HR 1053 IH

To amend the Equal Credit Opportunity Act and the Home Mortgage Disclosure Act of 1975 to reduce the disparate impact of predatory lending on minorities, and for other purposes.

March 15, 2001

Mr. LAFALCE (for himself, Mr. GUTIERREZ, Ms. LEE, Mrs. JONES of Ohio, Mr. CAPUANO, Mr. CLAY, Mr. HINCHEY, and Ms. SCHAKOWSKY) introduced the following bill; which was referred to the Committee on Financial Services

To amend the Equal Credit Opportunity Act and the Home Mortgage Disclosure Act of 1975 to reduce the disparate impact of predatory lending on minorities, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Equal Credit Enhancement and Neighborhood Protection Act of 2001'.

SEC. 2. COMBATING DISCRIMINATORY STEERING AND REVERSE REDLINING.

(a) DISCRIMINATORY STEERING AND REVERSE REDLINING PROHIBITED- Section 701 of the Equal Credit Opportunity Act (15 U.S.C. 1691) is amended--

(1) by striking `(a) It shall be unlawful' and inserting `(a) IN GENERAL- It shall be unlawful';

(2) by redesignating subsections (b), (c), (d), and (e) as subsections (d), (e), (f), and (g), respectively; and

(3) by inserting after subsection (a) the following new subsections:

`(b) MOST FAVORABLE CREDIT TERMS-

`(1) IN GENERAL- It shall be unlawful for a creditor to fail to extend credit to an applicant under the most favorable terms available from the creditor, or an affiliate of the creditor, for which the applicant qualifies.

`(2) AFFILIATE DEFINED- For purposes of this subsection, the term `affiliate' has the same meaning given such term in section 2(k) of the Bank Holding Company Act of 1956.

`(c) TARGETING HIGH-COST MORTGAGES PROHIBITED-

`(1) IN GENERAL- It shall be unlawful for any creditor to adversely target an applicant or group of applicants on the basis of race, color, religion, national origin, sex, marital status or age, with respect to a high cost mortgage.

`(2) HIGH COST MORTGAGE DEFINED-

`(A) IN GENERAL- For purposes of this title, the term `high cost mortgage' means a consumer credit transaction--

`(i) that is secured by the consumer's principal dwelling, other than a reverse mortgage transaction; and

`(ii) the terms of which are described in at least 1 of the following subclauses:

`(I) The transaction is secured by a first mortgage on the consumer's principal dwelling and the annual percentage rate on the credit, at the consummation of the transaction, will exceed by more than 6 percentage points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor;

`(II) The transaction is secured by a junior or subordinate mortgage on the consumer's principal dwelling and the annual percentage rate on the credit, at the consummation of the transaction, will exceed by more than 8 percentage points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor.

`(III) The total points and fees payable on the transaction will exceed the greater of 5 percent of the total loan amount or $1,000.

`(B) INTRODUCTORY RATES NOT TAKEN INTO ACCOUNT- If the terms of any consumer credit transaction that is secured by the consumer's principal dwelling offer, for any initial or introductory period, an annual percentage rate of interest which--

`(i) is less than the annual percentage rate of interest which will apply after the end of such initial or introductory period; or

`(ii) in the case of an annual percentage rate which varies in accordance with an index, which is less than the current annual percentage rate under the index which will apply after the end of such period,

the annual percentage rate of interest that shall be taken into account for purposes of subclauses (I) and (II) of subparagraph (A)(ii) shall be the rate described in clause (i) or (ii) of this subparagraph rather than any rate in effect during the initial or introductory period.

`(3) NO NEGATIVE IMPLICATION- No provision of this subsection shall be construed as prohibiting a nonprofit entity or government agency from promoting a program that enhances the availability of mortgage credit on fair terms, as defined in regulations that the Secretary shall prescribe, to underserved persons and communities.'.

