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115th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 115-416
======================================================================
PRESERVING ACCESS TO MANUFACTURED HOUSING ACT OF 2017
_______
November 21, 2017.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Hensarling, from the Committee on Financial Services, submitted the
following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 1699]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 1699) to amend the Truth in Lending Act to
modify the definitions of a mortgage originator and a high-cost
mortgage, to amend the Secure and Fair Enforcement for Mortgage
Licensing Act of 2008 to modify the definition of a loan
originator, and for other purposes, having considered the same,
report favorably thereon without amendment and recommend that
the bill do pass.
Purpose and Summary
Introduced by Representative Andy Barr on March 23, 2017,
H.R. 1699, the ``Preserving Access to Manufactured Housing Act
of 2017'', amends Section 103 of the Truth in Lending Act
(TILA) (15 U.S.C. 1602) to clarify that retailers of
manufactured homes, or their employees, are not ``mortgage
originators'' for purposes of the TILA unless these retailers
or their employees receive compensation from a lender, mortgage
broker, or loan originator. The bill also amends the Section
1503 of the Secure and Fair Enforcement for Mortgage Licensing
(SAFE) Act of 2008 (12 U.S.C. 5102) to specify that such a
retailer is generally not a ``loan originator'' subject to
requirements under that Act.
The bill also revises the Consumer Financial Protection
Bureau's (CFPB) definition of ``high cost mortgages,'' and
adjusts the Home Ownership and Equity Protection Act (HOEPA)
high-cost mortgage thresholds for a first mortgage of less than
$75,000 on a dwelling that is not real property to: (1) an
Annual Percentage Rate (APR) that will exceed the average prime
offer rate by more than 10 percentage points, or (2) points and
fees that will exceed the greater of 5 percent of the total
transaction amount or $3,000.
Background and Need for Legislation
In 1994 Congress amended, and President Clinton signed into
law, amendments to TILA, known as HOEPA, to address abusive
practices in mortgage re-financings and closed-end home equity
loans with high interest rates or high fees. Since HOEPA's
enactment, re-financings or home equity mortgage loans meeting
any of HOEPA's high-cost coverage tests have been subject to
special disclosure requirements and restrictions on loan terms,
and HOEPA provides enhanced remedies to consumers with high-
cost mortgages for violations of the law. HOEPA identifies a
class of high-cost mortgage loans through rate and fee
triggers, and it provides consumers that enter into these
transactions with special protections.
On January 10, 2013, the CFPB issued a final rule to
implement the changes to HOEPA mandated by the Dodd-Frank Wall
Street Reform and Consumer Protection Act (P.L. 111-203). The
Dodd-Frank Act expanded HOEPA's scope to include purchase money
mortgage loans and home equity lines of credit. Previously
HOEPA only applied to re-financings and home equity installment
loans.
Additionally, the Dodd-Frank Act, and the implementing
rule, amends the tests used to determine whether a loan is
`high cost' under HOEPA. Previously a loan was covered by HOEPA
if the annual percentage rate (APR) exceeded the rate for
Treasury securities with a comparable maturity by more than 10
percentage points, or if the points and fees paid by the
consumer exceeded the greater of 8 percent of the loan amount
or $400. The $400 figure, set in 1994, was adjusted annually
based on the Consumer Price Index. The Dodd-Frank Act, and the
implementing rule, lowered the rate threshold for HOEPA
coverage. Under the new regime, a loan will be covered by HOEPA
if the APR applicable to the transaction exceeds the average
prime offer rate (APOR) for a comparable transaction by more
than 6.5 percent for a first-lien mortgage, or by more than 8.5
percent for a first-lien mortgage if the transaction is for
less than $50,000. Additionally, the Dodd-Frank Act, and the
implementing rule, reduces the total amount of points and fees
that would trigger HOEPA coverage. A loan will be covered by
HOEPA if the points and fees associated with the transaction
exceed 5 percent of the total loan amount for a loan greater
than or equal to $20,000; or 8 percent of the total loan amount
or $1,000 (whichever is less) for a loan less than $20,000.
H.R. 1699 clarifies that a manufactured home sales person
is not originating a loan when it assists a consumer apply for
a mortgage or prepare loan information, unless they receive
compensation from a creditor, lender or mortgage broker. The
legislation also improves the ``high cost'' mortgage definition
by slightly increasing the maximum interest rate and points and
fees cap for manufactured loans that are provided for less than
$75,000 in order to preserve access to mortgage credit for low
and moderate-income consumers who are seeking to buy a
manufactured home.
In a statement in support for H.R. 1699 dated March 24,
2017, the Manufactured Housing Institute wrote:
Recent Home Mortgage Disclosure Act data shows that
consumers have been shut out of the market for quality,
affordable housing because regulations have decreased
the availability of financing for manufactured homes,
which are a vital source of affordable housing for
millions of low- and moderate-income families across
the country . . .
. . . H.R. 1699 modifies the definition of ``high-
cost'' loans so that manufactured home loans are not
unfairly swept under this designation simply due to
their small size. The provision of the Dodd-Frank Act
that established parameters for which mortgage loans
are classified as ``high cost'' included more flexible
annual percentage rate (APR) and points and fees
provisions for small loans. This was in recognition of
the simple mathematical fact that fixed costs on
smaller loans translate into higher percentages of the
total loan. In practice, this flexibility has not been
sufficient to address market realities. Thus, some
manufactured housing lenders have exited the market and
others are no longer offering smaller dollar amount
(and most affordable) loans.
