To establish an Office of Housing Counseling to carry out the responsibilities of the Department of Housing and Urban Development regarding counseling on homeownership and rental housing issues, to establish a toll-free telephone number to provide referral to entities providing such counseling, and to make grants to such entities for providing such counseling, and for other purposes.

March 11, 2004

Mr. NEY (for himself, Ms. VELAZQUEZ, and Mr. SCOTT of Georgia) introduced the following bill; which was referred to the Committee on Financial Services

To establish an Office of Housing Counseling to carry out the responsibilities of the Department of Housing and Urban Development regarding counseling on homeownership and rental housing issues, to establish a toll-free telephone number to provide referral to entities providing such counseling, and to make grants to such entities for providing such counseling, 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 `Expanding Housing Opportunities Through Education and Counseling Act'.

SEC. 2. ESTABLISHMENT OF OFFICE OF HOUSING COUNSELING.

Section 4 of the Department of Housing and Urban Development Act (42 U.S.C. 3533) is amended by adding at the end the following new subsection:

`(g) Office of Housing Counseling-

`(1) Establishment- There is established, in the Office of the Secretary, the Office of Housing Counseling.

`(2) Director- There is established the position of Director of Housing Counseling. The Director shall be the head of the Office of Housing Counseling and shall be appointed by the Secretary. Such position shall be a career reserved position in the Senior Executive Service.

`(3) Functions-

`(A) In general- The Director shall have ultimate responsibility within the Department, except for the Secretary, for all activities and matters relating to homeownership counseling and rental housing counseling, including--

`(i) research, grant administration, public outreach, and policy development relating to such counseling; and

`(ii) establishment, coordination, and administration of all regulations, requirements, standards, and performance measures under programs and laws administered by the Department that relate to housing counseling, homeownership counseling (including maintenance of homes), mortgage-related counseling (including home equity conversion mortgages and credit protection options to avoid foreclosure), and rental housing counseling, including the requirements, standards, and performance measures relating to housing counseling.

`(B) Specific functions- The Director shall carry out the functions assigned to the Director and the Office under this section and any other provisions of law. Such functions shall include establishing rules necessary--

`(i) for the counseling procedures under section 106(h)(1) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(h)(1));

`(ii) carrying out all other functions of the Secretary under section 106(h) of the Housing and Urban Development Act of 1968, including the establishment, operation, and publication of the availability of the toll-free telephone number under paragraph (2) of such section;

`(iii) carrying out section 5 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2604) for mortgage information booklets prepared pursuant to such section;

`(iv) carrying out the certification program under section 106(e) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(e));

`(v) carrying out the assistance program under section 106(a)(4) of the Housing and Urban Development Act of 1968, including criteria for selection of applications to receive assistance;

`(vi) carrying out any functions regarding predatory and unscrupulous lending practices relating to residential mortgage loans that the Secretary considers appropriate, which shall include conducting the study under section 6 of the Expanding Housing Opportunities Through Education and Counseling Act;

`(vii) providing for operation of the advisory committee established under paragraph (4) of this subsection; and

`(viii) collaborating with community-based organizations with expertise in the field of housing counseling.

`(4) Advisory committee-

`(A) In general- The Secretary shall appoint an advisory committee to provide advice and oversight regarding the carrying out of the functions of the Director.

`(B) Members- Such advisory committee shall consist of not more than 12 individuals, and the membership of the committee shall equally represent all aspects of the mortgage and real estate industry, including consumers.

`(C) Terms- Except as provided in subparagraph (D), each member of the advisory committee shall be appointed for a term of three years. Members may be reappointed at the discretion of the Secretary.

`(D) Terms of initial appointees- As designated by the Secretary at the time of appointment, of the members first appointed to the advisory committee, four shall be appointed for a term of one year and four shall be appointed for a term of two years.

`(E) Prohibition of pay; travel expenses- Members of the advisory committee shall serve without pay, but shall receive travel expenses, including per diem in lieu of subsistence, in accordance with applicable provisions under subchapter I of chapter 57 of title 5, United States Code.

