Summary: H.R.3915 — 110th Congress (2007-2008)All Information (Except Text)

Bill summaries are authored by CRS.

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Passed House amended (11/15/2007)

Mortgage Reform and Anti-Predatory Lending Act of 2007 - Title I: Residential Mortgage Loan Origination - Subtitle A: Licensing System for Residential Mortgage Loan Originators - Encourages the states, through the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, to establish a Nationwide Mortgage Licensing System and Registry (NMLSR) for the residential mortgage industry.

(Sec. 103) Includes among licensing and registration requirements that a loan origination business obtain: (1) a unique identifier; and (2) instruction on fraud, consumer protection, and fair lending issues.

Exempts certain loan processors and underwriters from the licensing or registration requirements.

Requires independent contractors who work as loan processors or underwriters to be either licensed or registered.

(Sec. 104) Sets forth state license and registration procedures.

(Sec. 105) Prescribes minimum standards for license renewal for state-licensed loan originators.

Requires the NMLSR to review and publish, but prohibits its from offering, directly or indirectly, pre-licensure educational courses for loan originators.

(Sec. 106) Requires federal banking agencies to develop and maintain jointly a system for registering employees of depository institutions or their subsidiaries as registered loan originators with the NMLSR.

Requires such agencies to: (1) include in the information furnished to the NMLSR the personal history and experience of such employees; and (2) authorize the NMLSR to obtain information related to any administrative, civil or criminal findings by any governmental jurisdiction.

(Sec. 107) Instructs the Secretary of Housing and Urban Development (HUD) to provide for a licensing and registration system governing loan originators operating in a state which: (1) does not have such a system in place within a prescribed time frame; or (2) does not participate in the NMLSR.

Instructs the Secretary to coordinate with the NMLSR to establish protocols for assigning a unique identifier to each loan originator licensed by HUD as a state-licensed loan originator that will facilitate electronic tracking and uniform identification of, and public access to, the employment history and the publicly adjudicated disciplinary and enforcement actions against loan originators.

(Sec. 108) Directs the Secretary to establish a back-up licensing and registry system any time the Secretary determines that the NMLSR is failing to meet the requirements and purposes of this Act for a comprehensive licensing, supervisory, and tracking system for loan originators.

(Sec. 109) Authorizes the federal banking agencies, HUD, and the NMLSR to charge fees to cover the costs of maintaining and providing access to NMLSR information to the extent such fees are not charged to consumers for access to such system and registry.

(Sec. 110) Instructs the Attorney General to provide access to all criminal history information to state regulators of loan originators if such checks are required for state licenses.

(Sec. 111) Provides for confidentiality of information.

(Sec. 112) Shields from liability regulatory entities performing in good faith information collection and dissemination under this Act.

(Sec. 113) Grants the Secretary enforcement authority to implement this Act, including assessment of civil monetary penalties.

Subtitle B: Residential Mortgage Loan Origination Standards - (Sec. 122) Amends the Truth in Lending Act to set forth a duty of care standard for residential mortgage loan originations.

(Sec. 123) Prohibits the payment of steering incentive compensation to mortgage originators based on, or varying with, the terms (other than principal amount) of any loan that is not a qualified mortgage.

Requires the federal banking agencies jointly to prescribe regulations to implement this Act.

(Sec. 124) Subjects mortgage originators to liability for monetary penalties for violations of this Act.

Title II: Minimum Standards for Mortgages - (Sec. 201) Sets forth minimum repayment standards for residential mortgage loans.

Requires creditors to determine, based on verified and documented information, that a consumer has a reasonable ability to repay the loan, according to its terms (taxes, insurance, and assessments), including the consumer's repayment ability if multiple loans are secured by the same dwelling.

Requires a creditor to take into consideration: (1) variable rate loans that defer repayment of any principal or interest (nonstandard loans); (2) interest-only loans; and (3) any balance increase that may accrue from any negative amortization.

(Sec. 202) Prohibits a creditor from extending credit for residential mortgage loans that involve refinancing of a prior residential mortgage loan unless the creditor determines that refinancing provides a net tangible benefit to the consumer.

Describes residential mortgage loans which do not provide a net tangible benefit to the consumer.

