HR 3915 Mortgage Reform Bill – Full Text

110TH CONGRESS 1ST SESSION

H. R. 3915

To amend the Truth in Lending Act to reform consumer mortgage practices and provide accountability for such practices, to establish licensing and registration requirements for residential mortgage originators, to provide certain minimum standards for consumer mortgage loans, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 22, 2007 Mr. MILLER of North Carolina (for himself, Mr. WATT, Mr. FRANK of Massa­chusetts, Ms. WATERS, Mrs. MALONEY of New York, Mr. GUTIERREZ, Ms. CARSON, Mr. MEEKS of New York, Mr. CAPUANO, Mr. CLAY, Mr. AL GREEN of Texas, Mr. CLEAVER, Ms. BEAN, Ms. MOORE of Wisconsin, Mr. HODES, Mr. ELLISON, and Mr. MURPHY of Connecticut) introduced the following bill; which was referred to the Committee on Financial Serv­ices

A BILL

To amend the Truth in Lending Act to reform consumer mortgage practices and provide accountability for such practices, to establish licensing and registration require­ments for residential mortgage originators, to provide certain minimum standards for consumer mortgage loans, and for other purposes.

1 Be it enacted by the Senate and House of Representa­

2 tives of the United States of America in Congress assembled,

1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

2 (a) SHORT TITLE.-This Act may be cited as the

3 ‘‘Mortgage Reform and Anti-Predatory Lending Act of

4 2007”.

5 (b) TABLE OF CONTENTS.-The table of contents for

6 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I-MORTGAGE ORIGINATION

Sec. 101. Definitions.

Sec. 102. Residential mortgage loan origination.

Sec. 103. Anti-steering.

Sec. 104. Licensing and registration of mortgage originators.

Sec. 105. Enforcement.

Sec. 106. Regulations.

TITLE II-MINIMUM STANDARDS FOR MORTGAGES

Sec. 201. Ability to repay. Sec. 202. Net tangible benefit for refinancing of residential mortgage loans. Sec. 203. Safe harbor and rebuttable presumption. Sec. 204. Securitizer liability. Sec. 205. Defense to foreclosure. Sec. 206. Additional standards and requirements. Sec. 207. Amendment to provision governing correction of errors. Sec. 208. Amendment relating to right of rescission. Sec. 209. Amendments to civil liability provisions. Sec. 210. Rule of construction. Sec. 211. Regulations.

TITLE III-HIGH-COST MORTGAGES

Sec. 301. Definitions relating to high-cost mortgages. Sec. 302. Amendments to existing requirements for certain mortgages. Sec. 303. Additional requirements for certain mortgages. Sec. 304. Regulations.

7 TITLE I-MORTGAGE 8 ORIGINATION 9 SEC. 101. DEFINITIONS.

10 Section 103 of the Truth in Lending Act (15 U.S.C.

11 1602) is amended by adding at the end the following new

12 subsection:

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1 ‘‘(cc) DEFINITIONS RELATING TO MORTGAGE ORIGI­2 NATION.- 3 ‘‘(1) COMMISSION.-The term ‘Commission’ 4 means the Federal Trade Commission. 5 ‘‘(2) MORTGAGE ORIGINATOR.-The term 6 ‘mortgage originator’- 7 ‘‘(A) means any person who, for direct or 8 indirect compensation or gain, or in the expec­9 tation of direct or indirect compensation or 10 gain- 11 ‘‘(i) takes a residential mortgage loan 12 application; 13 ‘‘(ii) assists a consumer in obtaining 14 or applying to obtain a residential mort­15 gage loan; or 16 ‘‘(iii) offers or negotiates terms of a 17 residential mortgage loan; 18 ‘‘(B) includes any person who represents 19 to the public, through advertising or other 20 means of communicating or providing informa­21 tion (including the use of business cards, sta­22 tionery, brochures, signs, rate lists, or other 23 promotional items), that such person can or will 24 provide any of the services or perform any of

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1 the activities described in subparagraph (A); 2 and 3 ‘‘(C) does not include any person who is 4 not otherwise described in subparagraph (A) or

(B) and who performs purely administrative or 6 clerical tasks on behalf of a person who is de­7 scribed in any such subparagraph. 8 ‘‘(3) QUALIFIED NATIONWIDE REGISTRATION 9 REGIME.-The term ‘qualified nationwide registra­tion regime’ means a nationwide registry for the res­11 idential mortgage industry, such as the registry es­12 tablished by the Conference of State Bank Super­13 visors and the American Association of Residential 14 Mortgage Regulators, which is- ‘‘(A) certified by the Secretary as a reg­16 istry that provides a comprehensive licensing 17 and supervisory database for mortgage origina­18 tors; or 19 ‘‘(B) established by the Secretary under section 129A(c)(3). 21 ‘‘(4) OTHER DEFINITIONS RELATING TO MORT­22 GAGE ORIGINATOR.-For purposes of this sub­23 section, a person ‘assists a consumer in obtaining or 24 applying to obtain a residential mortgage loan’ by, among other things, advising on loan terms (includ­

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1 ing rates, fees, other costs), preparing loan pack­2 ages, or collecting information on behalf of the con­3 sumer with regard to a residential mortgage loan. 4 ‘‘(5) QUALIFYING STATE LICENSING LAW.-The 5 term ‘qualifying State licensing law’ means the law 6 in effect in a State which the Secretary determines 7 satisfies the following minimum requirements: 8 ‘‘(A) All mortgage originators operating in 9 the State which are not depository institutions 10 or institution-affiliated parties of a depository 11 institution are required- 12 ‘‘(i) to be licensed by the State; and 13 ‘‘(ii) to meet effective minimum re­14 quirements in order to qualify for any such 15 license. 16 ‘‘(B) All mortgage originators operating in 17 the State which are not depository institutions 18 or institution-affiliated parties of a depository 19 institution are required at all times to main­20 tain- 21 ‘‘(i) a minimum net worth, net of in­22 tangibles, of at least $100,000, as deter­23 mined in accordance with generally accept­24 ed accounting principles; or

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1 ‘‘(ii) a surety bond in the minimum 2 amount of $100,000. 3 ‘‘(C) A State mortgage originator super­4 visory authority is maintained to provide effec­tive supervision and enforcement of such law, 6 including the suspension, termination, or non­7 renewal of a license for a violation of State or 8 Federal law. 9 ‘‘(D) The State mortgage originator super­visory authority ensures that all mortgage origi­11 nators operating in the State which are not de­12 pository institutions or institution-affiliated par­13 ties of a depository institution are registered 14 under the qualified nationwide registration re­gime. 16 ‘‘(E) The State mortgage originator super­17 visory authority is required to regularly report 18 violations of such law, as well as enforcement 19 actions and other relevant information, to the qualified nationwide reporting regime. 21 ‘‘(F) All mortgage originators operating in 22 the State which are not depository institutions 23 or institution-affiliated parties of a depository 24 institution are required to receive minimum training and undergo a background check be­

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1 fore receiving a license, and receive ongoing 2 training or continuing education as a condition 3 for maintaining and renewing the licence. 4 ‘‘(G) Any mortgage originator licensed 5 under such law is required to provide accurate 6 and effective disclosures to consumers con­7 cerning the costs of the mortgage originator’s 8 services and the costs and benefits of residential 9 mortgage loan products, including the disclo­10 sures required under section 129A(a). 11 ‘‘(H) Individual consumers have an effec­12 tive mechanism to obtain redress for any viola­13 tion of such law by a mortgage originator. 14 ‘‘(6) RESIDENTIAL MORTGAGE LOAN.-The 15 term ‘residential mortgage loan’ means any con­16 sumer credit transaction that is secured by a mort­17 gage or deed of trust on a dwelling or on residential 18 real property that includes a dwelling, other than a 19 consumer credit transaction under an open end cred­20 it plan or a reverse mortgage. 21 ‘‘(7) SECRETARY.-The term ‘Secretary’, when 22 used in connection with any transaction or person 23 involved with a residential mortgage loan, means the 24 Secretary of Housing and Urban Development.

