Text: S.318 — 105th Congress (1997-1998)All Information (Except Text)

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Public Law No: 105-216 (07/29/1998)

 
[105th Congress Public Law 216]
[From the U.S. Government Printing Office]


<DOC>
[DOCID: f:publ216.105]


[[Page 112 STAT. 897]]

Public Law 105-216
105th Congress

                                 An Act


 
To require automatic cancellation and notice of cancellation rights with 
 respect to private mortgage insurance which is required as a condition 
  for entering into a residential mortgage transaction, to abolish the 
       Thrift Depositor Protection Oversight Board, and for other 
             purposes. <<NOTE: July 29, 1998 -  [S. 318]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress <<NOTE: Homeowners ProtectionAct 
of1998.>> assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short <<NOTE: 12 USC 4901 note.>> Title.--This Act may be cited 
as the ``Homeowners Protection Act of 1998''.

    (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. Termination of private mortgage insurance.
Sec. 4. Disclosure requirements.
Sec. 5. Notification upon cancellation or termination.
Sec. 6. Disclosure requirements for lender paid mortgage insurance.
Sec. 7. Fees for disclosures.
Sec. 8. Civil liability.
Sec. 9. Effect on other laws and agreements.
Sec. 10. Enforcement.
Sec. 11. Construction.
Sec. 12. Amendment to Higher Education Act of 1965.
Sec. 13. Effective date.
Sec. 14. Abolishment of the Thrift Depositor Protection Oversight Board.

SEC. <<NOTE: 12 USC 4901.>> 2. DEFINITIONS.

    In this Act, the following definitions shall apply:
            (1) Adjustable rate mortgage.--The term ``adjustable rate 
        mortgage'' means a residential mortgage that has an interest 
        rate that is subject to change.
            (2) Cancellation date.--The term ``cancellation date'' 
        means--
                    (A) with respect to a fixed rate mortgage, at the 
                option of the mortgagor, the date on which the principal 
                balance of the mortgage--
                          (i) based solely on the initial amortization 
                      schedule for that mortgage, and irrespective of 
                      the outstanding balance for that mortgage on that 
                      date, is first scheduled to reach 80 percent of 
                      the original value of the property securing the 
                      loan; or
                          (ii) based solely on actual payments, reaches 
                      80 percent of the original value of the property 
                      securing the loan; and
                    (B) with respect to an adjustable rate mortgage, at 
                the option of the mortgagor, the date on which the 
                principal balance of the mortgage--

[[Page 112 STAT. 898]]

                          (i) based solely on amortization schedules for 
                      that mortgage, and irrespective of the outstanding 
                      balance for that mortgage on that date, is first 
                      scheduled to reach 80 percent of the original 
                      value of the property securing the loan; or
                          (ii) based solely on actual payments, first 
                      reaches 80 percent of the original value of the 
                      property securing the loan.
            (3) Fixed rate mortgage.--The term ``fixed rate mortgage'' 
        means a residential mortgage that has an interest rate that is 
        not subject to change.
            (4) Good payment history.--The term ``good payment history'' 
        means, with respect to a mortgagor, that the mortgagor has not--
                    (A) made a mortgage payment that was 60 days or 
                longer past due during the 12-month period beginning 24 
                months before the date on which the mortgage reaches the 
                cancellation date; or
                    (B) made a mortgage payment that was 30 days or 
                longer past due during the 12-month period preceding the 
                date on which the mortgage reaches the cancellation 
                date.
            (5) Initial amortization schedule.--The term ``initial 
        amortization schedule'' means a schedule established at the time 
        at which a residential mortgage transaction is consummated with 
        respect to a fixed rate mortgage, showing--
                    (A) the amount of principal and interest that is due 
                at regular intervals to retire the principal balance and 
                accrued interest over the amortization period of the 
                loan; and
                    (B) the unpaid principal balance of the loan after 
                each scheduled payment is made.
            (6) Mortgage insurance.--The term ``mortgage insurance'' 
        means insurance, including any mortgage guaranty insurance, 
        against the nonpayment of, or default on, an individual mortgage 
        or loan involved in a residential mortgage transaction.
            (7) Mortgage insurer.--The term ``mortgage insurer'' means a 
        provider of private mortgage insurance, as described in this 
        Act, that is authorized to transact such business in the State 
        in which the provider is transacting such business.
            (8) Mortgagee.--The term ``mortgagee'' means the holder of a 
        residential mortgage at the time at which that mortgage 
        transaction is consummated.
            (9) Mortgagor.--The term ``mortgagor'' means the original 
        borrower under a residential mortgage or his or her successors 
        or assignees.
            (10) Original value.--The term ``original value'', with 
        respect to a residential mortgage, means the lesser of the sales 
        price of the property securing the mortgage, as reflected in the 
        contract, or the appraised value at the time at which the 
        subject residential mortgage transaction was consummated.
            (11) Private mortgage insurance.--The term ``private 
        mortgage insurance'' means mortgage insurance other than 
        mortgage insurance made available under the National Housing 
        Act, title 38 of the United States Code, or title V of the 
        Housing Act of 1949.
            (12) Residential mortgage.--The term ``residential 
        mortgage'' means a mortgage, loan, or other evidence of a 
        security

