To combat unfair and deceptive practices in the high-cost mortgage market, establish a consumer mortgage protection board, and establish licensing and minimum standards for mortgage brokers, and for other purposes.

February 13, 2003

Mr. NEY (for himself, Mr. LUCAS of Kentucky, Mr. GILLMOR, and Mr. GARY G. MILLER of California) introduced the following bill; which was referred to the Committee on Financial Services

To combat unfair and deceptive practices in the high-cost mortgage market, establish a consumer mortgage protection board, and establish licensing and minimum standards for mortgage brokers, 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; TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Responsible Lending Act'.

(b) TABLE OF CONTENTS- The table of contents for this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I--HIGH-COST MORTGAGES

Sec. 101. Definitions relating to high-cost mortgages.

Sec. 102. Amendments to existing requirements for high-cost mortgages.

Sec. 103. Amendments to liability provisions relating to high-cost mortgages.

Sec. 104. Coordination with State law.

Sec. 105. Continuation of identifications under the Alternative Mortgage Transaction Parity Act of 1982.

Sec. 106. Effective date.

TITLE II--CONSUMER MORTGAGE PROTECTION BOARD

Sec. 201. Establishment.

Sec. 202. Counseling procedures.

Sec. 203. Grants for housing counseling assistance.

Sec. 204. Requirements to use HUD-certified counselors under HUD programs.

Sec. 205. Updating and simplification of mortgage information booklet.

TITLE III--REQUIREMENTS FOR MORTGAGE BROKERS

Subtitle A--Licensing and Minimum Standards

Sec. 301. State regulation of mortgage brokers.

Sec. 302. Federal mortgage broker requirements.

Sec. 303. Definitions.

Subtitle B--Database of Licensed Mortgage Brokers

Sec. 311. Establishment.

Sec. 312. Database.

Sec. 313. Fees.

Sec. 314. Confidentiality of information.

Sec. 315. Liability provisions.

TITLE I--HIGH-COST MORTGAGES

SEC. 101. DEFINITIONS RELATING TO HIGH-COST MORTGAGES.

(a) HIGH-COST MORTGAGE DEFINED- 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 residential mortgage transaction, a reverse mortgage transaction, or a transaction under an open end credit plan, if any of the following apply with respect to such consumer credit transaction:

`(A) 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 8 percentage points the yield on Treasury securities having comparable periods of maturity on the fifteenth day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor.

`(B) 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 10 percentage points the yield on Treasury securities having comparable periods of maturity on the fifteenth day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor.

`(C) The total loan amount exceeds $30,000 and total points and fees payable on the transaction will exceed 6 percent of the total loan amount.

`(D) The total loan amount is $30,000 or less and total points and fees payable on the transaction will exceed 7 percent of the total loan amount.'.

(b) POINTS AND FEES DEFINED- Section 103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)) is amended--

(1) by striking paragraph (3);

(2) by striking paragraph (4) and inserting the following new paragraph:

`(3) DEFINITION OF POINTS AND FEES-

`(A) IN GENERAL- For purposes of subparagraphs (C) and (D) of paragraph (1), the term `points and fees' shall exclude prepayment fees, yield-spread premiums, and borrower credits and shall include--

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

`(ii) all compensation paid directly to mortgage brokers by or on behalf of the consumer (other than borrower credits); and

`(iii) each of the charges listed in section 106(e) (except an escrow for future payment of taxes or insurance), unless--

`(I) the charge is reasonable and competitive;

`(II) the creditor receives no direct compensation; and

`(III) the charge is paid to a third party; and

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

`(B) BONA FIDE DISCOUNT POINTS EXCLUDABLE- Not more than 2 bona fide loan discount points in connection with the loan transaction may be excluded from the amount of points and fees taken into account for purposes of paragraph (1).

`(C) BONA FIDE DISCOUNT POINT DEFINED- For purposes of subparagraph (B), the term `bona fide discount point' means any loan discount point which is paid for the purpose of reducing, and which in fact results in a bona fide reduction of, the interest rate or time-price differential applicable to the loan if the amount of the interest rate reduction purchased by the discount points is reasonably consistent with established industry norms and practices for mortgage market transactions.'; and

(3) by redesignating paragraph (5) as paragraph (4).

(c) TECHNICAL AND CONFORMING AMENDMENT- Paragraph (2) of section 103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)(2)) is amended by striking `specified in paragraph (1)(A)' and inserting `specified in subparagraph (A) or (B) of paragraph (1)'.

SEC. 102. AMENDMENTS TO EXISTING REQUIREMENTS FOR HIGH-COST MORTGAGES.

(a) PREPAYMENT PENALTIES- Section 129(c)(2)(C) of the Truth in Lending Act (15 U.S.C. 1639(c)(2)(C)) is amended by striking `5-year period' and inserting `4-year period'.

(b) BALLOON PAYMENTS- Section 129(e) of the Truth in Lending Act (15 U.S.C. 1639(e)) is amended--

(1) by striking `PAYMENTS- A mortgage' and inserting `PAYMENTS-

`(1) IN GENERAL- A mortgage'; and

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

`(2) EXCEPTION- Paragraph (1) shall not apply when the payment schedule is adjusted to account for the seasonal or irregular income of the obligor or if the purpose of the loan is a bridge loan made in connection with the acquisition or construction of a dwelling intended to become the obligor's principal dwelling.

`(3) NOTICE REQUIRED- A creditor that offers a high-cost mortgage having a balloon payment term in accordance with paragraph (2) shall clearly disclose to the consumer that the loan contains such a term, the balloon payment amount that will be owed by the consumer, and that balloon payments are permissible under the circumstances described in paragraph (2) but are not required for such types of mortgages.'.

(c) NEGATIVE AMORTIZATION- Subsection (f) of section 129 of the Truth in Lending Act (15 U.S.C. 1639(f)) is amended--

(1) by striking `AMORTIZATION- A mortgage referred to in section 103 (aa)' and inserting `AMORTIZATION-

`(1) IN GENERAL- A high-cost mortgage'; and

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

`(2) EXCEPTION FOR PERIOD OF FORBEARANCE- Paragraph (1) shall not apply with respect to negative amortization resulting from periods of temporary forbearance allowed by the creditor.'.

(d) DISCLOSURE OF FINANCING OF POINTS OR FEES- Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by adding at the end the following new subsection:

`(m) DISCLOSURE OF FINANCING OF POINTS OR FEES- If, in connection with the formation or consummation of a high-cost mortgage, any portion of the points, fees, or other charges payable to the creditor or any third party are included, directly or indirectly, in the principal amount of the loan or otherwise financed by the creditor, the creditor shall disclose that fact to the consumer together with a statement that such treatment of any such point, fee, or charge is not legally required.'.

