I 
111TH CONGRESS 
1ST SESSION H. R. 1782 
To amend the Truth in Lending Act to protect consumers from certain 
practices in connection with the origination of consumer credit trans-
actions secured by the consumer’s principal dwelling, and for other pur-
poses. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 30, 2009 
Mr. ELLISON introduced the following bill; which was referred to the 
Committee on Financial Services 
A BILL 
To amend the Truth in Lending Act to protect consumers 
from certain practices in connection with the origination 
of consumer credit transactions secured by the con-
sumer’s principal dwelling, and for other purposes. 
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 ‘‘Fairness for Home-
owners Act of 2009’’. 
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SEC. 2. ORIGINATIONS OF CONSUMER CREDIT TRANS-
ACTIONS SECURED BY THE CONSUMER’S 
PRINCIPAL DWELLING. 
(a) IN GENERAL.—The Truth in Lending Act (15 
U.S.C. 1601 et seq.) is amended by inserting after section 
129A the following new section: 
‘‘SEC. 129B. ORIGINATIONS OF CONSUMER CREDIT TRANS-
ACTIONS SECURED BY THE CONSUMER’S 
PRINCIPAL DWELLING. 
‘‘(a) DEFINITIONS.—For purposes of this section, the 
following definitions shall apply: 
‘‘(1) FULLY INDEXED RATE.—The term ‘fully 
indexed rate’ means the index rate prevailing at the 
time a consumer credit transaction secured by a con-
sumer’s principal dwelling is originated, plus the 
margin that will apply after the expiration of an in-
troductory interest rate. 
‘‘(2) MORTGAGE BROKER.—The term ‘mortgage 
broker’ means any person who is defined as a mort-
gage broker under applicable State law. 
‘‘(b) REQUIREMENTS FOR ORIGINATORS.— 
‘‘(1) ABILITY TO PAY.— 
‘‘(A) IN GENERAL.—No creditor or mort-
gage broker may make, provide, or arrange for 
any consumer credit transaction secured by a 
consumer’s principal dwelling without verifying 
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the consumer’s reasonable ability to pay the 
scheduled payments of the following, as applica-
ble: 
‘‘(i) Principal. 
‘‘(ii) Interest. 
‘‘(iii) Real estate taxes. 
‘‘(iv) Homeowner’s insurance, assess-
ments, and mortgage insurance premiums. 
‘‘(B) VARIABLE INTEREST RATE.—In the 
case of any consumer credit transaction secured 
by a consumer’s principal dwelling for which 
the applicable annual percentage rate may vary 
over the life of the credit, the reasonable ability 
to pay shall be determined, for purposes of this 
paragraph, on the basis of a fully indexed rate 
plus 200 basis points and a repayment schedule 
which achieves full amortization over the life of 
the extension of credit. 
‘‘(C) VERIFICATION OF CONSUMER INCOME 
AND FINANCIAL RESOURCES.— 
‘‘(i) IN GENERAL.—In the case of any 
consumer credit transaction secured by a 
consumer’s principal dwelling, the income 
and financial resources of the consumer 
shall be verified for purposes of this para-
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graph by tax returns, payroll receipts, 
bank records, or other similarly reliable 
documents. 
‘‘(ii) CONSUMER STATEMENT INSUF-
FICIENT.—A statement by a consumer of 
the consumer’s income or financial re-
sources shall not be sufficient to establish 
the existence of any income or financial re-
sources when verifying the reasonable abil-
ity of the consumer to repay any consumer 
credit transaction secured by the con-
sumer’s principal dwelling, for purposes of 
this paragraph. 
‘‘(D) 
OTHER
CRITERIA.—Creditors 
or 
mortgage brokers may rely on additional cri-
teria other than a consumer’s income and fi-
nancial resources to establish the reasonable 
ability of the consumer to repay any consumer 
credit transaction secured by the consumer’s 
principal dwelling, to the extent such other cri-
teria are also verified through reasonably reli-
able methods and documentation. 
‘‘(E) EQUITY IN DWELLING NOT TO BE 
TAKEN INTO ACCOUNT.—The consumer’s equity 
in the principal dwelling that secures or would 
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secure the consumer credit transaction may not 
be used to establish the ability to make the pay-
ments described in subparagraph (A) with re-
spect to such transaction. 
‘‘(2) PROHIBITION ON STEERING.— 
‘‘(A) IN GENERAL.—In connection with a 
home mortgage loan, a mortgage broker or 
creditor may not— 
‘‘(i) steer, counsel, or direct a con-
sumer to rates, charges, principal amount, 
or prepayment terms that are more expen-
sive for that which the consumer qualifies; 
or 
‘‘(ii) make, provide, or arrange for 
any consumer credit transaction secured by 
a consumer’s principal dwelling that is 
more expensive than that for which the 
consumer qualifies. 