[[Page 112 STAT. 899]]

        interest created with respect to a single-family dwelling that 
        is the primary residence of the mortgagor.
            (13) Residential mortgage transaction.--The term 
        ``residential mortgage transaction'' means a transaction 
        consummated on or after the date that is 1 year after the date 
        of enactment of this Act, in which a mortgage, deed of trust, 
        purchase money security interest arising under an installment 
        sales contract, or equivalent consensual security interest is 
        created or retained against a single-family dwelling that is the 
        primary residence of the mortgagor to finance the acquisition, 
        initial construction, or refinancing of that dwelling.
            (14) Servicer.--The term ``servicer'' has the same meaning 
        as in section 6(i)(2) of the Real Estate Settlement Procedures 
        Act of 1974, with respect to a residential mortgage.
            (15) Single-family dwelling.--The term ``single-family 
        dwelling'' means a residence consisting of 1 family dwelling 
        unit.
            (16) Termination date.--The term ``termination date'' 
        means--
                    (A) with respect to a fixed rate mortgage, the date 
                on which the principal balance of the mortgage, based 
                solely on the initial amortization schedule for that 
                mortgage, and irrespective of the outstanding balance 
                for that mortgage on that date, is first scheduled to 
                reach 78 percent of the original value of the property 
                securing the loan; and
                    (B) with respect to an adjustable rate mortgage, the 
                date on which the principal balance of the mortgage, 
                based solely on amortization schedules for that 
                mortgage, and irrespective of the outstanding balance 
                for that mortgage on that date, is first scheduled to 
                reach 78 percent of the original value of the property 
                securing the loan.

SEC. <<NOTE: 12 USC 4902.>> 3. TERMINATION OF PRIVATE MORTGAGE 
            INSURANCE.

    (a) Borrower Cancellation.--A requirement for private mortgage 
insurance in connection with a residential mortgage transaction shall be 
canceled on the cancellation date, if the mortgagor--
            (1) submits a request in writing to the servicer that 
        cancellation be initiated;
            (2) has a good payment history with respect to the 
        residential mortgage; and
            (3) has satisfied any requirement of the holder of the 
        mortgage (as of the date of a request under paragraph (1)) for--
                    (A) evidence (of a type established in advance and 
                made known to the mortgagor by the servicer promptly 
                upon receipt of a request under paragraph (1)) that the 
                value of the property securing the mortgage has not 
                declined below the original value of the property; and
                    (B) certification that the equity of the mortgagor 
                in the residence securing the mortgage is unencumbered 
                by a subordinate lien.

    (b) Automatic Termination.--A requirement for private mortgage 
insurance in connection with a residential mortgage transaction shall 
terminate with respect to payments for that mortgage insurance made by 
the mortgagor--

[[Page 112 STAT. 900]]

            (1) on the termination date if, on that date, the mortgagor 
        is current on the payments required by the terms of the 
        residential mortgage transaction; or
            (2) on the date after the termination date on which the 
        mortgagor becomes current on the payments required by the terms 
        of the residential mortgage transaction.

    (c) Final Termination.--If a requirement for private mortgage 
insurance is not otherwise canceled or terminated in accordance with 
subsection (a) or (b), in no case may such a requirement be imposed 
beyond the first day of the month immediately following the date that is 
the midpoint of the amortization period of the loan if the mortgagor is 
current on the payments required by the terms of the mortgage.
    (d) No Further Payments.--No payments or premiums may be required 
from the mortgagor in connection with a private mortgage insurance 
requirement terminated or canceled under this section--
            (1) in the case of cancellation under subsection (a), more 
        than 30 days after the later of--
                    (A) the date on which a request under subsection 
                (a)(1) is received; or
                    (B) the date on which the mortgagor satisfies any 
                evidence and certification requirements under subsection 
                (a)(3);
            (2) in the case of termination under subsection (b), more 
        than 30 days after the termination date or the date referred to 
        in subsection (b)(2), as applicable; and
            (3) in the case of termination under subsection (c), more 
        than 30 days after the final termination date established under 
        that subsection.

