Fair and Responsible Lending Act

109th CONGRESS
1st Session

H. R. 4471

To amend the Home Ownership and Equity Protection Act of 1994 and other sections of the Truth in Lending Act, so as to enact the `Fair and Responsible Lending Act;' to provide for definitions; to provide for prohibited practices and limitations relating to high-cost home loans; to provide for prohibited practices and limitations relating to home loans; to provide for penalties and remedies and enforcement; to provide for corrections of certain unintentional violations; to provide for coordination with state laws; to provide for related matters; to provide for consumer counseling requirements; to expand housing counseling opportunities; and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

December 8, 2005

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

A BILL

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 `Fair and Responsible Lending Act.'.

SEC. 2. TABLE OF CONTENTS.

Sec. 1. Short title.

Sec. 2. Table of contents.

TITLE I--HIGH-COST HOME LOANS

Sec. 101. Short title.

Sec. 102. Definitions relating to high-cost home loans.

Sec. 103. Amendments to requirements for high-cost home loans.

Sec. 104. Amendments relating to dispute and error resolution.

Sec. 105. Amendments to damages, rescission, liability, and rescission provisions.

Sec. 106. Coordination with State law.

Sec. 107. Clarification of State enforcement authority.

Sec. 108. Requirements for Home Loans.

Sec. 109. Amendments to Disclosure Guidelines.

Sec. 110. Regulations.

Sec. 111. Effective dates.

TITLE II--HOUSING COUNSELING

Subtitle A--Consumer Counseling

Sec. 201. Consumer counseling requirements.

Subtitle B--Expanded Housing Counseling Opportunities

Sec. 211. Short title.

Sec. 212. Establishment of Office of Housing Counseling.

Sec. 213. Counseling procedures.

Sec. 214. Grants for housing counseling assistance.

Sec. 215. Requirements to use HUD-certified counselors under HUD programs.

Sec. 216. Study of defaults and foreclosures.

Sec. 217. Definitions for counseling-related programs.

Sec. 218. Updating and simplification of mortgage information booklet.

Sec. 219. Option for notice of foreclosure prevention counseling availability.

TITLE I--HIGH-COST LOANS

SEC. 101. SHORT TITLE.

This title may be cited as the `Uniform National Mortgage Lending Standards Act'.

SEC. 102. DEFINITIONS RELATING TO HIGH-COST HOME LOANS.

(a) HIGH-COST HOME LOANS DEFINED- Section 103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)(1)) is amended--

(1) by striking all that precedes paragraph (2) and inserting the following:

`(aa) High-Cost Home Loan Defined-

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

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

`(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 consummation of the transaction, will exceed by more than 10 percentage points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor.

`(C) The total loan amount exceeds $50,000 and total points and fees payable on the transaction will exceed 5 percent of the total loan amount.

`(D) The total loan amount is $50,000 or less and total points and fees payable on the transaction will exceed 7 percent of the total loan amount.

`(E) For purposes of computing the annual percentage rate for this subsection, introductory rate shall be not taken into account.'; and

(2) in paragraph (2)(B)(i), by striking `that' and inserting `than'.

(b) POINTS AND FEES DEFINED-

(1) IN GENERAL- Section 103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)) is amended--

(A) by striking paragraph (3);

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

`(3) POINTS AND FEES DEFINED-

`(A) IN GENERAL- For purposes of subparagraphs (C) and (D) of paragraph (1), the term `points and fees' includes--

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

`(ii) all compensation paid directly to mortgage brokers;

`(iii) all compensation paid indirectly by a creditor to mortgage brokers, provided, however, indirect compensation not in excess of 2 percent of the total loan amount may be excluded if the new loan does not refinance a previous loan that was consummated within the prior 12 months and that was originated by the same creditor;

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

`(I) the charge is bona fide, and reasonable;

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

`(III) the charge is paid to a third party that is not under the control of or controlled by the creditor; and

`(v) all prepayment fees or penalties that are incurred by the consumer on the previous loan if the new loan refinances a previous loan currently held by the same creditor or an affiliate of the creditor, unless the loan is held in a fiduciary or servicing capacity only.'.

(2) CALCULATION OF POINTS AND FEES FOR OPEN-END LOANS- Section 103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)) is amended--

(A) by redesignating paragraph (5) as paragraph (6); and

(B) by inserting after paragraph (3), as amended by paragraph (1) above, the following new paragraph:

`(4) CALCULATION OF POINTS AND FEES FOR OPEN-END LOANS- In the case of open-end loans, points and fees shall be calculated, for purposes of this section and section 129, by adding the total points and fees known at or before closing, plus the minimum additional fees the consumer would be required to pay to draw down an amount equal to the total credit line.'.

(3) EXCLUSION OF BONA FIDE DISCOUNT POINTS- Section 103(aa) of the Truth in Lending Act (15 U.S.C. 1602(aa)) is amended by inserting after paragraph (4), as amended by paragraph (2) above, the following new paragraph:

`(5) EXCLUSION OF BONA FIDE DISCOUNT POINTS-

`(A) IN GENERAL- Not more than 2 bona fide loan discount points shall be excluded from determining the amounts of points and fees with respect to a high-cost home loan for purposes of subsection (aa), but only if the interest rate from which the loan's interest rate will be discounted does not exceed by more than 3 percentage points the required net yield for a 90-day standard mandatory delivery commitment for a reasonably comparable loan from either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, whichever is greater.