(Sec. 203) Sets forth a rebuttable presumption of the ability to repay.

(Sec. 204) Subjects a creditor to civil liability for violations of this Act, including rescission of a residential mortgage loan and certain additional costs, including a reasonable attorney's fee of the obligor.

Subjects an assignee or securitizer of such a loan, acting in good faith, to liability for a creditor's violations, but only for rescission of the loan, plus related costs and attorney fees. Exempts an assignee or securitizer from such liability if it provides a cure, and meets other specified requirements.

Permits a consumer to maintain a civil action against an assignee to cure, but not rescind, a residential mortgage loan, if a creditor or assignee of a loan has: (1) ceased to exist as a matter of law; (2) filed for bankruptcy protection; or (3) had receivers or liquidating agents appointed.

Subjects good faith assignees and securitizers of such a creditor to the same liability for a creditor's violations, unless they provide a cure for such violations or they meet specified conditions.

Prohibits class action suits against assignees and securitizers.

Excludes from such assignee and securitizer liability any residential mortgage loans aggregated in a pool of assets held to issue or sell instruments representing interests in such pools, including through a securitization vehicle.

(Sec. 205) Authorizes a consumer who has the right to rescind with respect to a residential mortgage loan against the creditor (or any assignee or securitizer) to assert such right as a defense or counterclaim to foreclosure against the mortgage loan holder (or its agent).

(Sec. 206) Proscribes certain practices, including: (1) certain prepayment penalties; (2) single premium credit insurance; (3) mandatory arbitration (except for reverse mortgages); (4) mortgage loan provisions that waive statutory cause of action by the consumer ; (5) negative amortization mortgages.

Reserves the right of a securitizer to retain access to any residential mortgage loan in any document establishing a pool of assets including such loan in order to provide for and obtain a remedy for the obligor under such loan.

Sets forth the effect of foreclosure on a preexisting lease.

(Sec. 208) Declares that: (1) this Act supersedes any state law that provides additional remedies against any assignee, securitizer, or securitization vehicle; and (2) the remedies in this Act constitute the sole remedies against any assignee, securitizer, or securitization vehicle for specified violations.

(Sec. 210) Doubles civil money penalties for certain violations.

Extends to three years the statute of limitations for certain violations.

(Sec. 211) Exempts a creditor, assignee, or securitizer from liability and rescission in the case of borrower fraud or deception by an obligor.

(Sec. 212) Requires the creditor or servicer of a loan to notify the consumer with a written explanation, including alternative moves, during the one-month period that ends six months before the interest rate in effect during the introductory period of a hybrid adjustable rate mortgage adjusts or resets to a variable interest rate.

(Sec. 213) Requires additional information disclosures for: (1) variable payments or interest rates; (2) escrow or impound accounts; (3) aggregate settlement charges; (4) aggregate mortgage origination loan fees; (5) payment schedules; and (6) updating of annual percentage rates of interest (APRs).

(Sec. 214) Requires specified disclosures in monthly statements for residential mortgage loans, including: (1) the amount of the principal obligation under the mortgage; (2) the current interest rate in effect for the loan; and (3) the date on which the interest rate may next reset or adjust.

(Sec. 215) Authorizes appropriations to the Attorney General for FY2008-FY2012 for prosecution of mortgage fraud.

(Sec. 217) Directs the Comptroller General to study and report to Congress on the effects of this Act upon the availability and affordability of credit for homebuyers and mortgage lending.

Title III: High-Cost Mortgages - (Sec. 301) Redefines high cost-mortgages with respect to: (1) introductory rates; (2) adjustment of percentage points; (3) points and fees; (4) high-cost mortgage lenders; and (5) bona fide discount points.

(Sec. 302) Revises requirements governing prepayment penalties.

Prohibits: (1) balloon payments for high-cost mortgages; (2) lending without due regard to debtor's repayment ability; (3) creditor recommendation to debtor to default; (4) certain late fees in connection with a high-cost mortgage; (5) debt acceleration at creditor's sole discretion; (6) creditor financing of certain financing points and fees; (7) evasions, structuring of transactions, and reciprocal arrangements; and (8) certain creditor-imposed fees for modification, deferral, and payoff statements.