‘‘(B) DUTIES TO CONSUMERS.—If unable 
to suggest, offer, or recommend to a consumer 
a home loan that is not more expensive than 
that for which the consumer qualifies, a mort-
gage originator shall— 
‘‘(i) based on the information reason-
ably available and using the skill, care, and 
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diligence reasonably expected for a mort-
gage originator, originate or otherwise fa-
cilitate a suitable home mortgage loan by 
another creditor to a consumer, if per-
mitted by and in accordance with all other-
wise applicable law; or 
‘‘(ii) disclose to a consumer— 
‘‘(I) that the creditor does not 
offer a home mortgage loan that is 
not more expensive than a loan for 
which the consumer qualifies, but that 
other creditors may offer such a loan; 
and 
‘‘(II) the reasons that the prod-
ucts and services offered by the mort-
gage originator are not available to or 
reasonably advantageous for the con-
sumer. 
‘‘(C) PROHIBITED CONDUCT.—In connec-
tion with a home mortgage loan, a mortgage 
originator may not— 
‘‘(i) mischaracterize the credit history 
of a consumer or the home loans available 
to a consumer; 
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‘‘(ii) mischaracterize or suborn the 
mischaracterization of the appraised value 
of the property securing the extension of 
credit; and 
‘‘(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, discourage a con-
sumer from seeking a home mortgage loan 
from another creditor or with another 
mortgage originator. 
‘‘(3) PROHIBITION
ON
PREPAYMENT
PEN-
ALTIES.—In the case of any consumer credit trans-
action secured by a consumer’s principal dwelling, 
the transaction may not contain terms under which 
a consumer is required to pay a prepayment penalty 
for paying all or part of the principal before the date 
on which the principal is due. 
‘‘(c) LIMITATION ON FINANCED POINTS, CHARGES, 
AND FEES.— 
‘‘(1) IN GENERAL.—No creditor or mortgage 
broker may, in connection with any consumer credit 
transaction secured by the consumer’s principal 
dwelling, include in the principal amount of such 
transaction any portion of any qualified finance 
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charge in excess of the amount which is equal to 5 
percent of the principal amount of the transaction. 
‘‘(2) DEFINITIONS.—For purposes of this sub-
section, the following definitions shall apply: 
‘‘(A) QUALIFIED FINANCE CHARGE.—The 
term ‘qualified finance charge’ means the sum 
of— 
‘‘(i) the finance charge as determined 
under section 103(aa)(4); and 
‘‘(ii) all compensation paid to a mort-
gage broker from any source in connection 
with this transaction. 
‘‘(B) 
PRINCIPAL
AMOUNT.—The 
term 
‘principal amount’ means— 
‘‘(i) in the case of any consumer cred-
it transaction under an open end credit 
plan secured by the consumer’s principal 
dwelling, the maximum amount of credit 
that may be extended under the terms of 
such plan as determined without taking 
into account any amount included in deter-
mining the finance charge under section 
106; and 
‘‘(ii) in the case of any other con-
sumer credit transaction secured by a con-
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sumer’s 
principal 
dwelling, 
the 
face 
amount of the obligation on the note. 
‘‘(3) PROHIBITION
ON
EXCESSIVE
FINANCE 
CHARGES.— 
‘‘(A) LIMITATION BASED ON AMOUNT OF 
TRANSACTION.—No person may, in connection 
with any consumer credit transaction secured 
by the consumer’s principal dwelling, impose or 
receive any amount included in determining the 
qualified finance charge for such transaction 
that exceeds the amount which is equal to 5 
percent of the principal amount of the trans-
action; 
‘‘(B) LIMITATION ON FEE FOR PROVIDING 
LESS BENEFICIAL TERMS FOR CONSUMER.—Ex-
cept as provided in subparagraph (c), no person 
may provide and no mortgage originator may 
receive, directly or indirectly, any compensation 
for originating a consumer credit transaction 
secured by a consumer’s principal dwelling that 
is more costly than that for which the consumer 
qualifies, or that is based on, or varies with, the 
terms of any home mortgage loan (other than 
the amount of loan principal.); 
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‘‘(C) EXCEPTION.—Notwithstanding sub-
paragraph (B), a mortgage broker may receive 
compensation in the form of an increased rate, 
but only if— 
‘‘(i) the mortgage broker receives no 
other compensation, however denominated, 
directly or indirectly, from the consumer, 
creditor, or other mortgage originator; 
‘‘(ii) the loan does not include dis-
count points, origination points, or rate re-
duction points, however denominated, or 
any payment reduction fee, however de-
nominated; 
‘‘(iii) the loan does not include a pre-
payment penalty; and 
‘‘(iv) there are no other closing costs 
associated with the loan, except for fees to 
government officials or amounts to fund 
escrow accounts for taxes and insurance. 