`(B) DEFINITION- For purposes of paragraph (1), the term `bona fide discount points' means loan discount points which are knowingly paid by the consumer to a creditor for the purpose of reducing, and which in fact result in a bona fide reduction of, the interest rate or time-price differential applicable to the loan.

`(C) EXCEPTION FOR INTEREST RATE REDUCTIONS INCONSISTENT WITH INDUSTRY NORMS- Paragraph (1) shall not apply to discount points used to purchase an interest rate reduction unless the amount of the interest rate reduction purchased is reasonably consistent with established industry norms and practices for secondary mortgage market transactions.'.

(c) HOME LOAN DEFINED- Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is amended by adding at the end the following subsection:

`(cc) the term `home loan' means any consumer credit transaction that is secured by a dwelling that is, or upon the consummation of the transaction is intended to be, occupied by the consumer as his principal dwelling.'.

(d) TECHNICAL AND CONFORMING AMENDMENT-

(1) 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)'.

(2) Subchapter I of chapter 41 of title 15 of the United States Code is amended by striking `a mortgage referred to in this subsection' and `a mortgage

referred to in section 129(aa)' each place such term appears and inserting `a high-cost home loan' in lieu thereof.

(3) The title of section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by striking `Requirements for Certain Mortgages' and inserting `Requirements for High-Cost Home Loans'.

SEC. 103. AMENDMENTS TO REQUIREMENTS FOR HIGH-COST HOME LOANS.

(a) PREPAYMENT PENALTIES- Subsection (c) of section 129 of the Truth in Lending Act (15 U.S.C. 1639(c)) is amended to read as follows:

`(c) [Repealed]'.

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

(1) by striking `PAYMENTS- A mortgage referred to in section 103(aa) of this title' and inserting `PAYMENTS-

`(1) IN GENERAL- A high-cost home loan';

(2) by striking `having a term of less than 5 years'; and

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

`(2) EXCEPTION-

`(A) IN GENERAL- Paragraph (1) shall not apply--

`(i) when the payment schedule is adjusted to account for the seasonal or irregular income of the consumer;

`(ii) if the purpose of the loan is a bridge loan; or

`(iii) if the unamortized amount is the result of the creditor's deferral of the consumer's delinquent payments and fees relating to delinquent payments.

`(B) BRIDGE LOAN DEFINED- For purposes of this subsection, the term `bridge loan' means a loan that--

`(i) has a period to maturity of 12 months or less; and

`(ii) is made in connection with the acquisition or construction of a dwelling.

`(3) NOTICE REQUIRED- A creditor that offers a high-cost home loan having a balloon payment term that, in accordance with paragraph (2), is not subject to paragraph (1) shall clearly disclose to the consumer that--

`(A) the loan contains such a term;

`(B) the balloon payment amount that will be owed by the consumer on the loan maturity date will be equal to the initial principal loan amount, plus interest and costs that may be due, minus any principal payments that may have been made over the term of the loan; and

`(C) balloon payments are permissible under the circumstances described in paragraph (2).'.

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

`(1) IN GENERAL- A high-cost home loan'; 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) 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) RESTRICTIONS ON FINANCING OF POINTS OR FEES- No creditor may directly or indirectly finance, in connection with any high-cost home loan, any of the following:

`(1) Any prepayment fee or penalty payable by the consumer in a refinancing transaction if the creditor or an affiliate of the creditor is the holder of the note being refinanced in other than a fiduciary or servicing capacity.

`(2) Any points or fees in excess of 3 percent of the total loan amount.'.

(e) PROHIBITION ON EVASIONS- Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended by inserting after subsection (n) (as added by section 104(a) of this Act) the following new subsection:

`(o) PROHIBITION ON EVASIONS- A creditor may not take any action in connection with a high-cost home loan with the intent of evading provisions of this title.'.

(f) NO ENCOURAGEMENT OF DEFAULT 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 (e) of this section) the following new subsection:

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

(g) 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:

`(1) IN GENERAL- A creditor may not extend credit to a consumer under a high-cost home loan unless a reasonable creditor would believe at the time the loan is closed that the consumer or consumers that are residing or will reside in the dwelling subject to the loan will be able to make the scheduled payments associated with the loan, based upon a consideration of the consumers' current and expected income, current obligations, employment status, and other financial resources, other than equity in the dwelling.

`(2) PRESUMPTION OF ABILITY- For purposes of this subsection, there shall be a rebuttable presumption that a consumer is able to make the scheduled payments to repay the obligation if, at the time the extension of credit is approved, the consumer's total monthly debts due on outstanding obligations, including amounts under the high-cost home loan, do not exceed 50 percent of his or her monthly gross income as verified by: (a) the consumer's credit application and a credit report; and (b) tax returns, payroll receipts, or other third-party income verification.'.

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

`(q) LIMITATIONS ON REFINANCING-

`(1) IN GENERAL- No creditor shall knowingly or intentionally engage in the unfair act or practice of loan flipping.