    (e) Return of Unearned Premiums.--
            (1) In <<NOTE: Deadline.>> general.--Not later than 45 days 
        after the termination or cancellation of a private mortgage 
        insurance requirement under this section, all unearned premiums 
        for private mortgage insurance shall be returned to the 
        mortgagor by the servicer.
            (2) Transfer <<NOTE: Deadline.>> of funds to servicer.--Not 
        later than 30 days after notification by the servicer of 
        termination or cancellation of private mortgage insurance under 
        this Act with respect to a mortgagor, a mortgage insurer that is 
        in possession of any unearned premiums of that mortgagor shall 
        transfer to the servicer of the subject mortgage an amount equal 
        to the amount of the unearned premiums for repayment in 
        accordance with paragraph (1).

    (f) Exceptions for High Risk Loans.--
            (1) In general.--The termination and cancellation provisions 
        in subsections (a) and (b) do not apply to any residential 
        mortgage or mortgage transaction that, at the time at which the 
        residential mortgage transaction is consummated, has high risks 
        associated with the extension of the loan--
                    (A) as determined in accordance with guidelines 
                published by the Federal National Mortgage Association 
                and the Federal Home Loan Mortgage Corporation, in the 
                case of a mortgage loan with an original principal 
                balance that does not exceed the applicable annual 
                conforming loan limit for the secondary market 
                established pursuant to

[[Page 112 STAT. 901]]

                section 305(a)(2) of the Federal Home Loan Mortgage 
                Corporation Act, so as to require the imposition or 
                continuation of a private mortgage insurance requirement 
                beyond the terms specified in subsection (a) or (b) of 
                section 3; or
                    (B) as determined by the mortgagee in the case of 
                any other mortgage, except that termination shall 
                occur--
                          (i) with respect to a fixed rate mortgage, on 
                      the date on which the principal balance of the 
                      mortgage, based solely on the initial amortization 
                      schedule for that mortgage, and irrespective of 
                      the outstanding balance for that mortgage on that 
                      date, is first scheduled to reach 77 percent of 
                      the original value of the property securing the 
                      loan; and
                          (ii) with respect to an adjustable rate 
                      mortgage, on the date on which the principal 
                      balance of the mortgage, based solely on 
                      amortization schedules for that mortgage, and 
                      irrespective of the outstanding balance for that 
                      mortgage on that date, is first scheduled to reach 
                      77 percent of the original value of the property 
                      securing the loan.
            (2) Termination at midpoint.--A private mortgage insurance 
        requirement in connection with a residential mortgage or 
        mortgage transaction described in paragraph (1) shall terminate 
        in accordance with subsection (c).
            (3) Rule of construction.--Nothing in this subsection may be 
        construed to require a mortgage or mortgage transaction 
        described in paragraph (1)(A) to be purchased by the Federal 
        National Mortgage Association or the Federal Home Loan Mortgage 
        Corporation.
            (4) Gao <<NOTE: Deadline.>> report.--Not later than 2 years 
        after the date of the enactment of this Act, the Comptroller 
        General of the United States shall submit to the Congress a 
        report describing the volume and characteristics of residential 
        mortgages and residential mortgage transactions that, pursuant 
        to paragraph (1) of this subsection, are exempt from the 
        application of subsections (a) and (b). The report shall--
                    (A) determine the number or volume of such mortgages 
                and transactions compared to residential mortgages and 
                residential mortgage transactions that are not 
                classified as high-risk for purposes of paragraph (1); 
                and
                    (B) identify the characteristics of such mortgages 
                and transactions that result in their classification 
                (for purposes of paragraph (1)) as having high risks 
                associated with the extension of the loan and describe 
                such characteristics, including--
                          (i) the income levels and races of the 
                      mortgagors involved;
                          (ii) the amount of the downpayments involved 
                      and the downpayments expressed as percentages of 
                      the acquisition costs of the properties involved;
                          (iii) the types and locations of the 
                      properties involved;
                          (iv) the mortgage principal amounts; and

[[Page 112 STAT. 902]]

                          (v) any other characteristics of such 
                      mortgages and transactions that may contribute to 
                      their classification as high risk for purposes of 
                      paragraph (1), including whether such mortgages 
                      are purchase-money mortgages or refinancings and 
                      whether and to what extent such loans are low-
                      documentation loans.

SEC. <<NOTE: 12 USC 4903.>> 4. DISCLOSURE REQUIREMENTS.