(b) ENHANCED GENERAL DAMAGES FOR REVERSE REDLINING- Section 706 of the Equal Credit Opportunity Act (15 U.S.C. 1691e) is amended--

(1) by striking `(a) Any creditor' and inserting `(a) ACTUAL DAMAGES- Any creditor';

(2) by striking `(b) Any creditor' and inserting `(b) GENERAL DAMAGES-

`(1) IN GENERAL- Any creditor'; and

(3) by adding at the end of subsection (b) the following new paragraph:

`(2) PUNITIVE DAMAGES FOR REVERSE REDLINING- Any creditor, other than a government or governmental subdivision or agency, who fails to comply with any requirement imposed under subsection (b) or (c) of section 701 shall be liable--

`(A) to the aggrieved applicant for punitive damages in an amount not greater than $20,000, in addition to any actual damages provided in subsection (a) of this section; and

`(B) except in the case of a class action the total recovery under this paragraph shall not exceed the greater of--

`(i) the amount determined by multiplying the maximum amount of liability under subparagraph (A) for such failure to comply in an individual action by the number of members of the certified class; or

`(ii) the amount equal to 2 percent of the net worth of the creditor.'.

SEC. 3. APPLICABILITY OF EQUAL CREDIT OPPORTUNITY ACT TO REQUESTS FOR PREAPPROVALS.

Section 702(b) of the Equal Credit Opportunity Act (15 U.S.C. 1691a(b)) is amended by inserting the following before the period at the end: `and includes any person who requests a written commitment from a creditor for a home purchase loan, even if the person requests a commitment to be issued subject to the identification of a suitable property or other condition'.

SEC. 4. PROHIBITION ON CERTAIN REGULATORY EXEMPTIONS UNDER THE HOME MORTGAGE DISCLOSURE ACT OF 1977.

Section 304 of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2803) is amended by adding at the end the following new subsection:

`(n) PROHIBITION ON REGULATORY EXEMPTIONS FROM REPORTING REQUIREMENTS- Subject to subsection (i)--

`(1) no provision of this title may be construed as authorizing the Board, the Secretary, or any other Federal agency to exempt any depository institution from the requirements of this title; and

`(2) any exemption from the requirements of this title provided in any regulation, such as the exemption provided in Appendix A to part 203 of the Code of Federal Regulations for lending institutions described in section 303(2)(B) whose total dollar amount of purchase loans originated in any year did not exceed 10 percent of the total dollar amount of all loan originations by such institution in such year, shall cease to be effective as of the date of the enactment of the Equal Credit Enhancement and Neighborhood Protection Act.'.

SEC. 5. ADDITIONAL DISCLOSURES UNDER THE HOME MORTGAGE DISCLOSURE ACT OF 1977.

(a) REASON FOR DENIAL- Paragraph (4) of section 304(b) of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2803(b)(4)) is amended by inserting `(and the reasons for denial of a loan in the case of completed application, as appropriate)' after `completed applications'.

(b) APR AND FEES- Section 304(b) of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2803(b)) is amended--

(1) by striking `and' at the end of paragraph (3);

(2) by striking the period at the end of paragraph (4) and inserting a semicolon; and

(3) by adding at the end the following new paragraph:

`(5) annual percentage rate (as determined under section 107 of the Truth in Lending Act) of mortgage loans, along with all costs of credit, which shall include all finance charges (as determined under section 106 of the Truth in Lending Act), costs of all insurance premiums paid within 90 days of a loan's origination, fees and amounts imposed by third party closing agents and all fees collected by mortgage brokers, and an indication of whether a loan is subject to the Homeownership Equity Protection Act of 1994, grouped according to census tract, income level, racial characteristics and gender;'.

(c) DEBT-TO-INCOME RATIO FOR CERTAIN LOANS- Section 304(b) of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2803(b)) is amended by inserting after paragraph (5) (as added by subsection (b)(3) of this section) the following new paragraph:

`(6) for each mortgage loan, the ratio of the mortgagor's debt to the mortgagor's income;'.

(d) MANUFACTURED HOUSING- Section 304(b) of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2803(b)) is amended by inserting after paragraph (6) (as added by subsection (c) of this section) the following new paragraph:

`(7) for each mortgage loan, indication of whether repayment of the loan is secured by a lien on a manufactured home;'.