In a letter of support for H.R. 1699 dated May 1, 2017, the
Mortgage Bankers Association wrote:
[H.R. 1699] would allow more low-balance loans to fit
within the cap on points and fees under the Home
Ownership and Equity Protection Act by revising those
triggers. This will allow more consumers, particularly
on the lower end of the economic spectrum, to gain
access to safe and affordable mortgage credit.
In a letter of support for H.R. 1699 dated October 11,
2017, the National Association of Federal Credit Unions Inc.
wrote:
[H.R. 1699] would modify the definitions of a
mortgage originator and a high-cost mortgage to ensure
that consumers of small-balance mortgage loans,
including manufactured housing loans, will have access
credit. Working families across the country,
particularly in rural America, depend on access to
financing for affordable manufactured homes and this
bill addresses an impo1tant barrier to entry in the
marketplace.
Hearings
The Committee on Financial Services held a hearing
examining matters relating to H.R. 1699 on April 5, 2017, April
26, 2017 and April 28, 2017.
Committee Consideration
The Committee on Financial Services met in open session on
October 11 and 12, 2017 and ordered H.R. 1699 to be reported
favorably to the House as amended by a recorded vote of 42 yeas
to 18 nays (Record vote no. FC-75), a quorum being present.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. The
sole recorded vote was on a motion by Chairman Hensarling to
report the bill favorably to the House as amended. The motion
was agreed to by a recorded vote of 42 yeas to 18 nays (Record
vote no. FC-75), a quorum being present.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee states that H.R. 1699
will alter certain definitions contained within the Truth in
Lending Act and Secure and Fair Enforcement for Mortgage
Licensing Act to ensure that consumers of small-balance
residential loans have access to mortgage credit.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Congressional Budget Office Estimates
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, November 21, 2017.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1699, the
Preserving Access to Manufactured Housing Act of 2017.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Stephen
Rabent.
Sincerely,
Mark P. Hadley
(For Keith Hall).
Enclosure.
H.R. 1699--Preserving Access to Manufactured Housing Act of 2017
H.R. 1699 would amend the Truth in Lending Act (TILA) and
the SAFE Mortgage Licensing Act to change the definitions of
mortgage originator, loan originator, and high-cost mortgage.
Under TILA, employees of manufactured-home retailers that do
not accept residential mortgage loan applications, offer or
negotiate terms of loans, or advise consumers on loan terms are
excluded from the definition of mortgage originator. H.R. 1699
would broaden that exception to include retailers of
manufactured homes and their employees, as long as they receive
no more compensation for selling a home with a mortgage than
they would for selling the same home for cash. The bill also
would amend the SAFE Mortgage Licensing Act to exempt the same
people from the definition of loan originator.
TILA also provides special protections, such as
restrictions on certain fees, to consumers who are offered
high-cost mortgages. H.R. 1699 would increase the amount an
originator or creditor could charge in interest rates and fees
for a loan on manufactured housing before the loan would be
considered a high-cost mortgage.
Based on an analysis of information from the Consumer
Financial Protection Bureau, CBO estimates that enacting H.R.
1699 would increase direct spending by less than $500,000 for
that agency to implement the proposed changes to TILA and the
SAFE Mortgage Licensing Act. Because enacting the bill would
affect direct spending, pay-as-you-go procedures apply.
Enacting the bill would not affect revenues.
CBO estimates that enacting H.R. 1699 would not increase
net direct spending or on-budget deficits in any of the four
consecutive 10-year periods beginning in 2028.
H.R. 1699 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Stephen Rabent.
The estimate was approved by H. Samuel Papenfuss, Deputy
Assistant Director for Budget Analysis.
Federal Mandates Statement
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995.
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of the section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
Disclosure of Directed Rulemaking
Pursuant to section 3(i) of H. Res. 5 (115th Congress) the
following statement is made concerning directed rulemakings:
The Committee estimates that the bill requires no directed
rulemakings within the meaning of such section.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This section cites H.R. 1699 as the `Preserving Access to
Manufactured Housing Act of 2017.'
Section 2. Mortgage and loan originator definition
This section amends section 103 of the Truth in Lending Act
(P.L. 90-321) to specify that the definition of `mortgage
originator' does not include any person who is a retailer of
manufactured or modular homes unless the retailer or its
employees receive compensation for taking a residential
mortgage loan application, assisting a consumer in obtaining or
applying to obtain a residential mortgage loan, or offering or
negotiating terms of a residential mortgage loan that is in
excess of any compensation or gain received in a comparable
cash transaction.
This section amends section 1503 of the Secure and Fair
Enforcement for Mortgage Licensing Act of 2008 (P.L. 110-289)
to specify that the definition of `loan originator' does not
include a retailer of manufactured or modular homes or its
employees unless such retailer or its employees receive
compensation or gain for engaging in activities related to
taking a residential mortgage loan application, and offering or
negotiating terms of a residential mortgage loan for
compensation or gain, that is in excess of any compensation or
gain received in a comparable cash transaction.