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1 ‘‘(8) SECURITIZER.-The term ‘securitizer’ 2 means any assignee who acquires or aggregates resi­3 dential mortgage loans for the purpose of including 4 such loans in a pool of assets for the purpose of issuing or selling instruments representing interests 6 in such pools.”. 7 SEC. 102. RESIDENTIAL MORTGAGE LOAN ORIGINATION. 8 (a) IN GENERAL.-Chapter 2 of the Truth in Lend­9 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting after section 129 the following new section:

11 ‘‘§ 129A. Residential mortgage loan origination 12 ‘‘(a) DUTY OF CARE.- 13 ‘‘(1) STANDARD.-Subject to regulations pre­14 scribed under this subsection, each mortgage origi­nator shall, in addition to the duties imposed by oth­16 erwise applicable provisions of State or Federal 17 law- 18 ‘‘(A) be qualified, licensed, and registered 19 as a mortgage originator in accordance with ap­plicable State or Federal law; 21 ‘‘(B) with respect to each consumer seek­22 ing or inquiring about a residential mortgage 23 loan, diligently work to present the consumer 24 with a range of residential mortgage loan prod­ucts for which the consumer qualifies and which

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1 are appropriate to the consumer’s existing cir­2 cumstances, based on information known by, or 3 provided in good faith to, the originator; 4 ‘‘(C) make full, complete, and timely dis­5 closure to each such consumer of- 6 ‘‘(i) the comparative costs and bene­7 fits of each residential mortgage loan prod­8 uct offered, discussed, or referred to by the 9 originator; 10 ‘‘(ii) the nature of the originator’s re­11 lationship to the consumer (including the 12 cost of the services to be provided by the 13 originator and a statement that the mort­14 gage originator is or is not acting as an 15 agent for the consumer, as the case may 16 be); and 17 ‘‘(iii) any relevant conflicts of interest; 18 ‘‘(D) certify to the creditor, with respect to 19 any transaction involving a residential mortgage 20 loan, that the mortgage originator has fulfilled 21 all requirements applicable to the originator 22 under this section with respect to the trans­23 action; and

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1 ‘‘(E) include the unique identifier of the 2 originator provided by a qualified nationwide 3 registration regime on all loan documents. 4 ‘‘(2) RULES OF CONSTRUCTION.-No provision 5 of this subsection shall be construed as- 6 ‘‘(A) creating an agency or fiduciary rela­7 tionship between a mortgage originator and a 8 consumer if the originator does not hold himself 9 or herself out as such an agent or fiduciary and 10 complies with all requirements of this title that 11 are applicable to mortgage originators; and 12 ‘‘(B) restricting a mortgage originator 13 from holding himself or herself out as an agent 14 or fiduciary of a consumer subject to any addi­15 tional duty, requirement, or limitation applica­16 ble to agents or fiduciaries under any Federal 17 or State law. 18 ‘‘(3) REGULATIONS.- 19 ‘‘(A) IN GENERAL.-The Secretary, the 20 Comptroller of the Currency, the Director of 21 the Office of Thrift Supervision, and the Fed­22 eral Deposit Insurance Corporation, in con­23 sultation with the Commission, shall jointly pre­24 scribe regulations to-

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1 ‘‘(i) further define the duty estab­2 lished under paragraph (1); 3 ‘‘(ii) implement the requirements of 4 this subsection; 5 ‘‘(iii) establish the time period within 6 which any disclosure required under para­7 graph (1) shall be made to the consumer; 8 and 9 ‘‘(iv) establish such other require­10 ments for any mortgage originator as such 11 regulatory agencies may determine to be 12 appropriate to meet the purposes of this 13 subsection. 14 ‘‘(B) COMPLEMENTARY AND NONDUPLICA­15 TIVE DISCLOSURES.-The agencies referred to 16 in subparagraph (A) shall endeavor to make the 17 required disclosures to consumers under this 18 section complementary and nonduplicative with 19 other disclosures for mortgage consumers to the 20 extent such efforts- 21 ‘‘(i) are practicable; and 22 ‘‘(ii) do not reduce the value of any 23 such disclosure to recipients of such 24 loans.”.

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1 (b) CLERICAL AMENDMENT.-The table of sections 2 for chapter 2 of the Truth in Lending Act is amended 3 by inserting after the item relating to section 129 the fol­4 lowing new item:

‘‘129A. Residential mortgage loan origination.”.

5 SEC. 103. ANTI-STEERING.

6 Section 129A of the Truth in Lending Act (as added

7 by section 102(a)) is amended by inserting after sub­

8 section (a) the following new subsection:

9 ‘‘(b) PROHIBITION ON STEERING INCENTIVES.- 10 ‘‘(1) IN GENERAL.-No mortgage originator 11 may receive from any person, and no person may 12 pay to any mortgage originator, directly or indi­13 rectly, any incentive compensation (including yield 14 spread premium) that is based on, or varies with, 15 the terms of any residential mortgage loan. 16 ‘‘(2) ANTI-STEERING REGULATIONS.- 17 ‘‘(A) REQUIRED.-The Secretary, the 18 Comptroller of the Currency, the Director of 19 the Office of Thrift Supervision, and the Fed­20 eral Deposit Insurance Corporation, in con­21 sultation with the Commission, shall jointly pre­22 scribe regulations to prohibit mortgage origina­23 tors from steering any consumer to a residential 24 mortgage loan that is not in the consumer’s in­

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1 terest (such as loans with predatory character­2 istics). 3 ‘‘(B) CONDITIONS.-In prescribing any 4 regulations under this subsection, the Sec­retary, the Comptroller of the Currency, the Di­6 rector of the Office of Thrift Supervision, and 7 the Federal Deposit Insurance Corporation, in 8 consultation with the Commission, shall seek to 9 ensure that such regulations- ‘‘(i) promote the interest of the con­11 sumer in obtaining- 12 ‘‘(I) the best terms for a residen­13 tial mortgage loan for which the con­14 sumer qualifies; and ‘‘(II) useful information on the 16 nature of the residential mortgage 17 loan and the relationship of the con­18 sumer with the mortgage originator; 19 and ‘‘(ii) prohibit mortgage originators 21 from steering, counseling, or directing a 22 consumer into any residential mortgage 23 loan that is not in the consumer’s interest. 24 ‘‘(3) RULES OF CONSTRUCTION.-No provision of this subsection shall be construed as-

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1 ‘‘(A) limiting or affecting the ability of a

2 mortgage originator to sell residential mortgage

3 loans to subsequent purchasers; or

4 ‘‘(B) restricting a consumer’s ability to fi­

nance origination fees to the extent that such

6 fees were fully disclosed to the consumer earlier

7 in the application process and do not vary

8 based on the consumer’s decision about whether

9 to finance such fees.”.

SEC. 104. LICENSING AND REGISTRATION OF MORTGAGE 11 ORIGINATORS. 12 Section 129A of the Truth in Lending Act is amend­13 ed by inserting after subsection (b) (as added by section 14 103) the following new subsections: ‘‘(c) FEDERAL LICENSING AND REGULATION BACK­16 STOP.- 17 ‘‘(1) IN GENERAL.-A mortgage originator 18 which is not a depository institution or an institu­19 tion-affiliated party of a depository institution may not originate any residential mortgage loan after the 21 end of the 24-month period beginning on the date of 22 the enactment of the Mortgage Reform and Anti- 23 Predatory Lending Act of 2007, unless such mort­24 gage originator- ‘‘(A) is licensed-

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1 ‘‘(i) under a qualifying State licensing 2 law or by the Secretary in accordance with 3 paragraph (2); and 4 ‘‘(B) is registered with and participating in a qualified nationwide registration regime. 6 ‘‘(2) HUD LICENSING AND REGISTRATION.- 7 ‘‘(A) ESTABLISHMENT.-If, on or after the 8 end of the 24-month period beginning on the 9 date of the enactment of the Mortgage Reform and Anti-Predatory Lending Act of 2007, any 11 State does not have in effect a qualifying State 12 licensing law, the Secretary shall establish and 13 maintain a system for licensing and registering 14 mortgage originators operating in such State which are not depository institutions or institu­16 tion-affiliated parties of a depository institution. 17 ‘‘(B) REQUIREMENTS.-The Secretary 18 shall prescribe, by regulation, such require­19 ments for mortgage originators licensed under the system established under subparagraph (A) 21 as the Secretary determines to be appropriate 22 and are equivalent to the requirements for 23 qualifying State licensing laws. 24 ‘‘(C) BEST INTERESTS OF CONSUMER RE­QUIREMENT.-Regulations prescribed under

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1 subparagraph (B) shall require a mortgage 2 originator to act solely in the best interest of 3 the consumer, including finding the residential 4 mortgage loan that best meets the needs of the borrower, and to meet any other duties incum­6 bent on the mortgage originator under Federal 7 or State law when acting in such a capacity. 8 ‘‘(3) PARTICIPATION IN QUALIFIED NATION­9 WIDE REGISTRATION REGIME.-If the Secretary has not certified any registry as a qualified nationwide 11 registration regime by the end of the 18-month pe­12 riod beginning on the date of the enactment of the 13 Mortgage Reform and Anti-Predatory Lending Act 14 of 2007, or if a certified nationwide registration re­gime fails to meet the requirements under this title 16 for such a regime, the Secretary shall establish a 17 qualified nationwide registration regime that pro­18 vides a comprehensive licensing and supervisory 19 database for mortgage originators to carry out the purposes of this section and the effective regulation 21 of mortgage originators licensed under a qualifying 22 State licensing law or by the Secretary under para­23 graph (2). 24 ‘‘(4) ADVANCE PREPARATION.-The Secretary shall take such actions as the Secretary determines