(e) PROHIBITION ON UNFAIR ARBITRATION REQUIREMENTS- Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (m) (as added by subsection (d) of this section) the following new subsection:

`(n) NO UNFAIR ARBITRATION CLAUSES-

`(1) IN GENERAL- A high-cost mortgage may not be subject to a mandatory arbitration clause that is oppressive, unfair, unconscionable, or substantially in derogation of the rights of consumers.

`(2) SAFE HARBOR- An arbitration clause that--

`(A) establishes the venue for the arbitration in the Federal judicial district or division in which the real property that is the security for the high-cost mortgage is located;

`(B) complies with the standards set forth by a nationally recognized arbitration organization, such as the Statement of Principles of the National Consumer Dispute Advisory Committee of the American Arbitration Association or any comparable standards of such other organization as may be approved by the Board of Governors of the Federal Reserve System, or any official or employee of the Board duly authorized by the Board; and

`(C) requires the creditor to bear the reasonable costs of all parties to the arbitration, including the production of fact witnesses and documents, during the first 2 days of such arbitration,

shall be presumed not to violate the proscriptions of paragraph (1).'.

(f) PROHIBITION ON EVASIONS THROUGH STRUCTURING TRANSACTIONS OR RECIPROCAL ARRANGEMENTS- Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (n) (as added by subsection (e) of this section) the following new subsection:

`(o) PROHIBITION ON EVASIONS THROUGH STRUCTURING TRANSACTIONS OR RECIPROCAL ARRANGEMENTS-

`(1) IN GENERAL- No creditor, or any affiliate of a creditor, may take any action for the purpose of, or with the intent to, circumvent or evade any requirement of this title with respect to high-cost mortgages, including--

`(A) entering into any reciprocal arrangement;

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

`(C) structuring or restructuring a credit transaction as a business loan, as credit extended under an open end consumer credit plan, or other form of credit 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 consumer loan or as credit not extended under an open end consumer credit plan.

`(2) RECIPROCAL ARRANGEMENT DEFINED- For purposes of this subsection, the term `reciprocal arrangement' means any agreement, understanding, or other arrangement under which--

`(A) 1 creditor or affiliate of a creditor agrees to engage in a transaction with, or on behalf of, another creditor (or affiliate of such other creditor), in exchange for

`(B) the agreement of the second creditor referred to in subparagraph (A), or any affiliate of such company, to engage in a transaction with, or on behalf of, the first creditor referred to in such subparagraph, or any affiliate of such company,

for the purpose of evading any requirement or prohibition under this title, or any other provision of any Federal law or regulation relating to high-cost mortgages.

`(3) REGULATIONS- The Board shall prescribe such regulations as may be necessary to enforce the requirements of this subsection.'.

(g) NO ENCOURAGEMENT OF DEFAULT OR NONPAYMENT ON PRIOR EXISTING LOAN- Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (o) (as added by subsection (f) of this section) the following new subsection:

`(p) NO ENCOURAGEMENT OF DEFAULT OR SKIPPED PAYMENT- No creditor may recommend or encourage default or nonpayment (including nonpayment of any periodic payment) 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.'.

(h) ABILITY TO REPAY- Subsection (h) of section 129 of the Truth in Lending Act (15 U.S.C. 1639(h)) is amended to read as follows:

`(h) PROHIBITION ON EXTENDING CREDIT WITHOUT REGARD TO PAYMENT ABILITY OF CONSUMER-

`(1) IN GENERAL- A creditor shall not engage in a pattern or practice of extending credit to consumers under high-cost mortgages based on the consumers' collateral without regard to the consumers' repayment ability, including the consumers' current and expected income, current obligations, and employment.

`(2) PRESUMPTION OF ABILITY- Unless a creditor knows or has reason to know otherwise and except as provided in paragraphs (3) and (4), a creditor may presume that a consumer is able to make the scheduled payments to repay the high-cost mortgage, if, at the time the extension of credit is approved, the consumer's total monthly payments due on outstanding obligations, including amounts owed under the high-cost mortgage, do not exceed 53 percent of the consumer's monthly gross income, as verified by the credit application, the consumer's financial statement, a credit report, or any other reasonable means; except that if the consumer's repayment ability is based substantially on fixed income, then income verification shall include reasonable documentation of such fixed income, in addition to any statement by the consumer.

`(3) PRESUMPTION NOT APPLICABLE IN CASE OF BALLOON PAYMENTS- Paragraph (2) shall not apply in the case of any consumer who has an obligation secured by real property (that would be taken into account for purposes of such paragraph) for which the aggregate amount of the regular periodic payments would not fully amortize the obligation.

`(4) VERIFICATION OF INCOME REQUIRED IN CASE OF CONSUMER WITHOUT EARNED INCOME- A creditor may not rely on a consumer's statement of income for purposes of paragraph (2) if the consumer has no earned income.'.

(i) PROHIBITION ON SINGLE PREMIUM CREDIT LIFE INSURANCE- Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (p) (as added by subsection (g) of this section) the following new subsection:

`(q) PROHIBITION ON SINGLE PREMIUM CREDIT LIFE INSURANCE- No consumer credit transaction involving a high-cost mortgage may include the offer or sale of any insurance policy, on a single premium basis, that insures, guarantees, or indemnifies the repayment of the outstanding balance of the loan against death, illness, accident, disability, or unemployment of the consumer.'.

(j) LIMITATIONS ON REFINANCING- Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (q) (as added by subsection (i) of this section) the following new subsection:

`(r) LIMITATIONS ON REFINANCING-

`(1) PROHIBITION DURING 1ST YEAR-

`(A) IN GENERAL- No creditor may refinance a high-cost mortgage loan with another high-cost mortgage during the 1-year period beginning on the date of consummation of the prior high-cost mortgage loan.

`(B) ARRANGEMENTS PROHIBITED- No mortgage broker may arrange for the refinancing of a high-cost mortgage with another high-cost mortgage during the 1-year period beginning on the date of consummation of the prior high-cost mortgage.

`(2) EXCEPTION FOR LOWER INTEREST LOAN- Paragraph (1) shall not apply if the scheduled finance charge for the balance of the prior existing high-cost mortgage exceeds the scheduled finance charge for the subsequent high-cost mortgage

by an amount greater than the amount of the fees and charges imposed by the creditor for such subsequent mortgage.