(Sec. 303) Prohibits a creditor from extending credit to a consumer under a high-cost mortgage without first receiving certification from a counselor approved by either HUD or a state housing finance authority that the consumer has received counseling on the advisability of the mortgage.

Prohibits a creditor from knowingly or intentionally engaging in the unfair act or practice of flipping in connection with a high-cost mortgage (defined as a loan or extension of credit in the form a high-cost mortgage to a consumer which refinances an existing mortgage when the new loan or extension of credit does not have reasonable, tangible net benefit to the consumer considering all circumstances).

(Sec. 305) Directs the Board of Governors of the Federal Reserve System (Federal Reserve Board) to promulgate regulations implementing this Act.

Authorizes the Board to prescribe regulations requiring or encouraging creditors to provide consumer mortgage education to prospective customers, or direct such customers to qualified consumer mortgage education or counseling programs.

Prohibits any construction of a Board requirement as affecting or superseding any state law requirement regarding consumer mortgage counseling or education.

Title IV: Office of Housing Counseling - Expand and Preserve Home Ownership Through Counseling Act - (Sec. 402) Establishes within HUD the Office of Housing Counseling, headed by the Director of Housing Counseling.

Requires the Secretary to appoint an advisory committee.

(Sec. 403) Sets forth counseling procedures.

Instructs the Director to develop and conduct national public service multimedia campaigns designed to make persons facing mortgage foreclosure, persons considering a subprime mortgage loan to purchase a home, elderly persons, persons who face language barriers, low-income persons, and other potentially vulnerable consumers aware that it is advisable, before seeking or maintaining a residential mortgage loan, to obtain home ownership counseling from an unbiased and reliable sources, and that such home ownership counseling is available from HUD.

Requires HUD to provide advice and technical assistance to states, local governmental entities, and nonprofit organizations regarding the establishment and operation of consumer education programs (particularly for those most vulnerable with respect to residential mortgage loans, mortgage refinancing, home equity loans, and home repair loans).

(Sec. 404) Amends the Housing and Urban Development Act of 1968 to require the Secretary to make financial assistance available to states, local governments, and nonprofit organizations providing home ownership or rental counseling.

Authorizes appropriations for FY2008-FY2011.

(Sec. 405) Revises requirements for use of HUD-certified counselors under HUD programs.

(Sec. 406) Instructs the Secretary to study and report to Congress on the root causes of default and foreclosure of home loans, including an examination of the role of escrow accounts in helping prime and nonprime borrowers to avoid defaults and foreclosures.

(Sec. 408) Amends the Real Estate Settlement Procedures Act of 1974 (RESPA) to require HUD to prepare, periodically, in various languages and cultural styles, a booklet to help consumers applying for federally related mortgage loans to understand the nature and costs of real estate settlement services.

Title V: Mortgage Disclosures Under Real Estate Settlement Procedures Act of 1974 - (Sec. 501) Amends RESPA to set forth a universal mortgage disclosure requirement for good faith estimates of settlement services costs.

Requires the Secretary to prescribe a standard form for such disclosure, to be used without variation in all transactions in the United States that involve federally related mortgage loans.

Title VI: Mortgage Servicing - (Sec. 601) Requires a creditor, in connection with the formation or consummation of a consumer credit transaction secured by a first lien on the consumer's principal dwelling (other than a reverse mortgage or a credit card transaction), to establish in a federally insured depository institution, at the time of consummation, an escrow or impound account for the payment of taxes and hazard insurance, and, if applicable, flood insurance, mortgage insurance, ground rents, and other required periodic payments or premiums.

(Sec. 602) Requires the creditor or servicer of a mortgage loan to advise a consumer in writing of the consumer's responsibilities and the implications for the consumer in the absence of an escrow or impound account, if one is not established or the consumer chooses to close one.

(Sec. 603) Amends RESPA to prohibit certain practices by federally related mortgage loan servicers, including: (1) obtaining force-placed hazard insurance unless it is reasonable to believe the borrower has failed to comply with the loan contract's requirements to maintain property insurance; (2) charging fees for responding to valid qualified written requests; (3) failing to respond timely to borrower's requests to correct errors relating to standard servicer duties; and (4) failing to respond within 10 business days to a borrower's request to provide relevant contact information about the owner assignee of the loan.