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1 to be appropriate in advance of the end of the 24- 2 month period beginning on the date of the enact­3 ment of the Mortgage Reform and Anti-Predatory 4 Lending Act of 2007, to ensure the timely establish­5 ment, if necessary, on or after the end of such pe­6 riod of- 7 ‘‘(A) a system for licensing and registering 8 mortgage originators under paragraph (2); or 9 ‘‘(B) a qualified nationwide registration re­10 gime under paragraph (3). 11 ‘‘(5) TEMPORARY EXTENSION OF PERIOD.-The 12 Secretary may extend, by not more than 6 months, 13 the 24-month period referred to in paragraphs (1) 14 and (2) for the licensing of mortgage originators in 15 any State under a qualifying State licensing law if 16 the Secretary determines that such State is making 17 a good faith effort to establish a qualifying State li­18 censing law and to license mortgage originators 19 under such law. 20 ‘‘(6) MINIMUM STANDARDS FOR CERTIFICATION 21 OF A NATIONWIDE REGISTRATION REGIME.-In de­22 termining whether to certify a nationwide registra­23 tion regime, the Secretary shall determine that the 24 regime at a minimum-

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1 ‘‘(A) provides and maintains a unique 2 identifier for each mortgage originator partici­3 pating in the regime; and 4 ‘‘(B) provides relevant and timely informa­tion to consumers, industry participants, and 6 Federal and State regulatory agencies (includ­7 ing any enforcement actions relating to any 8 mortgage originator). 9 ‘‘(d) REGULATION OF DEPOSITORY INSTITUTIONS.- ‘‘(1) IN GENERAL.-Any depository institution, 11 and any institution-affiliated party of a depository 12 institution, that is a mortgage originator shall com­13 ply with regulations prescribed under paragraph (2) 14 and applicable requirements for registrants of a qualified nationwide registration regime. 16 ‘‘(2) REGULATIONS.-The Comptroller of the 17 Currency, the Director of the Office of Thrift Super­18 vision, and the Federal Deposit Insurance Corpora­19 tion, in consultation with the Secretary, shall jointly prescribe equivalent regulations applicable to deposi­21 tory institutions, and institution-affiliated parties of 22 depository institutions that act as mortgage origina­23 tors, taking into account all the requirements for a 24 qualifying State licensing law, and shall specifically require-

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1 ‘‘(A) licensing of any institution-affiliated 2 party of a depository institution who acts as a 3 mortgage originator; 4 ‘‘(B) registration with, and participation in, a qualified nationwide registration regime; 6 and 7 ‘‘(C) minimum qualification requirements 8 and pre-licensing training and continuing edu­9 cation requirements. ‘‘(3) DEFINITIONS.-For purposes of this sub­11 section, the term ‘depository institution’ includes a 12 credit union and the term ‘institution-affiliated 13 party’ has the same meaning as in section 3(u) of 14 the Federal Deposit Insurance Act.”.

SEC. 105. ENFORCEMENT.

16 Section 129A of the Truth in Lending Act is amend­17 ed by inserting after subsection (d) (as added by section 18 104) the following new subsection: 19 ‘‘(e) LIABILITY FOR VIOLATIONS.- ‘‘(1) IN GENERAL.-For purposes of providing 21 a cause of action for any failure by a mortgage origi­22 nator to comply with any requirement imposed 23 under this section and any regulation prescribed 24 under this section, subsections (a) and (b) of section 130 shall be applied with respect to any such failure

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1 by substituting ‘mortgage originator’ for ‘creditor’ 2 each place such term appears in each such sub­3 section 4 ‘‘(2) MAXIMUM.-The maximum amount of any 5 liability of a mortgage originator under paragraph 6 (1) to a consumer for any violation of this section 7 shall not exceed an amount equal to 3 times the 8 total amount of direct and indirect compensation or 9 gain accruing to the mortgage originator in connec­10 tion with the residential mortgage loan involved in 11 the violation, plus the costs to the consumer of the 12 action, including a reasonable attorney’s fee.”. 13 SEC. 106. REGULATIONS. 14 Except as otherwise provided in the amendment made 15 by section 104, regulations required or authorized to be 16 prescribed under this title or the amendments made by 17 this title- 18 (1) shall be prescribed in final form before the 19 end of the 12-month period beginning on the date of 20 the enactment of this Act; and 21 (2) shall take effect not later than 18 months 22 after the date of the enactment of this Act.

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1 TITLE II-MINIMUM STANDARDS 2 FOR MORTGAGES 3 SEC. 201. ABILITY TO REPAY. 4 (a) IN GENERAL.-Chapter 2 of the Truth in Lend­ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 6 after section 129A (as added by section 102(a)) the fol­7 lowing new section: 8 ‘‘§ 129B. Minimum standards for residential mortgage 9 loans

‘‘(a) ABILITY TO REPAY.- 11 ‘‘(1) IN GENERAL.-In accordance with regula­12 tions prescribed jointly by the Comptroller of the 13 Currency, the Director of the Office of Thrift Super­14 vision and the Federal Deposit Insurance Corpora­tion, in consultation with the Commission, no cred­16 itor may make a residential mortgage loan unless 17 the creditor makes a reasonable and good faith de­18 termination based on verified and documented infor­19 mation that, at the time the loan is consummated, the consumer has a reasonable ability to repay the 21 loan, according to its terms, and all applicable taxes, 22 insurance, and assessments. 23 ‘‘(2) MULTIPLE LOANS.-If the creditor knows, 24 or has reason to know, that 1 or more residential mortgage loans secured by the same dwelling will be

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1 made to the same consumer, the creditor shall make 2 a reasonable and good faith determination, based on 3 verified and documented information, that the con­4 sumer has a reasonable ability to repay the com­5 bined payments of all loans on the same dwelling ac­6 cording to the terms of those loans and all applicable 7 taxes, insurance, and assessments. 8 ‘‘(3) BASIS FOR DETERMINATION.-A deter­9 mination under this subsection of a consumer’s abil­10 ity to repay a residential mortgage loan shall be 11 based on consideration of the consumer’s credit his­12 tory, current income, expected income the consumer 13 is reasonably assured of receiving, current obliga­14 tions, debt-to-income ratio, employment status, and 15 other financial resources other than the consumer’s 16 equity in the real property that secures repayment 17 of the loan. 18 ‘‘(4) NONSTANDARD LOANS.- 19 ‘‘(A) ADJUSTABLE RATE LOANS THAT 20 DEFER REPAYMENT OF ANY PRINCIPAL OR IN­21 TEREST.-For purposes of determining, under 22 this subsection, a consumer’s ability to repay an 23 adjustable rate residential mortgage loan that 24 defers the repayment of any principal or inter­

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1 est, the creditor shall take into consideration a 2 fully amortizing repayment schedule. 3 ‘‘(B) INTEREST-ONLY LOANS.-For pur­4 poses of determining, under this subsection, a consumer’s ability to repay a residential mort­6 gage loan that requires the payment of interest 7 only, the creditor shall take into consideration 8 the payment amount required to amortize the 9 loan by its final maturity. ‘‘(C) CALCULATION FOR NEGATIVE AMOR­11 TIZATION.-In making any determination under 12 this subsection, a creditor shall also take into 13 consideration any balance increase that may ac­14 crue from any negative amortization provision. ‘‘(D) CALCULATION PROCESS.-For pur­16 poses of making any determination under this 17 subsection, a creditor shall calculate the month­18 ly payment amount for principal and interest on 19 any residential mortgage loan by assuming- ‘‘(i) the loan proceeds are fully dis­21 bursed on the date of the consummation of 22 the loan; 23 ‘‘(ii) the loan is to be repaid in sub­24 stantially equal monthly amortizing pay­ments for principal and interest over the

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1 entire term of the loan with no balloon 2 payment, unless the loan contract requires 3 more rapid repayment (including balloon 4 payment), in which case the contract’s re­5 payment schedule shall be used in this cal­6 culation; and 7 ‘‘(iii) the interest rate over the entire 8 term of the loan is a fixed rate equal to the 9 fully indexed rate at the time of the loan 10 closing, without considering the introduc­11 tory rate. 12 ‘‘(5) FULLY-INDEXED RATE DEFINED.-For 13 purposes of this subsection, the term ‘fully indexed 14 rate’ means the index rate prevailing on a residential 15 mortgage loan at the time the loan is made plus the 16 margin that will apply after the expiration of an in­17 troductory interest rate.”. 18 (b) CLERICAL AMENDMENT.-The table of sections 19 for chapter 2 of the Truth in Lending Act is amended 20 by inserting after the item relating to section 129A (as 21 added by section 102(b)) the following new item:

‘‘129B. Minimum standards for all mortgages.”.

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1 SEC. 202. NET TANGIBLE BENEFIT FOR REFINANCING OF 2 RESIDENTIAL MORTGAGE LOANS. 3 Section 129B of the Truth in Lending Act (as added 4 by section 201(a)) is amended by inserting after sub­section (a) the following new subsection: 6 ‘‘(b) NET TANGIBLE BENEFIT FOR REFINANCING OF 7 RESIDENTIAL MORTGAGE LOANS.- 8 ‘‘(1) IN GENERAL.-No creditor may extend 9 credit in connection with any residential mortgage loan that involves a refinancing of a prior existing 11 residential mortgage loan unless the creditor reason­12 ably and in good faith determines, at the time the 13 loan is consummated and on the basis of information 14 known by or provided in good faith to the creditor, that the refinanced loan will provide a net tangible 16 benefit to the consumer. 17 ‘‘(2) CERTAIN LOANS PROVIDING NO NET TAN­18 GIBLE BENEFIT.-A residential mortgage loan that 19 involves a refinancing of a prior existing residential mortgage loan shall not be considered to provide a 21 net tangible benefit to the consumer if the costs of 22 the refinanced loan, including points, fees and other 23 charges, exceed the amount of any newly advanced 24 principal. ‘‘(3) NET TANGIBLE BENEFIT.-The Comp­26 troller of the Currency, the Director of the Office of

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1 Thrift Supervision and the Federal Deposit Insur­2 ance Corporation shall jointly prescribe regulations 3 defining the term ‘net tangible benefit’ for purposes 4 of this subsection.”.