    (a) Disclosures for New Mortgages at Time of Transaction.--
            (1) Disclosures for non-exempted transactions.--In any case 
        in which private mortgage insurance is required in connection 
        with a residential mortgage or mortgage transaction (other than 
        a mortgage or mortgage transaction described in section 
        3(f)(1)), at the time at which the transaction is consummated, 
        the mortgagee shall provide to the mortgagor--
                    (A) if the transaction relates to a fixed rate 
                mortgage--
                          (i) a written initial amortization schedule; 
                      and
                          (ii) written notice--
                                    (I) that the mortgagor may cancel 
                                the requirement in accordance with 
                                section 3(a) of this Act indicating the 
                                date on which the mortgagor may request 
                                cancellation, based solely on the 
                                initial amortization schedule;
                                    (II) that the mortgagor may request 
                                cancellation in accordance with section 
                                3(a) of this Act earlier than provided 
                                for in the initial amortization 
                                schedule, based on actual payments;
                                    (III) that the requirement for 
                                private mortgage insurance will 
                                automatically terminate on the 
                                termination date in accordance with 
                                section 3(b) of this Act, and what that 
                                termination date is with respect to that 
                                mortgage; and
                                    (IV) that there are exemptions to 
                                the right to cancellation and automatic 
                                termination of a requirement for private 
                                mortgage insurance in accordance with 
                                section 3(f) of this Act, and whether 
                                such an exemption applies at that time 
                                to that transaction; and
                    (B) if the transaction relates to an adjustable rate 
                mortgage, a written notice that--
                          (i) the mortgagor may cancel the requirement 
                      in accordance with section 3(a) of this Act on the 
                      cancellation date, and that the servicer will 
                      notify the mortgagor when the cancellation date is 
                      reached;
                          (ii) the requirement for private mortgage 
                      insurance will automatically terminate on the 
                      termination date, and that on the termination 
                      date, the mortgagor will be notified of the 
                      termination or that the requirement will be 
                      terminated as soon as the mortgagor is current on 
                      loan payments; and
                          (iii) there are exemptions to the right of 
                      cancellation and automatic termination of a 
                      requirement for private mortgage insurance in 
                      accordance with section 3(f) of this Act, and 
                      whether such an exemption applies at that time to 
                      that transaction.

[[Page 112 STAT. 903]]

            (2) Disclosures for excepted transactions.--In the case of a 
        mortgage or mortgage transaction described in section 3(f)(1), 
        at the time at which the transaction is consummated, the 
        mortgagee shall provide written notice to the mortgagor that in 
        no case may private mortgage insurance be required beyond the 
        date that is the midpoint of the amortization period of the 
        loan, if the mortgagor is current on payments required by the 
        terms of the residential mortgage.
            (3) Annual disclosures.--If private mortgage insurance is 
        required in connection with a residential mortgage transaction, 
        the servicer shall disclose to the mortgagor in each such 
        transaction in an annual written statement--
                    (A) the rights of the mortgagor under this Act to 
                cancellation or termination of the private mortgage 
                insurance requirement; and
                    (B) an address and telephone number that the 
                mortgagor may use to contact the servicer to determine 
                whether the mortgagor may cancel the private mortgage 
                insurance.
            (4) Applicability.--Paragraphs (1) through (3) shall apply 
        with respect to each residential mortgage transaction 
        consummated on or after the date that is 1 year after the date 
        of enactment of this Act.

    (b) Disclosures for Existing Mortgages.--If private mortgage 
insurance was required in connection with a residential mortgage entered 
into at any time before the effective date of this Act, the servicer 
shall disclose to the mortgagor in each such transaction in an annual 
written statement--
            (1) that the private mortgage insurance may, under certain 
        circumstances, be canceled by the mortgagor (with the consent of 
        the mortgagee or in accordance with applicable State law); and
            (2) an address and telephone number that the mortgagor may 
        use to contact the servicer to determine whether the mortgagor 
        may cancel the private mortgage insurance.

    (c) Inclusion in Other Annual Notices.--The information and 
disclosures required under subsection (b) and paragraphs (1)(B) and (3) 
of subsection (a) may be provided on the annual disclosure relating to 
the escrow account made as required under the Real Estate Settlement 
Procedures Act of 1974, or as part of the annual disclosure of interest 
payments made pursuant to Internal Revenue Service regulations, and on a 
form promulgated by the Internal Revenue Service for that purpose.
    (d) Standardized Forms.--The mortgagee or servicer may use 
standardized forms for the provision of disclosures required under this 
section.

SEC. <<NOTE: 12 USC 4904.>> 5. NOTIFICATION UPON CANCELLATION OR 
            TERMINATION.

    (a) In <<NOTE: Deadline.>> General.--Not later than 30 days after 
the date of cancellation or termination of a private mortgage insurance 
requirement in accordance with this Act, the servicer shall notify the 
mortgagor in writing--
            (1) that the private mortgage insurance has terminated and 
        that the mortgagor no longer has private mortgage insurance; and
            (2) that no further premiums, payments, or other fees shall 
        be due or payable by the mortgagor in connection with the 
        private mortgage insurance.