`(2) FLIPPING DEFINED- For purposes of this subsection, the term `loan flipping' means the making of a high-cost home loan to a consumer which refinances an existing home loan that was consummated within the prior 36 months when the new high-cost home loan does not have a reasonable tangible net benefit to the consumer, considering all of the material circumstances known to the creditor, including but not limited to, the terms of both the new and the refinanced loans or credit, the cost of the new loan or credit, and the consumer's known economic and non-economic circumstances, the consumer's stated purpose of and desire for the loan, and the benefits the consumer states that he or she will receive from the refinancing.

`(3) SAFE HARBORS- A high-cost home loan shall be presumed to provide a reasonable tangible net benefit to the consumer if any of the following factors applies to the new loan:

`(A) The interest rate on the new fixed-rate high-cost home loan is lower than the interest rate on the fixed-rate refinanced loan and it will take 4 years or less for the consumer to recoup the costs of the points and fees, and other closing costs that are required to be paid by the consumer on the new high-cost home loan through savings resulting from the lower interest rate.

`(B) The creditor makes a good-faith determination that the consumer's monthly payment of principal and interest required to be paid on the new high-cost home loan is a minimum of 15 percent less than the consolidated total of all minimum monthly payments on the obligations being financed, and it will take 4 years or less for the consumer to recoup the costs of the points and fees and other closing costs that are required to be paid by the consumer on the new high-cost home loan through savings resulting from the total reduction in payments.

`(C) The consumer provides written confirmation to the creditor from an independent housing or credit counselor approved by the United States Department of Housing and Urban Development, or by any State housing authority, which states that the consumer has received counseling regarding the advisability of refinancing the existing loan with the high-cost home loan being offered to the consumer by the creditor.

`(D) The refinancing is necessary under, or in response to, any order or judgment of a court of competent jurisdiction, or to avoid a filed foreclosure action.

`(4) RULE OF CONSTRUCTION- No negative inference may be drawn from the absence of any factor or circumstance described in any subparagraph of paragraph (2) with regard to any high-cost home loan so as to create a presumption of a violation of this subsection with regard to such high-cost home loan by reason of such absence.

`(5) LIMITATION- Notwithstanding section 130 or any other provision of law, any suit instituted by a consumer who alleges that a creditor violated this section shall be brought only in an individual action, and the presiding judge may, in the judge's discretion, allow reasonable attorneys' fees to be taxed as a part of the court costs and payable by the losing party, upon a finding by the court that:

`(A) The party charged with the violation has willfully engaged in the act or practice, and there was an unwarranted refusal by such party to fully resolve the matter which constitutes the basis of such suit; or

`(B) The party instituting the action knew, or should have known, that the action was frivolous and malicious.

`(6) REGULATIONS- The Board may, by regulation or order, add to, delete, or modify the factors listed in paragraph (3) of this subsection.'.

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

`(r) NO CALL PROVISION- No high-cost home loan may contain a provision which permits the creditor, in its sole discretion, to accelerate the indebtedness. This provision shall not apply when repayment of the loan has been accelerated by default, pursuant to a due-on-sale provision, pursuant to a material violation of some other provision of the loan documents unrelated to the payment schedule, or due to any action or omission by the consumer that adversely affects the creditor's security interest in the dwelling or any rights of the creditor in such security.'.

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

`(s) 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 home loan, or to defer any payment due under the terms of such loan, unless the modification, renewal, extension or amendment results in a lower annual percentage rate on the loan 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 home loans.

`(2) EXCEPTION FOR CERTAIN WORKOUTS- The restrictions in paragraph (1) shall not apply in the case of an existing high-cost home loan 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.'.

(k) 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 (s) (as added by subsection (j) of this section) the following new subsection:

`(t) INCREASED INTEREST RATE UPON DEFAULT PERMITTED FOR VARIABLE-RATE HIGH-COST HOME LOAN- In the case of a high-cost home loan that is subject to a variable rate of interest, subsection (d) shall not apply to changes in the rate of interest due to any change in the index rate, 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.'.

(l) PREPAYMENT OF PERIODIC PAYMENTS FROM PROCEEDS PROHIBITED- Subsection (g) of section 129 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 home loan may include terms under which more than 2 scheduled payments of interest or principal due under such loan may be paid in advance or otherwise deducted from the proceeds of the loan.'.

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

`(u) PAYOFF STATEMENTS-

`(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 home loan.

`(B) TRANSACTION FEE- When payoff information referred to in subparagraph (A) is provided by facsimile or electronic transmission, courier service or other expedited means, a creditor or servicer may charge a processing fee to cover the cost of such transmission or service in an amount 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 high-cost home loans.

`(C) FEE DISCLOSURE- Prior to charging a transaction fee as provided in subparagraph (B), a creditor or servicer shall disclose that payoff balances are available for free pursuant to subparagraph (A).

`(D) 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 10 business days after receiving a written request by a consumer or a person authorized by the consumer to obtain such information.'.

(n) DISCRETIONARY REGULATORY AUTHORITY OF THE BOARD- Subsection (l) of section 129 of the Truth in Lending Act (15 U.S.C. 1639(l)) is amended--

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

`(2) The Board, by regulation or order, shall prohibit acts or practices in connection with--

`(A) mortgage loans that the Board finds to be unfair, deceptive, abusive, or designed to evade the provisions of this section; and

`(B) mortgage loans that the Board finds to be associated with abusive lending practices, or that are otherwise not in the interest of the borrower.