SEC. 203. SAFE HARBOR AND REBUTTABLE PRESUMPTION.

6 Section 129B of the Truth in Lending Act is amend­7 ed by inserting after subsection (b) (as added by section 8 202) the following new subsection: 9 ‘‘(c) PRESUMPTION OF ABILITY TO REPAY AND NET TANGIBLE BENEFIT.- 11 ‘‘(1) IN GENERAL.-Any creditor with respect 12 to any residential mortgage loan, and any assignee 13 of such loan, may presume that the loan has met the 14 requirements of subsections (a) and (b), if the loan is a qualified mortgage or a qualified safe harbor 16 mortgage. 17 ‘‘(2) REBUTTABLE PRESUMPTION.-Any pre­18 sumption established under paragraph (1) with re­19 spect to any residential mortgage loan shall be re­buttable only- 21 ‘‘(A) against the creditor of such loan; and 22 ‘‘(B) if such loan is a qualified safe harbor 23 mortgage. 24 ‘‘(3) DEFINITIONS.-For purposes of this sec­tion the following definitions shall apply:

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1 ‘‘(A) MOST RECENT CONVENTIONAL MORT­2 GAGE RATE.-The term ‘most recent conven­3 tional mortgage rate’ means the contract inter­4 est rate on commitments for fixed-rate first 5 mortgages most recently published in the Fed­6 eral Reserve Statistical Release on selected in­7 terest rates (daily or weekly), and commonly re­8 ferred to as the H.15 release, in the week pre­9 ceding a date of determination for purposes of 10 applying this subsection. 11 ‘‘(B) QUALIFIED MORTGAGE.-The term 12 ‘qualified mortgage’ means- 13 ‘‘(i) a residential mortgage loan 14 that- 15 ‘‘(I) constitutes a first lien on the 16 real property securing the loan; 17 ‘‘(II) has an annual percentage 18 rate that does not equal or exceed the 19 yield on securities issued by the Sec­20 retary of the Treasury under chapter 21 31 of title 31, United States Code, 22 that bear comparable periods of matu­23 rity by more than 3 percentage points; 24 and

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1 ‘‘(III) has an annual percentage 2 rate that does not equal or exceed the 3 most recent conventional mortgage 4 rate, or such other annual percentage 5 rate as may be established by regula­6 tion under paragraph (6), by more 7 than 175 basis points; or 8 ‘‘(ii) a residential mortgage loan 9 that- 10 ‘‘(I) is not the first lien on the 11 real property securing the loan; 12 ‘‘(II) has an annual percentage 13 rate that does not equal or exceed the 14 yield on securities issued by the Sec­15 retary of the Treasury under chapter 16 31 of title 31, United States Code, 17 that bear comparable periods of matu­18 rity by more than 5 percentage points; 19 and 20 ‘‘(III) has an annual percentage 21 rate that does not equal or exceed the 22 most recent conventional mortgage 23 rate, or such other annual percentage 24 rate as may be established by regula­

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1 tion under paragraph (6), by more 2 than 375 basis points. 3 ‘‘(C) QUALIFIED SAFE HARBOR MORT­4 GAGE.-The term ‘qualified safe harbor mort­gage’ means a residential mortgage loan- 6 ‘‘(i) for which the income and finan­7 cial resources of the consumer are verified 8 and documented; 9 ‘‘(ii) for which the residential mort­gage loan underwriting process is based on 11 the fully-indexed rate, and takes into ac­12 count real estate taxes and homeowner’s 13 and mortgage insurance premiums; 14 ‘‘(iii) which does not cause the con­sumer’s total monthly debts, including 16 amounts under the loan, to exceed 50 per­17 cent of his or her monthly gross income or 18 such other maximum percentage of such 19 income as may be prescribed by regulation under paragraph (4); 21 ‘‘(iv) which does not provide for a re­22 payment schedule that results in negative 23 amortization at any time; 24 ‘‘(v) meets such other requirements as may be established by regulation; and

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1 ‘‘(vi) for which any of the following 2 factors apply with respect to such loan: 3 ‘‘(I) The periodic payment 4 amount for principal or interest are fixed for a minimum of 7 years under 6 the terms of the loan. 7 ‘‘(II) In the case of an adjustable 8 rate loan, the annual percentage rate 9 varies based on a margin that is less than 3 percent over a single generally 11 accepted interest rate index that is 12 the basis for determining the rate of 13 interest for the mortgage. 14 ‘‘(4) DETERMINATION OF COMPARISON TO TREASURY SECURITIES.- 16 ‘‘(A) IN GENERAL.-Without regard to 17 whether a residential mortgage loan is subject 18 to or reportable under the Home Mortgage Dis­19 closure Act of 1975 and subject to subpara­graph (B), the difference between the annual 21 percentage rate of such loan and the yield on 22 securities issued by the Secretary of the Treas­23 ury under chapter 31 of title 31, United States 24 Code, having comparable periods of maturity shall be determined using the same procedures

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1 and methods of calculation applicable to loans 2 that are subject to the reporting requirements 3 under the Home Mortgage Disclosure Act of 4 1975. ‘‘(B) DATE OF DETERMINATION OF 6 YIELD.-The yield on the securities referred to 7 in subparagraph (A) shall be determined, for 8 purposes of such subparagraph and paragraph 9 (3) with respect to any residential mortgage loan, as of the 15th day of the month preceding 11 the month in which a completed application is 12 submitted for such loan. 13 ‘‘(5) APR IN CASE OF INTRODUCTORY 14 OFFER.-For purposes of making a determination of whether a residential mortgage loan that provides 16 for a fixed interest rate for an introductory period 17 and then resets or adjusts to an adjustable rate is 18 a qualified mortgage, the determination of the an­19 nual percentage rate shall be based on the greater of the introductory rate and the fully indexed rate 21 of interest. 22 ‘‘(6) REGULATIONS.- 23 ‘‘(A) IN GENERAL.-The Comptroller of 24 the Currency, the Director of the Office of Thrift Supervision, and the Federal Deposit In­

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1 surance Corporation shall jointly prescribe reg­2 ulations to carry out the purposes of this sub­3 section. 4 ‘‘(B) CLASSIFICATIONS, DIFFERENTIA­TIONS, MODIFICATIONS, AND EXEMPTIONS.- 6 The regulations prescribed under subparagraph 7 (A) may contain such classifications, differen­8 tiations, modifications of terms defined in this 9 subsection, or other provisions, and may provide for such adjustments and exceptions, as in the 11 judgement of the Federal banking agencies re­12 ferred to in subparagraph (A) are necessary 13 and appropriate to effectuate the purposes of 14 this subsection to prevent circumvention or eva­sion thereof, or to facilitate compliance there­16 with.”. 17 SEC. 204. SECURITIZER LIABILITY. 18 Section 129B of the Truth in Lending Act is amend­19 ed by inserting after subsection (c) (as added by section 203) the following new subsection: 21 ‘‘(d) LIABILITY FOR VIOLATIONS.- 22 ‘‘(1) LIMITED ASSIGNEE LIABILITY.-Notwith­23 standing sections 125(e) and 131 and except as pro­24 vided in paragraph (2), a civil action which may be maintained against a creditor with respect to a resi­

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1 dential mortgage loan for a violation of subsection 2 (a) or (b) may be maintained against an assignee, 3 including a securitizer, of such residential mortgage 4 loan, acting in good faith, for the following liabilities only: 6 ‘‘(A) Rescission of the loan in accordance 7 with this title. 8 ‘‘(B) Such additional costs as the obligor 9 may have incurred as a result of the violation and in connection with obtaining a rescission of 11 the loan, including a reasonable attorney’s fee. 12 ‘‘(2) EXEMPTION.-No assignee, including a 13 securitizer, of a residential mortgage loan shall be 14 liable under paragraph (1) with respect to such loan if- 16 ‘‘(A) no later than 90 days after the re­17 ceipt of notification from the consumer that the 18 loan violates subsection (a) or (b), the assignee 19 provides a cure so that the loan satisfies the re­quirements of subsections (a) and (b); or 21 ‘‘(B) each of the following conditions are 22 met: 23 ‘‘(i) The assignee- 24 ‘‘(I) has a policy against buying residential mortgage loans other than

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1 qualified mortgages or qualified safe 2 harbor mortgages (as defined in sub­3 section (c)); and 4 ‘‘(II) exercises reasonable due 5 diligence to adhere to such policy in 6 purchasing residential mortgage loans 7 through adequate, thorough, and con­8 sistently applied sampling procedures 9 established in accordance which regu­10 lations which the Comptroller of the 11 Currency, the Director of the Office of 12 Thrift Supervision, and the Federal 13 Deposit Insurance Corporation shall 14 jointly prescribe. 15 ‘‘(ii) The contract under which such 16 assignee acquired the residential mortgage 17 loan from a seller or assignor of the loan 18 contains representations and warranties 19 that the seller or assignor- 20 ‘‘(I) will not sell or assign any 21 residential mortgage loan which is not 22 a qualified mortgage or a qualified 23 safe harbor mortgage; or

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1 ‘‘(II) is a beneficiary of a rep­

2 resentation and warranty from a pre­

3 vious seller or assignor to that effect,

4 and the assignee in good faith takes rea­

sonable steps to obtain the benefit of such

6 representation or warranty.

