S. 2114 - American Home Ownership Preservation Act of 2007

S 2114

110th CONGRESS
1st Session

S. 2114

To amend the Truth in Lending Act, to provide for enhanced disclosures to consumers and enhanced regulation of mortgage brokers, and for other purposes.

IN THE SENATE OF THE UNITED STATES

September 27, 2007

Mrs. CLINTON introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

A BILL

To amend the Truth in Lending Act, to provide for enhanced disclosures to consumers and enhanced regulation of 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 `American Home Ownership Preservation Act of 2007'.

(b) Table of Contents- The table of contents for this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Definitions.

Sec. 3. Enhanced residential mortgage disclosure requirements.

Sec. 4. National registry for mortgage brokers.

Sec. 5. Elimination of prepayment penalties for all mortgage products.

Sec. 6. Foreclosure prevention and mortgage refinancing fund.

Sec. 7. Affordable housing trust fund support grant program.

Sec. 8. Foreclosure prevention goal for government-sponsored enterprises.

Sec. 9. Mortgage fraud enforcement and prosecution.

SEC. 2. DEFINITIONS.

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

(1) FEDERAL BANKING AGENCIES- The term `Federal banking agencies' has the same meaning as in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813).

(2) FFIEC- The term `FFIEC' means Federal Financial Institutions Examination Council.

(3) HOME MORTGAGE LOAN- The term `home mortgage loan' means any consumer credit transaction in which a security interest, including any such interest arising by operation of law, is or will be retained or acquired in any real property located within the United States which is or, upon the completion of the transaction, will be used as the principle residence of the consumer.

(4) MORTGAGE BROKER- The term `mortgage broker'--

(A) means any person who, for compensation or in anticipation of compensation, provides mortgage brokerage services in connection with home mortgage loans, with respect to which, the person is not the creditor; and

(B) includes any loan officer that provides such services.

(5) MORTGAGE BROKERAGE SERVICES- The term `mortgage brokerage services' means--

(A) arranging or negotiating, or attempting to arrange or negotiate, home mortgage loans or commitments for such loans;

(B) accepting or offering to accept an application for a home mortgage loan;

(D) referring consumer applicants or prospective applicants for home mortgage loans to creditors;

(E) selecting or offering to select, on behalf of consumers, creditors to whom requests for an extension of a home mortgage loan may be made;

(F) negotiating the terms or conditions of a home mortgage loan;

(G) issuing home mortgage loan commitments or interest rate guarantee agreements to borrowers; or

(H) engaging in tablefunding of home mortgage loans, whether done through contact by telephone, by electronic means, by mail, or in person with the borrower or potential borrower.

(6) MORTGAGE ORIGINATOR- The term `mortgage originator' means any creditor or other person, including a mortgage broker, and any employee or agent thereof, who, for compensation or in anticipation of compensation, engages either directly or indirectly in--

(A) the acceptance of applications for home mortgage loans;

(B) solicitation of home mortgage loans on behalf of borrowers;

(D) negotiation of sales of existing home mortgage loans to institutional or noninstitutional lenders.

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

SEC. 3. ENHANCED RESIDENTIAL MORTGAGE DISCLOSURE REQUIREMENTS.

(a) In General- The Truth in Lending Act (15 U.S.C. 1601 et seq.) is amended by inserting after section 129 the following new section:

`SEC. 129A. RESPONSIBILITIES OF MORTGAGE BROKERS.

`(a) Definitions- For purposes of this section, the following definitions shall apply:

`(1) FEDERAL BANKING AGENCIES- The term `Federal banking agencies' has the same meaning as in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813).

`(2) FFIEC- The term `FFIEC' means Federal Financial Institutions Examination Council.

`(3) HOME MORTGAGE LOAN- The term `home mortgage loan' means any consumer credit transaction in which a security interest, including any such interest arising by operation of law, is or will be retained or acquired in any real property located within the United States which is or, upon the completion of the transaction, will be used as the principle residence of the consumer.

`(4) MORTGAGE BROKER- The term `mortgage broker'--

`(A) means any person who, for compensation or in anticipation of compensation, provides mortgage brokerage services in connection with home mortgage loans, with respect to which, the person is not the creditor; and

`(B) includes any loan officer that provides such services.

`(5) MORTGAGE BROKERAGE SERVICES- The term `mortgage brokerage services' means--

`(A) arranging or negotiating, or attempting to arrange or negotiate, home mortgage loans or commitments for such loans;

`(B) accepting or offering to accept an application for a home mortgage loan;

`(C) soliciting or offering to solicit a home mortgage loan;

`(D) referring consumer applicants or prospective applicants for home mortgage loans to creditors;

`(E) selecting or offering to select, on behalf of consumers, creditors to whom requests for an extension of a home mortgage loan may be made;

`(F) negotiating the terms or conditions of a home mortgage loan;

`(G) issuing home mortgage loan commitments or interest rate guarantee agreements to borrowers; and

`(H) engaging in tablefunding of home mortgage loans, whether done through contact by telephone, by electronic means, by mail, or in person with the borrower or potential borrower.