(e) LOAN-TO-VALUE RATIO- Section 304(b) of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2803(b)) is amended by inserting after paragraph (7) (as added by subsection (d) of this section) the following new paragraph:

`(8) for each mortgage loan, the ratio of the value of the real estate (including a manufactured home, as appropriate) that secures repayment of the loan to the principal amount of the loan at the time of origination; and'

(f) RACE, AGE, AND GENDER OF ALL APPLICANTS- Section 304(b) of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2803(b)) is amended by inserting after paragraph (8) (as added by subsection (e) of this section) the following new paragraph:

`(9) for each completed application, including applications taken by telephone or electronically, the racial characteristics, age, and gender of each applicant.'

(g) INVOLVEMENT OF MORTGAGE BROKERS- Section 304(b) of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2803(b)) is amended by inserting after paragraph (9) (as added by subsection (f) of this section) the following new paragraph:

`(9) the number and dollar amounts of mortgage loans and loan applications (whether completed or not) with respect to which a mortgage broker (as defined in regulations prescribed under the Real Estate Settlement Procedures Act of 1974) was involved at any stage of the loan process.'.

(h) TECHNICAL AND CONFORMING AMENDMENTS- Section 304(h) of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2803(b)) is amended by striking `subsection (b)(4)' each place such term appears and inserting `paragraph (4), (5), (6), (7), (8), (9), or (10) of subsection (b)'.

SEC. 6. DISCLOSURE OF PARENT COMPANY.

Section 304 of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2803) is amended by inserting after subsection (n) (as added by section 4 of this Act) the following new subsection:

`(o) OBLIGATION TO IDENTIFY PARENT-

`(1) IN GENERAL- In each disclosure and submission required by this title, each depository institution shall clearly identify the company that controls the depository institution and any affiliate of the depository institution that makes mortgage loans or provides financing for such loans.

`(2) CONTROL DEFINED- For purposes of this subsection, the term `control' shall have the same meaning given such term in section 2 of the Bank Holding Company Act of 1956.'.

SEC. 7. APPLICATION INCLUDES REQUESTS FOR PREAPPROVAL.

Section 303(3) of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2802(3)) is amended by inserting `and includes any request for a written commitment from a depository institution for a home purchase loan, even if the applicant requests a commitment to be issued subject to the identification of a suitable property or other condition' before the semicolon at the end.

SEC. 8. SANCTIONS AGAINST MORTGAGE LENDERS NOT AFFILIATED WITH DEPOSITORY INSTITUTIONS.

Section 305 of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2804) is amended--

(1) in subsection (b)--

(A) by inserting `and' after the semicolon at the end of paragraph (2);

(B) by striking `; and' at the end of paragraph (3) and inserting a period; and

(C) by striking paragraph (4);

(2) by redesignating subsection (c) as subsection (e); and

(3) by inserting after subsection (b), the following new subsection:

`(c) POWERS OF THE SECRETARY OF HOUSING AND URBAN DEVELOPMENT-

`(1) IN GENERAL- The Secretary of Housing and Urban Development (hereafter in this subsection referred to as `the Secretary') shall enforce compliance with the requirements imposed under this title with regard to other lending institutions not described in subsection (b).

`(2) CIVIL MONEY PENALTIES- Pursuant to paragraph (1) of this subsection, the Secretary may impose a civil money penalty for failure to comply with the requirements of this Act.

`(3) AMOUNT OF PENALTY- The amount of the penalty, as determined by the Secretary, may not exceed $5,000 for each violation, except that the maximum penalty for all violations by any particular lending institution during any 1-year period shall not exceed $1,000,000.

`(4) VIOLATIONS FOR WHICH PENALTY MAY BE IMPOSED- A civil money penalty may be imposed for the late submission of a report, failure to submit a report, submission of an illegible report, submission of an erroneous report, and failure to submit corrections to a report that was illegible or erroneous.

`(5) AGENCY PROCEDURES-

`(A) ESTABLISHMENT- The Secretary shall establish standards and procedures governing the imposition of civil money penalties under this section. These standards and procedures shall provide for the Secretary to make the determination to impose the penalty or to use in administrative entity (such as the Mortgagee Review Board, established pursuant to section 202(c) of the National Housing Act) to make the determination, shall provide for the imposition of a penalty only after the lending institution has been given an opportunity for a hearing on a record, and may provide for review by the Secretary of a determination on order, or interlocutory ruling, arising from a hearing.

