; and 
‘‘(ii) establishment, coordination, and 
administration of all regulations, require-
1565 
ments, standards, and performance meas-
ures under programs and laws adminis-
tered by the Department that relate to 
housing counseling, homeownership coun-
seling (including maintenance of homes), 
mortgage-related 
counseling 
(including 
home equity conversion mortgages and 
credit protection options to avoid fore-
closure), and rental housing counseling, in-
cluding the requirements, standards, and 
performance measures relating to housing 
counseling. 
‘‘(B) SPECIFIC FUNCTIONS.—The Director 
shall carry out the functions assigned to the Di-
rector and the Office under this section and any 
other provisions of law. Such functions shall in-
clude establishing rules necessary for— 
‘‘(i) the counseling procedures under 
section 106(g)(1) of the Housing and 
Urban Development Act of 1968 (12 
U.S.C. 1701x(h)(1)); 
‘‘(ii) carrying out all other functions 
of the Secretary under section 106(g) of 
the Housing and Urban Development Act 
of 1968, including the establishment, oper-