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SECTION 1. SHORT TITLE.

This Act may be cited as the ''Financial Literacy for Homeowners
Act''.

SEC. 2. FINDINGS.

The Congress finds the following:
(1) While expanded access to credit from both prime and
subprime lenders has contributed to the highest homeownership
rates in the Nation's history, there is growing evidence that
some lenders are engaging in predatory lending practices--
excessive front-end fees, single-premium credit life insurance,
and exorbitant prepayment penalties--that make homeownership
much more costly for families that can least afford it.
(2) Borrowers with fair to good credit ratings may be able
to obtain loans in the ''prime'' mortgage market, with the
lowest interest rates and costs.
(3) Borrowers with blemished credit histories obtain
mortgage loans in the ''subprime'' mortgage market, with higher
interest rates and loan fees than are obtainable in the prime
market. Some subprime lenders have been making loans on terms
that are regarded as ''predatory''.
(4) Predatory lending involves home mortgages, mortgage
refinancing, home equity loans, and home repair loans with
unjustifiably high interest rates, excessive fees, balloon
payments, prepayment penalties, and the imposition of other
unreasonable, and sometimes fraudulent, terms.
(5) Predatory loans are said to have grown rapidly in
minority neighborhoods, often stripping away wealth that may
have taken owners decades or a lifetime to accumulate.
(6) Some communities that have lacked access to traditional
institutions were being victimized by second mortgage lenders,
home improvement contractors, and finance companies who peddled
high interest rate home equity loans with high loan fees to
cash-poor homeowners. Borrowers, who may not have fully
understood the terms of the loans, and who may not have been
offered adequate disclosures of the loan terms, often have
struggled to meet overwhelming mortgage payments and too often
ultimately lost their homes through foreclosure.
(7) A joint report by the Department of Housing and Urban
Development and the Department of the Treasury, issued June 21,
2000, entitled ''Curbing Predatory Home Mortgage Lending'',
urged the Congress to adopt legislation that would restrict
abusive terms and conditions on high-cost loans, prohibit
harmful sales practices in mortgage markets, improve consumer
literacy and disclosures, prohibit government-sponsored
enterprises from purchasing loans with predatory features, and
establish predatory lending as a factor in evaluations for the
Community Reinvestment Act of 1977.
(8) The joint report proposed a four-point plan to address
predatory lending practices, which included improving consumer
literacy and disclosures by requiring lenders to recommend that
applicants for high-cost loans avail themselves of home
mortgage counseling, to disclose credit scores to all borrowers
upon request, and to give borrowers more timely and more
accurate information on loan costs and terms.
(9) A number of government agencies have become involved in
addressing various aspects of the predatory lending issue in an
attempt to reduce the number of lenders that use high-pressure
telemarketing sales techniques and mislead borrowers about
increases in interest rates and monthly payments on adjustable
rate mortgages.
(10) Predatory lending threatens to undo the work of many
nonprofit organizations that have worked with lenders and local
governments to improve distressed neighborhoods. More needs to
be done to assist borrowers who already have predatory loans,
to educate consumers about the dangers and pitfalls of entering
into a home loan, and to refer consumers to appropriate
governmental agencies or consumer protection organizations for
assistance.

SEC. 3. GRANT PROGRAM FOR EDUCATION AND COUNSELING REGARDING PREDATORY
LENDING.

