HR 2531 IH

To amend the Truth in Lending Act, the Revised Statutes of the United States, the Home Mortgage Disclosure Act of 1975, and the amendments made by the Home Ownership and Equity Protection Act of 1994 to protect consumers from predatory lending practices, and for other purposes.

July 17, 2001

Ms. SCHAKOWSKY (for herself, Mr. SANDERS, Mr. GUTIERREZ, Mr. JACKSON of Illinois, Mrs. CLAYTON, Mr. HINCHEY, Ms. NORTON, Mr. PAYNE, Mr. DAVIS of Illinois, Ms. MCKINNEY, Mr. RUSH, Ms. JACKSON-LEE of Texas, Mr. DEFAZIO, Ms. WATERS, Mr. JEFFERSON, and Mr. FILNER) introduced the following bill; which was referred to the Committee on Financial Services

To amend the Truth in Lending Act, the Revised Statutes of the United States, the Home Mortgage Disclosure Act of 1975, and the amendments made by the Home Ownership and Equity Protection Act of 1994 to protect consumers from predatory lending practices, 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 `Save Our Homes Act'.

SEC. 2. HOME MORTGAGE DISCLOSURE ACT AMENDMENTS.

(a) STATUTORY REPORTING REQUIREMENTS-

(1) IN GENERAL- Section 304(b) of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2803(b)) is amended--

(A) in paragraph (3), by striking `and' after the semicolon;

(B) in paragraph (4), by striking the period at the end and inserting `; and'; and

(C) by inserting after paragraph (4) the following new paragraph:

`(5) the annual percentage rate of mortgage loans and other loans secured by residential real property originated by the institution, and the amount of fees and points imposed in connection with the origination of such loans, grouped according to census tract, income level, racial characteristics, age, and gender.'.

(2) CONFORMING AMENDMENTS- The Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2801 et seq.) is amended--

(A) in section 304(i), by striking `subsection (b)(4)' and inserting `paragraphs (4) and (5) of subsection (b)'.

(B) in section 308, by striking `subsection (b)(4)' and inserting `paragraphs (4) and (5) of subsection (b)'.

(b) PROHIBITION ON REGULATORY EXEMPTIONS FROM REPORTING REQUIREMENTS- 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 Anti-Predatory Lending Act of 2001.'.

SEC. 3. TRUTH IN LENDING ACT AMENDMENTS.

(a) APPLYING HIGH-COST LOAN PROTECTIONS TO HOME PURCHASE LOANS AND LOWERING THE THRESHOLD FOR HIGH-COST LOANS- Section 103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)(1)) is amended by striking all that precedes paragraph (2) and inserting the following:

`(aa) HIGH-COST MORTGAGE DEFINED-

`(1) IN GENERAL- The term `high-cost mortgage', and a mortgage referred to in this subsection, means a consumer credit transaction that is secured by the consumer's principal dwelling, other than a reverse mortgage transaction, if any of the following apply with respect to such consumer credit transaction:

`(A) The annual percentage rate at consummation of the transaction exceeds by 5 or more percentage points the yield on United States Treasury securities having comparable periods of maturity (as made available by the Board) as of the week immediately preceding the week in which the interest rate for the loan is established.

`(B) The mortgage is a variable-rate loan in which the annual percentage rate can reasonably be expected to increase beyond the threshold established in subparagraph (A).

`(C) Potential or scheduled increases in the annual percentage rate of the home loan are controlled by the creditor and not directly tied to changes in a publicly available rate not controlled by the creditor.

`(D) The total points and fees payable on the transaction will exceed the greater of 3 percent of the total loan amount or $1,000.'.