`(6) MORTGAGE ORIGINATOR- The term `mortgage originator' means any creditor or other person, including a mortgage broker, and any employee or agent thereof, who, for compensation or in anticipation of compensation, engages either directly or indirectly in--

`(A) the acceptance of applications for home mortgage loans;

`(B) solicitation of home mortgage loans on behalf of borrowers;

`(C) negotiation of terms or conditions of home mortgage loans on behalf of borrowers or lenders; or

`(D) negotiation of sales of existing home mortgage loans to institutional or noninstitutional lenders.

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

`(b) Full Disclosure of Mortgage Broker and Originator Compensation-

`(1) IN GENERAL- Upon entering into mortgage brokerage services, each mortgage broker or mortgage originator shall--

`(A) establish a fee for mortgage brokerage services performed for a borrower, and shall disclose that fee to the borrower; and

`(B) disclose to the consumer, in an easy to understand format, at a minimum--

`(i) any payment to the mortgage broker or mortgage originator from the home mortgage loan lender or any other party connected to the transaction;

`(ii) a clear demonstration of how the compensation of the broker is affected by the mortgage rate and fees to be paid by the borrower; and

`(iii) the total fee and any associated payment arrangement.

`(2) BORROWER ACKNOWLEDGMENT- The borrower shall acknowledge confirmation of fees disclosed under paragraph (1), either through written or electronic communication, before mortgage brokerage services may be provided with respect to that borrower.

`(c) Comprehensive Underwriting Assessment- Any mortgage originator or lender that has primary responsibility for conducting an underwriting assessment on a home mortgage loan for a borrower shall include the ability of the borrower to repay other costs, such as property taxes, property fees, adjustments in interest rates, and property insurance.

`(d) Full Disclosure of Mortgage Broker Relationship-

`(1) IN GENERAL- Each mortgage broker shall clearly disclose to each potential borrower the relationship it has to the borrower.

`(2) CONTENTS- The disclosure required by paragraph (1) shall require the broker to advise the borrower--

`(A) of whether the broker is or is not acting as an agent of the borrower;

`(B) if not an agent of the borrower, that the broker does not represent the interests of the borrower and is not legally responsible for getting the borrower the best rate or product for their home mortgage loan; and

`(C) if an agent of the borrower, that the broker has a duty to fully and fairly represent the interests of the borrower in obtaining a home mortgage loan product.'.

(b) Rulemaking- Not later than 180 days after the date of enactment of this Act, the Federal banking agencies, through the FFIEC, in conjunction with the Secretary, shall issue regulations to carry out section 129A of the Truth in Lending Act, as added by this Act, after a public comment period of not less than 60 days.

SEC. 4. NATIONAL REGISTRY FOR MORTGAGE BROKERS.

(a) Mortgage Broker Registry-

(1) IN GENERAL- Not later than 240 days after the date of enactment of this Act, the Federal banking agencies, through the FFIEC, in consultation with the Secretary, the Attorney General of the United States, the Conference of State Bank Supervisors, the American Association of Residential Mortgage Regulators, and the National Association of State Attorneys General, shall establish a nationwide registry and database system for all mortgage brokers.

(2) CONTENT- The registry and database required by this section shall be maintained by the FFIEC, and shall contain the names of all mortgage brokers in the United States.

(3) PUBLIC AVAILABILITY- The registry required by this section shall be made available to the public, and shall be readily and easily searchable electronically and through an Internet portal.

(b) Required Registration- It shall be unlawful for any person in the United States to engage in the provision of mortgage brokerage services, unless that person has registered in the nationwide database established under this section.

(1) IN GENERAL- Not later than 180 days after the date of enactment of this Act, the FFIEC, after a public comment period of not less than 60 days--

(A) shall issue final regulations to carry out this section; and

(B) rules for compliance with the registry.

(2) CONTENT- At a minimum, the regulations required by paragraph (1) shall require that individuals registering with the database furnish information concerning their identity, including--

(A) full name, current address, and contact information;

(B) fingerprints, for submission to the Federal Bureau of Investigation, and any governmental agency or entity authorized to receive such information, for a State and national criminal history background check; and

(i) an independent credit report obtained from a consumer reporting agency described in section 603(p) of the Fair Credit Reporting Act; and

(ii) information related to any administrative, civil, or criminal findings by any governmental jurisdiction.

(d) Authority To Modify- The FFIEC may make amendments to the regulations required by this section in order to improve the efficiency of the registry or compliance with the requirements of this section.

(e) No Preemption- Nothing in this section shall be construed as preempting any State licensing or registration requirement.

(f) Authorization of Appropriations- There are authorized to be appropriated to the FFIEC, such funds as may be necessary to carry out this section.

SEC. 5. ELIMINATION OF PREPAYMENT PENALTIES FOR ALL MORTGAGE PRODUCTS.