Section 3. High-cost mortgage definition
This section amends section 103 of the Truth in Lending Act
(P.L. 90-321), as added by the Dodd-Frank Wall Street Reform
and Consumer Protection Act (P.L. 111-203), to clarify that a
first mortgage on a consumer's principal dwelling that is
considered personal property will be considered a `high-cost
mortgage' if the annual percentage rate at consummation of the
transaction will exceed the average prime offer rate for a
comparable transaction by more than 10 percentage points, in
the case of a transaction in an amount of $75,000 or less. This
section would also amend the definition of `high-cost mortgage'
to include a transaction for less than $75,000 in which the
dwelling is personal property and the total points and fees
payable in connection with the transaction, other than bona
fide third party charges not retained by the mortgage
originator, creditor, or an affiliate of the creditor or
mortgage originator, exceed the greater of 5 percent of the
total transaction amount or $3,000. This section authorizes the
CFPB to adjust such amounts to reflect the change in the
Consumer Price Index.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
TRUTH IN LENDING ACT
* * * * * * *
TITLE I--CONSUMER CREDIT COST DISCLOSURE
* * * * * * *
CHAPTER 1--GENERAL PROVISIONS
* * * * * * *
Sec. 103. Definitions and rules of construction
(a) The definitions and rules of construction set forth in
this section are applicable for the purposes of this title.
(b) Bureau.--The term ``Bureau'' means the Bureau of Consumer
Financial Protection.
(c) The term ``Bureau'' refers to the Bureau of Governors of
the Federal Reserve System.
(d) The term ``organization'' means a corporation, government
or governmental subdivision or agency, trust, estate,
partnership, cooperative, or association.
(e) The term ``person'' means a natural person or an
organization.
(f) The term ``credit'' means the right granted by a creditor
to a debtor to defer payment of debt or to incur debt and defer
its payment.
(g) The term ``creditor'' refers only to a person who both
(1) regularly extends, whether in connection with loans, sales
of property or services, or otherwise, consumer credit which is
payable by agreement in more than four installments or for
which the payment of a finance charge is or may be required,
and (2) is the person to whom the debt arising from the
consumer credit transaction is initially payable on the face of
the evidence of indebtedness or, if there is no such evidence
of indebtedness, by agreement. Notwithstanding the preceding
sentence, in the case of an open-end credit plan involving a
credit card, the card issuer and any person who honors the
credit card and offers a discount which is a finance charge are
creditors. For the purpose of the requirements imposed under
chapter 4 and sections 127(a)(5), 127(a)(6), 127(a)(7),
127(b)(1), 127(b)(2), 127(b)(3), 127(b)(8), and 127(b)(10) of
chapter 2 of this title, the term ``creditor'' shall also
include card issuers whether or not the amount due is payable
by agreement in more than four installments or the payment of a
finance charge is or may be required, and the Bureau shall, by
regulation, apply these requirements to such card issuers, to
the extent appropriate, even though the requirements are by
their terms applicable only to creditors offering open-end
credit plans. Any person who originates 2 or more mortgages
referred to in subsection (aa) in any 12-month period or any
person who originates 1 or more such mortgages through a
mortgage broker shall be considered to be a creditor for
purposes of this title. The term ``creditor'' includes a
private educational lender (as that term is defined in section
140) for purposes of this title.
(h) The term ``credit sale'' refers to any sale in which the
seller is a creditor. The term includes any contract in the
form of a bailment or lease if the bailee or lessee contracts
to pay as compensation for use a sum substantially equivalent
to or in excess of the aggregate value of the property and
services involved and it is agreed that the bailee or lessee
will become, or for no other or a nominal consideration has the
option to become, the owner of the property upon full
compliance with his obligations under the contract.
(i) The adjective ``consumer'', used with reference to a
credit transaction, characterizes the transaction as one in
which the party to whom credit is offered or extended is a
natural person, and the money, property, or services which are
the subject of the transaction are primarily for personal,
family, or household purposes.
(j) The terms ``open end credit plan'' and ``open end
consumer credit plan'' mean a plan under which the creditor
reasonably contemplates repeated transactions, which prescribes
the terms of such transactions, and which provides for a
finance charge which may be computed from time to time on the
outstanding unpaid balance. A credit plan or open end consumer
credit plan which is an open end credit plan or open end
consumer credit plan within the meaning of the preceding
sentence is an open end credit plan or open end consumer credit
plan even if credit information is verified from time to time.
(k) The term ``adequate notice'', as used in section 133,
means a printed notice to a cardholder which sets forth the
pertinent facts clearly and conspicuously so that a person
against whom it is to operate could reasonably be expected to
have noticed it and understood its meaning. Such notice may be
given to a cardholder by printing the notice on any credit
card, or on each periodic statement of account, issued to the
cardholder, or by any other means reasonably assuring the
receipt thereof by the cardholder.
(l) The term ``credit card'' means any card, plate, coupon
book or other credit device existing for the purpose of
obtaining money, property, labor, or services on credit.
(m) The term ``accepted credit card'' means any credit card
which the cardholder has requested and received or has signed
or has used, or authorized another to use, for the purpose of
obtaining money, property, labor, or services on credit.
(n) The term ``cardholder'' means any person to whom a credit
card is issued or any person who has agreed with the card
issuer to pay obligations arising from the issuance of a credit
card to another person.
(o) The term ``card issuer'' means any person who issues a
credit card, or the agent of such person with respect to such
card.
(p) The term ``unauthorized use'', as used in section 133,
means a use of a credit card by a person other than the
cardholder who does not have actual, implied, or apparent
authority for such use and from which the cardholder receives
no benefit.