`(3) Notwithstanding paragraph (2), the Board shall not have authority to adjust or modify the definitions contained in section 103(aa) (15 U.S.C. 1602(aa)) of this title.

`(4) On a biannual basis, the Board shall hold a hearing to solicit and consider input and recommendations from State Attorneys General and other interested parties on whether new regulations should be prescribed, or new legislation passed to prevent further acts and practices in connection with mortgage loans that are abusive or otherwise not in the interest of the borrower.'.

SEC. 104. AMENDMENTS RELATING TO DISPUTE AND ERROR RESOLUTION.

(a) PROHIBITION ON 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 section 103) the following new subsection:

`(n) ARBITRATION-

`(1) IN GENERAL- A high-cost home loan may not include terms which require arbitration or any other nonjudicial procedure as the method for resolving any controversy or settling any claims arising out of the transaction.

`(2) POST-CONTROVERSY AGREEMENTS- Subject to paragraph (3), paragraph (1) shall not be construed as limiting the right of the consumer and the creditor to agree to arbitration or any other nonjudicial procedure as the method for resolving any controversy at any time after a dispute or claim under the transaction arises.

`(3) NO WAIVER OF STATUTORY CAUSE OF ACTION- No provision of any high-cost home loan and no other pre-controversy agreement between the consumer and the creditor shall be applied or interpreted so as to bar a consumer from bringing an action in an appropriate district court of the United States, or any other court of competent jurisdiction, pursuant to section 130 or any other provision of law, for damages or other relief in connection with any alleged violation of this section, any other provision of this title, or any other Federal law, provided that this section does not prohibit a creditor from requiring a consumer to waive or release such rights in connection with the settlement of a dispute.'.

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

(1) by redesignating subsections (d) through (i) as subsections (e) through (j);

(2) by adding the following sentence at the end of subsection (b): `This section does not apply to violations of section 129 or section 129A.';

(3) by adding the following sentence at the end of subsection (c): `This section does not apply to violations of section 129 or section 129A.'; and

(4) by inserting the following new subsection (d):

`(d) Correction of Violations of Requirements for High-Cost Home Loans and Home Loans-

`(1) IN GENERAL- A creditor or assignee shall have no liability under this section or section 108, 112, or 125 for any failure to comply with any requirement imposed under section 129 or 129A, except for knowing or intentional violations, if--

`(A) before the end of the 45-day period beginning on the date of consummation of a loan, the creditor or assignee notifies the consumer of the error and makes appropriate restitution to the consumer of any amounts collected in error, and takes the necessary action to make all appropriate adjustments to the credit transaction to correct the error, including, if applicable, that the consumer will not be required to pay an amount in excess of the charge actually disclosed, or the dollar equivalent of the annual percentage rate actually disclosed, whichever is less; or

`(B) before the end of the 60-day period beginning on the date an error is discovered, whether pursuant to a final examination report or notice issued under section 108(e) of this title, or through the creditor's or assignee's own procedures, or receipt of written notice from the consumer or service upon the creditor or assignee of the institution of an action, the creditor or assignee notifies the consumer of the error, makes appropriate restitution to the consumer of any amounts collected in error, takes the necessary action to make all appropriate adjustments to the credit transaction to correct the error, including, if applicable, that the consumer will not be required to pay an amount in excess of the charge actually disclosed, or the dollar equivalent of the annual percentage rate actually disclosed, whichever is less, pays the consumer an error penalty of $2,000 and the consumer's reasonable attorney's fees, if any, except that no error penalty or attorney's fees shall be assessed if the creditor or assignee discovers the error through the creditor's or assignee's own procedures.

`(2) MODIFICATION OF TERMS- In the case of a high-cost home loan, appropriate restitution for purposes of paragraph (1) above may also include a creditor modifying the terms of the credit transaction in such a way that the transaction is no longer a high-cost home loan within the meaning of this title.

`(3) CONSUMER REMEDY- If a creditor or assignee fails to correct the error as provided for above in paragraph (1), the consumer may file an action or proceed with an action already filed.

`(4) CONSUMER RESCISSION RIGHT UNAFFECTED- This section does not affect a consumer's right to rescind the transaction in accordance with section 125.

`(5) EFFECTIVE DATE OF DOCUMENT REVISIONS- Any document revisions necessitated by and made consistent with the procedures set forth above in subparagraph (A) or (B) of paragraph (1) shall be deemed legally effective for all purposes as of the original date of the document that was revised.'.

(b) CLARIFICATION RELATING TO STATE-REGULATED TRANSACTIONS- Section 123 of the Truth in Lending Act (15 U.S.C. 1633) is amended by striking `The Board' and inserting `Except with respect to section 129 and 129A, the Board'.

SEC. 105. AMENDMENTS TO DAMAGES, LIABILITY, AND RESCISSION PROVISIONS.