`(B) FINAL ORDERS- If no hearing is requested within 15 days of receipt of the notice of opportunity for hearing, the imposition of the penalty shall constitute a final and unappealable determination. If the Secretary reviews the determination or order, the Secretary may affirm, modify, or reverse that determination or order. If the Secretary does not review the determination or order within 90 days of the issuance of the determination or order, the determination or order shall be final.

`(C) FACTORS IN DETERMINING AMOUNT OF PENALTY- In determining the amount of a penalty under this subsection, consideration shall be given to such factors as the gravity of the offense, any history of prior offenses, ability to pay the penalty, deterrence of future violations, and such other factors as the Secretary may determine to be appropriate.

`(D) REVIEWABILITY OF IMPOSITION OF PENALTY- The Secretary's determination or order imposing a penalty under this subsection shall not be subject to review, except as provided in this subsection.

`(6) JUDICIAL REVIEW OF AGENCY DETERMINATION-

`(A) IN GENERAL- After exhausting all administrative remedies established by the Secretary under this subsection, a lending institution against whom the Secretary has imposed a civil money penalty under this subsection may obtain a review of the penalty as may be addressed in the notice of determination to impose a penalty in the appropriate court of appeals of the United States, by filing in such court, within 20 days after the entry of such order or determination, a written petition praying that the Secretary's determination or order be modified or set aside in whole or in part.

`(B) OBJECTIONS NOT RAISED IN HEARING-

`(i) IN GENERAL- The court shall not consider any objection that was not raised in the hearing conducted pursuant to this subsection unless a demonstration is made of extraordinary circumstances causing the failure to raise the objection.

`(ii) REMAND OF NEW EVIDENCE- If any party demonstrates to the satisfaction of the court that additional evidence not presented at the hearing is material and that there were reasonable grounds for the failure to present such evidence at the hearing, the court shall remand the matter to the Secretary for consideration of the additional evidence.

`(C) SCOPE OF REVIEW- The decisions, findings, and determinations of the Secretary shall be reviewed pursuant to section 706 of title 5, United States Code.

`(D) ORDER TO PAY PENALTY- Notwithstanding any other provision of law, in any such review, the court shall have the power to order payment of the penalty imposed by the Secretary.

`(7) ACTION TO COLLECT PENALTY-

`(A) ACTION BY ATTORNEY GENERAL- If a lending institution fails to comply with the Secretary's determination or order imposing a civil money penalty under this subsection, after the determination or order is no longer subject to review as provided by this subsection, the Secretary may request the Attorney General to bring an action in an appropriate United States district court to obtain a monetary judgment against the lending institution.

`(B) SCOPE OF REVIEW- In such an action, the validity and appropriateness of the Secretary's determination or order imposing the penalty shall not be subject to review.

`(C) RECOVERY OF COSTS OF FEDERAL ACTION- The money judgment may, in the court's discretion, include the attorneys fees and other expenses incurred by the United States in connection with the action.

`(8) SETTLEMENT BY SECRETARY- The Secretary may compromise, modify, or remit any civil money penalty which may be imposed under this subsection.

`(9) REGULATIONS- The Secretary shall issue such regulations as the Secretary deems appropriate to implement this subsection.

`(10) RETENTION AND USE OF PENALTIES- Notwithstanding any other provisions of law, all civil money penalties collected under this subsection shall be deposited in a revolving fund established by the Secretary, to be available without fiscal year limitation for enforcement of the requirements of this title and for data improvement activities of the Secretary in connection with the reporting requirements of this title.'.

SEC. 9. ALTERNATIVE ENFORCEMENT BY STATES.

Section 305 of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2804) is amended by inserting after subsection (c) (as added by section 8 of this Act) the following new subsection:

`(d) ALTERNATIVE ENFORCEMENT BY STATES-

`(1) STATE REQUEST FOR ENFORCEMENT ACTION- A State may request in writing that the Secretary take an action permitted under subsection (c) to enforce compliance with the Act by a depository institution doing business within such State.

`(2) STATE ENFORCEMENT ACTION- If the Secretary fails to initiate any action requested by a State in accordance with paragraph (1) within 30 days of receipt of such a request, the State shall have the authority to bring an action against such depository institution to impose any penalty permitted under subsection (c).

`(3) VENUE- An enforcement action under paragraph (2) may be brought in any United States district court in which such depository institution does business within the State.'.

END