(q) The term ``discount'' as used in section 167 means a
reduction made from the regular price. The term ``discount'' as
used in section 167 shall not mean a surcharge.
(r) The term ``surcharge'' as used in section 103 and section
167 means any means of increasing the regular price to a
cardholder which is not imposed upon customers paying by cash,
check, or similar means.
(s) The term ``State'' refers to any State, the Commonwealth
of Puerto Rico, the District of Columbia, and any territory or
possession of the United States.
(t) The term ``agricultural purposes'' includes the
production, harvest, exhibition, marketing, transportation,
processing, or manufacture of agricultural products by a
natural person who cultivates, plants, propagates, or nurtures
those agricultural products, including but not limited to the
acquisition of farmland, real property with a farm residence,
and personal property and services used primarily in farming.
(u) The term ``agricultural products'' includes agricultural,
horticultural, viticultural, and dairy products, livestock,
wildlife, poultry, bees, forest products, fish and shellfish,
and any products thereof, including processed and manufactured
products, and any and all products raised or produced on farms
and any processed or manufactured products thereof.
(v) The term ``material disclosures'' means the disclosure,
as required by this title, of the annual percentage rate, the
method of determining the finance charge and the balance upon
which a finance charge will be imposed, the amount of the
finance charge, the amount to be financed, the total of
payments, the number and amount of payments, the due dates or
periods of payments scheduled to repay the indebtedness, and
the disclosures required by section 129(a).
(w) The term ``dwelling'' means a residential structure or
mobile home which contains one to four family housing units, or
individual units of condominiums or cooperatives.
(x) The term ``residential mortgage transaction'' means a
transaction 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 the consumer's dwelling to finance the
acquisition or initial construction of such dwelling.
(y) As used in this section and section 167, the term
``regular price'' means the tag or posted price charged for the
property or service if a single price is tagged or posted, or
the price charged for the property or service when payment is
made by use of an open-end credit plan or a credit card if
either (1) no price is tagged or posted, or (2) two prices are
tagged or posted, one of which is charged when payment is made
by use of an open-end credit plan or a credit card and the
other when payment is made by use of cash, check, or similar
means. For purposes of this definition, payment by check,
draft, or other negotiable instrument which may result in the
debiting of an open-end credit plan or a credit cardholder's
open-end account shall not be considered payment made by use of
the plan or the account.
(z) Any reference to any requirement imposed under this title
or any provision thereof includes reference to the regulations
of the Bureau under this title or the provision thereof in
question.
[(bb)] (aa) High-cost Mortgage.--
(1) Definition.--
(A) In general.--The term ``high-cost
mortgage'', and a mortgage referred to in this
subsection, means a consumer credit transaction
that is secured by the consumer's principal
dwelling, other than a reverse mortgage
transaction, if--
(i) in the case of a credit
transaction secured--
(I) by a first mortgage on
the consumer's principal
dwelling, the annual percentage
rate at consummation of the
transaction will exceed by more
than 6.5 percentage points
[(8.5 percentage points, if the
dwelling is personal property
and the transaction is for less
than $50,000)] (10 percentage
points if the dwelling is
personal property or is a
transaction that does not
include the purchase of real
property on which a dwelling is
to be placed, and the
transaction is for less than
$75,000 (as such amount is
adjusted by the Bureau to
reflect the change in the
Consumer Price Index)) the
average prime offer rate, as
defined in section
129C(b)(2)(B), for a comparable
transaction; or
(II) by a subordinate or
junior mortgage on the
consumer's principal dwelling,
the annual percentage rate at
consummation of the transaction
will exceed by more than 8.5
percentage points the average
prime offer rate, as defined in
section 129C(b)(2)(B), for a
comparable transaction;
(ii) the total points and fees
payable in connection with the
transaction, other than bona fide third
party charges not retained by the
mortgage originator, creditor, or an
affiliate of the creditor or mortgage
originator, exceed--
(I) in the case of a
transaction for $20,000 or
more, 5 percent of the total
transaction amount; [or]
(II) in the case of a
transaction for less than
$20,000, the lesser of 8
percent of the total
transaction amount or $1,000
(or such other dollar amount as
the Bureau shall prescribe by
regulation); or
(III) notwithstanding
subclauses (I) and (II), in the
case of a transaction for less
than $75,000 (as such amount is
adjusted by the Bureau to
reflect the change in the
Consumer Price Index) in which
the dwelling is personal
property (or is a consumer
credit transaction that does
not include the purchase of
real property on which a
dwelling is to be placed) the
greater of 5 percent of the
total transaction amount or
$3,000 (as such amount is
adjusted by the Bureau to
reflect the change in the
Consumer Price Index); or
(iii) the credit transaction
documents permit the creditor to charge
or collect prepayment fees or penalties
more than 36 months after the
transaction closing or such fees or
penalties exceed, in the aggregate,
more than 2 percent of the amount
prepaid.
(B) Introductory rates taken into account.--
For purposes of subparagraph (A)(i), the annual
percentage rate of interest shall be determined
based on the following interest rate:
(i) In the case of a fixed-rate
transaction in which the annual
percentage rate will not vary during
the term of the loan, the interest rate
in effect on the date of consummation
of the transaction.