(a) In General.--The Secretary of the Treasury may make grants
under this section to States, units of general local government, and
nonprofit organizations, which shall be used only for costs of carrying
out eligible anti-predatory lending activities under subsection (b).
(b) Eligible Anti-Predatory Lending Activities.--Amounts from a
grant under this section may be used only for carrying out the
following activities:
(1) Education programs.--For education programs to inform
and educate consumers, particularly those most vulnerable to
being taken advantage of by predatory and unscrupulous lending
practices relating to home loans (such as low-income borrowers
and senior citizens), regarding home mortgages, mortgage
refinancing, home equity loans, and home repair loans with
unjustifiably high interest rates, excessive fees, balloon
payments, prepayment penalties, and the imposition of other
unreasonable, and sometimes fraudulent, terms.
(2) Counseling programs.--For programs, provided only by
organizations certified by the Secretary as competent to
provide homeownership counseling, that counsel homeowners and
prospective homeowners regarding predatory and unscrupulous
lending practices relating to home loans.
(3) Referral services.--For services that provide
referrals, for homeowners and prospective homeowners--
(A) to education and counseling programs described
in paragraphs (1) and (2); or
(B) to appropriate agencies or authorities
responsible for handling consumer complaints,
allegations, or requests for assistance regarding
predatory and unscrupulous lending practices relating
to home loans or for investigating the circumstances
surrounding home loans for possible violations of law.
(c) Eligibility and Application.--To be eligible for a grant under
this section, a State, unit of general local government, or nonprofit
organization shall submit to the Secretary an application for a grant
in such form and including such information as the Secretary shall
require, which shall include such information as the Secretary
considers appropriate to ensure that the grant amounts are used for
activities eligible under subsection (b).
(d) Maximum Grant Amount.--The maximum amount of grant funds that
may be provided under this section to any single grantee for any single
fiscal year shall be $1,000,000.
(e) Selection of Applicants.--The Secretary shall provide for
States, units of general local government, and nonprofit organizations
to submit applications for grants under this section. The Secretary
shall select applications to receive such grants according to selection
criteria, which the Secretary shall establish.

SEC. 4. TOLL-FREE TELEPHONE NUMBER FOR PREDATORY LENDING COMPLAINTS.

The Secretary shall, using any amounts reserved under section 7(1),
provide for the establishment, operation, and publication of a
nationwide toll-free telephone number to receive consumer complaints
regarding predatory and unscrupulous lending practices relating to home
loans, provide information about predatory lending, refer borrowers who
already have predatory loans to the appropriate governmental agencies
or consumer protection organizations for assistance, and coordinate
between existing State and nonprofit community organizations to create
a resource database of information for consumers. Such toll-free
telephone line shall provide for receipt of such consumer complaints
and provision of such information at all times only through an actual
person and not by pre-recorded or recorded means.

SEC. 5. PREDATORY LENDING ADVISORY COUNCIL.

(a) Establishment.--There is established in the Department of the
Treasury a Predatory Lending Advisory Council (in this section referred
to as the ''Council'') to advise the Secretary on policies and issues
relating to predatory and unscrupulous lending practices relating to
home loans.
(b) Membership.--The Council shall be composed of 13 members
appointed by the Secretary, who shall include--
(1) 4 members who are representatives of community-based
organizations that work with consumers, lenders, and State and
local governments to improve distressed neighborhoods, assist
borrowers who already have predatory loans, educate consumers
about the dangers and pitfalls of entering into a home loan,
and refer consumers to appropriate governmental agencies or
consumer protection organizations for assistance;
(2) 3 members who are officials of State agencies or
offices for consumer affairs or consumer protection;
(3) 3 members who are private homeowners who are familiar
with home mortgages, mortgage refinancing, home equity loans,
and home repair loans; and
(4) 3 members who are representatives of the private real
estate industry, such as realtors, mortgage brokers, and
bankers.
(c) Terms and Vacancies.--Members of the Council shall serve terms
of two years, except that, of the initial members appointed, half shall
serve terms of one year and half shall serve terms of two years. A
vacancy in the Council shall be filled in the manner in which the
original appointment was made.
(d) Travel Expenses.--Members of the Council shall serve without
compensation but shall receive travel expenses, including per diem in
lieu of subsistence, in accordance with sections 5702 and 5703 of title
5, United States Code.
(e) Chairperson.--The Secretary shall designate a chairperson of
the Council at the time of appointment.
(f) Meetings and Hearings.--The Council shall meet upon the call of
the chairperson, except that the council shall meet not fewer than 3
times per year. The Council shall have the authority, when a majority
of the members deem necessary, to hold public hearings and to take
testimony and receive evidence from individuals and organizations.
(g) Advisory Functions.--The Council shall provide advice to the
Secretary regarding--
(1) the grant program under section 3, including advice
regarding criteria for selection of applications to receive
grant amounts;
(2) the establishment, operation, and publication of the
toll-free telephone number under section 4;
(3) coordination of activities of the Secretary regarding
prevention of predatory and unscrupulous lending practices
relating to home loans with such activities of lending
institutions; and
(4) any other matters regarding predatory and unscrupulous
lending practices relating to home loans that the Secretary
considers appropriate.
(h) Study of Defaults and Foreclosures.--The Council shall conduct
an extensive study of the root causes of default and foreclosure of
home loans, using as much empirical data as are available. The Council
shall submit a report to the Secretary and the Congress, not later than
12 months after the full membership of the Council is first appointed,
regarding the results of the study, which shall include recommendations
for consumer protection legislation regarding predatory and
unscrupulous lending practices relating to home loans.