(b) DEFINITION OF `POINTS AND FEES'- Paragraph (4) of section 103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)) is amended to read as follows:

`(4) DEFINITION OF POINTS AND FEES-

`(A) IN GENERAL- For purposes of paragraph (1)(D) and section 129(q), the term `points and fees' shall include--

`(i) all items included in the finance charge, except interest or the time-price differential;

`(ii) all compensation paid directly or indirectly to a mortgage broker, including a broker that originates a loan in its own name in a table-funded transaction;

`(iii) each of the charges listed in section 106(e) (except an escrow for future payment of taxes and insurance);

`(iv) the cost of all premiums financed by the lender, directly or indirectly, for any credit life, credit disability, credit unemployment or credit property insurance, or any other life or health insurance, or any payments financed by the lender, directly or indirectly, for any debt cancellation or suspension agreement or contract, except that, for purposes of this subparagraph, insurance premiums or debt cancellation or suspension fees calculated and paid on a monthly basis shall not be considered financed by the lender;

`(v) any prepayment penalty (as defined in section 129(c)(5)) or other fee paid by the consumer in connection with an existing loan which is being refinanced with the proceeds of the consumer credit transaction; and

`(vi) such other charges as the Board determines to be appropriate.

`(B) ITEMS EXCLUDED- For purposes of paragraph (1)(D) and section 129(q), the term `points and fees' shall not include the following:

`(i) Taxes, filing fees, recording and other charges and fees paid or to be paid to public officials for determining the existence of or for perfecting, releasing, or satisfying a security interest.

`(ii) Fees paid to a person other than a creditor or an affiliate of the creditor or to the mortgage broker or an affiliate of the mortgage broker for any of the following:

`(I) Fees for flood certification.

`(II) Fees for pest infestation and flood determinations.

`(III) Appraisal fees.

`(IV) Fees for inspections performed prior to closing.

`(V) Credit reports.

`(VI) Surveys.

`(VII) Attorneys' fees (if the borrower has the right to select the attorney from an approved list or otherwise).

`(VIII) Notary fees.

`(IX) Escrow charges, so long as not otherwise included under subparagraph (A).

`(X) Title insurance premiums.

`(XI) Fire insurance and flood insurance premiums, to the extent that the conditions in section 226.4(d)(2) of title 12 of the Code of Federal Regulations, as in effect on the date of the enactment of the Anti-Predatory Lending Act of 2001, are met.'.

(c) COVERAGE OF MORTGAGE BROKERS-

(1) IN GENERAL- The last sentence of section 103(f) of the Truth in Lending Act (15 U.S.C. 1602(f)) is amended--

(A) by striking `or any person who' and inserting a comma;

(B) by inserting after `through a mortgage broker' the following: `, or acted as a mortgage broker between originators and borrowers on more than 5 home loans within the past 12-month period,'.

(2) LIABILITY OF CREDITOR FOR VIOLATIONS BY MORTGAGE BROKER- Section 130 of the Truth in Lending Act (15 U.S.C. 1640) is amended by adding at the end the following new subsection:

`(j) LIABILITY OF CREDITOR FOR VIOLATIONS BY MORTGAGE BROKER- In the case of any credit extended to a consumer by a creditor through a mortgage broker, the creditor shall be liable under this section to the consumer for any violation of any requirement of this title, or regulations prescribed under this title, by the mortgage broker in connection with such extension of credit.'.

(d) PROHIBITED PRACTICES FOR HIGH-COST HOME LOANS- Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended--

(1) in subsection (e), by striking `of less than five years';

(2) by striking subsections (c), (f), and (h);

(3) by redesignating subsections (d), (e), (g), and (i) as subsections (c), (d), (e), and (f), respectively; and

(4) by inserting after subsection (f) (as so redesignated by paragraph (3) of this subsection) the following new subsections:

`(g) NO CALL PROVISION-

`(1) IN GENERAL- A high-cost mortgage may not include terms under which the indebtedness may be accelerated by the creditor, in the creditor's sole discretion.

`(2) EXCEPTION- Paragraph (1) shall not apply when repayment of the loan has been accelerated by default or made pursuant to a due-on-sale provision or some other provision of the loan documents unrelated to the payment schedule.

`(h) NO MODIFICATION OR DEFERRAL FEES- A creditor shall not charge a borrower any fees or other charges to modify, renew, extend, or amend a high-cost mortgage or to defer any payment due under any such mortgage.

`(i) NO LENDING WITHOUT HOME-OWNERSHIP COUNSELING- A creditor shall not enter into a high-cost mortgage without having received certification from a housing counseling agency (which is certified by the Department of Housing and Urban Development) that the borrower has received counseling on the advisability of the loan transaction and the appropriateness of the loan for the borrower.