‘‘(d) MORTGAGE BROKER DUTIES.— 
‘‘(1) IN GENERAL.—Any mortgage broker act-
ing to obtain or arrange for any consumer credit 
transaction secured by the consumer’s principal 
dwelling shall owe a duty to the borrower to comply 
with the following duties: 
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‘‘(A) Mortgage brokers shall act in the 
consumer’s best interest and in the utmost good 
faith toward each consumer and shall not com-
promise a consumer’s right or interest in favor 
of another’s right or interest, including a right 
or interest of the mortgage broker. 
‘‘(B) A mortgage broker shall not accept, 
give, or charge any undisclosed compensation or 
realize any undisclosed remuneration, either 
through direct or indirect means, that inures to 
the benefit of the mortgage broker on an ex-
penditure made for the consumer. 
‘‘(C) Mortgage brokers shall carry out all 
lawful instructions given by the consumer. 
‘‘(D) Mortgage brokers shall disclose to 
consumers all material facts of which the mort-
gage broker has knowledge which might reason-
ably affect the consumer’s rights, interests, or 
ability to receive the consumer’s intended ben-
efit from the consumer credit transaction, but 
not facts which are reasonably susceptible to 
the knowledge of the consumer. 
‘‘(E) Mortgage brokers shall use reason-
able care in performing duties. 
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‘‘(F) Mortgage brokers shall account to a 
consumer for all the consumer’s money and 
property received as agent. 
‘‘(2) SCOPE.—The duties of the mortgage 
broker to the consumer apply when the mortgage 
broker is acting in the capacity of mortgage broker 
providing mortgage brokerage services with respect 
to any consumer credit transaction secured by the 
consumer’s principal dwelling for which the broker is 
not the creditor. 
‘‘(3) RULES OF CONSTRUCTION.— 
‘‘(A) FEES FOR SERVICES RENDERED.— 
No provision of this subsection shall be con-
strued as prohibiting a mortgage broker from 
contracting for or collecting a fee for services 
actually rendered to the extent the fee has been 
disclosed to the consumer in advance of the pro-
vision of such services and complies with sub-
section (c)(3). 
‘‘(B) DUTY
OF
BROKER.—Except as re-
quired by subsection (b)(2), no provision of this 
subsection shall be construed as requiring a 
mortgage broker— 
‘‘(i) to obtain or arrange for any con-
sumer credit transaction secured by the 
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consumer’s principal dwelling on behalf of 
a consumer that contains terms or condi-
tions not available to the mortgage broker 
in the mortgage broker’s usual course of 
business; or 
‘‘(ii) to obtain or arrange for any con-
sumer credit transaction secured by the 
consumer’s principal dwelling from a cred-
itor with whom the mortgage broker does 
not have a business relationship. 
‘‘(e) INDEPENDENT VERIFICATION
OF CONSUMER 
COUNSELING BEFORE REFINANCING SPECIAL MORT-
GAGES.— 
‘‘(1) IN GENERAL.—No creditor or mortgage 
broker may make, provide, or arrange for any con-
sumer credit transaction secured by the consumer’s 
principal dwelling all or a portion of the proceeds of 
which are used to fully or partially pay off a special 
mortgage unless the borrower has obtained a written 
certification from an authorized independent loan 
counselor that the borrower has received counseling 
on the advisability of the transaction. 
‘‘(2) DEFINITIONS.—For purposes of this sec-
tion, the following definitions shall apply: 
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‘‘(A) SPECIAL MORTGAGE.—The term ‘spe-
cial mortgage’ means any consumer credit 
transaction secured by the consumer’s principal 
dwelling that was originated, subsidized, fund-
ed, or guaranteed by or through a State, tribal, 
or local government, or nonprofit organization, 
that bears 1 or more of the following non-
standard payment terms which substantially 
benefit the consumer: 
‘‘(i) Payments vary with income. 
‘‘(ii) Payments of principal or interest 
are not required or can be deferred under 
specified conditions. 
‘‘(iii) Principal or interest is forgiv-
able under specified conditions. 