`(5) Scope of homeownership counseling- In carrying out the responsibilities of the Director, the Director shall ensure that homeownership counseling provided by, in connection with, or pursuant to any function, activity, or program of the Department addresses the entire process of homeownership, including the decision to purchase a home, the selection and purchase of a home, issues arising during or affecting the period of ownership of a home (including refinancing, default and foreclosure, and other financial decisions), and the sale or other disposition of a home.'.

SEC. 3. COUNSELING PROCEDURES.

(a) In General- Section 106 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x), as amended by the preceding provisions of this Act, is further amended by adding at the end the following new subsection:

`(h) Procedures and Activities-

`(1) Counseling procedures-

`(A) In general- The Secretary shall establish, coordinate, and monitor the administration by the Department of Housing and Urban Development of the counseling procedures for homeownership counseling and rental housing counseling provided in connection with any program of the Department, including all requirements, standards, and performance measures that relate to homeownership and rental housing counseling.

`(B) Homeownership counseling- For purposes of this subsection and as used in the provisions referred to in this subparagraph, the term `homeownership counseling' means counseling related to homeownership and residential mortgage loans. Such term includes counseling related to homeownership and residential mortgage loans that is provided pursuant to--

`(i) section 105(a)(20) of the Housing and Community Development Act of 1974 (42 U.S.C. 5305(a)(20));

`(ii) in the United States Housing Act of 1937--

`(I) section 9(e) (42 U.S.C. 1437g(e));

`(II) section 8(y)(1)(D) (42 U.S.C. 1437f(y)(1)(D));

`(III) section 18(a)(4)(D) (42 U.S.C. 1437p(a)(4)(D));

`(IV) section 23(c)(4) (42 U.S.C. 1437u(c)(4));

`(V) section 32(e)(4) (42 U.S.C. 1437z-4(e)(4));

`(VI) section 33(d)(2)(B) (42 U.S.C. 1437z-5(d)(2)(B));

`(VII) sections 302(b)(6) and 303(b)(7) (42 U.S.C. 1437aaa-1(b)(6), 1437aaa-2(b)(7)); and

`(VIII) section 304(c)(4) (42 U.S.C. 1437aaa-3(c)(4));

`(iii) section 302(a)(4) of the American Homeownership and Economic Opportunity Act of 2000 (42 U.S.C. 1437f note);

`(iv) sections 233(b)(2) and 258(b) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12773(b)(2), 12808(b));

`(v) this section and section 101(e) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x, 1701w(e));

`(vi) section 220(d)(2)(G) of the Low-Income Housing Preservation and Resident Homeownership Act of 1990 (12 U.S.C. 4110(d)(2)(G));

`(vii) sections 422(b)(6), 423(b)(7), 424(c)(4), 442(b)(6), and 443(b)(6) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12872(b)(6), 12873(b)(7), 12874(c)(4), 12892(b)(6), and 12893(b)(6));

`(viii) section 491(b)(1)(F)(iii) of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11408(b)(1)(F)(iii));

`(ix) sections 202(3) and 810(b)(2)(A) of the Native American Housing and Self-Determination Act of 1996 (25 U.S.C. 4132(3), 4229(b)(2)(A));

`(x) in the National Housing Act--

`(I) in section 203 (12 U.S.C. 1709), the penultimate undesignated paragraph of paragraph (2) of subsection (b), subsection (c)(2)(A), and subsection (r)(4);

`(II) subsections (a) and (c)(3) of section 237 (12 U.S.C. 1715z-2); and

`(III) subsections (d)(2)(B) and (m)(1) of section 255 (12 U.S.C. 1715z-20);

`(xi) section 502(h)(4)(B) of the Housing Act of 1949 (42 U.S.C. 1472(h)(4)(B)); and

`(xii) section 508 of the Housing and Urban Development Act of 1970 (12 U.S.C. 1701z-7).