7 ‘‘(3) CURE DEFINED.-For purposes of para­

8 graph (2)(A), the term ‘cure’ means, with respect to

9 a residential mortgage loan that violates subsection

(a) or (b), the modification or refinancing, at no cost 11 to the consumer, of the loan to provide terms that 12 would have satisfied the requirements of subsection 13 (a) and (b) if the loan had contained such terms as 14 of the origination of the loan. ‘‘(4) NO CLASS ACTIONS UNDER THIS SUB­16 SECTION.-Only individual actions may be brought 17 against an assignee, including a securitizer, of a res­18 idential mortgage loan for a violation of subsection 19 (a) or (b). ‘‘(5) SCOPE OF APPLICATION.-Liability of an 21 assignee, including a securitizer, under this sub­22 section shall apply- 23 ‘‘(A) in any original action brought by a 24 consumer for a violation of subsection (a) or (b) with respect to a residential mortgage loan dur­

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1 ing the 6-year period beginning when the loan 2 is entered into; and 3 ‘‘(B) without regard to the 6-year limita­4 tion in subparagraph (A) if raised by the con­sumer at any time during the term of the 6 loan- 7 ‘‘(i) as a defense, claim, or counter­8 claim, including a claim for a violation of 9 subsection (a) or (b), with respect to a res­idential mortgage loan after foreclosure 11 has commenced on the loan, the obligation 12 to pay the balance due on the loan is accel­13 erated, or the obligor has been in default 14 on any payment for 60 days or more; or ‘‘(ii) in any action to enjoin fore­16 closure or to preserve or obtain possession 17 of the residence securing a residential 18 mortgage loan. 19 ‘‘(6) POOLS AND INVESTORS IN POOLS EX-CLUDED.-In the case of residential mortgage loans 21 acquired or aggregated for the purpose of including 22 such loans in a pool of assets for the purpose of 23 issuing or selling instruments representing interests 24 in such pools, the terms ‘assignee’ and ‘securitizer’, as used in this section, do not include the pools of

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1 such loans or any original or subsequent purchaser 2 of any instrument representing an interest in such 3 pool.”. 4 SEC. 205. DEFENSE TO FORECLOSURE. 5 Section 129B of the Truth in Lending Act is amend­6 ed by inserting after subsection (d) (as added by section 7 204) the following new subsection: 8 ‘‘(e) DEFENSE TO FORECLOSURE.-Notwithstanding 9 any other provision of law- 10 ‘‘(1) when the holder of a residential mortgage 11 loan or anyone acting for such holder initiates a ju­12 dicial or non-judicial foreclosure, a consumer who 13 has the right to rescind under this section with re­14 spect to such loan may exercise such right; and 15 ‘‘(2) a third party may sell, transfer, convey, or 16 assign a residential mortgage loan to an assignee, 17 including a securitizer, to effect a rescission or a 18 cure.”. 19 SEC. 206. ADDITIONAL STANDARDS AND REQUIREMENTS. 20 (a) IN GENERAL.-Section 129B of the Truth in 21 Lending Act is amended by inserting after subsection (e) 22 (as added by section 205) the following new subsections: 23 ‘‘(f) PROHIBITION ON CERTAIN PREPAYMENT PEN­24 ALTIES.-

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1 ‘‘(1) PROHIBITED ON CERTAIN LOANS.-A resi­2 dential mortgage loan that is not a qualified mort­3 gage (as defined in subsection (c)) may not contain 4 terms under which a consumer must pay a prepay­ment penalty for paying all or part of the principal 6 after the loan is consummated. 7 ‘‘(2) PROHIBITED AFTER INITIAL PERIOD ON 8 LOANS WITH A RESET.-A residential mortgage loan 9 with a fixed interest rate for an introductory period that adjusts or resets to a variable interest rate 11 after such period may not contain terms under 12 which a consumer must pay a prepayment penalty 13 for paying all or part of the principal after the be­14 ginning of the 3-month period ending on the date of the adjustment or reset. 16 ‘‘(g) SINGLE PREMIUM CREDIT INSURANCE PROHIB­17 ITED.-No creditor may finance, directly or indirectly, in 18 connection with any residential mortgage loan or with any 19 extension of credit under an open end consumer credit plan secured by the principal dwelling of the consumer 21 (other than a reverse mortgage), any credit life, credit dis­22 ability, credit unemployment or credit property insurance, 23 or any other accident, loss-of-income, life or health insur­24 ance, or any payments directly or indirectly for any debt cancellation or suspension agreement or contract, except

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1 that insurance premiums or debt cancellation or suspen­2 sion fees calculated and paid in full on a monthly basis 3 shall not be considered financed by the creditor. 4 ‘‘(h) ARBITRATION.- ‘‘(1) IN GENERAL.-No residential mortgage 6 loan and no extension of credit under an open end 7 consumer credit plan secured by the principal dwell­8 ing of the consumer (other than a reverse mortgage) 9 may include terms which require arbitration or any other nonjudicial procedure as the method for resolv­11 ing any controversy or settling any claims arising 12 out of the transaction. 13 ‘‘(2) POST-CONTROVERSY AGREEMENTS.-Sub­14 ject to paragraph (3), paragraph (1) shall not be construed as limiting the right of the consumer and 16 the creditor or an assignee, including a securitizer, 17 to agree to arbitration or any other nonjudicial pro­18 cedure as the method for resolving any controversy 19 at any time after a dispute or claim under the trans­action arises. 21 ‘‘(3) NO WAIVER OF STATUTORY CAUSE OF AC­22 TION.-No provision of any residential mortgage 23 loan or of any extension of credit under an open end 24 consumer credit plan secured by the principal dwell­ing of the consumer (other than a reverse mort­

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1 gage), and no other agreement between the con­2 sumer and the creditor, shall be applied or inter­3 preted so as to bar a consumer from bringing an ac­4 tion in an appropriate district court of the United 5 States, or any other court of competent jurisdiction, 6 pursuant to section 130 or any other provision of 7 law, for damages or other relief in connection with 8 any alleged violation of this section, any other provi­9 sion of this title, or any other Federal law. 10 ‘‘(i) DUTY OF SECURITIZER TO RETAIN ACCESS TO 11 LOANS.-Any securitizer shall reserve the right and pre­12 serve an ability, in any document or contract establishing 13 any pool of assets that includes any residential mortgage 14 loan- 15 ‘‘(1) to identify and obtain access to any such 16 loan in the pool; and 17 ‘‘(2) to provide for and obtain a remedy under 18 this title for the obligor under any such loan. 19 ‘‘(j) EFFECT OF FORECLOSURE ON PREEXISTING 20 LEASE.-In the case of any foreclosure on any residential 21 real property securing an extension of credit made under 22 a contract entered into after the date of the enactment 23 of the Mortgage Reform and Anti-Predatory Lending Act 24 of 2007, any successor in interest in such property pursu­

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1 ant to the foreclosure shall assume such interest subject 2 to- 3 ‘‘(1) any bona fide lease made to a bona fide 4 tenant entered into before the notice of foreclosure; 5 and 6 ‘‘(2) the rights of any bona fide tenant without 7 a lease or with a lease terminable at will under State 8 law and the provision, by the successor in interest, 9 of a notice to vacate to the tenant at least 90 days 10 before the effective date of the notice. 11 ‘‘(k) MORTGAGES WITH NEGATIVE AMORTIZA­12 TION.-No creditor may extend credit to a first-time bor­13 rower in connection with a consumer credit transaction 14 under an open or closed end consumer credit plan secured 15 by a dwelling or residential real property that includes a 16 dwelling, other than a reverse mortgage, that provides or 17 permits a payment plan that may, at any time over the 18 term of the extension of credit, result in negative amorti­19 zation unless, before such transaction is consummated- 20 ‘‘(1) the creditor provides the consumer with a 21 statement that- 22 ‘‘(A) the pending transaction will or may, 23 as the case may be, result in negative amortiza­24 tion;

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1 ‘‘(B) describes negative amortization in 2 such manner as the Federal banking agencies 3 shall prescribe; 4 ‘‘(C) negative amortization increases the 5 outstanding principal balance of the account; 6 and 7 ‘‘(D) negative amortization reduces the 8 consumer’s equity in the real property; and 9 ‘‘(2) the consumer provides the creditor with 10 sufficient documentation to demonstrate that the 11 consumer received homeownership counseling from 12 organizations or counselors certified by the Sec­13 retary of Housing and Urban Development as com­14 petent to provide such counseling.”. 15 (b) CONFORMING AMENDMENT RELATING TO EN­16 FORCEMENT .-Section 108(a) of the Truth in Lending 17 Act (15 U.S.C. 1607(a)) is amended by inserting after 18 paragraph (6) the following new paragraph: 19 ‘‘(7) sections 21B and 21C of the Securities 20 Exchange Act of 1934, in the case of an entity that 21 is subject to consolidated supervision by the Securi­22 ties and Exchange Commission, other than a deposi­23 tory institution, by the Securities and Exchange 24 Commission.”.