Prescribes requirements for a federally related mortgage loan servicer to meet when obtaining force-placed insurance (hazard insurance coverage obtained by a servicer when the borrower has failed to maintain or renew hazard insurance on a property as required under the mortage terms).

Requires prompt crediting of a borrower's payments on the business day received by a home loan lender or servicer.

Increases the maximum additional damages for RESPA violations: (1) from $1,000 to $2,000 for an individual action; and (2) from $500,000 to $1 million for a class action.

Reduces the maximum length of time for a loan servicer to respond to borrower inquiries: (1) from 20 to 10 days to acknowledge receipt of an inquiry; and (2) from 60 to 30 days to take certain actions in response to an inquiry.

Requires: (1) a creditor or servicer to send a payoff balance within seven business days of receipt of a borrower's written request; and (2) prompt refund of escrow accounts upon payoff.

(Sec. 604) Requires the Secretary to study and report to Congress on: (1) mortgage servicing practices and their potential for fraud and abuse; and (2) mortgage servicing improvements.

(Sec. 605) Amends the Truth in Lending Act, in any case of a consumer credit transaction secured by a first mortgage or lien on the consumer's principal dwelling (other than a reverse mortgage or a credit card transaction), for which an account is set up for property taxes, hazard insurance, and other periodic payments, to require the repayment analysis to account for escrow payments and the taxable assessed value of the real property securing the transaction.

Title VII: Appraisal Activities - (Sec. 701) Amends the Truth in Lending Act to prohibit a creditor from extending credit in the form of a mortgage to any consumer without first obtaining a written property appraisal prepared, in accordance with the requirements of this Act, by a qualified appraiser after conducting a physical property visit of the interior of the mortgaged property.

Requires the creditor to provide one copy of each such appraisal, without charge, to the consumer at least three days before the transaction closing date. Subjects violations to a monetary penalty.

(Sec. 702) Proscribes certain unfair and deceptive practices in connection with a consumer credit transaction secured by the consumer's principal dwelling, including: (1) mischaracterizing, or suborning a mischaracterization of, the property's appraised value; (2) seeking to influence an appraiser or otherwise to encourage a targeted value in order to facilitate the making or pricing of the transaction; and (3) failing to timely compensate an appraiser for a completed appraisal, regardless of whether the transaction closes.

Requires the federal banking agencies and the Federal Trade Commission (FTC) to jointly prescribe regulations defining with specificity unfair or deceptive practices in the provision of mortgage lending services.

(Sec. 703) Creates the Appraisal Subcommittee of the Financial Institutions Examination Council to protect the consumer from improper appraisal practices and the predations of unlicensed appraisers.

Authorizes the Appraisal Subcommittee to prescribe regulations.

Requires each state with an appraiser certifying and licensing agency meeting certain criteria to report to the Appraisal Subcommittee's national registry on sanctions, disciplinary actions, license and certification revocations, and license and certification suspensions.

Increases from $25 to $40 the annual registry fees for persons performing appraisals in federally related transactions. Authorizes the Appraisal Subcommittee to adjust such fees within certain limits.

Directs the Appraisal Subcommittee to: (1) make grants to state appraiser regulatory agencies to help defray costs of enforcement activities; and (2) report to state appraiser certifying and licensing agencies when a license or certification is surrendered, revoked, or suspended.

Requires the Appraisal Subcommittee to monitor state appraiser certifying and licencing agencies for compliance with certain requirements.

Prohibits specified interested parties in a real estate transaction from engaging in certain practices to influence improperly the development, reporting, result, or review of a real estate appraisal sought in connection with a mortgage loan.

Subjects violators to civil penalties.

(Sec. 704) Directs the Comptroller General to study and report to Congress on possible improvements in the appraisal process, including the consistency and the effectiveness of improvements in state compliance efforts and programs in accordance with title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA).

(Sec. 705) Requires that, in any case in which an appraisal is performed in connection with an extension of credit secured by an interest in real property, the mortgage originator make available to the credit applicant a copy of all appraisal valuation reports upon completion, but no later than three business days before the transaction closing date.