(a) INCREASE IN AMOUNT OF CIVIL MONEY PENALTIES FOR CERTAIN VIOLATIONS- Section 130(a) of the Truth in Lending Act (15 U.S.C. 1640(a)) is amended--

(1) by redesignating paragraph (2)(A)(iii) as paragraph (2)(A)(iii)(I);

(2) by inserting `or' at the end of paragraph (2)(A)(iii)(I);

(3) by inserting at the end the following:

`(II) in the case of an individual action relating to violations of sections 129 or 129A, not less than $500 or greater than $5,000';

(4) by redesignating paragraph (2)(B) as paragraph (2)(B)(i);

(5) by inserting `or' at the end of paragraph (2)(B)(i); and

(6) by inserting at the end the following:

`(ii) in the case of a class action relating to violations of sections 129 or 129A, such amount as the court may allow, except that as to each member of the class no minimum recovery shall be applicable, and the total recovery under this subparagraph in any class action or series of class actions arising out of the same failure to comply by the same creditor shall not be more than the lesser of $1,500,000 or 1 per centum of the net worth of the creditor.'.

(b) CLASS-ACTIONS RELATING TO HIGH-COST HOME LOANS- 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 HOME LOANS; KNOWING OR INTENTIONAL VIOLATIONS- In determining the amount of any liability of any person under subsection (a)(2)(B)(ii) for violations of section 129 in a class action, the court shall consider whether the person knowingly or intentionally violated this part.'.

(c) Statute of Limitations Extended for Section 129 Violations- Section 130(e) of the Truth in Lending Act (15 U.S.C. 1640(e)) is amended--

(1) in the first sentence, by striking `Any action' and inserting `Except as provided in the subsequent sentence, any action';

(2) by inserting after the first sentence the following new sentence: `Any action under this section with respect to any violation of section 129 or 129A may be brought in any United States district court, or in any other court of competent jurisdiction, before the end of the 2-year period beginning on the date of the occurrence of the violation, unless a shorter time period is herein provided.'.

(d) AMENDMENTS 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 home loan'.

(2) RIGHTS UPON ASSIGNMENT OF HIGH-COST HOME LOANS- Section 131(d) of the Truth in Lending Act (15 U.S.C. 1641(d)) is amended by striking paragraph (1) and inserting the following new paragraph:

`(1) IN GENERAL- A borrower acting only in an individual capacity may assert affirmative claims and any defenses with respect to a high-cost home loan against any subsequent holder or assignee of the high-cost home loan that the borrower could assert against the original lender or broker of the loan, provided that this paragraph shall not apply if the purchaser or assignee demonstrates by a preponderance of the evidence that it:

`(A) has in place at the time of the purchase or assignment of the subject loan policies that expressly prohibit its purchase or acceptance of assignment of any high-cost home loans;

`(B) requires by contract that a seller or assignor of home loans represents and warrants to the purchaser or assignee that either--

`(i) the seller or assignor will not sell or assign any high-cost home loans to the purchaser or assignee; or

`(ii) that the seller or assignor is a beneficiary of a representation and warranty from a previous seller or assignor to that effect; and

Provided, however,

(e) CONFORMING AMENDMENT CONCERNING CONSUMER'S RIGHT TO RESCIND IN STEERING CASES- Section 125(b) of the Truth in Lending Act (15 U.S.C. 1635(b)) is amended in the first sentence by inserting `or subsection (d) of section 129A' after `subsection (a) of this section'.

SEC. 106. COORDINATION WITH STATE LAW.

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) HOME LOANS AND HIGH-COST HOME LOANS-

`(1) IN GENERAL- The provisions of this title shall supersede any provision of the law of any State, whether enacted before, on, or after the effective date of this Act, to the extent that such provision of law attempts, directly or indirectly, to regulate, or has the effect of regulating, mortgage lending activities by or through--

`(A) the imposition of a rate limitation, including--

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

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

`(B) any requirement, including data collection, or any limitation, or prohibition pertaining to--

`(i) unfair, deceptive or abusive mortgage lending practices, or

`(ii) the subject matters contained in sections 129 and 129A,

regardless of whether the consumer credit transaction subject to such requirement, limitation, or prohibition is a home loan or high-cost home loan.

`(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, placement, application, processing, underwriting, originating, closing, funding, recording, assignment, purchase, pledge, securitization, holding, servicing, collection, modification, satisfaction, or foreclosure in connection with or arising out of a consumer credit transaction secured by a lien against a consumer's principal dwelling, by or on behalf of a broker, creditor, secured creditor, purchaser, servicer, trustee, certificate or securities holder, or any other person or entity that may engage in any of the above enumerated activities and their respective agents, contractors, employees, officers, and directors.

`(B) LAW OF ANY STATE- The term `law of any State' includes any constitutional provision, statute, rule, regulation, or ordinance of any State or any political subdivision of any State, including any State law as to which the Board has made a determination under section 123, and any judicial decision or determination rendered in connection therewith.

`(C) RATE LIMITATION- The term `rate limitation' means any requirement, limitation, or prohibition on any mortgage lending activities in connection with a consumer credit transaction secured by a lien against a consumer's principal dwelling when the applicability of such requirement, limitation or prohibition is based in whole or in part on whether the actual or contingent, direct or indirect, interest rate, costs, fees, price or finance charges to the consumer associated with such consumer credit transaction exceed any particular threshold, however such threshold may be defined, without regard to whether the consumer credit transaction subject to such requirement, limitation, or prohibition is a high cost home loan.