[[Page 112 STAT. 904]]

    (b) Notice of Grounds.--
            (1) In general.--If a servicer determines that a mortgage 
        did not meet the requirements for termination or cancellation of 
        private mortgage insurance under subsection (a) or (b) of 
        section 3, the servicer shall provide written notice to the 
        mortgagor of the grounds relied on to make the determination 
        (including the results of any appraisal used to make the 
        determination).
            (2) Timing.--Notice required by paragraph (1) shall be 
        provided--
                    (A) with respect to cancellation of private mortgage 
                insurance under section 3(a), not later than 30 days 
                after the later of--
                          (i) the date on which a request is received 
                      under section 3(a)(1); or
                          (ii) the date on which the mortgagor satisfies 
                      any evidence and certification requirements under 
                      section 3(a)(3); and
                    (B) with respect to termination of private mortgage 
                insurance under section 3(b), not later than 30 days 
                after the scheduled termination date.
SEC. <<NOTE: 12 USC 4905.>> 6. DISCLOSURE REQUIREMENTS FOR LENDER 
                    PAID MORTGAGE INSURANCE.

    (a) Definitions.--For purposes of this section--
            (1) the term ``borrower paid mortgage insurance'' means 
        private mortgage insurance that is required in connection with a 
        residential mortgage transaction, payments for which are made by 
        the borrower;
            (2) the term ``lender paid mortgage insurance'' means 
        private mortgage insurance that is required in connection with a 
        residential mortgage transaction, payments for which are made by 
        a person other than the borrower; and
            (3) the term ``loan commitment'' means a prospective 
        mortgagee's written confirmation of its approval, including any 
        applicable closing conditions, of the application of a 
        prospective mortgagor for a residential mortgage loan.

    (b) Exclusion.--Sections 3 through 5 do not apply in the case of 
lender paid mortgage insurance.
    (c) Notices to Mortgagor.--In the case of lender paid mortgage 
insurance that is required in connection with a residential mortgage or 
a residential mortgage transaction--
            (1) not later than the date on which a loan commitment is 
        made for the residential mortgage transaction, the prospective 
        mortgagee shall provide to the prospective mortgagor a written 
        notice--
                    (A) that lender paid mortgage insurance differs from 
                borrower paid mortgage insurance, in that lender paid 
                mortgage insurance may not be canceled by the mortgagor, 
                while borrower paid mortgage insurance could be 
                cancelable by the mortgagor in accordance with section 
                3(a) of this Act, and could automatically terminate on 
                the termination date in accordance with section 3(b) of 
                this Act;
                    (B) that lender paid mortgage insurance--

[[Page 112 STAT. 905]]

                          (i) usually results in a residential mortgage 
                      having a higher interest rate than it would in the 
                      case of borrower paid mortgage insurance; and
                          (ii) terminates only when the residential 
                      mortgage is refinanced, paid off, or otherwise 
                      terminated; and
                    (C) that lender paid mortgage insurance and borrower 
                paid mortgage insurance both have benefits and 
                disadvantages, including a generic analysis of the 
                differing costs and benefits of a residential mortgage 
                in the case lender paid mortgage insurance versus 
                borrower paid mortgage insurance over a 10-year period, 
                assuming prevailing interest and property appreciation 
                rates;
                    (D) that lender paid mortgage insurance may be tax-
                deductible for purposes of Federal income taxes, if the 
                mortgagor itemizes expenses for that purpose; and
            (2) <<NOTE: Deadline.>> not later than 30 days after the 
        termination date that would apply in the case of borrower paid 
        mortgage insurance, the servicer shall provide to the mortgagor 
        a written notice indicating that the mortgagor may wish to 
        review financing options that could eliminate the requirement 
        for private mortgage insurance in connection with the 
        residential mortgage.

    (d) Standard Forms.--The servicer of a residential mortgage may 
develop and use a standardized form or forms for the provision of 
notices to the mortgagor, as required under subsection (c).

SEC. <<NOTE: 12 USC 4906.>> 7. FEES FOR DISCLOSURES.

    No fee or other cost may be imposed on any mortgagor with respect to 
the provision of any notice or information to the mortgagor pursuant to 
this Act.

SEC. <<NOTE: 12 USC 4907.>> 8. CIVIL LIABILITY.

    (a) In General.--Any servicer, mortgagee, or mortgage insurer that 
violates a provision of this Act shall be liable to each mortgagor to 
whom the violation relates for--
            (1) in the case of an action by an individual, or a class 
        action in which the liable party is not subject to section 10, 
        any actual damages sustained by the mortgagor as a result of the 
        violation, including interest (at a rate determined by the 
        court) on the amount of actual damages, accruing from the date 
        on which the violation commences;
            (2) in the case of--
                    (A) an action by an individual, such statutory 
                damages as the court may allow, not to exceed $2,000; 
                and
                    (B) in the case of a class action--
                          (i) in which the liable party is subject to 
                      section 10, such amount as the court may allow, 
                      except that the total recovery under this 
                      subparagraph in any class action or series of 
                      class actions arising out of the same violation by 
                      the same liable party shall not exceed the lesser 
                      of $500,000 or 1 percent of the net worth of the 
                      liable party, as determined by the court; and
                          (ii) in which the liable party is not subject 
                      to section 10, such amount as the court may allow, 
                      not to exceed $1,000 as to each member of the 
                      class, except that the total recovery under this 
                      subparagraph in any class action or series of 
                      class actions arising out of the same violation by 
                      the same liable party shall

[[Page 112 STAT. 906]]

                      not exceed the lesser of $500,000 or 1 percent of 
                      the gross revenues of the liable party, as 
                      determined by the court;
            (3) costs of the action; and
            (4) reasonable attorney fees, as determined by the court.