SEC. 6. DEFINITIONS.

For purposes of this Act, the following definitions shall apply:
(1) Home loan.--The term ''home loan'' means a loan or
agreement to extend credit made to a natural person, which loan
is secured by a deed to secure debt, security deed, mortgage,
security instrument, deed of trust, or other document
representing a security interest or lien upon any interest in
one- to four-family residential property or a manufactured
home, regardless of where made, including the renewal or
refinancing of any such loan. Such term includes a home equity
line of credit or home improvement loan or other similar
agreement.
(2) Nonprofit organization.--The term ''nonprofit
organization'' has the meaning given such term in section
104(5) of the Cranston-Gonzalez National Affordable Housing Act
(42 U.S.C. 12704(5)), except that subparagraph (D) of such
section shall not apply for purposes of this Act.
(3) Predatory or unscrupulous lending practice.--The term
''predatory or unscrupulous lending practice'' includes--
(A) making any loan that--
(i) is solely based on the borrower's home
equity;
(ii) is made without regard to the
borrower's ability to repay the obligation; and
(iii) is unaffordable to the borrower, as
may be evidenced by a failure to fully
understand the terms of the loans, a failure to
offer adequate disclosures of the loan terms, a
difficulty in meeting overwhelming mortgage
payments, loss of a home through foreclosure,
or otherwise;
(B) inducing a borrower to refinance a loan
repeatedly and charging additional points and fees,
even though refinancing may not be in the borrower's
interest; and
(C) engaging in fraud or deception to conceal the
true nature of the loan obligation from an unsuspecting
or unsophisticated borrower.
(4) Secretary.--The term ''Secretary'' means the Secretary
of the Treasury.
(5) State.--The term ''State'' means each of the several
States, the Commonwealth of Puerto Rico, the District of
Columbia, the Commonwealth of the Northern Mariana Islands,
Guam, the Virgin Islands, American Samoa, the Trust Territories
of the Pacific, or any other possession of the United States.
(6) Unit of general local government.--The term ''unit of
general local government'' means any city, town, township,
parish, village, or other general purpose political subdivision
of a State.

SEC. 7. AUTHORIZATION OF APPROPRIATIONS.

There is authorized to be appropriated for carrying out this Act
$55,000,000 for each of fiscal years 2008 through 2012, of which--
(1) not more than $2,000,000 in each such fiscal year shall
be for carrying out section 4; and
(2) not more than $5,000,000 in each such fiscal year shall
be for carrying out section 5.

SEC. 8. REGULATIONS.

The Secretary may issue any regulations necessary to carry out this
Act.
Financial Literacy for Homeowners Act - Authorizes the Secretary of the Treasury to make grants to state and local governments and nonprofit organizations to implement anti-predatory lending activities, including: (1) consumer education programs; (2) certified home ownership counseling programs; and (3) referral services for homeowners and prospective homeowners.

Directs the Secretary provide for establishment, operation, and publication of a nationwide toll-free telephone number to receive consumer complaints regarding predatory and unscrupulous lending practices relating to home loans.

Establishes the Predatory Lending Advisory Council to: (1) advise the Secretary; and (2) study and report to the Secretary and Congress on the root causes of default and foreclosure of home loans.