`(3) CLARIFICATION OF PREEMPTION- Any law of any State preempted under paragraph (1) of this subsection shall, without in any way limiting the effect of paragraph (1) of this subsection, include, but not be limited to, any law of any State that directly or indirectly--

`(A) limits a creditor's ability to extend to a consumer new consumer credit secured by a consumer's principal dwelling;

`(B) limits the rights, claims, defenses, or other remedies at law or equity available to a creditor, secured creditor, servicer, assignee or other direct or indirect holder, and their respective agents or contractors, including without limitation, the right to foreclose on

the lien against the consumer's principal dwelling in respect of a consumer's default under the related mortgage loan documents; or

`(C) imposes legal liability on any party for the violations of law by another party by virtue of such first party's acquisition of any direct or indirect right, title or interest in and to, or contractual responsibility for the servicing or administration of, a home loan or high cost home loan.

`(4) EXCLUSIONS- The following laws are expressly excluded from the preemption established under paragraph (1):

`(A) Any law of any State prohibiting a creditor or broker from discriminating against any person in making available a consumer credit transaction that is secured by the consumer's principal dwelling because of race, creed, color, religion, age, sex, handicap, marital status, familial status, or national origin. For the purpose of this section, the term `discriminating' means engaging in any of the following acts in a manner that is arbitrary or unsupported by a reasonable analysis of the lending risks associated with a particular consumer credit transaction:

`(i) failing to provide information or services or providing different information or services regarding any aspect of the mortgage lending process, including credit availability, application procedures, or mortgage lending standards;

`(ii) discouraging or selectively encouraging consumer credit transaction applicant with respect to inquiries about or applications for consumer credit;

`(iii) refusing to extend consumer credit card or using different standards in determining whether to extend consumer credit;

`(iv) varying the terms of consumer credit offered, including the amount, interest rate, duration, type, or other terms term or condition of loan;

`(v) using different standards to evaluate collateral; and

`(vi) treating a consumer differently in servicing a loan or in invoking default remedies.

`(B) 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 principal dwelling, to the extent that such law does not require compliance with any law that is otherwise preempted under paragraphs (1), (2), and (3) as a condition of contracting for, charging, or collecting any rate of interest otherwise permitted by such law;

`(C) Any law of any State requiring the licensing, registration, or authorization of any person engaged in mortgage-lending activities, except that the law of any State will be preempted to the extent that such law conditions the issuance or maintenance 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), (2), and (3);

`(D) General contract and commercial law to the extent that such law is not otherwise preempted under paragraphs (1), (2), and (3);

`(E) Torts to the extent that such law is not otherwise preempted under paragraphs (1), (2), and (3);

`(F) Real property law to the extent that such law is not otherwise preempted under paragraphs (1), (2), and (3);

`(G) Tax law to the extent that such law is not otherwise preempted under paragraphs (1), (2), and (3); and

`(H) Criminal law to the extent that such law is not otherwise preempted under paragraphs (1), (2), and (3).

`(5) PROMPT DETERMINATION BY BOARD OF GOVERNORS-

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

`(i) promptly determine whether and to the extent to which 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- The preemption provided under this section shall be self-executing, and the publication of a finding or preemption by the Board shall not be required in order for preemption to occur in accordance with the terms of this section.

`(6) EFFECT ON PREEMPTION BY OTHER FEDERAL LAWS- Nothing in this subsection shall narrow or limit the extent to which another provision of Federal law preempts or validates any State law to the extent such State law would be preempted or validated in the absence of this subsection.

`(7) PROHIBITION ON EVASION- No State or any political subdivision of a State shall regulate mortgage lending activities with the intent to circumvent or evade the provisions of this title, or in a manner which has the effect of circumventing or evading the provisions of this title.'.

(2) in subsection (a)(1), by striking the first sentence and inserting the following new sentence: `Except as provided in subsections (3) 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.',

(3) in subsection (b)--

(A) by striking `section 129' the first place such terms appears and inserting `subsection (f) and sections 129 and 129A'; and

(B) by inserting `, or 129A' after `section 129' each place such term appears after the first place; and

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

SEC. 107. CLARIFICATION OF STATE ENFORCEMENT AUTHORITY.

Subsection (e) of section 130 of Truth in Lending Act (15 U.S.C. 1640(e)) (as amended by section 105(d) of this Act) is amended--

(1) by striking `(e) Except as provided in the subsequent sentence, any action' and inserting `(e) Jurisdiction; Statute of Limitations-

`(1) IN GENERAL- Except as provided in the subsequent sentence, any action'; and

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

`(2) CLARIFICATION OF PRIMARY ENFORCEMENT AUTHORITY WITH RESPECT TO STATE-CHARTERED OR LICENSED ENTITIES- In addition to the authority provided under subsection (1), no provision of this title shall be construed as limiting the authority of any State to enforce the provisions of this title, as the primary enforcement authority, with regard to any person licensed or chartered by such State.'.

SEC. 108. REQUIREMENTS FOR HOME LOANS.