`(j) NO MANDATORY ARBITRATION CLAUSE- A high-cost mortgage may not include terms under which a

mandatory arbitration clause limits in any way the right of the borrower to seek relief through the judicial process.

`(k) NO PREPAYMENT PENALTY-

`(1) LIMITATION ON TERMS- A high-cost mortgage may not contain terms under which a consumer must pay a prepayment penalty for paying all or part of the principal before the date on which the principal is due.

`(2) CONSTRUCTION- For purposes of this subsection, any method of computing a refund of unearned scheduled interest is a prepayment penalty if it is less favorable to the consumer than the actuarial method (as that term is defined in section 933(d)(1) of the Housing and Community Development Act of 1992).

`(l) NO NEGATIVE AMORTIZATION- A high-cost mortgage may not include terms under which the outstanding principal balance will increase at any time over the course of the loan because the regular periodic payments do not cover the full amount of interest due.

`(m) PROHIBITION ON EXTENDING CREDIT WITHOUT REGARD TO PAYMENT ABILITY OF CUSTOMER-

`(1) IN GENERAL- No creditor may make a high-cost mortgage, unless the creditor reasonably believes at the time the loan is consummated that 1 or more of the obligors, when considered individually or collectively, will be able to make the scheduled payments to repay the obligation based upon a consideration of their current and expected income, current obligations, employment status, and other financial resources (other than the borrower's equity in the dwelling which secures repayment of the loan).

`(2) OBLIGOR DEFINED- For purposes of paragraph (1), the term `obligor' means each borrower, coborrower, cosigner, or guarantor obligated to repay a loan.

`(n) PROHIBITION ON FLIPPING OF HOME LOANS-

`(1) IN GENERAL- No creditor may knowingly or intentionally engage in the practice of flipping a high-cost mortgage.

`(2) FLIPPING DEFINED- For purposes of paragraph (1), the term `flipping' means the act of making of a new high-cost mortgage to a borrower to refinance an existing home loan when the new loan does not have a reasonable, tangible net benefit to the borrower considering all of the circumstances, including the terms of both the new and refinanced loans, the cost of the new loan, and the borrower's circumstances.

`(o) NO ENCOURAGEMENT OF DEFAULT- No creditor may recommend or encourage default on an existing loan or other debt prior to and in connection with the closing or planned closing of a high-cost mortgage that refinances all or any portion of such existing loan or debt.

`(p) NO FINANCING OF CREDIT INSURANCE-

`(1) IN GENERAL- No creditor may finance, directly or indirectly, any credit life, credit disability, or credit unemployment insurance, or any other life or health insurance premiums through a high-cost mortgage.

`(2) RULE OF CONSTRUCTION- Paragraph (1) shall not be construed as affecting the right of a creditor to require the collection of insurance premium payments into an escrow account in conjunction with the servicing of a high-cost mortgage to the extent the calculation and servicing of such insurance premiums are conducted and reported independently of the high-cost mortgage.

`(q) RESTRICTION ON FINANCING POINTS AND FEES-

`(1) LIMIT ON AMOUNT OF POINTS AND FEES THAT MAY BE FINANCED- No creditor may, in connection with the formation or consummation of a high-cost mortgage, finance, directly or indirectly, any portion of the points, fees, or other charges payable to the creditor or any third party in an amount in excess of the greater of 3 percent of the total loan amount or $600.

`(2) PROHIBITION ON FINANCING CERTAIN POINTS, FEES, OR CHARGES- No creditor may, in connection with the formation or consummation of a high-cost mortgage, finance, directly or indirectly, any of the following fees or other charges payable to the creditor or any third party:

`(A) Any prepayment fee or penalty required to be paid by the consumer in connection with a loan or other extension of credit which is being refinanced by such mortgage if the creditor, with respect to such mortgage, or any affiliate of the creditor, is the creditor with respect to the loan or other extension of credit being refinanced.

