I
107TH CONGRESS
2D SESSION
H. R. 4818
To amend the Real Estate Settlement Procedures Act of 1974 and the
Truth in Lending Act to make the residential mortgage process more
understandable, fair, and competitive.
IN THE HOUSE OF REPRESENTATIVES
MAY 22, 2002
Mr. LAFALCE introduced the following bill; which was referred to the
Committee on Financial Services
A BILL
To amend the Real Estate Settlement Procedures Act of
1974 and the Truth in Lending Act to make the residen-
tial mortgage process more understandable, fair, and
competitive.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Mortgage Loan Con-
sumer Protection Act’’.
SEC. 2. DISCLOSURE SIMPLIFICATION AND IMPROVEMENT.
(a) MORE
ACCURATE
FINANCE
CHARGE.—Sub-
section (e) of section 106 of the Truth in Lending Act
(15 U.S.C. 1605(e)) is amended to read as follows:
‘‘(e) EXCLUSION OF CERTAIN ESCROWS.—Escrows
for future payments of taxes and insurance shall not be
included in the computation of the finance charge with re-
spect to any extension of credit secured by an interest in
real property.’’.
(b) MORE UNDERSTANDABLE DISCLOSURE STATE-
MENTS.—Section 4(a) of the Real Estate Settlement Pro-
cedures Act of 1974 (12 U.S.C. 2603(a)) is amended—
(1) by inserting ‘‘(1)’’ after ‘‘(a)’’; and
(2) by adding at the end the following new
paragraph:
‘‘(2) In developing and prescribing such form, the
Secretary shall clearly delineate, and provide a box for to-
tals for, the following 3 types of charges:
‘‘(A) ‘Closing Costs’, which shall include all
noninterest costs that the consumer is required to
pay as a condition for receiving the extension of
credit. Fees paid to or collected by the lender may
be itemized by purpose, but must also be totaled up
and shown separately under the heading ‘Total
Lender Fees’.
‘‘(B) ‘Prepaid Items’, which shall include pre-
paid interest, funds deposited into any escrow ac-
count, and any other items required by the lender to
be paid in advance.
‘‘(C) ‘All Other Costs Paid At Closing’, which
shall include all costs paid at the time of closing that
are neither Closing Costs nor Prepaid Items.’’.
(c) HARMONIZATION OF GOOD FAITH ESTIMATE AND
SETTLEMENT STATEMENT.—Section 5(c) of the Real Es-
tate Settlement Procedures Act of 1974 (12 U.S.C.
2604(c)) is amended—
(1) by inserting ‘‘(1)’’ after ‘‘(c)’’; and
(2) by adding at the end the following new
paragraph:
‘‘(2) The Secretary shall, to the maximum extent,
harmonize the terms and forms for the good faith estimate
required under this subsection and the final settlement
statement required under section 4, which shall include
delineating, on the good faith estimate, the 3 types of
charges specified under section 4(a)(2).’’.
SEC. 3. ADVANCE AVAILABILITY OF FINAL SETTLEMENT
STATEMENT.
Section 4(b) of the Real Estate Settlement Proce-
dures Act of 1974 (12 U.S.C. 2603(b)) is amended—
(1) by inserting ‘‘(1)’’ after ‘‘(b)’’;
(2) in the first sentence, by striking ‘‘at or be-
fore settlement’’ and inserting ‘‘at least 2 days be-
fore settlement’’; and
(3) by striking the last sentence.
SEC. 4. PROHIBITION AGAINST MARKUPS AND UNDIS-
CLOSED LENDER FEES.
(a) REQUIREMENT
TO
DISCLOSE
ALL
LENDER
FEES.—Section 4 of the Real Estate Settlement Proce-
dures Act of 1974 (12 U.S.C. 2603) is amended by adding
at the end the following new subsection:
‘‘(c)(1) All fees paid to or collected by a lender in
connection with a federally related mortgage loan shall be
clearly disclosed as being paid to such lender on the settle-
ment statement for such mortgage loan.’’.
(b) PROHIBITION
OF MARKUPS
AND UNEARNED
FEES.—Section 8(b) of the Real Estate Settlement Proce-
dures Act of 1974 (12 U.S.C. 2607(b)) is amended by in-
sert after the period at the end the following: ‘‘This sub-
section prohibits markups of the cost of services performed
or goods provided by another settlement service provider,
and fees charged or collected by one settlement service
provider where no, nominal, or duplicative work is done.’’.
SEC. 5. ENHANCED CONSUMER ASSISTANCE.