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1 SEC. 207. AMENDMENT TO PROVISION GOVERNING COR­2 RECTION OF ERRORS. 3 Section 130(b) of the Truth in Lending Act (15 4 U.S.C. 1640(b)) is amended to read as follows: ‘‘(b) CORRECTION OF ERRORS.-A creditor has no li­6 ability under this section or section 108 or 112 for any 7 failure to comply with any requirement imposed under this 8 chapter or chapter 5, if- 9 ‘‘(1) within 30 days of the loan closing and prior to the institution of any action, the consumer 11 is notified of or discovers the violation, appropriate 12 restitution is made, and whatever adjustments are 13 necessary are made to the loan to either, at the 14 choice of the consumer- ‘‘(A) make the loan satisfy the require­16 ments of this chapter; or 17 ‘‘(B) change the terms of the loan in a 18 manner beneficial to the consumer so that the 19 loan will no longer be a high-cost mortgage; or ‘‘(2) within 60 days of the creditor’s discovery 21 or receipt of notification of an unintentional viola­22 tion or bona fide error as described in subsection (c) 23 and prior to the institution of any action, the con­24 sumer is notified of the compliance failure, appro­priate restitution is made, and whatever adjustments

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1 are necessary are made to the loan to either, at the 2 choice of the consumer- 3 ‘‘(A) make the loan satisfy the require­4 ments of this chapter; or 5 ‘‘(B) change the terms of the loan in a 6 manner beneficial so that the loan will no 7 longer be a high-cost mortgage.”. 8 SEC. 208. AMENDMENT RELATING TO RIGHT OF RESCIS­9 SION. 10 Section 130(e) of the Truth in Lending Act (15 11 U.S.C. 1640(e)) is amended by inserting after the second 12 sentence the following new sentence: ‘‘This subsection also 13 shall not bar a person from asserting a right to rescission 14 under section 125, in an action to collect the debt or as 15 a defense to a judicial or nonjudicial foreclosure after the 16 expiration of the time periods for affirmative actions set 17 forth in this section and section 125.”. 18 SEC. 209. AMENDMENTS TO CIVIL LIABILITY PROVISIONS. 19 (a) INCREASE IN AMOUNT OF CIVIL MONEY PEN­20 ALTIES FOR CERTAIN VIOLATIONS.-Section 130(a) of 21 the Truth in Lending Act (15 U.S.C. 1640(a)) is amend­22 ed, in the matter preceding paragraph (1), by striking ‘‘an 23 amount equal to the sum” and inserting ‘‘an amount equal 24 to twice the sum”.

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1 (b) STATUTE OF LIMITATIONS EXTENDED FOR SEC­2 TION 129 VIOLATIONS.-Section 130(e) of the Truth in 3 Lending Act (15 U.S.C. 1640(e)) (as amended by section 4 207 of this title) is amended- 5 (1) in the first sentence, by striking ‘‘Any ac­6 tion” and inserting ‘‘Except as provided in the sub­7 sequent sentence, any action”; and 8 (2) by inserting after the first sentence the fol­9 lowing new sentence: ‘‘Any action under this section 10 with respect to any violation of section 129 may be 11 brought in any United States district court, or in 12 any other court of competent jurisdiction, before the 13 end of the 3-year period beginning on the date of the 14 occurrence of the violation.”. 15 SEC. 210. RULE OF CONSTRUCTION. 16 Except as otherwise expressly provided in section 17 129A or 129B of the Truth in Lending Act (as added by 18 this Act), no provision of such section 129A or 129B shall 19 be construed as superseding, repealing, or affecting any 20 duty, right, obligation, privilege, or remedy of any person 21 under any other provision of the Truth in Lending Act. 22 SEC. 211. REGULATIONS. 23 Regulations required or authorized to be prescribed 24 under this title or the amendments made by this title-

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1 (1) shall be prescribed in final form before the 2 end of the 12-month period beginning on the date of 3 the enactment of this Act; and 4 (2) shall take effect not later than 18 months after the date of the enactment of this Act.

6 TITLE III-HIGH-COST 7 MORTGAGES 8 SEC. 301. DEFINITIONS RELATING TO HIGH-COST MORT­9 GAGES.

(a) HIGH-COST MORTGAGE DEFINED.-Section 11 103(aa) of the Truth in Lending Act (15 U.S.C. 12 1602(aa)) is amended by striking all that precedes para­13 graph (2) and inserting the following: 14 ‘‘(aa) HIGH-COST MORTGAGE.- ‘‘(1) DEFINITION.- 16 ‘‘(A) IN GENERAL.-The term ‘high-cost 17 mortgage’, and a mortgage referred to in this 18 subsection, means a consumer credit trans­19 action that is secured by the consumer’s prin­cipal dwelling, other than a reverse mortgage 21 transaction, if- 22 ‘‘(i) in the case of a loan secured- 23 ‘‘(I) by a first mortgage on the 24 consumer’s principal dwelling, the an­nual percentage rate at consummation

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1 of the transaction will exceed by more 2 than 8 percentage points the yield on 3 Treasury securities having comparable 4 periods of maturity on the 15th day of the month immediately preceding the 6 month in which the application for the 7 extension of credit is received by the 8 creditor; or 9 ‘‘(II) by a subordinate or junior mortgage on the consumer’s principal 11 dwelling, the annual percentage rate 12 at consummation of the transaction 13 will exceed by more than 10 percent­14 age points the yield on Treasury secu­rities having comparable periods of 16 maturity on the 15th day of the 17 month immediately preceding the 18 month in which the application for the 19 extension of credit is received by the creditor; 21 ‘‘(ii) the total points and fees payable 22 in connection with the loan exceed- 23 ‘‘(I) in the case of a loan for 24 $20,000 or more, 5 percent of the total loan amount; or

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1 ‘‘(II) in the case of a loan for 2 less than $20,000, the lesser of 8 per­3 cent of the total loan amount or 4 $1,000; or ‘‘(iii) the loan documents permit the 6 creditor to charge or collect prepayment 7 fees or penalties more than 30 months 8 after the loan closing or such fees or pen­9 alties exceed, in the aggregate, more than 2 percent of the amount prepaid. 11 ‘‘(B) INTRODUCTORY RATES TAKEN INTO 12 ACCOUNT.-For purposes of subparagraph 13 (A)(i), the annual percentage rate of interest 14 shall be determined based on the following in­terest rate: 16 ‘‘(i) In the case of a fixed-rate loan in 17 which the annual percentage rate will not 18 vary during the term of the loan, the inter­19 est rate in effect on the date of consumma­tion of the transaction. 21 ‘‘(ii) In the case of a loan in which 22 the rate of interest varies solely in accord­23 ance with an index, the interest rate deter­24 mined by adding the index rate in effect on the date of consummation of the trans­

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1 action to the maximum margin permitted 2 at any time during the loan agreement. 3 ‘‘(iii) In the case of any other loan in 4 which the rate may vary at any time dur­ing the term of the loan for any reason, 6 the interest charged on the loan at the 7 maximum rate that may be charged during 8 the term of the loan.”. 9 (b) ADJUSTMENT OF PERCENTAGE POINTS.-Section 103(aa)(2) of the Truth in Lending Act (15 U.S.C. 11 1602(aa)(2)) is amended by striking subparagraph (B) 12 and inserting the following new subparagraph: 13 ‘‘(B) An increase or decrease under sub­14 paragraph (A)- ‘‘(i) may not result in the number of 16 percentage points referred to in paragraph 17 (1)(A)(i)(I) being less than 6 percentage 18 points or greater than 10 percentage 19 points; and ‘‘(ii) may not result in the number of 21 percentage points referred to in paragraph 22 (1)(A)(i)(II) being less than 8 percentage 23 points or greater than 12 percentage 24 points.”.