`(C) Rental housing counseling- For purposes of this subsection, the term `rental housing counseling' means counseling related to rental of residential property, which may include counseling regarding future homeownership opportunities and providing referrals for renters and prospective renters to entities providing counseling and shall include counseling related to such topics that is provided pursuant to--

`(i) section 105(a)(20) of the Housing and Community Development Act of 1974 (42 U.S.C. 5305(a)(20));

`(ii) in the United States Housing Act of 1937--

`(I) section 9(e) (42 U.S.C. 1437g(e));

`(II) section 18(a)(4)(D) (42 U.S.C. 1437p(a)(4)(D));

`(III) section 23(c)(4) (42 U.S.C. 1437u(c)(4));

`(IV) section 32(e)(4) (42 U.S.C. 1437z-4(e)(4));

`(V) section 33(d)(2)(B) (42 U.S.C. 1437z-5(d)(2)(B)); and

`(VI) section 302(b)(6) (42 U.S.C. 1437aaa-1(b)(6));

`(iii) section 233(b)(2) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12773(b)(2));

`(iv) section 106 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x);

`(v) section 422(b)(6) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12872(b)(6));

`(vi) section 491(b)(1)(F)(iii) of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11408(b)(1)(F)(iii));

`(vii) sections 202(3) and 810(b)(2)(A) of the Native American Housing and Self-Determination Act of 1996 (25 U.S.C. 4132(3), 4229(b)(2)(A)); and

`(viii) the rental assistance program under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f).

`(2) Toll-free telephone number and web site- The Secretary shall provide for the establishment, operation, and publication of a language-appropriate toll-free telephone number and a World Wide Web site through which persons interested in homeownership or rental housing counseling services may locate and obtain names and contact information of persons and organizations certified under section 106(e) of the Housing and Urban Development Act of 1968 to provide such services.

`(3) Standards for materials- The Secretary, in conjunction with the advisory committee established under subsection (g)(4), shall establish standards for materials and forms to be used, as appropriate, by organizations providing homeownership counseling services, including any recipients of assistance pursuant to subsection (a)(4).

`(4) Mortgage software systems-

`(A) Certification- The Secretary shall provide for the certification of various computer software programs for consumers to use in evaluating different residential mortgage loan proposals. The Secretary shall require, for such certification, that the mortgage software systems that take into account--

`(i) the consumer's financial situation and the cost of maintaining a home, including insurance, taxes, and utilities;

`(ii) the amount of time the consumer expects to remain in the home or expected time to maturity of the loan;

`(iii) such other factors as the Secretary considers appropriate to assist the consumer in evaluating whether to pay points, to lock in an interest rate, to select an adjustable or fixed rate loan, to select a conventional or government-insured or guaranteed loan and to make other choices during the loan application process.

If the Secretary determines that available existing software is inadequate to assist consumers during the residential mortgage loan application process, the Secretary shall arrange for the development by private sector software companies of new mortgage software systems that meet the Secretary's specifications.

`(B) Use and initial availability- Such certified computer software programs shall be used to supplement, not replace, housing counseling. The Secretary shall provide that such programs are initially used only in connection with the assistance of housing counselors certified pursuant to subsection (e).

`(C) Availability- After a period of initial availability under subparagraph (B) as the Secretary considers appropriate, the Secretary shall take reasonable steps to make mortgage software systems certified pursuant to this paragraph widely available through the Internet and at public locations, including public libraries, senior-citizen centers, public housing sites, offices of public housing agencies that administer rental housing assistance vouchers, and housing counseling centers.

`(5) Outreach to vulnerable populations- The Secretary shall develop a multimedia outreach program designed to make elderly persons, persons who face language barriers, low-income persons, and other potentially vulnerable consumers aware that it is advisable, before seeking a residential mortgage loan, to obtain homeownership counseling from an unbiased and reliable source and that such homeownership counseling is available, including through programs of the Department of Housing and Urban Development.

`(6) Education programs- The Secretary shall provide advice and technical assistance to States, units of general local government, and non-profit organizations regarding the establishment and operation of, including assistance with the development of content and materials for, educational programs to inform and educate consumers, particularly those most vulnerable with respect to residential mortgage loans (such as elderly persons, persons facing language barriers, low-income persons, and other potentially vulnerable consumers), regarding home mortgages, mortgage refinancing, home equity loans, and home repair loans.'.

(b) Conforming Amendments to Grant Program for Homeownership Counseling Organizations- Section 106(c)(5)(A)(ii) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(c)(5)(A)(ii)) is amended--

(1) in subclause (II), by striking `and' at the end;

(2) in subclause (III) by striking the period at the end and inserting `; and'; and

(3) by inserting after subclause (III) the following new subclause:

`(IV) notify the Housing or mortgage applicant of the availability of mortgage software systems provided pursuant to subsection (h)(4).'.