(ii) In the case of a transaction in
which the rate of interest varies
solely in accordance with an index, the
interest rate determined by adding the
index rate in effect on the date of
consummation of the transaction to the
maximum margin permitted at any time
during the loan agreement.
(iii) In the case of any other
transaction in which the rate may vary
at any time during the term of the loan
for any reason, the interest charged on
the transaction at the maximum rate
that may be charged during the term of
the loan.
(C) Mortgage insurance.--For the purposes of
computing the total points and fees under
paragraph (4), the total points and fees shall
exclude--
(i) any premium provided by an agency
of the Federal Government or an agency
of a State;
(ii) any amount that is not in excess
of the amount payable under policies in
effect at the time of origination under
section 203(c)(2)(A) of the National
Housing Act (12 U.S.C. 1709(c)(2)(A)),
provided that the premium, charge, or
fee is required to be refundable on a
pro-rated basis and the refund is
automatically issued upon notification
of the satisfaction of the underlying
mortgage loan; and
(iii) any premium paid by the
consumer after closing.
(2)(A) After the 2-year period beginning on the effective
date of the regulations promulgated under section 155 of the
Riegle Community Development and Regulatory Improvement Act of
1994, and no more frequently than biennially after the first
increase or decrease under this subparagraph, the Bureau may by
regulation increase or decrease the number of percentage points
specified in paragraph (1)(A), if the Bureau determines that
the increase or decrease is--
(i) consistent with the consumer protections against
abusive lending provided by the amendments made by
subtitle B of title I of the Riegle Community
Development and Regulatory Improvement Act of 1994; and
(ii) warranted by the need for credit.
(B) An increase or decrease under subparagraph (A)--
(i) may not result in the number of
percentage points referred to in paragraph
(1)(A)(i)(I) being less than 6 percentage
points or greater than 10 percentage points;
and
(ii) may not result in the number of
percentage points referred to in paragraph
(1)(A)(i)(II) being less than 8 percentage
points or greater than 12 percentage points.
(C) In determining whether to increase or decrease the number
of percentage points referred to in subparagraph (A), the
Bureau shall consult with representatives of consumers,
including low-income consumers, and lenders.
(3) The amount specified in paragraph (1)(B)(ii) shall be
adjusted annually on January 1 by the annual percentage change
in the Consumer Price Index, as reported on June 1 of the year
preceding such adjustment.
(4) For purposes of paragraph (1)(B), points and fees shall
include--
(A) all items included in the finance charge, except
interest or the time-price differential;
(B) all compensation paid directly or indirectly by a
consumer or creditor to a mortgage originator from any
source, including a mortgage originator that is also
the creditor in a table-funded transaction;
(C) each of the charges listed in section 106(e)
(except an escrow for future payment of taxes),
unless--
(i) the charge is reasonable;
(ii) the creditor receives no direct or
indirect compensation; and
(iii) the charge is paid to a third party
unaffiliated with the creditor; and
(D) premiums or other charges payable at or before
closing for any credit life, credit disability, credit
unemployment, or credit property insurance, or any
other accident, loss-of-income, life or health
insurance, or any payments directly or indirectly for
any debt cancellation or suspension agreement or
contract, except that insurance premiums or debt
cancellation or suspension fees calculated and paid in
full on a monthly basis shall not be considered
financed by the creditor;
(E) the maximum prepayment fees and penalties which
may be charged or collected under the terms of the
credit transaction;
(F) all prepayment fees or penalties that are
incurred by the consumer if the loan refinances a
previous loan made or currently held by the same
creditor or an affiliate of the creditor; and
(G) such other charges as the Bureau determines to be
appropriate.
(5) Calculation of points and fees for open-end
consumer credit plans.--In the case of open-end
consumer credit plans, points and fees shall be
calculated, for purposes of this section and section
129, by adding the total points and fees known at or
before closing, including the maximum prepayment
penalties which may be charged or collected under the
terms of the credit transaction, plus the minimum
additional fees the consumer would be required to pay
to draw down an amount equal to the total credit line.
(6) This subsection shall not be construed to limit the rate
of interest or the finance charge that a person may charge a
consumer for any extension of credit.
[(aa)] (bb) The disclosure of an amount or percentage which
is greater than the amount or percentage required to be
disclosed under this title does not in itself constitute a
violation of this title.
(cc) The term ``reverse mortgage transaction'' means a
nonrecourse transaction in which a mortgage, deed of trust, or
equivalent consensual security interest is created against the
consumer's principal dwelling--
(1) securing one or more advances; and
(2) with respect to which the payment of any
principal, interest, and shared appreciation or equity
is due and payable (other than in the case of default)
only after--
(A) the transfer of the dwelling;
(B) the consumer ceases to occupy the
dwelling as a principal dwelling; or
(C) the death of the consumer.
[(cc)] (dd) Definitions Relating to Mortgage Origination and
Residential Mortgage Loans.--
(1) Commission.--Unless otherwise specified, the term
``Commission'' means the Federal Trade Commission.
