Text: H.R.5941 — 111th Congress (2009-2010)All Information (Except Text)

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Introduced in House (07/29/2010)


111th CONGRESS
2d Session
H. R. 5941


To reduce fraud and abusive practices in the origination of residential mortgages by establishing a clearinghouse of mortgage application information.


IN THE HOUSE OF REPRESENTATIVES

July 29, 2010

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


A BILL

To reduce fraud and abusive practices in the origination of residential mortgages by establishing a clearinghouse of mortgage application information.

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 “Anti-Redlining and Anti-Mortgage Fraud Act of 2010”.

SEC. 2. Residential mortgage application recordation requirement.

(a) Recordation requirement.—It shall be unlawful for any person or entity to extend credit (including in connection with a lease-purchase transaction), or to provide funds or collect any payments in connection with such an extension of credit, that is secured by a single-family residence unless the originator has recorded the applicant’s application for such extension of credit with the clearinghouse established under subsection (b). The Secretary of the Treasury shall, by regulation, require originators to record each application to enter into a transaction covered by this subsection with the clearinghouse established under subsection (b), at the time that application is first received by the originator.

(b) Mortgage application recordation system.—

(1) ESTABLISHMENT.—The Secretary of the Treasury, acting through the Director of FinCEN, shall establish a system in accordance with this subsection to record applications for extensions of credit that are subject to the requirement under subsection (a), which shall include the establishment of a clearinghouse (in this section referred to as the “clearinghouse”) for recording all such applications.

(2) CLEARINGHOUSE OPERATOR.—The clearinghouse shall be established and managed by a private sector entity selected, in accordance with standards established by the Secretary, from applicants that—

(A) demonstrate the capacity to operate the clearinghouse in accordance with this section and provide technology sufficient to carry out all functions and activities of the clearinghouse;

(B) meet such standards, as the Secretary shall establish, to ensure that the clearinghouse operator is independent of ownership of, by, or with, and affiliation of any kind with, any entity that is engaged in the business of originating, funding, guaranteeing, purchasing, selling, securitizing, or assuming any risk related to residential mortgages other than from the operation of the clearinghouse; and

(C) are small business concerns, as such term is defined pursuant to section 3 of the Small Business Act (15 U.S.C. 632).

(3) COSTS.—

(A) RESPONSIBILITY.—All costs of the establishment and operation of the clearinghouse shall be borne by the clearinghouse operator.

(B) FEES.—

(i) AUTHORITY.—The clearinghouse operator may assess and collect fees to cover the costs of the establishment and operation of the clearinghouse established under this subsection.

(ii) LIMITATION.—Such fees may be assessed and collected only in such manner as may reasonably be expected to result in an aggregate amount of fees collected that does not exceed the aggregate amount of the costs for establishment and operation of the clearinghouse, plus a market rate of return on the investment in establishing and operating costs of the clearinghouse, as determined by the Secretary.

(iii) PERSONS SUBJECT TO FEES.—Fees under this subparagraph shall be assessed against and collected from originators, for each application for an extension of credit that is required to be recorded with the clearinghouse.

(C) GUARANTEE.—The Secretary may guarantee repayment of principal and interest on a loan to the clearinghouse operator in an amount sufficient to cover the costs of establishing, and operating, the clearinghouse established under this section and there is authorized to be appropriated such sums as may be necessary for costs (as such term is defined in section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a)) of such guarantee.

(c) Collection of information.—For each application for an extension of credit recorded with the clearinghouse, the clearinghouse shall, through an internet-based electronic system—

(1) provide a unique identifier that shall be permanently assigned to the application; and

(2) collect and maintain—

(A) the name, social security number, and address of each applicant and co-applicant;

(B) the address of the property or properties that provide security for the extension of credit for which the application is filed;

(C) the identity of the legal entity receiving the application and the identity of the agent or employee of that entity actually taking the application;

(D) the identity of any entity or individual that enters any information into the clearinghouse system with respect to an application;

(E) identification of whether property securing the extension of credit is a principal residence, an additional residence, or an investment property;

(F) identification of whether the extension of credit was secured by a first or subsequent lien on property and whether it was made for purchase, refinance, a home equity loan or line of credit, construction finance, home equity conversion, or lease-purchase, or such other category as the Secretary may provide;

(G) the name of each lender to which the application is submitted;

(H) the name of each lender that accepts the application;

(I) the date and type of transaction that results from the approval of the application or the date of termination of the application; and

(J) such other information as the Secretary may, by regulation, require that is consistent with the fraud prevention and detection purposes of the clearinghouse.