    (b) Timing of actions.--No action may be brought by a mortgagor 
under subsection (a) later than 2 years after the date of the discovery 
of the violation that is the subject of the action.
    (c) Limitations on Liability.--
            (1) In general.--With respect to a residential mortgage 
        transaction, the failure of a servicer to comply with the 
        requirements of this Act due to the failure of a mortgage 
        insurer or a mortgagee to comply with the requirements of this 
        Act, shall not be construed to be a violation of this Act by the 
        servicer.
            (2) Rule of construction.--Nothing in paragraph (1) shall be 
        construed to impose any additional requirement or liability on a 
        mortgage insurer, a mortgagee, or a holder of a residential 
        mortgage.

SEC. <<NOTE: 12 USC 4908.>> 9. EFFECT ON OTHER LAWS AND AGREEMENTS.

    (a) Effect on State Law.--
            (1) In general.--With respect to any residential mortgage or 
        residential mortgage transaction consummated after the effective 
        date of this Act, and except as provided in paragraph (2), the 
        provisions of this Act shall supersede any provisions of the law 
        of any State relating to requirements for obtaining or 
        maintaining private mortgage insurance in connection with 
        residential mortgage transactions, cancellation or automatic 
        termination of such private mortgage insurance, any disclosure 
        of information addressed by this Act, and any other matter 
        specifically addressed by this Act.
            (2) Protection of existing state laws.--
                    (A) In general.--The provisions of this Act do not 
                supersede protected State laws, except to the extent 
                that the protected State laws are inconsistent with any 
                provision of this Act, and then only to the extent of 
                the inconsistency.
                    (B) Inconsistencies.--A protected State law shall 
                not be considered to be inconsistent with a provision of 
                this Act if the protected State law--
                          (i) requires termination of private mortgage 
                      insurance or other mortgage guaranty insurance--
                                    (I) at a date earlier than as 
                                provided in this Act; or
                                    (II) when a mortgage principal 
                                balance is achieved that is higher than 
                                as provided in this Act; or
                          (ii) requires disclosure of information--
                                    (I) that provides more information 
                                than the information required by this 
                                Act; or
                                    (II) more often or at a date earlier 
                                than is required by this Act.
                    (C) Protected state laws.--For purposes of this 
                paragraph, the term ``protected State law'' means a 
                State law--

[[Page 112 STAT. 907]]

                          (i) regarding any requirements relating to 
                      private mortgage insurance in connection with 
                      residential mortgage transactions;
                          (ii) that was enacted not later than 2 years 
                      after the date of the enactment of this Act; and
                          (iii) that is the law of a State that had in 
                      effect, on or before January 2, 1998, any State 
                      law described in clause (i).

    (b) Effect on Other Agreements.--The provisions of this Act shall 
supersede any conflicting provision contained in any agreement relating 
to the servicing of a residential mortgage loan entered into by the 
Federal National Mortgage Association, the Federal Home Loan Mortgage 
Corporation, or any private investor or note holder (or any successors 
thereto).

SEC. <<NOTE: 12 USC 4909.>> 10. ENFORCEMENT.

    (a) In General.--Compliance with the requirements imposed under this 
Act shall be enforced under--
            (1) section 8 of the Federal Deposit Insurance Act--
                    (A) by the appropriate Federal banking agency (as 
                defined in section 3(q) of the Federal Deposit Insurance 
                Act) in the case of insured depository institutions (as 
                defined in section 3(c)(2) of such Act);
                    (B) by the Federal Deposit Insurance Corporation in 
                the case of depository institutions described in clause 
                (i), (ii), or (iii) of section 19(b)(1)(A) of the 
                Federal Reserve Act that are not insured depository 
                institutions (as defined in section 3(c)(2) of the 
                Federal Deposit Insurance Act); and
                    (C) by the Director of the Office of Thrift 
                Supervision in the case of depository institutions 
                described in clause (v) and or (vi) of section 
                19(b)(1)(A) of the Federal Reserve Act that are not 
                insured depository institutions (as defined in section 
                3(c)(2) of the Federal Deposit Insurance Act);
            (2) the Federal Credit Union Act, by the National Credit 
        Union Administration Board in the case of depository 
        institutions described in clause (iv) of section 19(b)(1)(A) of 
        the Federal Reserve Act; and
            (3) part C of title V of the Farm Credit Act of 1971 (12 
        U.S.C. 2261 et seq.), by the Farm Credit Administration in the 
        case of an institution that is a member of the Farm Credit 
        System.