SEC. 4. GRANTS FOR HOUSING COUNSELING ASSISTANCE.

Section 106(a) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(a)(3)) is amended by adding at the end the following new paragraph:

`(4) Homeownership and Rental Counseling Assistance-

`(A) In general- The Secretary shall make financial assistance available under this paragraph to States, units of general local governments, nonprofit organizations and other entities providing homeownership or rental counseling (as such terms are defined in subsection (h)(1)).

`(B) Qualified entities- The Secretary shall establish standards and guidelines for eligibility of organizations (including governmental and nonprofit organizations) to receive assistance under this paragraph.

`(C) Distribution- Assistance made available under this paragraph shall be distributed in a manner that encourages efficient and successful counseling programs.

`(D) Authorization of appropriations- There are authorized to be appropriated $45,000,000 for each of fiscal years 2004 through 2007 for--

`(i) the operations of the Office of Housing Counseling of the Department of Housing and Urban Development;

`(ii) the responsibilities of the Secretary under paragraphs (2) through (6) of subsection (h); and

`(ii) assistance pursuant to this paragraph for entities providing homeownership and rental counseling.'.

SEC. 5. REQUIREMENTS TO USE HUD-CERTIFIED COUNSELORS UNDER HUD PROGRAMS.

Section 106(e) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(e)) is amended--

(1) by striking paragraph (1) and inserting the following new paragraph:

`(1) Requirement for assistance- An organization may not receive assistance for counseling activities under subsection (a)(1)(iii), (a)(2), (a)(4), (c), or (d) of this section, or under section 101(e), unless the organization, or the individuals through which the organization provides such counseling, has been certified by the Secretary under this subsection as competent to provide such counseling.';

(2) in paragraph (2)--

(A) by inserting `and for certifying organizations' before the period at the end of the first sentence; and

(B) in the second sentence by striking `for certification' and inserting `, for certification of an organization, that each individual through which the organization provides counseling shall demonstrate, and, for certification of an individual,';

(3) in paragraph (3), by inserting `organizations and' before `individuals';

(4) by redesignating paragraph (3) as paragraph (5); and

(5) by inserting after paragraph (2) the following new paragraphs:

`(3) Requirement under hud programs- Any homeownership counseling or rental housing counseling (as such terms are defined in subsection (h)(1)) required under, or provided in connection with, any program administered by the Department of Housing and Urban Development shall be provided only by organizations or counselors certified by the Secretary under this subsection as competent to provide such counseling.

`(4) Outreach- The Secretary shall take such actions as the Secretary considers appropriate to ensure that individuals and organizations providing homeownership or rental housing counseling are aware of the certification requirements and standards of this subsection and of the training and certification programs under subsection (f).'.

SEC. 6. STUDY OF DEFAULTS AND FORECLOSURES.

The Secretary of Housing and Urban Development shall conduct an extensive study of the root causes of default and foreclosure of home loans, using as much empirical data as are available. Not later than 12 months after the Director of Housing Counseling of the Department of Housing and Urban Development is first appointed, the Secretary shall submit to the Congress a preliminary report regarding the study. Not later than 24 months after such date of appointment, the Secretary shall submit a final report regarding the results of the study, which shall include any recommended legislation relating to the study and recommendations for best practices and for a process to identify populations that need counseling the most.

SEC. 7. DEFINITIONS FOR COUNSELING-RELATED PROGRAMS.

Section 106 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x), as amended by the preceding provisions of this Act, is further amended by adding at the end the following new subsection:

`(i) Definitions- For purposes of this section:

`(1) Nonprofit organization- The term `nonprofit organization' has the meaning given such term in section 104(5) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12704(5)), except that subparagraph (D) of such section shall not apply for purposes of this section.

`(2) State- The term `State' means each of the several States, the Commonwealth of Puerto Rico, the District of Columbia, the Commonwealth of the Northern Mariana Islands, Guam, the Virgin Islands, American Samoa, the Trust Territories of the Pacific, or any other possession of the United States.

`(3) Unit of general local government- The term `unit of general local government' means any city, town, township, parish, village, or other general purpose political subdivision of a State.'.