(2) Mortgage originator.--The term ``mortgage
originator''--
(A) means any person who, for direct or
indirect compensation or gain, or in the
expectation of direct or indirect compensation
or gain--
(i) takes a residential mortgage loan
application;
(ii) assists a consumer in obtaining
or applying to obtain a residential
mortgage loan; or
(iii) offers or negotiates terms of a
residential mortgage loan;
(B) includes any person who represents to the
public, through advertising or other means of
communicating or providing information
(including the use of business cards,
stationery, brochures, signs, rate lists, or
other promotional items), that such person can
or will provide any of the services or perform
any of the activities described in subparagraph
(A);
(C) does not include any person who is (i)
not otherwise described in subparagraph (A) or
(B) and who performs purely administrative or
clerical tasks on behalf of a person who is
described in any such subparagraph, or (ii) [an
employee of a retailer of manufactured homes
who is not described in clause (i) or (iii) of
subparagraph (A) and who does not advise a
consumer on loan terms (including rates, fees,
and other costs)] a retailer of manufactured or
modular homes or its employees unless such
retailer or its employees receive compensation
or gain for engaging in activities described in
subparagraph (A) that is in excess of any
compensation or gain received in a comparable
cash transaction;
(D) does not include a person or entity that
only performs real estate brokerage activities
and is licensed or registered in accordance
with applicable State law, unless such person
or entity is compensated by a lender, a
mortgage broker, or other mortgage originator
or by any agent of such lender, mortgage
broker, or other mortgage originator;
(E) does not include, with respect to a
residential mortgage loan, a person, estate, or
trust that provides mortgage financing for the
sale of 3 properties in any 12-month period to
purchasers of such properties, each of which is
owned by such person, estate, or trust and
serves as security for the loan, provided that
such loan--
(i) is not made by a person, estate,
or trust that has constructed, or acted
as a contractor for the construction
of, a residence on the property in the
ordinary course of business of such
person, estate, or trust;
(ii) is fully amortizing;
(iii) is with respect to a sale for
which the seller determines in good
faith and documents that the buyer has
a reasonable ability to repay the loan;
(iv) has a fixed rate or an
adjustable rate that is adjustable
after 5 or more years, subject to
reasonable annual and lifetime
limitations on interest rate increases;
and
(v) meets any other criteria the
Bureau may prescribe;
(F) does not include the creditor (except the
creditor in a table-funded transaction) under
paragraph (1), (2), or (4) of section 129B(c);
and
(G) does not include a servicer or servicer
employees, agents and contractors, including
but not limited to those who offer or negotiate
terms of a residential mortgage loan for
purposes of renegotiating, modifying, replacing
and subordinating principal of existing
mortgages where borrowers are behind in their
payments, in default or have a reasonable
likelihood of being in default or falling
behind.
(3) Nationwide mortgage licensing system and
registry.--The term ``Nationwide Mortgage Licensing
System and Registry'' has the same meaning as in the
Secure and Fair Enforcement for Mortgage Licensing Act
of 2008.
(4) Other definitions relating to mortgage
originator.--For purposes of this subsection, a person
``assists a consumer in obtaining or applying to obtain
a residential mortgage loan'' by, among other things,
advising on residential mortgage loan terms (including
rates, fees, and other costs), preparing residential
mortgage loan packages, or collecting information on
behalf of the consumer with regard to a residential
mortgage loan.
(5) Residential mortgage loan.--The term
``residential mortgage loan'' means any consumer credit
transaction that is secured by a mortgage, deed of
trust, or other equivalent consensual security interest
on a dwelling or on residential real property that
includes a dwelling, other than a consumer credit
transaction under an open end credit plan or, for
purposes of sections 129B and 129C and section 128(a)
(16), (17), (18), and (19), and sections 128(f) and
130(k), and any regulations promulgated thereunder, an
extension of credit relating to a plan described in
section 101(53D) of title 11, United States Code.
(6) Secretary.--The term ``Secretary'', when used in
connection with any transaction or person involved with
a residential mortgage loan, means the Secretary of
Housing and Urban Development.
(7) Servicer.--The term ``servicer'' has the same
meaning as in section 6(i)(2) of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C.
2605(i)(2)).
[(dd)] (ee) Bona Fide Discount Points and Prepayment
Penalties.--For the purposes of determining the amount of
points and fees for purposes of subsection (aa), either the
amounts described in paragraph (1) or (2) of the following
paragraphs, but not both, shall be excluded:
(1) Up to and including 2 bona fide discount points
payable by the consumer in connection with the
mortgage, but only if the interest rate from which the
mortgage's interest rate will be discounted does not
exceed by more than 1 percentage point--
(A) the average prime offer rate, as defined
in section 129C; or
(B) if secured by a personal property loan,
the average rate on a loan in connection with
which insurance is provided under title I of
the National Housing Act (12 U.S.C. 1702 et
seq.).
(2) Unless 2 bona fide discount points have been
excluded under paragraph (1), up to and including 1
bona fide discount point payable by the consumer in
connection with the mortgage, but only if the interest
rate from which the mortgage's interest rate will be
discounted does not exceed by more than 2 percentage
points--
(A) the average prime offer rate, as defined
in section 129C; or
(B) if secured by a personal property loan,
the average rate on a loan in connection with
which insurance is provided under title I of
the National Housing Act (12 U.S.C. 1702 et
seq.).
(3) For purposes of paragraph (1), the term ``bona
fide discount points'' means loan discount points which
are knowingly paid by the consumer for the purpose of
reducing, and which in fact result in a bona fide
reduction of, the interest rate or time-price
differential applicable to the mortgage.
(4) Paragraphs (1) and (2) shall not apply to
discount points used to purchase an interest rate
reduction unless the amount of the interest rate
reduction purchased is reasonably consistent with
established industry norms and practices for secondary
mortgage market transactions.