(d) Use and protection of information.—

(1) IN GENERAL.—All information collected by the clearinghouse shall be the property of the Secretary and access to and use of the information shall be limited as prescribed in this section and regulations issued under this section by the Secretary.

(2) DISCLOSURES TO APPLICANTS.—The Secretary shall require each originator accepting applications for extensions of credit subject to the requirement under subsection (a) to provide to each applicant, at the time of application, a written disclosure, in such form and containing such information as the Secretary shall require, sufficient to inform the applicant of the existence and purpose of the clearinghouse, the information regarding the application to be collected by the clearinghouse, who has access to such information collected by the clearinghouse, and the manner in which the information may be used.

(3) ACCESS.—Access to information collected by the clearinghouse shall be limited as follows:

(A) An individual or entity that accepts applications for extensions of credit shall have access solely to information that was submitted to the clearinghouse by that individual or entity.

(B) An entity that considers an extension of credit based upon an application shall have access solely to information associated with applications submitted to such entity and to other currently or recently active applications involving the same applicants or co-applicants or the same property or properties.

(C) A prospective purchaser or guarantor of any instrument related to an extension of credit for which application information was collected by the clearinghouse shall have access to the same information as the entity that extended the credit.

(D) The Secretary and any other Federal and State regulatory or law enforcement agencies shall have access to all data collected by the clearinghouse to the extent and in the manner prescribed by the Secretary for the purpose of investigating fraudulent, discriminatory, or predatory activities and other activities that are potential violations of Federal or State law.

(4) PROTECTION OF INFORMATION.—The Secretary shall, by regulation pursuant to subsection (e), provide for the operation of the clearinghouse and establish guidelines and procedures necessary to ensure that the clearinghouse operates in a secure manner that protects the information collected from unauthorized access or misuse by any individual or entity.

(e) Definitions.—For purposes of this section, the following definitions shall apply:

(1) APPLICATION.—The term “application” means, any writing whether or not in paper or electronic form and whether or not signed by the applicant, that—

(A) is prepared or received by an originator;

(B) is submitted or is intended to be submitted for consideration by any creditor for an extension of credit to be secured by a single-family residence; and

(C) identifies the applicant and the security property.

(2) CREDIT; EXTENSION OF CREDIT.—The terms “credit” and “extension of credit” mean the provision of time for payment pursuant to contractual terms, including lease-purchase contracts, home equity lines of credit, and home equity conversion transactions.

(3) FINCEN.—The term “FinCEN” means the Financial Crimes Enforcement Network of the Department of the Treasury.

(4) SECRETARY.—The term “Secretary ” means the Secretary of the Treasury, acting through the Director of FinCEN.

(5) SINGLE FAMILY RESIDENCE.—The term “single-family residence” means residential real property that contains one to four dwelling units, or individual units of condominiums or cooperatives.

(6) ORIGINATOR.—The term “originator” means any entity that is in the business of receiving applications for extensions of credit.

(f) Regulations.—The Secretary shall issue any regulations necessary to carry out this section.

(g) Effective date.—The provisions of this section shall take effect with respect to extensions of credit entered into on and after January 1, 2011.

(h) Conforming amendment.—Paragraph (2) of section 310 of title 31, United States Code, is amended—

(1) by redesignating subparagraph (J) as subparagraph (K); and

(2) by inserting after subparagraph (I) the following new subparagraph:

“(J) Carry out the responsibilities of the Secretary under section 2 of the Anti-Redlining and Anti-Mortgage Fraud Act of 2010 (relating to residential mortgage application recordation requirement and establishment of a clearinghouse for such recording).”.