SEC. 8. UPDATING AND SIMPLIFICATION OF MORTGAGE INFORMATION BOOKLET.

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

(1) in the section heading, by striking `special' and inserting `mortgage';

(2) by striking subsections (a) and (b) and inserting the following new subsections:

`(a) Preparation and Distribution- The Secretary shall prepare a booklet to help consumers applying for federally related mortgage loans to understand the nature and costs of real estate settlement services. The Secretary shall prepare the booklet in various languages and cultural styles, as the Secretary determines to be appropriate, so that the booklet is understandable and accessible to homebuyers of different ethnic and cultural backgrounds. The Secretary shall distribute such booklets to all lenders that make federally related mortgage loans. The Secretary shall also distribute to such lenders lists, organized by location, of homeownership counselors certified under section 106(e) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(e)) for use in complying with the requirement under subsection (c) of this section.

`(b) Contents- Each booklet shall be in such form and detail as the Secretary shall prescribe and, in addition to such other information as the Secretary may provide, shall include in plain and understandable language the following information:

`(1) A description and explanation of the nature and purpose of the costs incident to a real estate settlement or a federally related mortgage loan. The description and explanation shall provide general information about the mortgage process as well as specific information concerning, at a minimum--

`(A) balloon payments;

`(B) prepayment penalties; and

`(C) the trade-off between closing costs and the interest rate over the life of the loan.

`(2) An explanation and sample of the uniform settlement statement required by section 4.

`(3) A list and explanation of lending practices, including those prohibited by the Truth in Lending Act or other applicable Federal law, and of other unfair practices and unreasonable or unnecessary charges to be avoided by the prospective buyer with respect to a real estate settlement.

`(4) A list and explanation of questions a consumer obtaining a federally related mortgage loan should ask regarding the loan, including whether the consumer will have the ability to repay the loan, whether the consumer sufficiently shopped for the loan, whether the loan terms include prepayment penalties or balloon payments, and whether the loan will benefit the borrower.

`(5) An explanation of the right of rescission as to certain transactions provided by sections 125 and 129 of the Truth in Lending Act (15 U.S.C. 1635, 1639).

`(6) A brief explanation of the nature of a variable rate mortgage and a reference to the booklet entitled `Consumer Handbook on Adjustable Rate Mortgages', published by the Board of Governors of the Federal Reserve System pursuant to section 226.19(b)(1) of title 12, Code of Federal Regulations, or to any suitable substitute of such booklet that such Board of Governors may subsequently adopt pursuant to such section.

`(7) A brief explanation of the nature of a home equity line of credit and a reference to the pamphlet required to be provided under section 127A of the Truth in Lending Act (15 U.S.C. 1637a(e)).

`(8) Information about homeownership counseling services made available pursuant to section 106(a)(4) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(a)(4)), a recommendation that the consumer use such services, and notification that a list of certified providers of homeownership counseling in the area, and their contact information, is provided with the booklet.

`(9) An explanation of the nature and purpose of escrow accounts when used in connection with loans secured by residential real estate and the requirements under section 10 of this Act regarding such accounts.

`(10) An explanation of the choices available to buyers of residential real estate in selecting persons to provide necessary services incident to a real estate settlement.

`(11) An explanation of a consumer's responsibilities, liabilities, and obligations in a mortgage transaction.

`(12) An explanation of the nature and purpose of real estate appraisals, including the difference between an appraisal and a home inspection.

`(13) Notice that the Office of Housing of the Department of Housing and Urban Development has made publicly available a brochure regarding loan fraud and a World Wide Web address for obtaining the brochure.

The booklet prepared pursuant to this section shall take into consideration differences in real estate settlement procedures which may exist among the several States and territories of the United States and among separate political subdivisions within the same State and territory.';

(3) in subsection (c), by striking the last sentence and inserting the following new sentence: `Each lender shall also include with the booklet a list of homeownership counselors who are certified pursuant to section 106(e) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(e)) and located in the area of the lender.'; and

(4) in subsection (d), by inserting after the period at the end of the first sentence the following: `The lender shall provide the booklet in the version that is most language- and culturally-appropriate for the person receiving it.'.

END