* * * * * * *
----------
SECTION 1503 OF THE SECURE AND FAIR ENFORCEMENT FOR MORTGAGE LICENSING
ACT OF 2008
SEC. 1503. DEFINITIONS
For purposes of this title, the following definitions shall
apply:
(1) Bureau.--The term ``Bureau'' means the Bureau of
Consumer Financial Protection.
(2) Federal banking agency.--The term ``Federal
banking agency'' means the Board of Governors of the
Federal Reserve System, the Office of the Comptroller
of the Currency, the National Credit Union
Administration, and the Federal Deposit Insurance
Corporation.
(3) Depository institution.--The term ``depository
institution'' has the same meaning as in section 3 of
the Federal Deposit Insurance Act, and includes any
credit union.
(4) Loan originator.--
(A) In general.--The term ``loan
originator''--
(i) means an individual who--
(I) takes a residential
mortgage loan application; and
(II) offers or negotiates
terms of a residential mortgage
loan for compensation or gain;
(ii) does not include any individual
who is not otherwise described in
clause (i) and who performs purely
administrative or clerical tasks on
behalf of a person who is described in
any such clause;
(iii) does not include a person or
entity that only performs real estate
brokerage activities and is licensed or
registered in accordance with
applicable State law, unless the person
or entity is compensated by a lender, a
mortgage broker, or other loan
originator or by any agent of such
lender, mortgage broker, or other loan
originator; [and]
(iv) does not include a person or
entity solely involved in extensions of
credit relating to timeshare plans, as
that term is defined in section
101(53D) of title 11, United States
Code[.]; and
(v) does not include a retailer of
manufactured or modular homes or its
employees unless such retailer or its
employees receive compensation or gain
for engaging in activities described in
clause (i) that is in excess of any
compensation or gain received in a
comparable cash transaction.
(B) Other definitions relating to loan
originator.--For purposes of this subsection,
an individual ``assists a consumer in obtaining
or applying to obtain a residential mortgage
loan'' by, among other things, advising on loan
terms (including rates, fees, other costs),
preparing loan packages, or collecting
information on behalf of the consumer with
regard to a residential mortgage loan.
(C) Administrative or clerical tasks.--The
term ``administrative or clerical tasks'' means
the receipt, collection, and distribution of
information common for the processing or
underwriting of a loan in the mortgage industry
and communication with a consumer to obtain
information necessary for the processing or
underwriting of a residential mortgage loan.
(D) Real estate brokerage activity defined.--
The term ``real estate brokerage activity''
means any activity that involves offering or
providing real estate brokerage services to the
public, including--
(i) acting as a real estate agent or
real estate broker for a buyer, seller,
lessor, or lessee of real property;
(ii) bringing together parties
interested in the sale, purchase,
lease, rental, or exchange of real
property;
(iii) negotiating, on behalf of any
party, any portion of a contract
relating to the sale, purchase, lease,
rental, or exchange of real property
(other than in connection with
providing financing with respect to any
such transaction);
(iv) engaging in any activity for
which a person engaged in the activity
is required to be registered or
licensed as a real estate agent or real
estate broker under any applicable law;
and
(v) offering to engage in any
activity, or act in any capacity,
described in clause (i), (ii), (iii),
or (iv).
(5) Loan processor or underwriter.--
(A) In general.--The term ``loan processor or
underwriter'' means an individual who performs
clerical or support duties at the direction of
and subject to the supervision and instruction
of--
(i) a State-licensed loan originator;
or
(ii) a registered loan originator.
(B) Clerical or support duties.--For purposes
of subparagraph (A), the term ``clerical or
support duties'' may include--
(i) the receipt, collection,
distribution, and analysis of
information common for the processing
or underwriting of a residential
mortgage loan; and
(ii) communicating with a consumer to
obtain the information necessary for
the processing or underwriting of a
loan, to the extent that such
communication does not include offering
or negotiating loan rates or terms, or
counseling consumers about residential
mortgage loan rates or terms.
(6) Nationwide mortgage licensing system and
registry.--The term ``Nationwide Mortgage Licensing
System and Registry'' means a mortgage licensing system
developed and maintained by the Conference of State
Bank Supervisors and the American Association of
Residential Mortgage Regulators for the State licensing
and registration of State-licensed loan originators and
the registration of registered loan originators or any
system established by the Director under section 1509.
(7) Nontraditional mortgage product.--The term
``nontraditional mortgage product'' means any mortgage
product other than a 30-year fixed rate mortgage.
(8) Registered loan originator.--The term
``registered loan originator'' means any individual
who--
(A) meets the definition of loan originator
and is an employee of--
(i) a depository institution;
(ii) a subsidiary that is--
(I) owned and controlled by a
depository institution; and
(II) regulated by a Federal
banking agency; or
(iii) an institution regulated by the
Farm Credit Administration; and
(B) is registered with, and maintains a
unique identifier through, the Nationwide
Mortgage Licensing System and Registry.
(9) Residential mortgage loan.--The term
``residential mortgage loan'' means any loan primarily
for personal, family, or household use that is secured
by a mortgage, deed of trust, or other equivalent
consensual security interest on a dwelling (as defined
in section 103(v) of the Truth in Lending Act) or
residential real estate upon which is constructed or
intended to be constructed a dwelling (as so defined).