    (b) Additional Enforcement Powers.--
            (1) Violation of this act treated as violation of other 
        acts.--For purposes of the exercise by any agency referred to in 
        subsection (a) of such agency's powers under any Act referred to 
        in such subsection, a violation of a requirement imposed under 
        this Act shall be deemed to be a violation of a requirement 
        imposed under that Act.
            (2) Enforcement authority under other acts.--In addition to 
        the powers of any agency referred to in subsection (a) under any 
        provision of law specifically referred to in such subsection, 
        each such agency may exercise, for purposes of enforcing 
        compliance with any requirement imposed under this Act, any 
        other authority conferred on such agency by law.

[[Page 112 STAT. 908]]

    (c) Enforcement and Reimbursement.--In carrying out its enforcement 
activities under this section, each agency referred to in subsection (a) 
shall--
            (1) <<NOTE: Notification.>> notify the mortgagee or servicer 
        of any failure of the mortgagee or servicer to comply with 1 or 
        more provisions of this Act;
            (2) with respect to each such failure to comply, require the 
        mortgagee or servicer, as applicable, to correct the account of 
        the mortgagor to reflect the date on which the mortgage 
        insurance should have been canceled or terminated under this 
        Act; and
            (3) require the mortgagee or servicer, as applicable, to 
        reimburse the mortgagor in an amount equal to the total unearned 
        premiums paid by the mortgagor after the date on which the 
        obligation to pay those premiums ceased under this Act.

SEC. <<NOTE: 12 USC 4910.>> 11. CONSTRUCTION.

    (a) PMI Not Required.--Nothing in this Act shall be construed to 
impose any requirement for private mortgage insurance in connection with 
a residential mortgage transaction.
    (b) No Preclusion of Cancellation or Termination Agreements.--
Nothing in this Act shall be construed to preclude cancellation or 
termination, by agreement between a mortgagor and the holder of the 
mortgage, of a requirement for private mortgage insurance in connection 
with a residential mortgage transaction before the cancellation or 
termination date established by this Act for the mortgage.

SEC. 12. AMENDMENT TO HIGHER EDUCATION ACT OF 1965.

    Section 481(a)(4) of the Higher Education Act of 1965 (20 U.S.C. 
1088(a)(4)) is amended by--
            (1) inserting the subparagraph designation ``(A)'' 
        immediately after the paragraph designation ``(4)'';
            (2) redesignating subparagraphs (A) and (B) as clauses (i) 
        and (ii), respectively; and
            (3) adding at the end thereof the following new 
        subparagraph:
                    ``(B) Subparagraph (A)(i) shall not apply to a 
                nonprofit institution whose primary function is to 
                provide health care educational services (or an 
                affiliate of such an institution that has the power, by 
                contract or ownership interest, to direct or cause the 
                direction of the institution's management or policies) 
                that files for bankruptcy under chapter 11 of title 11 
                of the United States Code between July 1, and December 
                31, 1998.''.

SEC. <<NOTE: 12 USC 4901 note.>> 13. EFFECTIVE DATE.

    This Act, other than section 14, shall become effective 1 year after 
the date of enactment of this Act.
SEC. 14. ABOLISHMENT OF THE THRIFT DEPOSITOR PROTECTION OVERSIGHT 
                      BOARD.

    (a) In <<NOTE: Effective date. 12 USC 1441a note.>> General.--
Effective at the end of the 3-month period beginning on the date of 
enactment of this Act, the Thrift Depositor Protection Oversight Board 
established under section 21A of the Federal Home Loan Bank Act 
(hereafter in this section referred to as the ``Oversight Board'') is 
hereby abolished.

[[Page 112 STAT. 909]]

    (b) Disposition <<NOTE: 12 USC 1441a note. Effective date.>> of 
Affairs.--
            (1) Power of chairperson.--Effective on the date of 
        enactment of this Act, the Chairperson of the Oversight Board 
        (or the designee of the Chairperson) may exercise on behalf of 
        the Oversight Board any power of the Oversight Board necessary 
        to settle and conclude the affairs of the Oversight Board.
            (2) Availability of funds.--Funds available to the Oversight 
        Board shall be available to the Chairperson of the Oversight 
        Board to pay expenses incurred in carrying out paragraph (1).