`(3) REFINANCING OF CERTAIN LOW-INTEREST LOANS PROHIBITED FOR 10 YEARS- A high-cost mortgage may not be made to refinance, and the proceeds of a high-cost mortgage may not be used to pay off, any below-market interest rate or subsidized loan made by any government agency, government-sponsored enterprise, or nonprofit corporation (other than a mutual bank, mutual savings association, or credit union) during the 10-year period beginning when such low-interest loan was consummated, without either the express written consent of the holder of the loan or certification from a person or organization certified under section 106(e) of the Housing and Urban Development Act of 1968 that the consumer has obtained credit counseling.'.

(k) REQUIREMENTS RELATING TO HOME IMPROVEMENT CONTRACTS- Section 129(i) of the Truth in Lending Act (15 U.S.C. 1639(i)) is amended--

(1) by striking `IMPROVEMENT CONTRACTS- A creditor' and inserting `IMPROVEMENT CONTRACTS-

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

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

`(2) NO PAYMENT IN FULL WITHOUT PROOF OF COMPLETION OF THE WORK-

`(A) IN GENERAL- No creditor may use the proceeds of a high-cost mortgage to make a final payment or payment in full to a home improvement contractor under a home improvement contract without proof that the contractor has fully performed the obligations of the contract.

`(B) SIGNED STATEMENT OF CONSUMER- A signed statement by the consumer who entered into the high-cost mortgage and home improvement contract referred to in subparagraph (A) that the contractor has fully performed the contract shall constitute proof for purposes of such subparagraph.'.

(l) ADDITIONAL SPECIFIC DISCLOSURES- Section 129(a)(1) of the Truth in Lending Act (15 U.S.C. 1639(a)) is amended by adding at the end the following new subparagraphs:

`(C) `The rate of interest and the amount of fees you pay on a loan may vary depending on which lender or broker you select.'

`(D) `The timing and amount of payments on debts you already are carrying contribute to the credit rating that is used to determine whether you may get a new loan and how much you will pay for that new loan. You should NOT accept any advice to ignore or delay making any payments on loans you already have, even if those loans will be paid off with the new loan.'

`(E) `You may get into serious financial difficulties if you use this loan to pay off old debts and then run up other new debts.'.

(m) CREDIT REPORTING REQUIREMENTS- Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (r) (as added by subsection (j) of this section) the following new subsection:

`(s) CREDIT REPORTING REQUIREMENTS-

`(1) PERIODIC FULL FILE REPORTING REQUIRED- A creditor with respect to a high-cost mortgage (or the assignee or servicer of such mortgage) shall furnish, at least once in each calendar quarter, a full file credit report with respect to all high-cost mortgages held or serviced by such creditor, assignee, or servicer to a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis (as defined in section 603(p) of the Fair Credit Reporting Act), except for information deleted in connection with the settlement of a dispute or consumer complaint.

`(2) RIGHT TO FREE CREDIT REPORTS IN CONNECTION WITH HIGH-COST MORTGAGES- Any acceptance by a creditor of an application for a consumer credit transaction the terms of which would cause the transaction to be defined as a high-cost mortgage shall be treated as an adverse action with respect to the consumer for purposes of sections 612(b) and 615(a) of the Fair Credit Reporting Act, except that, the creditor need not refer to such action as adverse in any communication with the consumer.

`(3) FULL FILE CREDIT REPORT DEFINED- For purposes of this subsection, the term `full file credit report' means a report given to a consumer reporting agency on a regular basis reflecting the status of every loan in the server's portfolio as of the report date.'.

(n) NO CALL PROVISION- Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (s) (as added by subsection (m) of this section) the following new subsection:

`(t) 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--

`(A) by default or pursuant to a due-on-sale provision or some other provision of the loan documents unrelated to the payment schedule; or

`(B) due to any action or omission by the consumer that adversely affects the creditor's security interest in the residence or any rights of the creditor in such security.'.

(o) MODIFICATION AND DEFERRAL FEES PROHIBITED- Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (t) (as added by subsection (n) of this section) the following new subsection:

`(u) MODIFICATION AND DEFERRAL FEES PROHIBITED-

`(1) IN GENERAL- A creditor may not charge a consumer any fee to modify, renew, extend, or amend a high-cost mortgage, or to defer any payment due under the terms of such mortgage, unless the modification, renewal, extension, or amendment results in a lower annual percentage rate on the mortgage for the consumer and then only if the amount of the fee is comparable to fees imposed for similar transactions in connection with consumer credit transactions that are secured by a consumer's principal dwelling and are not high-cost mortgages.

`(2) EXCEPTION FOR CERTAIN WORKOUTS- Paragraph (1) shall not apply in the case of an existing high-cost mortgage that is in default or more than 60 days delinquent, if the modification, renewal, extension, or amendment is part of the resolution or workout of the default or delinquency.'.

(p) PROFITING ON FORECLOSURES PROHIBITED- Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (u) (as added by subsection (o) of this section) the following new subsection:

`(v) LENDER PROFITS ON FORECLOSURES PROHIBITED-

`(1) IN GENERAL-

`(A) CREDITOR, ASSIGNEE, OR AFFILIATE REACQUIRES PROPERTY INTEREST AT FORECLOSURE SALE- If the creditor, any assignee of the creditor, or any affiliate of such creditor or assignee is the successful bidder at a judicial or nonjudicial foreclosure sale of a residence of a consumer that was the security for a high-cost mortgage, any profit realized by a creditor, any assignee of the creditor, or any affiliate of such creditor or assignee realized upon the subsequent resale or other disposition of the property that was the security for a high-cost mortgage shall be paid to the consumer.

`(B) CREDITOR, ASSIGNEE, OR AFFILIATE DOES NOT REACQUIRE PROPERTY INTEREST AT FORECLOSURE SALE- If the creditor, any assignee of the creditor, or any affiliate of such creditor or assignee is not the successful bidder at a judicial or nonjudicial foreclosure sale of a residence of a consumer that was the security for a high cost mortgage, any surplus realized in excess of the sum of--

`(i) the amount to which the creditor or assignee or affiliate or others have a right under the law of the State where the real property that was the security for a high-cost mortgage is located; and

`(ii) the amounts referred to in subparagraphs (A), (B), and (C) of paragraph (4),

shall be paid to the consumer.

`(2) PROFIT DEFINED- For purposes of this subsection, the term `profit' means the amount which is equal to--

`(A) the amount paid to the creditor, any assignee of the creditor, or any affiliate of such creditor or assignee by a third party for the sale of the property to the third party, minus

`(B) the amount to which the creditor or assignee has a right under the terms of the mortgage.