‘‘(iv) Either no interest or an annual 
interest rate of 2 percent or less is charged 
in connection with the loan. 
‘‘(B) AUTHORIZED
LOAN
COUNSELOR.— 
The term ‘authorized independent loan coun-
selor’ means any nonprofit, third-party indi-
vidual or organization providing homebuyer 
education 
programs, 
foreclosure 
prevention 
services, mortgage loan counseling, or credit 
counseling that is certified by the Secretary of 
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Housing and Urban Development, or certified 
by any State housing agency or nonprofit orga-
nization designated by such Secretary, for such 
purposes. 
‘‘(f) MINIMUM
FINANCIAL
REQUIREMENTS
FOR 
MORTGAGE BROKERS.—No mortgage broker may obtain 
or arrange for any consumer credit transaction secured 
by the consumer’s principal dwelling unless at all times 
the mortgage broker— 
‘‘(1) maintains a minimum net worth, net of in-
tangibles, of at least $500,000, as determined in ac-
cordance with generally accepted accounting prin-
ciples; or 
‘‘(2) maintains a surety bond or irrevocable let-
ter of credit in the amount of $50,000. 
‘‘(g) ENFORCEMENT.—For purposes of providing a 
cause of action for any failure by a mortgage broker to 
comply with any requirement imposed under this section, 
section 130(a) shall be applied with respect to any such 
failure— 
‘‘(1) by substituting ‘mortgage broker’ for 
‘creditor’ each place such term appears in such sec-
tion; and 
‘‘(2) by treating all qualified finance charges 
(as defined in subsection (c)(2)(A)) incurred in the 
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origination of any consumer credit transaction se-
cured by the consumer’s principal dwelling and any 
compensation paid or payable in violation of (c)(3) 
as actual damages sustained by the consumer as a 
result of the failure. 
‘‘(h) EXCLUSION OF REVERSE MORTGAGES.—This 
section shall not apply with respect to any consumer mort-
gage transaction that constitutes a reverse mortgage.’’. 
(b) TECHNICAL AND CONFORMING AMENDMENTS.— 
The Truth in Lending Act is amended— 
(1) in section 103(u) (15 U.S.C. 1602(u)), by 
striking ‘‘and the disclosures required by section 
129(a)’’ and inserting ‘‘and the provisions of sec-
tions 129 and 129B’’; 
(2) in section 130 (15 U.S.C. 1640), by insert-
ing ‘‘or 129B’’ after ‘‘section 129’’ each place such 
term appears; 
(3) in the heading for subsection (d) of section 
131 (15 U.S.C. 1641), strike ‘‘CERTAIN’’ and insert 
‘‘HIGH-COST’’; 
(4) in section 131(c) (15 U.S.C. 1641)— 
(A) by striking ‘‘(c) Any consumer’’ and 
inserting ‘‘(c) RESCISSION RIGHTS.— 
‘‘(1) IN GENERAL.—Any consumer’’; and 
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(B) by inserting after paragraph (1) (as so 
designated by subparagraph (A) of this para-
graph) the following new paragraph: 
‘‘(2) CIVIL
DAMAGES.—In a consumer credit 
transaction secured by a principal dwelling, other 
than a mortgage referred to in section 103(aa), an 
assignee or holder shall be liable for violations of 
this chapter or, of section 129B in a civil action for 
monetary damages under section 130(a), notwith-
standing paragraph (1), except that any relief made 
permissible by this subparagraph may not exceed the 
sum of the amount of any remaining indebtedness 
and the total amount paid by the consumer in con-
nection with the transaction.’’; and 
(5) in section 131 (15 U.S.C. 1641) by adding 
at the end the following new subsection: 
‘‘(g) REMEDY IN LIEU OF RESCISSION FOR CERTAIN 
VIOLATIONS.—At the election of a consumer entitled to 
rescission for violations of section 129B, any person, in-
cluding a creditor, who holds, purchases, or is otherwise 
assigned a mortgage or similar security interest in connec-
tion with a mortgage on a principal dwelling— 
‘‘(1) may be required to make such adjustments 
to the balance of the obligation as are required 
under section 125, and to reflect any other relief 
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pursuant to section 130 and any other legal claims; 
and 
‘‘(2) shall modify or refinance the loan, at no 
cost to the consumer, the resulting balance of which 
shall provide terms that would have satisfied the re-
quirements of section 129B at the origination of the 
loan and to pay costs and reasonable attorneys 
fees.’’. 
(c) 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 item: 
‘‘129B. Originations of consumer credit transactions secured by the consumer’s 
principal dwelling.’’. 
Æ 
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