`(B) Any points, fees, or other charges required to be paid by the consumer in connection with such mortgage if--

`(i) the mortgage is being entered into in order to refinance an existing high-cost mortgage of the consumer; and

`(ii) if the creditor, with respect to such new mortgage, or any affiliate of the creditor, is the creditor with respect to the existing high-cost mortgage which is being refinanced.

`(r) NO BLANK ITEMS- A high-cost mortgage document in which blanks are left to be filled in after the contract is signed shall not be enforceable under Federal law or the law of any State.

`(s) SAME LANGUAGE REQUIREMENT- If the discussions between a creditor and a borrower or potential borrower with respect to a high-cost mortgage are conducted primarily in a language other than English, the creditor shall, before closing, provide an additional copy of all information required to be disclosed to the borrower under this title translated into the language in which the discussions were conducted.

`(t) ATTEMPTED EVASION OF COVERAGE- The provisions of this section shall apply to any person who in bad faith attempts to avoid its application by--

`(1) structuring a loan transaction as an open end credit plan for the purpose and with the intent of evading the provisions of this section when the loan would have been a high-cost mortgage if the loan had been structured as a closed-end loan;

`(2) dividing any loan transaction into separate parts for the purpose and with the intent of evading the provisions of this section; or

`(3) engaging in any other such subterfuge for the purpose of evading the provisions of this section.

`(u) CORRECTIONS AND UNINTENTIONAL VIOLATIONS-

`(1) IN GENERAL- A creditor with respect to a high-cost mortgage who, when acting in good faith, fails to comply with this section, shall not be deemed to have violated this section if the creditor establishes that either--

`(A) within 30 days of the loan closing and prior to the institution of any action under this section, the borrower is notified of the compliance failure, appropriate restitution is made, and whatever adjustments are necessary are made to the loan to either, at the choice of the borrower--

`(i) make the high-cost home loan satisfy the requirements of this section; or

`(ii) change the terms of the loan in a manner beneficial to the borrower so that the loan will no longer be considered a high-cost mortgage subject to the provisions of this section; or

`(B) the compliance failure was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such errors, and within 60 days after the discovery of the compliance failure and prior to the institution of any action under this section or the receipt of written notice of the compliance failure, the borrower is notified of the compliance failure, appropriate restitution is made, and whatever adjustments are necessary are made to the loan to either, at the choice of the borrower--

`(i) make the high-cost home loan satisfy the requirements of this section; or

`(ii) change the terms of the loan in a manner beneficial to the borrower so that the loan will no longer be considered a high-cost home loan subject to the provisions of this section.

`(2) BONA FIDE ERROR- For purposes of paragraph (1), examples of a bona fide error include clerical, calculation, computer malfunction and programming, and printing errors. An error of legal judgment with respect to a person's obligations under this section is not a bona fide error.'.

SEC. 4. REQUIREMENTS FOR ALL CONFORMING HOME LOANS.

(a) IN GENERAL- Chapter 2 of the Truth in Lending Act (15 U.S.C. 1601 et seq.) is amended by inserting after section 129 the following new section:

`SEC. 129A. REQUIREMENTS FOR ALL CONFORMING HOME LOANS.

`(a) DEFINITION OF CONFORMING HOME LOAN- For the purpose of this section, the term `conforming home loan' means a loan, other than an extension of credit under an open end credit plan or a reverse mortgage transaction, where--

`(1) the principal amount of the loan does not exceed the conforming loan size limit for a single-family dwelling as established from time to time by the Federal National Mortgage Association;

`(2) the borrower is an individual or are individuals;

`(3) the debt is incurred by the borrower primarily for personal, family, or household purposes; and

`(4) the loan is secured by a mortgage or deed of trust on real estate upon which there is located or there is to be located a structure or structures designed principally for occupancy of from 1 to 4 families which is or will be occupied by the borrower as the borrower's principal dwelling.

`(b) NO PAYMENTS TO APPRAISERS- No creditor or mortgage broker may compensate, directly or indirectly, coerce, or intimidate an appraiser for the purpose of influencing the independent judgment of the appraiser with respect to the value of real estate that is to be covered by a conforming home loan or is being offered as security according to an application for a conforming home loan.