`(3) SURPLUS DEFINED-

`(A) IN GENERAL- For the purposes of paragraph (1)(B), the term `surplus' means the amount which is equal to--

`(i) the amount derived from the sale as determined by the law of the State where the real property that was the security for a high-cost mortgage is located; minus

`(ii) the amounts disbursed to others under the processes, priorities and procedures for disbursement of surplus funds, and for determining the rights and priorities between consumers and others who may have an interest in or claim to the surplus funds, as determined by the law of the State where the real property that was the security for a high-cost mortgage is located.

`(B) APPLICABLE DEFINITION IF STATE LAW DOES NOT PROVIDE FOR THE DETERMINATIONS OF AMOUNTS DESCRIBED IN SUBPARAGRAPH (A)- If the law of the State where the real property that was the security for a high-cost mortgage is located does not provide for the determination of the amounts described in clauses (i) and (ii) of subparagraph (A), the term `surplus' means that portion of the amount derived from the sale that exceeds the sum of the amounts described in subparagraphs (A), (B), and (C) of paragraph (4).

`(4) CREDITOR'S AMOUNT- The amount to which the creditor or assignee has a right under the terms of the mortgage, for purposes of this subsection, includes--

`(A) all foreclosure expenses, including reasonable attorneys' fees and expenses reasonably incurred to secure, market, and preserve the property through the date of the foreclosure sale, incurred by the creditor or assignee;

`(B) all amounts due the creditor or assignee under the terms of the agreement through the date of the judicial or nonjudicial foreclosure sale referred to in paragraph (1);

`(C) all amounts paid by the creditor or assignee to other lien holders of record on the property; and

`(D) all postforeclosure expenses, including reasonable attorneys' fees, commissions, advances, and expenses reasonably incurred to secure, market, preserve, improve and sell the property to a third party referred to in paragraph (1), incurred by the creditor or assignee.'.

(q) INCREASED INTEREST RATE UPON DEFAULT PROHIBITED- Section 129 of the Truth in Lending Act

(15 U.S.C. 1639) is amended by inserting after subsection (v) (as added by subsection (p) of this section) the following new subsection:

`(w) APPLICABILITY OF LIMITATIONS ON VARIABLE RATE CHANGES- In the case of a high-cost mortgage that is subject to a variable rate of interest based on an index or rate of interest which is publicly available and is not under the control of the creditor, subsection (d) shall not apply to changes in the rate of interest due to any change in such index, to the extent the change of interest is not due in any part to a default by the consumer or a permissible acceleration by the creditor.'.

(r) PREPAYMENT OF PERIODIC PAYMENTS FROM PROCEEDS PROHIBITED- Section 129(g) of the Truth in Lending Act (15 U.S.C. 1639) is amended to read as follows:

`(g) PREPAYMENT OF PERIODIC PAYMENTS FROM PROCEEDS PROHIBITED- No high-cost mortgage may include terms under which any periodic payments of interest or principal due under such mortgage may be paid in advance or otherwise deducted from the proceeds of the loan.'.

(s) PAYOFF STATEMENTS- Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (w) (as added by subsection (q) of this section) the following new subsection:

`(x) PAYOFF STATEMENT-

`(1) FEES-

`(A) IN GENERAL- Except as provided in subparagraph (B), no creditor or servicer may charge a fee for informing or transmitting to any person the balance due to pay off the outstanding balance on a high-cost mortgage.

`(B) TRANSACTION FEE- When payoff information referred to in subparagraph (A) is provided by facsimile transmission or by a courier service, a creditor or servicer may charge a processing fee not to exceed an amount that is comparable to fees imposed for similar services provided in connection with consumer credit transactions that are secured by the consumer's principal dwelling and are not residential mortgage transactions or high-cost mortgages.

`(C) MULTIPLE REQUESTS- If a creditor or servicer has provided payoff information referred to in subparagraph (A) without charge, other than the transaction fee allowed by subparagraph (B), on 4 occasions during a calendar year, the creditor or servicer may thereafter charge a reasonable fee for providing such information during the remainder of the calendar year.

`(2) PROMPT DELIVERY- Payoff balances shall be provided within a reasonable time but in any event no more than 5 business days after receiving a request by a consumer or a person authorized by the consumer to obtain such information.'.

SEC. 103. AMENDMENTS TO LIABILITY PROVISIONS RELATING TO HIGH-COST MORTGAGES.

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

(1) by striking `(b) A creditor or assignee' and inserting `(b) RIGHT TO CURE-

`(1) IN GENERAL- Subject to paragraph (2), a creditor or assignee'; and

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

`(2) HIGH-COST MORTGAGES- In addition to the provisions of paragraph (1), a creditor or assignee shall have no liability under this section for any failure to comply with any requirement imposed under section 129 with respect to a high-cost mortgage, if within 60 days after discovering an error, and prior to the institution of an action under this section, the creditor or assignee notifies the consumer of the error and makes appropriate restitution to the consumer or modifies the terms of the credit transaction in such a way that the transaction is no longer a high-cost mortgage within the meaning of this title.'.

(b) COORDINATION OF CLASS ACTION DAMAGES WITH ACTUAL DAMAGES- 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) CLASS ACTIONS RELATING TO HIGH-COST MORTGAGES-

`(1) COORDINATION OF CLASS ACTION DAMAGES WITH ACTUAL DAMAGES- The maximum amount of general damages which may otherwise be imposed on any person under subsection (a)(2)(B) for violations of section 129 in a class action shall be reduced by the aggregate amount of actual damages for which such person is liable to members of the class under subsection (a)(1).

`(2) PATTERN AND PRACTICE- In determining the amount of any liability of any person under subsection (a)(2)(B) for violations of section 129 in a class action, the court shall consider the pattern and practices of the person giving rise to the violations.'.

(c) AMENDMENT RELATING TO LIABILITY OF ASSIGNEES-

(1) IN GENERAL- Paragraph (4) of section 131(d) of the Truth in Lending Act (15 U.S.C. 1641(d)) is amended by striking `mortgage referred to in section 103(aa)' and inserting `high-cost mortgage'.

(2) RIGHTS UPON ASSIGNMENT OF HIGH-COST MORTGAGES- Section 131(d) of the Truth in Lending Act (15 U.S.C. 1641(d)) is amended--

(A) by redesignating paragraphs (2), (3), and (4) as paragraphs (5), (6), and (7), respectively; and

(B) striking paragraph (1) and inserting the following new paragraphs:

`(1) IN GENERAL- Any person who purchases or is otherwise assigned a high-cost mortgage shall be subject to an action under this title only if the violation for which such action or proceeding is brought is apparent on the face of the disclosure statement or the underlying promissory note.