(c) POINTS AND FEES DEFINED.-

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1 (1) IN GENERAL.-Section 103(aa)(4) of the 2 Truth in Lending Act (15 U.S.C. 1602(aa)(4)) is 3 amended- 4 (A) by striking subparagraph (B) and in­serting the following: 6 ‘‘(B) all compensation paid directly or indi­7 rectly by a consumer or creditor to a mortgage 8 broker from any source, including a mortgage 9 broker that originates a loan in the name of the broker in a table-funded transaction;”; 11 (B) in subparagraph (C)(ii), by striking 12 ‘‘and” after the semicolon at the end; 13 (C) by redesignating subparagraph (D) as 14 subparagraph (G); and

(D) by inserting after subparagraph (C) 16 the following new subparagraphs: 17 ‘‘(D) premiums or other charges payable at 18 or before closing for any credit life, credit dis­19 ability, credit unemployment, or credit property insurance, or any other accident, loss-of-income, 21 life or health insurance, or any payments di­22 rectly or indirectly for any debt cancellation or 23 suspension agreement or contract, except that 24 insurance premiums or debt cancellation or sus­pension fees calculated and paid in full on a

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1 monthly basis shall not be considered financed 2 by the creditor; 3 ‘‘(E) except as provided in subsection (cc), 4 the maximum prepayment fees and penalties which may be charged or collected under the 6 terms of the loan documents; 7 ‘‘(F) all prepayment fees or penalties that 8 are incurred by the consumer if the loan refi­9 nances a previous loan made or currently held by the same creditor or an affiliate of the cred­11 itor; and”. 12 (2) CALCULATION OF POINTS AND FEES FOR 13 OPEN-END LOANS.-Section 103(aa) of the Truth in 14 Lending Act (15 U.S.C. 1602(aa)) is amended-

(A) by redesignating paragraph (5) as 16 paragraph (6); and 17 (B) by inserting after paragraph (4) the 18 following new paragraph: 19 ‘‘(5) CALCULATION OF POINTS AND FEES FOR OPEN-END LOANS.-In the case of open-end loans, 21 points and fees shall be calculated, for purposes of 22 this section and section 129, by adding the total 23 points and fees known at or before closing, including 24 the maximum prepayment penalties which may be charged or collected under the terms of the loan doc­

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1 uments, plus the minimum additional fees the con­2 sumer would be required to pay to draw down an 3 amount equal to the total credit line.”. 4 (d) HIGH COST MORTGAGE LENDER.-Section 5 103(f) of the Truth in Lending Act (15 U.S.C. 1602(f)) 6 is amended by striking the last sentence and inserting the 7 following new sentence: ‘‘Any person who originates or 8 brokers 2 or more mortgages referred to in subsection (aa) 9 in any 12-month period, any person who originates 1 or 10 more such mortgages through a mortgage broker in any 11 12-month period, or, in connection with a table funding 12 transaction of such a mortgage, and any person to whom 13 the obligation is initially assigned at or after settlement 14 shall be considered to be a creditor for purposes of this 15 title.”. 16 (e) BONA FIDE DISCOUNT LOAN DISCOUNT POINTS 17 AND PREPAYMENT PENALTIES.-Section 103 of the 18 Truth in Lending Act (15 U.S.C. 1602) is amended by 19 adding at the end the following new subsection: 20 ‘‘(cc) BONA FIDE DISCOUNT POINTS AND PREPAY­21 MENT PENALTIES.-For the purposes of determining the 22 amount of points and fees for purposes of subsection (aa), 23 either the amounts described in paragraphs (1) or (4) of 24 the following paragraphs, but not both, may be excluded:

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1 ‘‘(1) EXCLUSION OF BONA FIDE DISCOUNT 2 POINTS.-The discount points described in 1 of the 3 following subparagraphs shall be excluded from de­4 termining the amounts of points and fees with re­spect to a high-cost mortgage for purposes of sub­6 section (aa): 7 ‘‘(A) Up to and including 2 bona fide dis­8 count points payable by the consumer in con­9 nection with the mortgage, but only if the inter­est rate from which the mortgage’s interest rate 11 will be discounted does not exceed by more than 12 1 percentage point the required net yield for a 13 90-day standard mandatory delivery commit­14 ment for a reasonably comparable loan from ei­ther the Federal National Mortgage Association 16 or the Federal Home Loan Mortgage Corpora­17 tion, whichever is greater. 18 ‘‘(B) Unless 2 bona fide discount points 19 have been excluded under subparagraph (A), up to and including 1 bona fide discount points 21 payable by the consumer in connection with the 22 mortgage, but only if the interest rate from 23 which the mortgage’s interest rate will be dis­24 counted does not exceed by more than 2 per­centage points the required net yield for a 90-

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1 day standard mandatory delivery commitment 2 for a reasonably comparable loan from either 3 the Federal National Mortgage Association or 4 the Federal Home Loan Mortgage Corporation, 5 whichever is greater. 6 ‘‘(2) DEFINITION.-For purposes of paragraph 7 (1), the term ‘bona fide discount points’ means loan 8 discount points which are knowingly paid by the con­9 sumer for the purpose of reducing, and which in fact 10 result in a bona fide reduction of, the interest rate 11 or time-price differential applicable to the mortgage. 12 ‘‘(3) EXCEPTION FOR INTEREST RATE REDUC­13 TIONS INCONSISTENT WITH INDUSTRY NORMS.- 14 Paragraph (1) shall not apply to discount points 15 used to purchase an interest rate reduction unless 16 the amount of the interest rate reduction purchased 17 is reasonably consistent with established industry 18 norms and practices for secondary mortgage market 19 transactions. 20 ‘‘(4) ALLOWANCE OF CONVENTIONAL PREPAY­21 MENT PENALTY.-Subsection (aa)(1)(4)(E) shall not 22 apply so as to include a prepayment penalty or fee 23 that is authorized by law other than this title and 24 may be imposed pursuant to the terms of a high-cost

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1 mortgage (or other consumer credit transaction se­2 cured by the consumer’s principal dwelling) if- 3 ‘‘(A) the annual percentage rate applicable 4 with respect to such mortgage or transaction 5 (as determined for purposes of subsection 6 (aa)(1)(A)(i))- 7 ‘‘(i) in the case of a first mortgage on 8 the consumer’s principal dwelling, does not 9 exceed by more than 2 percentage points 10 the yield on Treasury securities having 11 comparable periods of maturity on the 12 15th day of the month immediately pre­13 ceding the month in which the application 14 for the extension of credit is received by 15 the creditor; or 16 ‘‘(ii) in the case of a subordinate or 17 junior mortgage on the consumer’s prin­18 cipal dwelling, does not exceed by more 19 than 4 percentage points the yield on such 20 Treasury securities; and 21 ‘‘(B) the total amount of any prepayment 22 fees or penalties permitted under the terms of 23 the high-cost mortgage or transaction does not 24 exceed 2 percent of the amount prepaid.”.

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1 SEC. 302. AMENDMENTS TO EXISTING REQUIREMENTS FOR 2 CERTAIN MORTGAGES. 3 (a) PREPAYMENT PENALTY PROVISIONS.-Section 4 129(c)(2) of the Truth in Lending Act (15 U.S.C. 1639(c)(2)) is amended- 6 (1) by striking ‘‘and” after the semicolon at the 7 end of subparagraph (C); 8 (2) by redesignating subparagraph (D) as sub­9 paragraph (E); and

(3) by inserting after subparagraph (C) the fol­11 lowing new subparagraph: 12 ‘‘(D) the amount of the principal obliga­13 tion of the mortgage exceeds the maximum 14 principal obligation limitation (for the applica­ble size residence) under section 203(b)(2) of 16 the National Housing Act for the area in which 17 the residence subject to the mortgage is located; 18 and”. 19 (b) NO BALLOON PAYMENTS.-Section 129(e) of the Truth in Lending Act (15 U.S.C. 1639(e)) is amended to 21 read as follows: 22 ‘‘(e) NO BALLOON PAYMENTS.-No high-cost mort­23 gage may contain a scheduled payment that is more than 24 twice as large as the average of earlier scheduled pay­ments. This subsection shall not apply when the payment

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1 schedule is adjusted to the seasonal or irregular income 2 of the consumer.”. 3 (c) NO LENDING WITHOUT DUE REGARD TO ABIL­4 ITY TO REPAY.-Section 129(h) of the Truth in Lending Act (15 U.S.C. 1639(h)) is amended- 6 (1) by striking ‘‘PAYMENT ABILITY OF CON­7 SUMER.-A creditor shall not” and inserting ‘‘PAY­8 MENT ABILITY OF CONSUMER.- 9 ‘‘(1) PATTERN OR PRACTICE.- ‘‘(A) IN GENERAL.-A creditor shall not”; 11 (2) by inserting after subparagraph (A) (as so 12 designated by paragraph (1) of this subsection) the 13 following new subparagraph: 14 ‘‘(B) PRESUMPTION OF VIOLATION.- There shall be a presumption that a creditor 16 has violated this subsection if the creditor en­17 gages in a pattern or practice of making high- 18 cost mortgages without verifying or docu­19 menting the repayment ability of consumers with respect to such loans.”; and 21 (3) by adding at the end the following new 22 paragraph: 23 ‘‘(2) PROHIBITION ON EXTENDING CREDIT 24 WITHOUT REGARD TO PAYMENT ABILITY OF CON­SUMER.-

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1 ‘‘(A) IN GENERAL.-A creditor may not 2 extend credit to a consumer under a high-cost 3 mortgage unless a reasonable creditor would be­4 lieve at the time the loan is closed that the con­5 sumer or consumers that are residing or will re­6 side in the residence subject to the mortgage 7 will be able to make the scheduled payments as­8 sociated with the loan, based upon a consider­9 ation of current and expected income, current 10 obligations, employment status, and other fi­11 nancial resources, other than equity in the resi­12 dence. 13 ‘‘(B) PRESUMPTION OF ABILITY.-For 14 purposes of this subsection, there shall be a re­15 buttable presumption that a consumer is able to 16 make the scheduled payments to repay the obli­17 gation if, at the time the loan is consummated, 18 the consumer’s total monthly debts, including 19 amounts under the loan, do not exceed 50 per­20 cent of his or her monthly gross income as 21 verified by tax returns, payroll receipts, or other 22 third-party income verification.”.