Section 5(b) of the Real Estate Settlement Proce-
dures Act of 1974 (12 U.S.C. 2604(b)) is amended—
(1) in paragraph (4) by striking ‘‘and’’ at the
end;
(2) in paragraph (5), by striking the period at
the end and inserting ‘‘; and’’; and
(3) by adding at the end the following new
paragraphs:
‘‘(6) an explanation of the issues regarding the
cost-efficiency of refinancing a mortgage loan, in-
cluding the tradeoffs between mortgage interest
rates and closing costs (including tax consider-
ations), and other factors that may affect a mortga-
gor’s decision to refinance; and
‘‘(7) an explanation that some lenders may
offer the mortgagor the option to pay some fees up-
front or in the form of a higher mortgage interest
rate, and assistance in evaluating this type of op-
tion.’’.
SEC. 6. ADDITIONAL ESCROW ACCOUNT PROTECTIONS.
Section 10 of the Real Estate Settlement Procedures
Act of 1974 (12 U.S.C. 2609) is amended by adding at
the end the following new subsections:
‘‘(e) LIABILITY OF SERVICERS.—A servicer (as such
term is defined in section 6(i)) for a federally related mort-
gage loan, in connection with which an escrow account is
established, shall be liable to the borrower for any fees,
penalties, and other charges that arise out of the servicer’s
failure to make timely payment of taxes, insurance pre-
miums, or other charges that are required to be paid out
of such escrow account.
‘‘(f) 
FORCE-PLACED
HAZARD
INSURANCE.—A
servicer for a federally related mortgage loan may not re-
ceive any portion of any charge, rebate, or other fee associ-
ated with any force-placed hazard insurance in connection
with such loan that arises from the servicer’s failure to
make timely payment of insurance premiums.
‘‘(g) TIMELY CREDITING OF ESCROW FUNDS.—
‘‘(1) REQUIREMENT.—The servicer for a feder-
ally related mortgage loan shall return to the bor-
rower under such loan any amounts remaining in
any escrow account established for such loan, as fol-
lows:
‘‘(A) NOTICE OF PAYMENT.—If the bor-
rower provides written notice to the servicer of
intent to pay a loan in full not less than 7 days
before such payment, such amounts shall be re-
turned not later than the date that such loan
is paid in full. Such return of funds may be in
the form of an offset against the amount re-
quired to pay the loan in full.
‘‘(B) GENERAL
DEADLINE.—In no case
shall such amounts be returned later than 21
days after the date that the loan is paid in full.
‘‘(2) LIABILITY FOR FAILURE TO RETURN ES-
CROW AMOUNTS.—A servicer who fails to comply
with the requirements under paragraph (1) shall be
liable to the borrower under the loan for the
unreturned amount, plus a penalty equal to the sum
of 20 percent of the unreturned amount plus 1 per-
cent for each month that such amounts remain
unreturned to the borrower.’’.
SEC. 7. ENFORCEMENT OF RESPA CONSUMER PROTEC-
TIONS.
(a) UNIFORM
ENFORCEMENT
PROVISIONS.—The
Real Estate Settlement Procedures Act of 1974 is amend-
ed by inserting after section 12 (12 U.S.C. 2610) the fol-
lowing new section:
‘‘SEC. 13. DAMAGES AND COSTS.
‘‘Whoever fails to comply with any provision of sec-
tion 4, 5, 6, or 10(c) shall be liable to the borrower for
each such failure in an amount equal to the sum of the
following:
‘‘(1) ACTUAL DAMAGES.—Any actual damages
to the borrower as a result of such failure.
‘‘(2) ADDITIONAL
DAMAGES.—Any additional
damages, as the court may allow, in an amount not
to exceed $2,000 for each loan.
‘‘(3) COSTS.—In the case of any successful ac-
tion for damages pursuant to this section, the costs
of the action, together with any attorneys’ fees in-
curred in connection with such action as the court
may determine to be reasonable under the cir-
cumstances.’’.
(b) SUPERSEDED ENFORCEMENT PROVISIONS.—The
Real Estate Settlement Procedures Act of 1974 is
amended—
(1) in section 6 (12 U.S.C. 2605), by striking
subsection (f); and
(2) in section 10 (12 U.S.C. 2609), by striking
subsection (d).
(c) JURISDICTION OF COURTS AND STATUTE OF LIM-
ITATIONS.—Section 16 of the Real Estate Settlement Pro-
cedures Act of 1974 (12 U.S.C. 2614) is amended—
(1) by striking ‘‘, or 9’’ and inserting ‘‘, 9, 10,
or 13’’; and
(2) by striking ‘‘in the case of a violation of sec-
tion 6’’ and all that follows through ‘‘may be
brought within 3 years’’.
SEC. 8. EFFECTIVE DATE.
The amendments made by this Act shall be made and
shall apply upon the expiration of the 180-day period be-
ginning on the date of the enactment of this Act.
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