`(2) AFFIRMATIVE CLAIMS AND DEFENSES- Any person who purchases or is otherwise assigned a high-cost mortgage that was made, arranged, or assigned by a person financing home improvements

to the dwelling of a consumer shall be subject to all affirmative claims and defenses which the consumer may have against the seller, home improvement contractor, broker, or creditor with respect to such mortgage or home improvements.

`(3) SAFE HARBOR- A person who maintains and exercises procedures that are reasonably adapted to prevent the acquisition of high-cost mortgages containing violations of this title, which procedures are consistent with established industry norms and practices for secondary mortgage market transactions, shall not be liable for any such violations in connection with any loan acquired pursuant to such procedures.

`(4) CLARIFICATION OF TERMS- For purposes of this title, the terms `purchaser', `assignee', and `person who purchases or is otherwise assigned' includes--

`(A) any person acting on behalf of the purchaser or assignee; and

`(B) with regard to credit obligations secured by consumers' dwellings included in a pool for the purpose of issuing asset-backed securities, the issuer of the asset-backed security, the depositor entity holding such pool, and any affiliate of such issuer or depository entity.'.

SEC. 104. COORDINATION WITH STATE LAW.

(a) IN GENERAL- Section 111 of the Truth in Lending Act (15 U.S.C. 1610) is amended--

(1) by adding at the end the following new subsection:

`(f) HIGH-COST MORTGAGES-

`(1) IN GENERAL- To the extent that any law of any State--

`(A) imposes any requirement, limitation, or prohibition on any mortgage lending activities in connection with an extension of consumer credit secured by a lien against a consumer's dwelling in whole or in part because the actual or contingent costs and finance charges to the consumer associated with such extension of credit exceed any particular threshold for such costs, however such threshold may be defined; or

`(B) attempts to regulate such mortgage lending activities--

`(i) through limitations or prohibitions in connection with contracts for other business with any such State or political subdivision thereof;

`(ii) by making any conduct in connection with any such activities subject to criminal penalties; or

`(iii) by making activities regulated under real estate, foreclosure, or other laws of such State or political subdivision contingent upon the manner in which mortgage lending activities are conducted,

this title shall preempt such law, irrespective of whether such law affords greater protection, substantive or otherwise, to consumers.

`(2) DEFINITIONS- For purposes of this subsection, the following definitions shall apply:

`(A) MORTGAGE LENDING ACTIVITIES- The term `mortgage lending activities' includes any advertisement, solicitation, offer, negotiation, application, processing, underwriting, originating, closing, funding, recording, assignment, securitization, servicing, collection, modification, satisfaction, or foreclosure (including the disposition of foreclosed property) for or of any extension of consumer credit secured by a lien against a consumer's dwelling.

`(B) LAW OF ANY STATE- The term `law of any State' includes any statute, rule, regulation, or ordinance of any State or any political subdivision of any State.

`(3) CLARIFICATION OF PREEMPTION- Laws preempted under paragraph (1) of this subsection shall, without in any way limiting the effect of paragraph (1) of this subsection, include--

`(A) any law of any State that directly or indirectly limits a creditor's ability to extend new credit to a consumer for the purpose of refinancing an existing extension of consumer credit in whole or in part because the actual or contingent costs and finance charges to the consumer associated with either the existing or the new extension of consumer credit are lower than or in excess of any particular threshold; or

`(B) any law of any State that directly or indirectly limits the claims, defenses, or other remedies at law or equity available to a creditor, its agent, or its direct or indirect assignee in connection with an extension of consumer credit secured by a lien against a consumer's dwelling in whole or in part because the actual or contingent costs and finance charges to the

consumer associated with such extension of consumer credit are in excess of any particular threshold.

`(4) EXCLUSIONS- Notwithstanding paragraphs (1) and (2), the following laws are expressly excluded from the preemption set forth in paragraph (1):

`(A) Any law of any State, not otherwise preempted under Federal law, limiting the rate of interest reflected in the note or other instrument evidencing an extension of consumer credit secured by a lien against a consumer's dwelling, to the extent that such law does not require compliance with any law that is otherwise preempted under paragraphs (1) and (2) as a condition of contracting for, charging, or collecting any rate of interest otherwise permitted by such law.

`(B) Any law of any State requiring the licensing, registration, or authorization of any person engaged in mortgage lending activities, to the extent that such law does not condition the issuance of such a license, registration or other authorization, or the authority granted thereby, on compliance with any law that is otherwise preempted under paragraphs (1) and (2).

`(5) PROMPT DETERMINATION BY BOARD OF GOVERNORS-

`(A) IN GENERAL- In response to a request from any person, the Board of Governors of the Federal Reserve System, or any official or employee of the Board of Governors of the Federal Reserve System duly authorized by the Board, shall--

`(i) promptly determine whether the specific law of any State identified in such request is preempted by operation of this subsection; and

`(ii) cause such determination to be published in the Federal Register.

`(B) EFFECT OF PUBLICATION- Any determination under subparagraph (A) that is published in the Federal Register shall have the force and effect of law as of the date of such publication.';

(2) in subsection (a)(1), by striking the 1st sentence and inserting `Except as provided in subsections (e) and (f), no provision of chapter 1, 2 or 3 shall be construed as annulling, altering, or affecting the laws of any State relating to the disclosure of information in connection with credit transactions, except to the extent that those laws are inconsistent with the provisions of this title, and then only to the extent of the inconsistency.'; and

(3) in subsection (b) by striking `section 129' the 1st place such term appears and inserting `subsection (f) and section 129'; and

(4) in subsection (d), by striking `sections 125, 130, and 166' and inserting `subsection (f) and sections 125, 130, and 166'.

(b) CLARIFICATION OF PRIMARY ENFORCEMENT AUTHORITY WITH RESPECT TO STATE-CHARTERED ENTITIES- Section 108 of the Truth in Lending Act (15 U.S.C. 1607) is amended by adding at the end the following new subsection:

`(f) CLARIFICATION OF PRIMARY ENFORCEMENT AUTHORITY WITH RESPECT TO STATE-CHARTERED ENTITIES- In addition to the authority provided under section 130(e), no provision of this title shall be construed as affecting the authority of any State to enforce the laws of such State, as the primary enforcement authority, with regard to any person domiciled in such State or chartered by such State.'.

SEC. 105. CONTINUATION OF IDENTIFICATIONS UNDER THE ALTERNATIVE MORTGAGE TRANSACTION PARITY ACT OF 1982.