(a) IN GENERAL- Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by inserting after section 129 the following new section:

`Sec. 129A. Requirements for home loans

`(a) RESTRICTIONS ON PREPAYMENT PENALTIES- Except as otherwise provided by this title, any home loan may contain--

`(1) a provision for the imposition of a prepayment penalty for the prepayment of the credit transaction, only if--

`(A) the penalty cannot be imposed if the debt is accelerated solely as a result of default or any other breach of the loan documents;

`(B) the penalty does not apply after the end of the 36-month period beginning on the date the transaction is consummated, or in the case of an adjustable rate mortgage (ARM) where the first rate adjustment date is earlier than the end of such 36-month period, after the adjustment date;

`(C) the consumer is offered a choice of another similar loan without a prepayment penalty and is advised of the lower rate or other financial benefit the consumer will receive, and the consequences the consumer might encounter, for accepting a loan with the prepayment penalty; and

`(D) the penalty does not exceed an amount equal to the 2 1/2 percent of the original principal amount of the loan.

`(b) SINGLE PREMIUM CREDIT INSURANCE PROHIBITED-

`(1) IN GENERAL- No creditor may finance, directly or indirectly, in connection with any home loan, any credit life, credit disability, credit unemployment or credit property insurance, or any other credit insurance, or any payments directly or indirectly for any debt cancellation or suspension agreement or contract, except that insurance premiums or debt cancellation or suspension fees calculated and paid in full on a monthly basis shall not be considered financed by the creditor.

`(2) CREDIT INSURANCE DEFINED- For purposes of this subsection, the term `credit insurance' means a policy of insurance that insures, guarantees or indemnifies the creditor, as the primary beneficiary, for the repayment of the outstanding balance of the loan against death, illness, accident, disability, loss of property, or unemployment of the consumer.

`(c) LATE FEES PROHIBITED-

`(1) IN GENERAL- Except as otherwise provided by this title, any home loan may contain a provision for the imposition of unanticipated late payment, only if the late-payment fee--

`(A) is not in excess of 5 percent of the amount of the scheduled payment past due;

`(B) may only be assessed on a payment past due for 15 days or more; and

`(C) may not be charged more than once with respect to a single late payment.'.

`(2) LIMITATIONS- If a payment is otherwise a full payment for the applicable period and is paid on its due date or within an applicable grace period, and the only delinquency or insufficiency of payment is attributable to any late fee or delinquency charge assessed on any earlier payment, no late fee or delinquency charge may be imposed on such payment.

`(d) STEERING PROHIBITED-

`(1) CREDITORS-

`(A) IN GENERAL- A creditor who originates a home loan shall not knowingly or intentionally steer or direct a consumer to accept a home loan with a risk grade less favorable than the risk grade that the consumer would qualify for based on the then-current underwriting guidelines of the creditor or its affiliates, considering the information known to that creditor, including, but not limited to, the consumer's stated objectives and other information provided by the consumer.

`(B) EXCEPTION- A creditor does not violate this section by offering the consumer a home loan for which the price (including the rate) or the risk grade is based on the particular origination channel used by the consumer (e.g., internet, retail, broker, or correspondent), even if the consumer might get a lower price or a lower risk grade had the consumer used a different origination channel of that creditor.

`(C) DEFINITION- For purposes of this section, the term `risk grade' means the creditor's determination of the risk involved in making the home loan, considering both the credit risk related to the consumer and the risk related to the specific loan product.

`(D) RESCISSION OR REFORMATION-

`(i) IN GENERAL- A creditor found by a preponderance of the evidence to have violated subparagraph (A) shall, if the creditor is the holder of the obligation, at the consumer's option--

`(I) rescind the loan in accordance with the procedures contained in section 125(b) and 125(f); or

`(II) rewrite the loan into a loan at the risk grade and pricing that the consumer would have originally received but for the violation.

`(ii) RESTITUTION- In addition to the action required under clause (i)(II) with respect to a creditor, or in the case of a creditor who is not the holder of the obligation and has been found by a preponderance of the evidence to have violated subparagraph (A), such creditor shall make appropriate restitution to the consumer of all fees, interest, or other charges paid by the consumer above those that would have been paid had the loan not been originated at the less favorable risk grade.

`(2) BROKERS-

`(A) IN GENERAL- A broker who is not a creditor shall not knowingly or intentionally steer or direct a consumer to accept a home loan offered by a creditor with a risk grade that is less favorable than the risk grade that the consumer would qualify for on a home loan offered by the creditors or their affiliates with whom the broker regularly does business and for which the consumer would qualify for based on the then-current underwriting guidelines of such creditors or their affiliates.

`(B) CREDITOR LIABILITY- A creditor shall have no liability under subparagraph (2) unless the creditor had actual knowledge of the broker's violation.

`(C) PENALTY- A broker who knowingly or intentionally violates this section shall be liable to the consumer for an amount equal to the sum of $5,000 and the consumer's actual financial damages and reasonable attorney's fees and court costs.

`(e) CREDIT REPORTING REQUIREMENTS-

`(1) IN GENERAL- Each creditor who enters into a home loan, and each successor, assignee or servicer to such creditor with respect to such loan shall report monthly the complete payment history, favorable and unfavorable, of the obligor with respect to such transaction to a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis, while such transaction is in effect.

`(2) EXCEPTION FOR SHORT-TERM HOLDERS- Paragraph (1) shall not apply to any person who holds a home loan for less than 90 days.

`(3) EXCEPTION FOR CERTAIN CIRCUMSTANCES- Paragraph (1) shall not apply in connection with a loan forbearance or workout of a loan in default or settlement of a dispute or consumer complaint.

`(4) REGULATIONS- The Board may, by regulation or order, exempt from or defer reporting by other entities not listed in paragraph (2), and exempt or defer reporting under other circumstances not listed in paragraph (3).'.