Section 129A of the Truth in Lending Act, as added by this Act, is amended by adding at the end the following:

`(e) Limitation on Terms- Notwithstanding any other provision of law, a home mortgage loan may not contain terms under which a consumer must pay a prepayment penalty for paying all or part of the principal before the date on which the principal is due under the terms of the loan agreement.'.

SEC. 6. FORECLOSURE PREVENTION AND MORTGAGE REFINANCING FUND.

(a) In General- The Secretary of the Department of Housing and Urban Development (hereafter in this Act referred to as the `Secretary') shall make grants to State governments and tribal organizations (as defined in section 4(l) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b(l))) to assist State programs established for the purpose of foreclosure mitigation, and to encourage the refinancing of distressed or at risk mortgages.

(b) Preference- In providing grants under this section, the Secretary shall give preference to States and tribal organizations that have created partnerships through their State housing or mortgage finance agencies and government-sponsored enterprises, private mortgage lenders, nonprofit community organizations, and mortgage insurance companies, to create stable refinancing options for at risk mortgages.

(c) Regulations- Not later than 180 days after the date of enactment of this Act, the Secretary shall issue regulations, after a public comment period of not less than 60 days, prescribing the criteria for the selection of grant recipients under this section, and shall update such regulations as necessary.

(d) Authorization of Funds- There are authorized to be appropriated to the Secretary, not more than $1,000,000,000 to make grants under this section.

SEC. 7. AFFORDABLE HOUSING TRUST FUND SUPPORT GRANT PROGRAM.

(a) In General- The Secretary shall make grants to State, county, municipal governments, and tribal organizations (as defined in section 4(l) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b(l))) to assist housing trust funds that support low- and moderate-income housing opportunities.

(b) Preference- In providing grants under this section, the Secretary shall give preference to States, counties, municipalities, and tribal organizations with housing trust funds that can demonstrate--

(1) that the fund--

(A) serves a purpose not already addressed by existing housing agencies and programs;

(B) is established under an agency that already handles Federal housing programs;

(D) has some type of oversight board; and

(2) any other factors that the Secretary determines to be appropriate.

(c) Criteria- Not later than 180 days after the date of enactment of this Act, the Secretary shall issue regulations, after a public comment period of not less than 60 days, prescribing the criteria for the selection of grant recipients under this section, and shall update such regulations as necessary.

(d) Authorization of Funds- There are authorized to be appropriated to the Secretary not more than $1,000,000,000 to make grants under this section.

SEC. 8. FORECLOSURE PREVENTION GOAL FOR GOVERNMENT-SPONSORED ENTERPRISES.

(a) In General- The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.) is amended--

(1) by redesignating sections 1336 through 1338 as sections 1337 through 1139, respectively; and

(2) by inserting after section 1335 the following:

`SEC. 1336. FORECLOSURE PROTECTION.

`(a) In General- The Secretary shall establish an annual goal for each enterprise to identify and assist homeowners at risk of default or foreclosure on their mortgage, but would be able to stabilize their financial situation if their mortgage was recast or refinanced into more traditional mortgage terms, such as a fixed rate 30- or 40-year mortgage. This goal shall not be enforceable under the provisions of this title or any provision of the Federal National Mortgage Association Charter Act or the Federal Home Loan Mortgage Corporation Act.

`(b) Factors To Be Considered- In meeting the goal established under this section, each enterprise may--

`(1) enter into partnerships and develop relationships with nonprofit and for-profit organizations and State, county, tribal, and municipal agencies, programs, or initiatives that provide foreclosure counseling, foreclosure mitigation and abatement, and mortgage refinancing services to at-risk homeowners to help identify borrowers that could benefit from mortgage refinancing;

`(2) identify communities in which foreclosure risk is disproportionately high, including minority communities that receive higher cost loans at a disproportionate rate;

`(3) work to develop and offer refinancing products for borrowers that have been identified as at-risk, but can be prevented from entering foreclosure with a recast or refinanced mortgage; and

`(4) establish a dialogue with private lenders to identify opportunities to encourage servicing and workout agreements for at-risk borrowers.'.

(b) Conforming Amendments- Title XIII of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.) is amended--

(1) by striking `section 1336' each place that term appears and inserting `section 1337';

(2) by striking `1336' each place that term appears and inserting `1337';

(3) in each of sections 1341 and 1345(a)(3), by striking `1337' and inserting `section 1338'; and

(4) in each of subsections (a)(3)(B) and (b) of section 1371 (12 U.S.C. 4631), by striking `1337' and inserting `1338'.

SEC. 9. MORTGAGE FRAUD ENFORCEMENT AND PROSECUTION.

For each of fiscal years 2008 through 2012, there are authorized to be appropriated to the Attorney General of the United States, a total of $20,000,000, to support the employment of additional agents of the Federal Bureau of Investigation, and additional prosecutors at the Department of Justice to coordinate the prosecution of mortgage fraud efforts with the offices of the United States Attorneys.

END