The Director of the Office of Thrift Supervision shall take no action under the Alternative Mortgage Transaction Parity Act of 1982 that would have the effect of discontinuing the identification of regulations of the Director relating to late fees and prepayment penalties as applicable to State housing creditors and no regulation of the Director that was prescribed in final form before the enactment of this Act and that would discontinue such identification shall be effective on or after such date of enactment, unless permitted by a subsequent Act of the Congress.

SEC. 106. EFFECTIVE DATE.

(a) IN GENERAL- This Act, and the amendments made by this Act, shall take effect at the end of the 1-year period beginning on the date of the enactment of this Act.

(b) SCOPE OF APPLICATION- This Act, and the amendments made by this Act, shall apply with respect to applications for high-cost mortgages received on or after the effective date of this Act.

(c) VOLUNTARY COMPLIANCE- No creditor or assignee shall be subject to civil liability in any action brought under the Truth in Lending Act with respect to provisions of such Act that are amended by this Act, if the creditor or assignee voluntarily complies with the requirements of such amendments during the 1-year period referred to in subsection (a).

TITLE II--CONSUMER MORTGAGE PROTECTION BOARD

SEC. 201. ESTABLISHMENT.

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

`(g) CONSUMER MORTGAGE PROTECTION BOARD-

`(1) ESTABLISHMENT- There is established in the Department of Housing and Urban Development the Consumer Mortgage Protection Board (in this section referred to as the `Board').

`(2) FUNCTIONS- The Board shall carry out the functions assigned to the Board under this section and any other provisions of law. Such functions shall include establishing rules necessary--

`(A) for the counseling procedures under subsection (h)(1);

`(B) under 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;

`(C) for the operation and administration of the Board; and

`(D) for the establishment and maintenance of the national database of mortgage brokers under subtitle B of title II of the Responsible Lending Act.

`(3) MEMBERS- The Board shall be composed of 15 members, who shall be appointed by the Secretary, as follows:

`(A) 4 members shall be individuals who represent consumers of settlement services.

`(B) 3 members shall be individuals who represent originators of federally related mortgage loans (as such term is defined in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602), including at least 2 individuals who are associated with lenders that fund and close loans with their own funds and are capable of servicing such loans.

`(C) 1 member shall be an individual who represents real estate sales professionals.

`(D) 1 member shall be an individual who represents real estate appraisers.

`(E) 1 member shall be an individual who represents private mortgage insurers.

`(F) 1 member shall be an individual who represents title insurance providers.

`(G) 1 member shall be an individual who represents settlement service management companies.

`(H) 1 member shall be an individual who represents providers of electronic delivery mechanisms that facilitate home purchases and home financings.

`(I) 1 member shall be an individual who is a practicing attorney specializing in residential mortgage finance or settlement services.

`(J) 1 member shall be an individual who represents mortgage brokers (as such term is defined in section 303 of the Responsible Lending Act).

`(4) TERMS AND VACANCIES- Each member of the Board shall be appointed for a term of three years. Any member appointed to fill a vacancy occurring before the expiration of the term for which the member's predecessor was appointed shall be appointed only for the remainder of that term. A member may serve after the expiration of that member's term until a successor has taken office. A vacancy in the Board shall be filled in the manner in which the original appointment was made.

`(5) SERVICE WITHOUT PAY; TRAVEL EXPENSES- Members of the Board shall serve without pay, but each member of the Board 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.

`(6) STAFF- Subject to the rules prescribed by the Board, the Board may appoint and fix the pay of personnel as the Board considers appropriate to carry out the Board's functions. Such personnel may be appointed without regard to the provisions of title 5, United States Code, governing appointments in the competitive service, and may be paid without regard to the provisions of chapter 51 and subchapter III of chapter 53 of that title relating to classification and General Schedule pay rates. The Board may provide reasonable additional compensation and benefits to employees of the Board if the same type of compensation or benefits are then being provided by any Federal bank regulatory agency or, if not then being provided, could be provided by such an agency under applicable provisions of law, rule, or regulation.

`(7) EXEMPTION FROM FEDERAL ADVISORY COMMITTEE ACT PROVISIONS- The provisions of the Federal Advisory Committee Act (5 U.S.C. App.) shall not apply to the Board.'.

(b) INITIAL APPOINTMENTS- The Secretary of Housing and Urban Development shall appoint the initial members of the Consumer Mortgage Protection Board, pursuant to section 106(g) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(g)), not later than 20 days after the date of the enactment of this Act.

SEC. 202. 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) BOARD RESPONSIBILITIES-

`(1) Counseling procedures-

`(A) IN GENERAL- Subject to the approval of the Secretary, the Board 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 counseling.

`(B) HOMEOWNERSHIP COUNSELING- For purposes of this subsection, the term `homeownership counseling' means counseling related to homeownership and residential mortgage loans, and includes 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. 42 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 23(c)(4) (42 U.S.C. 1437u(c)(4));

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

`(V) 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) sections 101(e) and 106 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701w(e), 1701x);

`(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, and includes 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. 42 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);

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

`(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)).

`(2) TOLL-FREE TELEPHONE NUMBER AND WEB SITE- The Board shall establish and operate a toll-free telephone number and a World Wide Web site through which persons interested in homeownership 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) UNIFORM MATERIALS- The Board shall ensure the uniformity of 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 Board shall provide for the certification of various computer software programs for consumers to use in evaluating different residential mortgage loan proposals. The Board shall require, for such certification, that the mortgage software systems that take into account--

`(i) the consumer's financial situation;

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

`(B) AVAILABILITY- The Board 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, and homeownership counseling centers.

`(5) OUTREACH TO VULNERABLE POPULATIONS- The Board shall develop a media program designed to make elderly persons, illiterate persons, 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.'.

(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 homeowner or mortgage applicant of the availability of mortgage software systems provided pursuant to subsection (h)(4).'.

SEC. 203. GRANTS FOR HOUSING COUNSELING ASSISTANCE.

(a) AUTHORIZATION OF APPROPRIATIONS- 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 COUNSELING ASSISTANCE-

`(A) IN GENERAL- The Secretary shall, through the Consumer Mortgage Protection Board established under subsection (g), make financial assistance available under this paragraph to entities providing homeownership counseling (as such term is defined in subsection (h)(1)(B)).

`(B) QUALIFIED ENTITIES- The Consumer Mortgage Protection Board 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, to the Consumer Mortgage Protection Board established under subsection (g), $50,000,000 for each of fiscal years 2003 through 2007 for--

`(i) the operations of the Board; and

`(ii) assistance under this paragraph (1)(iii) for entities providing homeownership counseling.'.

SEC. 204. REQUIREMENTS TO USE HUD-CERTIFIED COUNSELORS UNDER HUD PROGRAMS.