(b) CLERICAL AMENDMENT- The table of sections for chapter 2 of the Truth in Lending Act is amended by inserting after the item relating to section 129 the following new item:

`129A. Requirements for Home Loans.'.

SEC. 109. AMENDMENTS TO DISCLOSURE GUIDELINES.

Section 105 of the Truth in Lending Act (15 U.S.C. 1604) is amended by striking paragraph (a) and inserting the following new paragraph:

`(a) The Board shall prescribe regulations to carry out the purposes of this title. These regulations may contain such classifications, differentiations, or other provisions, and may provide for such adjustments and exceptions for any class of transactions, as in the judgment of the Board are necessary or proper to effectuate the purposes of this title, to prevent circumvention or evasion thereof, or to facilitate compliance therewith.'.

SEC. 110. REGULATIONS.

Notwithstanding any provision of the Truth in Lending Act, the Board of Governors of the Federal Reserve System shall--

(1) prescribe such regulations implementing this title and the amendments made by this title as the Board may determine to be appropriate; and

(2) publish such regulations in final form in the Federal Register before the end of the 6-month period beginning on the date of the enactment of this Act.

SEC. 111. EFFECTIVE DATES.

(a) IN GENERAL- This title, and the amendments made by this title, shall take effect at the end of the 6-month period beginning on the date of the enactment of this Act.

(b) PENDING APPLICATIONS- This title, and the amendments made by this title, shall not apply with respect to applications for consumer credit transactions received prior to the effective date of this Act.

TITLE II--HOUSING COUNSELING

Subtitle A--Consumer Counseling

SEC. 201. CONSUMER COUNSELING REQUIREMENTS.

Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended byinserting after subsection (x) (as added by section 103(r) of this Act) the following:

`(y) CONSUMER COUNSELING REQUIREMENTS-

`(1) IN GENERAL- A creditor may not extend any credit in the form of a high-cost home loan to any consumer unless the creditor has provided to the consumer, at such time before the consummation of the mortgage and in such manner as the Board shall provide by regulation--

`(A) a separate written statement recommending that the consumer take advantage of available home ownership or credit counseling services before agreeing to the terms of any high-cost home loan; and

`(B) a written statement containing the names, addresses and telephone numbers of counseling agencies or programs reasonably available to the consumer that have been certified or approved and made publicly available by the Secretary of Housing and Urban Development, a State housing finance authority (as defined in section 1301 of the

Financial Institutions Reform, Recovery, and Enforcement Act of 1989), or the agency referred to in subsection (a) or (c) of section 108 with jurisdiction over the creditor as qualified to provide counseling on--

`(i) the advisability of a high-cost home loan transaction; and

`(ii) the appropriateness of a high-cost home loan for the consumer.

`(2) COMPLETE AND UPDATED LISTS REQUIRED- A creditor shall be deemed to be in compliance with the requirements of this subsection if the creditor provides the consumer with a reasonably complete or updated list of counseling agencies required by section 5(a) of the Real Estate Settlement Procedures Act of 1974.'.

Subtitle B--Expanded Housing Counseling Opportunities

SEC. 211. SHORT TITLE.

This subtitle may be cited as the `Expanding Housing Opportunities Through Education and Counseling Act'.

SEC. 212. 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 for--

`(i) 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 home buying 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 abusive, deceptive, or unscrupulous lending practices relating to residential mortgage loans that the Secretary considers appropriate, which shall include conducting the study under section 216 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.

`(F) ADVISORY ROLE ONLY- The advisory committee shall have no role in reviewing or awarding housing counseling grants.

`(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 213. 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 title, 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, 1701 w(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 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 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 met 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 nonprofit 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. 214. 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, and nonprofit organizations 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 a manner that encourages efficient and successful counseling programs.

`(D) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated $75,000,000 for each of fiscal years 2006 through 2009 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

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

SEC. 215. 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. 216. STUDY OF DEFAULTS AND FORECLOSURES.

The Secretary of Housing and Urban Development shall conduct an extensive study of the primary causes of default and foreclosure of home loans, using as much empirical data as are available. The study shall also examine the role of escrow accounts in helping prime and nonprime borrowers to avoid defaults and foreclosures. Not later than 12 months after the date of the enactment of this Act, the Secretary shall submit to the Congress a preliminary report regarding the study. Not later than 24 months after such date of enactment, 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. 217. 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 title, 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, county, parish, town, township, borough, village, or other general purpose political subdivision of a State.'.

SEC. 218. 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--

SPECIAL

HOME BUYING

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

`(a) PREPARATION AND DISTRIBUTION- The Secretary shall prepare, at least once every 5 years, 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.

`(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.

`(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 available.

`(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 incidental 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 and toll-free telephone number for obtaining the brochure.

The booklet prepared pursuant to this section shall take into consideration differences in real estate settlement procedures that 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 reasonably complete or updated 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 HUD-issued booklet in the version that is most appropriate for the person receiving it.'.

SEC. 219. OPTION FOR NOTICE OF FORECLOSURE PREVENTION COUNSELING AVAILABILITY.

Section 4 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2603) is amended by adding at the end the following new subsection:

`(c) Option for Notice of Foreclosure Prevention Counseling Availability-