    (c) Savings <<NOTE: 12 USC 1441a note.>> Provision.--
            (1) Existing rights, duties, and obligations not affected.--
        No provision of this section shall be construed as affecting the 
        validity of any right, duty, or obligation of the United States, 
        the Oversight Board, the Resolution Trust Corporation, or any 
        other person that--
                    (A) arises under or pursuant to the Federal Home 
                Loan Bank Act, or any other provision of law applicable 
                with respect to the Oversight Board; and
                    (B) existed on the day before the abolishment of the 
                Oversight Board in accordance with subsection (a).
            (2) Continuation of suits.--No action or other proceeding 
        commenced by or against the Oversight Board with respect to any 
        function of the Oversight Board shall abate by reason of the 
        enactment of this section.
            (3) Liabilities.--
                    (A) In general.--All liabilities arising out of the 
                operation of the Oversight Board during the period 
                beginning on August 9, 1989, and the date that is 3 
                months after the date of enactment of this Act shall 
                remain the direct liabilities of the United States.
                    (B) No substitution.--The Secretary of the Treasury 
                shall not be substituted for the Oversight Board as a 
                party to any action or proceeding referred to in 
                subparagraph (A).
            (4) Continuations of orders, resolutions, determinations, 
        and regulations pertaining to the resolution funding 
        corporation.--
                    (A) In general.--All orders, resolutions, 
                determinations, and regulations regarding the Resolution 
                Funding Corporation shall continue in effect according 
                to the terms of such orders, resolutions, 
                determinations, and regulations until modified, 
                terminated, set aside, or superseded in accordance with 
                applicable law if such orders, resolutions, 
                determinations, or regulations--
                          (i) have been issued, made, and prescribed, or 
                      allowed to become effective by the Oversight 
                      Board, or by a court of competent jurisdiction, in 
                      the performance of functions transferred by this 
                      section; and
                          (ii) are in effect at the end of the 3-month 
                      period beginning on the date of enactment of this 
                      section.
                    (B) Enforceability of orders, resolutions, 
                determinations, and regulations before transfer.--Before 
                the effective date of the transfer of the authority and 
                duties of the Resolution Funding Corporation to the 
                Secretary of the Treasury under subsection (d), all 
                orders, resolutions, determinations, and regulations 
                pertaining to

[[Page 112 STAT. 910]]

                the Resolution Funding Corporation shall be enforceable 
                by and against the United States.
                    (C) Enforceability of orders, resolutions, 
                determinations, and regulations after transfer.--On and 
                after the effective date of the transfer of the 
                authority and duties of the Resolution Funding 
                Corporation to the Secretary of the Treasury under 
                subsection (d), all orders, resolutions, determinations, 
                and regulations pertaining to the Resolution Funding 
                Corporation shall be enforceable by and against the 
                Secretary of the Treasury.

    (d) Transfer <<NOTE: Effective date. 12 USC 1441a note.>> of Thrift 
Depositor Protection Oversight Board Authority and Duties of Resolution 
Funding Corporation to Secretary of the Treasury.--Effective at the end 
of the 3-month period beginning on the date of enactment of this Act, 
the authority and duties of the Oversight Board under sections 
21A(a)(6)(I) and 21B of the Federal Home Loan Bank Act are transferred 
to the Secretary of the Treasury (or the designee of the Secretary).

    (e) Membership <<NOTE: Effective date.>> of the Affordable Housing 
Advisory Board.--Effective on the date of enactment of this Act, section 
14(b)(2) of the Resolution Trust Corporation Completion Act (12 U.S.C. 
1831q note) is amended--
            (1) by striking subparagraph (C); and
            (2) by redesignating subparagraphs (D) and (E) as 
        subparagraphs (C) and (D), respectively.

    (f) Time of Meetings of the Affordable Housing Advisory Board.--
            (1) In general.--Section 14(b)(6)(A) of the Resolution Trust 
        Corporation Completion Act (12 U.S.C. 1831q note) is amended--
                    (A) by striking ``4 times a year, or more frequently 
                if requested by the Thrift Depositor Protection 
                Oversight Board or'' and inserting ``2 times a year or 
                at the request of''; and
                    (B) by striking the second sentence.
            (2) Clerical amendment.--Section 14(b)(6)(A) of the 
        Resolution Trust Corporation Completion Act (12 U.S.C. 1831q 
        note) is amended, in the subparagraph heading, by striking ``and 
        location''.

    Approved July 29, 1998.

LEGISLATIVE HISTORY--S. 318 (H.R. 607):
---------------------------------------------------------------------------

HOUSE REPORTS: No. 105-55 accompanying H.R. 607 (Comm. on Banking and 
Financial Services).
SENATE REPORTS: No. 105-129 (Comm. on Banking, Housing, and Urban 
Affairs).
CONGRESSIONAL RECORD:
                                                        Vol. 143 (1997):
                                    Nov. 9, considered and passed 
                                        Senate.
                                                        Vol. 144 (1998):
                                    July 14, considered and passed 
                                        House, amended.
                                    July 15, Senate concurred in House 
                                        amendments with amendments.
                                    July 16, House concurred in Senate 
                                        amendments.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 34 (1998):
            July 29, Presidential statement.

                                  <all>