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

(1) in paragraph (1), by striking `Secretary' and inserting `Consumer Mortgage Protection Board established under subsection (g)'; and

(2) in paragraphs (2) and (3), by striking `Secretary' each place such term appears and inserting `Board'.

(b) REQUIREMENT TO USE CERTIFIED COUNSELORS- Section 106(e) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(e)) is amended--

(1) in paragraph (1)--

(A) by inserting `(a)(4),' after `(a)(2),';

(B) by inserting `of this section, or under section 101(e)' after `or (d)'; and

(C) by striking `, to the extent practicable,' and inserting `only';

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

(3) by inserting after paragraph (2) the following new paragraph:

`(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 counselors certified by the Board under this subsection as competent to provide such counseling.'.

SEC. 205. 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- Subject to the approval of the Secretary, the Consumer Mortgage Protection Board established under section 106(g) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(g)) (in this section referred to as the `Board') 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 distribute such booklets to all lenders that make federally related mortgage loans.

`(b) CONTENTS- Each booklet shall be in such form and detail as the Board shall prescribe and, in addition to such other information as the Board 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 tradeoff 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 common unfair, deceptive, or fraudulent 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)) and a recommendation that the consumer use such services.

`(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.

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

(4) in subsection (e), by striking `Secretary' and inserting `Board'.

TITLE III--REQUIREMENTS FOR MORTGAGE BROKERS

Subtitle A--Licensing and Minimum Standards

SEC. 301. STATE REGULATION OF MORTGAGE BROKERS.

(a) IN GENERAL- The Federal mortgage broker requirements established pursuant to this title shall apply only with respect to States that, upon the expiration of the 3-year period beginning on the date of the enactment of this Act, have not enacted and do not have in effect uniform laws and regulations described in subsection (b).

(b) UNIFORM STATE LAWS-

(1) IN GENERAL- Laws and regulations described in this subsection are laws and regulations that--

(A) require licensing for mortgage brokers;

(B) require, as a condition of issuance of a license, that an applicant comply with pre-licensing education requirements and submit a written application for a license, and that a criminal background check be performed on the applicant;

(C) establish minimum testing standards for mortgage brokers;

(D) establish continuing education requirements for mortgage brokers;

(E) require the public agency or official in the State that is responsible for licensing of mortgage brokers to provide, directly or otherwise to the national mortgage database established under subtitle B, such information as may be necessary to ensure that such database is effective for the purposes for which it is established; and

(F) comply with such standards regarding uniformity of information submitted to the national database of mortgage brokers established under subtitle B as the Secretary of Housing and Urban Development considers necessary to facilitate the operation of the database.

(2) EXEMPTIONS- For purposes of this subsection, the term `mortgage broker' has the meaning provided in section 303(3), except that the laws and regulations of a State may exempt from treatment as mortgage brokers the following persons:

(A) Any bank, savings bank, savings and loan association, or credit union organized under the laws of a State or the United States, or a subsidiary or affiliate of a bank, savings bank, savings and loan association, or credit union.

(B) Any budget or debt counseling service, as defined by the Secretary, that is a nonprofit organization exempt from taxation under section 501(c)(3) of the Internal Revenue Code of 1986 (26 U.S.C. 501(c)(3));

(C) Any consumer reporting agency that is in substantial compliance with the Fair Credit Reporting Act (15 U.S.C. 1681 et seq.).

(D) Any political subdivision, or any governmental or other public entity, corporation, or agency, in or of the United States or any State.

(E) Any college or university, or entity that is controlled by a college or university, as determined by the Secretary.

(F) Any person who--

(i) makes, service, buys, or sells mortgage loans;

(ii) underwrites the loans; and

(iii)(I) has been approved by the Secretary of Housing and Urban Development as a nonsupervised mortgagee with participation in the direct endorsement program, but not including a mortgagee approved as a loan correspondent;

(II) has been approved by the Federal National Mortgage Association as a seller/servicer;

(III) has been approved by the Federal Home Loan Mortgage Corporation as a seller/servicer;

(IV) has been approved by the Secretary of Veterans Affairs as a nonsupervised automatic lender, but not including a person approved by the Secretary as a nonsupervised lender, an agent of a nonsupervised automatic lender, or an agent of a nonsupervised lender; or

(V) is a creditor (as defined in section 103(f) of the Truth in Lending Act) who makes or invests in residential real estate loans aggregating more than $1,000,000 per year, and irrespective of whether such creditor is licensed or supervised by an agency of a State.

(G) Any person created solely for the purpose of packaging and selling, as a unit of sale as investment securities, mortgage loans that are secured by an interest in real estate, if the person does not service the loans.

(c) DETERMINATION-

(1) HUD DETERMINATION- At the end of the 3-year period beginning on the date of the enactment of this Act, the Secretary of Housing and Urban Development shall determine, in consultation with the Board of Governors of the Federal Reserve System, whether the uniformity necessary to comply with subsection (a) has been achieved.

(2) JUDICIAL REVIEW- The appropriate United States district court shall have exclusive jurisdiction over any challenge to the determination pursuant to paragraph (1) and such court shall apply the standards set forth in section 706 of title 5, United States Code, when reviewing any such challenge.

(d) CONTINUED APPLICATION- If, at any time, the Secretary determines that a State no longer has in effect laws and regulations described in subsection (a) or the uniformity necessary to comply with subsection (a) no longer exists with respect to a State, the Federal mortgage broker requirements shall take effect with respect to such State 2 years after the date on which such determination

was made, unless the State has in effect such laws or regulations, or the uniformity necessary to comply with subsection (a) is satisfied, before the expiration of such 2-year period.

(e) MONITORING- The Secretary shall monitor the laws and regulations of the States governing the matters referred to in subsection (a) for purposes of making determinations under subsection (d).

SEC. 302. FEDERAL MORTGAGE BROKER REQUIREMENTS.

(a) IN GENERAL- Not later than 3 years after the date of the enactment of this Act, the Secretary of Housing and Urban Development shall, by regulation and in consultation with the Board of Governors of the Federal Reserve System, establish Federal mortgage broker requirements under this section that meet the requirements set forth in subparagraphs (A) through (F) of section 301(b)(1).

(b) RULEMAKING- The regulations required under subsection (a) shall be issued after notice and opportunity for public comment pursuant to the provisions of section 553 of title 5, United States Code (notwithstanding subsections (a)(2), (b)(B), and (d)(3) of such section).

SEC. 303. DEFINITIONS.