`(c) NONCOMPLIANT LOANS PROHIBITED FROM MORTGAGE-BACKED SECURITY POOLS-

`(1) ISSUANCE OF SECURITIES FROM TAINTED POOLS PROHIBITED- No person may issue a security representing an interest in or an obligation backed by a pool of mortgages, deeds of trust, or other security interests created in connection with consumer credit transactions secured by principal dwellings of consumers if such person knows or has reason to believe that any high-cost mortgage or conforming home loan included in such pool violates any provision of this section or section 129.

`(2) INCLUSION IN POOLS- No creditor or other person may knowingly include any high-cost mortgage or conforming home loan that violates any provision of this section or section 129 in any pool described in paragraph (1).'.

(b) TECHNICAL AND CONFORMING AMENDMENTS-

(1) The first sentence of section 130(a) of the Truth in Lending Act (15 U.S.C. 1640(a)) is amended, in the portion of such section that precedes paragraph (1), by inserting `, and to the extent subject to any requirement of this title, any mortgage broker (including any person acting as a mortgage broker),' after `any creditor'.

(2) Section 130(b) of the Truth in Lending Act (15 U.S.C. 1640(b)) is amended--

(A) by striking `creditor or assignee' the first place such term appears and inserting `creditor, assignee, or, to the extent subject to any requirement of this title, any mortgage broker (including any person acting as a mortgage broker),';

(B) by striking `creditor's or assignee's own procedures' and inserting `creditor's, assignee's, or mortgage broker's own procedure'; and

(C) by striking `the creditor or assignee notifies' and inserting `creditor, assignee, or mortgage broker notifies'.

(3) Section 130(c) of the Truth in Lending Act (15 U.S.C. 1640(c)) is amended--

(A) by striking `creditor or assignee' the first place such term appears and inserting `creditor, assignee, or, to the extent subject to any requirement of this title, any mortgage broker (including any person acting as a mortgage broker),'; and

(B) by striking `if the creditor or assignee shows' and inserting `if the creditor, assignee, or mortgage broker shows'.

(4) The third sentence of section 130(e) of the Truth in Lending Act (15 U.S.C. 1640(e)) is amended by inserting `or 129A' after `section 129'.

(c) CLERICAL AMENDMENT- The table of sections for chapter 2 of the Truth in Lending Act (15 U.S.C. 1601 et seq.) is amended by inserting after the item relating to section 129 the following new item:

`129A. Requirements for all conforming home loans.'.

SEC. 5. ALTERNATIVE MAXIMUM AMOUNT OF CIVIL LIABILITY FOR VIOLATIONS INVOLVING HIGH-COST MORTGAGES AND CONFORMING LOANS.

(e) ALTERNATIVE MAXIMUM AMOUNT OF CIVIL LIABILITY- Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (u) (as added by section 3(d) of this Act) the following new subsection:

`(v) ALTERNATIVE MAXIMUM AMOUNT OF CIVIL LIABILITY- Notwithstanding any maximum amount limitation contained in section 130, any creditor, and to the extent subject to any requirement of this title, any mortgage broker (including any person acting as a mortgage broker), who fails to comply with section 129, in connection with any high-cost mortgage, or with section 129A, in connection with any conforming loan, shall be liable for--

`(1) in the case of an individual action, the greater of--

`(A) the amount determined under section 130; or

`(B) the sum of the amount of the principal and the total amount of all finance charges and fees paid by the consumer with respect to such mortgage or loan; and

`(2) in the case of a class action, the greater of--

`(A) the amount determined under section 130; or

`(B) as to each member of the class in any class action or series of class actions arising out of the same failure to comply by the same creditor, the sum of the amount of the principal and the total amount of all finance charges and fees paid by the consumer with respect to such mortgage or loan.'.

SEC. 6. EFFECTIVE DATE.

(a) IN GENERAL- Except as provided in subsection (b), this Act and the amendments made by this Act shall take effect at the end of the 90-day period beginning on the date of the enactment of this Act.

(b) HMDA REQUIREMENTS- Notwithstanding subsection (a), the amendments made by section 2 shall take effect on January 1 of the first calendar year beginning after the date of the enactment of this Act.

END