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HR 4818 IH

To amend the Real Estate Settlement Procedures Act of 1974 and the Truth in Lending Act to make the residential mortgage process more understandable, fair, and competitive.

MAY 22, 2002

Mr. LAFALCE introduced the following bill; which was referred to the Committee on Financial Services

To amend the Real Estate Settlement Procedures Act of 1974 and the Truth in Lending Act to make the residential mortgage process more understandable, fair, and competitive.

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 `Mortgage Loan Consumer Protection Act'.

SEC. 2. DISCLOSURE SIMPLIFICATION AND IMPROVEMENT.

(a) MORE ACCURATE FINANCE CHARGE- Subsection (e) of section 106 of the Truth in Lending Act (15 U.S.C. 1605(e)) is amended to read as follows:

`(e) EXCLUSION OF CERTAIN ESCROWS- Escrows for future payments of taxes and insurance shall not be included in the computation of the finance charge with respect to any extension of credit secured by an interest in real property.'.

(b) MORE UNDERSTANDABLE DISCLOSURE STATEMENTS- Section 4(a) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2603(a)) is amended--

(1) by inserting `(1)' after `(a)'; and

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

`(2) In developing and prescribing such form, the Secretary shall clearly delineate, and provide a box for totals for, the following 3 types of charges:

`(A) `Closing Costs', which shall include all noninterest costs that the consumer is required to pay as a condition for receiving the extension of credit. Fees paid to or collected by the lender may be itemized by purpose, but must also be totaled up and shown separately under the heading `Total Lender Fees'.

`(B) `Prepaid Items', which shall include prepaid interest, funds deposited into any escrow account, and any other items required by the lender to be paid in advance.

`(C) `All Other Costs Paid At Closing', which shall include all costs paid at the time of closing that are neither Closing Costs nor Prepaid Items.'.

(c) HARMONIZATION OF GOOD FAITH ESTIMATE AND SETTLEMENT STATEMENT- Section 5(c) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2604(c)) is amended--

(1) by inserting `(1)' after `(c)'; and

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

`(2) The Secretary shall, to the maximum extent, harmonize the terms and forms for the good faith estimate required under this subsection and the final settlement statement required under section 4, which shall include delineating, on the good faith estimate, the 3 types of charges specified under section 4(a)(2).'.

SEC. 3. ADVANCE AVAILABILITY OF FINAL SETTLEMENT STATEMENT.

Section 4(b) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2603(b)) is amended--

(1) by inserting `(1)' after `(b)';

(2) in the first sentence, by striking `at or before settlement' and inserting `at least 2 days before settlement'; and

(3) by striking the last sentence.

SEC. 4. PROHIBITION AGAINST MARKUPS AND UNDISCLOSED LENDER FEES.

(a) REQUIREMENT TO DISCLOSE ALL LENDER FEES- Section 4 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2603) is amended by adding at the end the following new subsection:

`(c)(1) All fees paid to or collected by a lender in connection with a federally related mortgage loan shall be clearly disclosed as being paid to such lender on the settlement statement for such mortgage loan.'.

(b) PROHIBITION OF MARKUPS AND UNEARNED FEES- Section 8(b) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2607(b)) is amended by insert after the period at the end the following: `This subsection prohibits markups of the cost of services performed or goods provided by another settlement service provider, and fees charged or collected by one settlement service provider where no, nominal, or duplicative work is done.'.

SEC. 5. ENHANCED CONSUMER ASSISTANCE.

Section 5(b) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2604(b)) is amended--

(1) in paragraph (4) by striking `and' at the end;

(2) in paragraph (5), by striking the period at the end and inserting `; and'; and

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

`(6) an explanation of the issues regarding the cost-efficiency of refinancing a mortgage loan, including the tradeoffs between mortgage interest rates and closing costs (including tax considerations), and other factors that may affect a mortgagor's decision to refinance; and

`(7) an explanation that some lenders may offer the mortgagor the option to pay some fees up-front or in the form of a higher mortgage interest rate, and assistance in evaluating this type of option.'.

SEC. 6. ADDITIONAL ESCROW ACCOUNT PROTECTIONS.

Section 10 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2609) is amended by adding at the end the following new subsections:

`(e) LIABILITY OF SERVICERS- A servicer (as such term is defined in section 6(i)) for a federally related mortgage loan, in connection with which an escrow account is established, shall be liable to the borrower for any fees,

penalties, and other charges that arise out of the servicer's failure to make timely payment of taxes, insurance premiums, or other charges that are required to be paid out of such escrow account.

`(f) FORCE-PLACED HAZARD INSURANCE- A servicer for a federally related mortgage loan may not receive any portion of any charge, rebate, or other fee associated with any force-placed hazard insurance in connection with such loan that arises from the servicer's failure to make timely payment of insurance premiums.

`(g) TIMELY CREDITING OF ESCROW FUNDS-

`(1) REQUIREMENT- The servicer for a federally related mortgage loan shall return to the borrower under such loan any amounts remaining in any escrow account established for such loan, as follows:

`(A) NOTICE OF PAYMENT- If the borrower provides written notice to the servicer of intent to pay a loan in full not less than 7 days before such payment, such amounts shall be returned not later than the date that such loan is paid in full. Such return of funds may be in the form of an offset against the amount required to pay the loan in full.

`(B) GENERAL DEADLINE- In no case shall such amounts be returned later than 21 days after the date that the loan is paid in full.

`(2) LIABILITY FOR FAILURE TO RETURN ESCROW AMOUNTS- A servicer who fails to comply with the requirements under paragraph (1) shall be liable to the borrower under the loan for the unreturned amount, plus a penalty equal to the sum of 20 percent of the unreturned amount plus 1 percent for each month that such amounts remain unreturned to the borrower.'.

SEC. 7. ENFORCEMENT OF RESPA CONSUMER PROTECTIONS.

(a) UNIFORM ENFORCEMENT PROVISIONS- The Real Estate Settlement Procedures Act of 1974 is amended by inserting after section 12 (12 U.S.C. 2610) the following new section:

`SEC. 13. DAMAGES AND COSTS.

`Whoever fails to comply with any provision of section 4, 5, 6, or 10(c) shall be liable to the borrower for each such failure in an amount equal to the sum of the following:

`(1) ACTUAL DAMAGES- Any actual damages to the borrower as a result of such failure.

`(2) ADDITIONAL DAMAGES- Any additional damages, as the court may allow, in an amount not to exceed $2,000 for each loan.

`(3) COSTS- In the case of any successful action for damages pursuant to this section, the costs of the action, together with any attorneys' fees incurred in connection with such action as the court may determine to be reasonable under the circumstances.'.

(b) SUPERSEDED ENFORCEMENT PROVISIONS- The Real Estate Settlement Procedures Act of 1974 is amended--

(1) in section 6 (12 U.S.C. 2605), by striking subsection (f); and

(2) in section 10 (12 U.S.C. 2609), by striking subsection (d).

(c) JURISDICTION OF COURTS AND STATUTE OF LIMITATIONS- Section 16 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2614) is amended--

(1) by striking `, or 9' and inserting `, 9, 10, or 13'; and

(2) by striking `in the case of a violation of section 6' and all that follows through `may be brought within 3 years'.

SEC. 8. EFFECTIVE DATE.

The amendments made by this Act shall be made and shall apply upon the expiration of the 180-day period beginning on the date of the enactment of this Act.

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