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1 SEC. 303. ADDITIONAL REQUIREMENTS FOR CERTAIN 2 MORTGAGES. 3 (a) ADDITIONAL REQUIREMENTS FOR CERTAIN 4 MORTGAGES.-Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended- 6 (1) by redesignating subsections (j), (k) and (l) 7 as subsections (n), (o) and (p) respectively; and 8 (2) by inserting after subsection (i) the fol­9 lowing new subsections: ‘‘(j) RECOMMENDED DEFAULT.-No creditor shall 11 recommend or encourage default on an existing loan or 12 other debt prior to and in connection with the closing or 13 planned closing of a high-cost mortgage that refinances 14 all or any portion of such existing loan or debt. ‘‘(k) LATE FEES.- 16 ‘‘(1) IN GENERAL.-No creditor may impose a 17 late payment charge or fee in connection with a 18 high-cost mortgage- 19 ‘‘(A) in an amount in excess of 4 percent of the amount of the payment past due; 21 ‘‘(B) unless the loan documents specifically 22 authorize the charge or fee; 23 ‘‘(C) before the end of the 15-day period 24 beginning on the date the payment is due, or in the case of a loan on which interest on each in­26 stallment is paid in advance, before the end of

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1 the 30-day period beginning on the date the 2 payment is due; or 3 ‘‘(D) more than once with respect to a sin­4 gle late payment. ‘‘(2) COORDINATION WITH SUBSEQUENT LATE 6 FEES.-If a payment is otherwise a full payment for 7 the applicable period and is paid on its due date or 8 within an applicable grace period, and the only delin­9 quency or insufficiency of payment is attributable to any late fee or delinquency charge assessed on any 11 earlier payment, no late fee or delinquency charge 12 may be imposed on such payment. 13 ‘‘(3) FAILURE TO MAKE INSTALLMENT PAY­14 MENT.-If, in the case of a loan agreement the terms of which provide that any payment shall first 16 be applied to any past due principal balance, the 17 consumer fails to make an installment payment and 18 the consumer subsequently resumes making install­19 ment payments but has not paid all past due install­ments, the creditor may impose a separate late pay­21 ment charge or fee for any principal due (without 22 deduction due to late fees or related fees) until the 23 default is cured. 24 ‘‘(l) ACCELERATION OF DEBT.-No high-cost mort­gage may contain a provision which permits the creditor,

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1 in its sole discretion, to accelerate the indebtedness. This 2 provision shall not apply when repayment of the loan has 3 been accelerated by default, pursuant to a due-on-sale pro­4 vision, or pursuant to a material violation of some other provision of the loan documents unrelated to the payment 6 schedule. 7 ‘‘(m) RESTRICTION ON FINANCING POINTS AND 8 FEES.-No creditor may directly or indirectly finance, in 9 connection with any high-cost mortgage, any of the fol­lowing: 11 ‘‘(1) Any prepayment fee or penalty payable by 12 the consumer in a refinancing transaction if the 13 creditor or an affiliate of the creditor is the 14 noteholder of the note being refinanced. ‘‘(2) Any points or fees.”. 16 (b) PROHIBITIONS ON EVASIONS.-Section 129 of 17 the Truth in Lending Act (15 U.S.C. 1639) is amended 18 by inserting after subsection (p) (as so redesignated by 19 subsection (a)(1)) the following new subsection: ‘‘(q) PROHIBITIONS ON EVASIONS, STRUCTURING OF 21 TRANSACTIONS, AND RECIPROCAL ARRANGEMENTS.-A 22 creditor may not take any action in connection with a 23 high-cost mortgage- 24 ‘‘(1) to structure a loan transaction as an open- end credit plan or another form of loan for the pur­

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1 pose and with the intent of evading the provisions of 2 this title; or 3 ‘‘(2) to divide any loan transaction into sepa­4 rate parts for the purpose and with the intent of evading provisions of this title.”. 6 (c) MODIFICATION OR DEFERRAL FEES.-Section 7 129 of the Truth in Lending Act (15 U.S.C. 1639) is 8 amended by inserting after subsection (q) (as added by 9 subsection (b) of this section) the following new sub­section: 11 ‘‘(r) MODIFICATION AND DEFERRAL FEES PROHIB­12 ITED.-A creditor may not charge a consumer any fee to 13 modify, renew, extend, or amend a high-cost mortgage, or 14 to defer any payment due under the terms of such mort­gage, unless the modification, renewal, extension or 16 amendment results in a lower annual percentage rate on 17 the mortgage for the consumer and then only if the 18 amount of the fee is comparable to fees imposed for simi­19 lar transactions in connection with consumer credit trans­actions that are secured by a consumer’s principal dwell­21 ing and are not high-cost mortgages.”. 22 (d) PAYOFF STATEMENT.-Section 129 of the Truth 23 in Lending Act (15 U.S.C. 1639) is amended by inserting 24 after subsection (r) (as added by subsection (c) of this section) the following new subsection:

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1 ‘‘(s) PAYOFF STATEMENT.- 2 ‘‘(1) FEES.- 3 ‘‘(A) IN GENERAL.-Except as provided in 4 subparagraph (B), no creditor or servicer may charge a fee for informing or transmitting to 6 any person the balance due to pay off the out­7 standing balance on a high-cost mortgage. 8 ‘‘(B) TRANSACTION FEE.-When payoff in­9 formation referred to in subparagraph (A) is provided by facsimile transmission or by a cou­11 rier service, a creditor or servicer may charge a 12 processing fee to cover the cost of such trans­13 mission or service in an amount not to exceed 14 an amount that is comparable to fees imposed for similar services provided in connection with 16 consumer credit transactions that are secured 17 by the consumer’s principal dwelling and are 18 not high-cost mortgages. 19 ‘‘(C) FEE DISCLOSURE.-Prior to charging a transaction fee as provided in subparagraph 21 (B), a creditor or servicer shall disclose that 22 payoff balances are available for free pursuant 23 to subparagraph (A). 24 ‘‘(D) MULTIPLE REQUESTS.-If a creditor or servicer has provided payoff information re­

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1 ferred to in subparagraph (A) without charge, 2 other than the transaction fee allowed by sub­3 paragraph (B), on 4 occasions during a cal­4 endar year, the creditor or servicer may there­after charge a reasonable fee for providing such 6 information during the remainder of the cal­7 endar year. 8 ‘‘(2) PROMPT DELIVERY.-Payoff balances shall 9 be provided within a reasonable time but in any event no more than 5 business days after receiving 11 a request by a consumer or a person authorized by 12 the consumer to obtain such information.”. 13 (e) PRE-LOAN COUNSELING REQUIRED.-Section 14 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (s) (as added by 16 subsection (d) of this section) the following new sub­17 section: 18 ‘‘(t) PRE-LOAN COUNSELING.- 19 ‘‘(1) IN GENERAL.-A creditor may not extend credit to a consumer under a high-cost mortgage 21 without first receiving certification from a counselor 22 that is approved by the Secretary of Housing and 23 Urban Development, or at the discretion of the Sec­24 retary, a state housing finance authority, that the consumer has received counseling on the advisability

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1 of the loan transaction. Such counselor shall not be 2 employed by the creditor or an affiliate of the cred­3 itor or be affiliated with the creditor. 4 ‘‘(2) DISCLOSURES REQUIRED PRIOR TO COUN-SELING.-No counselor may certify that a consumer 6 has received counseling on the advisability of the 7 loan transaction unless the counselor can verify that 8 the consumer has received each statement required 9 (in connection with such loan) by section 129 of this title or by the Real Estate Settlement Procedures 11 Act of 1974 with respect to the transaction. 12 ‘‘(3) REGULATIONS.-The Secretary of Housing 13 and Urban Development may prescribe such regula­14 tions as the Secretary determines to be appropriate to carry out the requirements of paragraph (1).”.

16 SEC. 304. REGULATIONS. 17 (a) IN GENERAL.-The Board of Governors of the 18 Federal Reserve System shall publish regulations imple­19 menting this title and the amendments made by this title in final form before the end of the 6-month period begin­21 ning on the date of the enactment of this Act. 22 (b) CONSUMER MORTGAGE EDUCATION.- 23 (1) REGULATIONS.-The Board of Governors of 24 the Federal Reserve System may prescribe regula­tions requiring or encouraging creditors to provide

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1 consumer mortgage education to prospective cus­2 tomers or direct such customers to qualified con­3 sumer mortgage education or counseling programs 4 in the vicinity of the residence of the consumer. 5 (2) COORDINATION WITH STATE LAW.-No re­6 quirement established by the Board of Governors of 7 the Federal Reserve System pursuant to paragraph 8 (1) shall be construed as affecting or superseding 9 any requirement under the law of any State with re­

10 spect to consumer mortgage counseling or education.