For purposes of this title, the following definitions shall apply:

(1) BUYER- the term `buyer' means an individual who is solicited to purchase, or who purchases, the services of a mortgage broker for purposes other than obtaining a business loan.

(2) MORTGAGE- The term `mortgage' means any indebtedness secured by a deed of trust, security deed, or other lien on real property.

(3) MORTGAGE BROKER-

(A) IN GENERAL- The term `mortgage broker' means a person that--

(i) holds such person out as being able to assist a buyer in obtaining a mortgage and charges or receives, from the buyer or lender for the mortgage, money or other valuable consideration readily convertible into money for providing such assistance; or

(ii) is engaged in table-funding mortgage loans that are first lien mortgage loans.

(B) SOLICITATION OF INFORMATION- Such term includes any person that solicits financial and mortgage information from the public, provides such information to a mortgage broker, as defined in subparagraph (A), and charges or receives from the mortgage broker money or other valuable consideration readily convertible into money for providing the information;

(C) EXCEPTIONS- Such term does not include the persons referred to in subparagraphs (A) through (H) of section 301(b)(2).

(4) SECRETARY- The term `Secretary' means the Secretary of Housing and Urban Development.

(5) TABLE-FUNDING MORTGAGE LOAN- The term `table-funding mortgage loan' means a mortgage loan transaction in which the mortgage is initially payable to the mortgage broker, the mortgage broker does not use the mortgage broker's own funds to fund the transaction, and, by the terms of the mortgage or other agreement, the mortgage is simultaneously assigned to another person.

Subtitle B--Database of Licensed Mortgage Brokers

SEC. 311. ESTABLISHMENT.

(a) IN GENERAL- The Consumer Mortgage Protection Board established under section 106(g) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(g)) (in this subtitle referred to as the `Board') shall provide for the establishment and maintenance of a national database of mortgage brokers.

(b) ADMINISTRATION- The Board may maintain and administrate the database established under this subtitle or may enter into a contract with a private regulatory organization to maintain and administrate the database. The Board shall consult with the American Association of Residential Mortgage Regulators, the Conference of State Bank Supervisors, and other appropriate organizations in determining the information to be maintained in the database and, if the Board provides for any other organization to maintain and administrate the database, in selecting such organization.

(c) COMPETITIVELY PROCURED CONTRACT- The Secretary shall enter into any contract for administration of the database using competitive procedures (as such term is defined in section 4 of the Office of Federal Procurement Policy Act).

(d) PERFORMANCE REVIEW- The Secretary--

(1) shall periodically review the performance of the Board, or such other organization, in serving as administrator of the database; and

(2) may replace any such other organization with another qualified organization, pursuant to competitive procedures if the Secretary determines

in writing that the organization serving as administrator is not fulfilling the terms of the contract or upon the expiration of the contract.

SEC. 312. DATABASE.

The national database of mortgage brokers maintained pursuant to this title shall--

(1) include a listing of each person licensed under State law or regulation or under Federal mortgage broker requirements under section 302 to act as a mortgage broker;

(2) make available to the public information regarding complaints made, and final disciplinary and enforcement actions taken, against each licensed mortgage broker;

(3) make available to the Secretary of Housing and Urban Development and to each public agency or official in a State responsible for licensing or testing under the laws or regulations referred to in section 301(b) such information regarding mortgage brokers as the Board, by regulation, considers appropriate for the Secretary and such agencies and officials to carry out their functions regarding regulation, licensing, or testing of mortgage brokers, including information regarding employment history and criminal background of mortgage brokers;

(4) make available to persons employing or using the services of mortgage brokers such information regarding mortgage brokers as the Board, by regulation, considers appropriate; and

(5) provide for the maintenance of such other information as the Board considers appropriate.

SEC. 313. FEES.

The Board may provide for the national database of mortgage brokers to charge reasonable fees to cover costs of maintaining and providing access to information from the database.

SEC. 314. CONFIDENTIALITY OF INFORMATION.

(a) IN GENERAL-

(1) DATABASE- Except as otherwise provided in this section, any requirement under Federal or State law regarding the privacy or confidentiality of any information or material in the possession of the Board or any other organization serving as the administrator of the database, and any privilege arising under Federal or State law (including the rules of any Federal or State court) with respect to such information or material, shall continue to apply to such information or material after the information or material has been disclosed to the database.

(2) NONAPPLICABILITY OF CERTAIN REQUIREMENTS- Information or material that is subject to a privilege or confidentiality under any other paragraph of this subsection shall not be subject to--

(A) disclosure under any Federal or State law governing the disclosure to the public of information held by an officer or an agency of the Federal Government or the respective State; or

(B) subpoena or discovery, or admission into evidence, in any private civil action or administrative process,

unless with respect to any privilege held by the Board with respect to such information or material, the participant waives, in whole or in part, in the discretion of the participant, such privilege.

(b) PREEMPTION OF STATE LAW- Any State law, including any State open record law, relating to the disclosure of confidential supervisory information or any information or material described in subsection (a) that is inconsistent with subsection (a) shall be superseded by the requirements of such provision to the extent State law provides less confidentiality or a weaker privilege.

SEC. 315. LIABILITY PROVISIONS.

(a) NO LIABILITY FOR GOOD FAITH DISCLOSURES- Any State official or agency, or employee thereof, shall not be subject to any civil action or proceeding for monetary damages by reason of the good faith action or omission of any officer or employee, while acting within the scope of office or employment, relating to collecting, furnishing, or disseminating of information concerning persons who are mortgage brokers or are applying for licensing as mortgage brokers, whether directly or through the national database established under this subtitle.

(b) CRIMINAL LIABILITY FOR INTENTIONAL UNLAWFUL DISCLOSURES-

(1) IN GENERAL- It shall be unlawful to willfully disclose to any person any information concerning any person who is a mortgage broker or is applying for licensing as a mortgage broker knowing the disclosure to be in violation of any provision of this title--

(A) requiring the confidentiality of such information; or

(B) establishing a privilege from disclosure for such information that has not been waived by the Board and the person who is a mortgage broker or is applying for licensing as a mortgage broker.

(2) PENALTY- Notwithstanding section 3571 of title 18, United States Code, any person who violates paragraph (1) shall be fined an amount not to exceed the greater of $100,000 or the amount of the actual damages sustained by any person as a result of such violation, or imprisoned not more than 5 years, or both.

(c) FULL, CONTINUED PROTECTION UNDER THE SO-CALLED `FEDERAL TORT CLAIMS ACT'- No provision of this Act shall be construed as reducing or limiting any protection provided for any Federal agency, or any officer or employee of any Federal agency, under section 2679 of title 28, United States Code.

END