(10) Director.--The term ``Director'' means the
Director of the Bureau of Consumer Financial
Protection.
(11) State.--The term ``State'' means any State of
the United States, the District of Columbia, any
territory of the United States, Puerto Rico, Guam,
American Samoa, the Trust Territory of the Pacific
Islands, the Virgin Islands, and the Northern Mariana
Islands.
(12) State-licensed loan originator.--The term
``State-licensed loan originator'' means any individual
who--
(A) is a loan originator;
(B) is not an employee of--
(i) a depository institution;
(ii) a subsidiary that is--
(I) owned and controlled by a
depository institution; and
(II) regulated by a Federal
banking agency; or
(iii) an institution regulated by the
Farm Credit Administration; and
(C) is licensed by a State or by the Director
under section 1508 and registered as a loan
originator with, and maintains a unique
identifier through, the Nationwide Mortgage
Licensing System and Registry.
(13) Unique identifier.--
(A) In general.--The term ``unique
identifier'' means a number or other identifier
that--
(i) permanently identifies a loan
originator;
(ii) is assigned by protocols
established by the Nationwide Mortgage
Licensing System and Registry and the
Bureau to facilitate electronic
tracking of loan originators and
uniform identification of, and public
access to, the employment history of
and the publicly adjudicated
disciplinary and enforcement actions
against loan originators; and
(iii) shall not be used for purposes
other than those set forth under this
title.
(B) Responsibility of states.--To the
greatest extent possible and to accomplish the
purpose of this title, States shall use unique
identifiers in lieu of social security numbers.
MINORITY VIEWS
We believe that low-income families that rely on
manufactured housing as an affordable option deserve the same
anti-predatory lending standards as other families. H.R. 1699
would not create more access to affordable housing, but instead
allow an already incredibly profitable industry to make even
more money by charging higher interest rates and fees to low-
income borrowers while simultaneously decreasing consumer
protections.
First, H.R. 1699 would change the definition of a
``mortgage originator'' such that rules established by the
Consumer Financial Protection Bureau (Consumer Bureau) for
marketing and documenting consumer financial transactions would
not apply to manufactured housing salespeople that offer credit
to borrowers.
In 2014, the Consumer Bureau published a study on the
manufactured housing industry, which noted that individuals who
apply for manufactured housing loans ``include consumers that
may be considered more financially vulnerable and, thus, may
particularly stand to benefit from strong consumer
protections.'' This study also revealed that many practices,
consistent with the current definition of a mortgage loan
originator, are practices commonly engaged in by retailers of
manufactured housing, such as assisting customers in filling
out a mortgage application and exempting retailers from the
definition may increase consumer costs and reduce incentives to
work in the best interests of the customer.\1\ Furthermore,
while increasing access to credit in the manufactured housing
sector is a worthy goal, information from this study, as well
as press articles highlighting increased production in the
manufactured housing sector,\2\ suggests that reducing consumer
protections is not an appropriate trade-off.
---------------------------------------------------------------------------
\1\``Manufactured-housing consumer finance in the United States'''
at 40-42.
\2\See, Manufactured Housing Institute, ``4,942 New HUD-Code Homes
Shipped in January 2015,'' http://www.manufacturedhousing.org/lib/
showtemp_detail.asp?Id=1127&cat=whats_hot (noting a trend of ``[year
over year] gains across the board'' in January 2015 for the
manufacturers of mobile homes in homes and floors shipped); see also,
``4,730 New HUD-Code Homes Shipped in December 2014,'' http://
www.manufacturedhousing.org/lib/showtemp_detail
asp?Id=1125&cat=whats_hot (``Compared with the prior year, 2014 has
recorded shipment increases in every month. For all twelve months,
shipments totaled 64,344 homes compared with 60,210 homes in 2013, a
net increase of 6.9 percent'').
---------------------------------------------------------------------------
Additionally, a years-long joint investigation by The
Seattle Times and Center for Public Integrity, which focused on
Clayton Homes, the largest manufactured homebuilder in the
United States, found that Clayton Homes, which is controlled by
multi-billionaire Warren Buffet, reaps significant financial
profits from unsuspecting consumers--from producing the
housing, to selling the housing, to originating loans that take
advantage of vulnerable consumers that leave them with
virtually no way to refinance.\3\ Specifically, the article
noted that, ``Clayton systematically pursues unwitting minority
homebuyers and baits them into costly subprime loans, many of
which are doomed to fail,'' charges minority borrowers
substantially higher rates, on average, than their white
counterparts, and ``typically charges black people who make
over $75,000 a year slightly more than white people who make
only $35,000.''\4\
---------------------------------------------------------------------------
\3\See ``The Mobile Home Trap,'' The Seattle Times, https://
www.seattletimes.com/category/mobile-homes/.
\4\Mike Baker and Daniel Wagner, ``Minorities Exploited by Warren
Buffet's Mobile Home Empire,'' THE SEATTLE TIMES, Dec. 26, 2015,
available at https://www.seattletimes.com/seattle-news/times-watchdog/
minorities-exploited-by-warren-buffetts-mobile-home-empire-clayton-
homes/.
---------------------------------------------------------------------------
Second, H.R. 1699 would increase the spread over the
average prime offer rate (APOR) required to trigger Home
Ownership and Equity Protection Act (HOEPA) protections for
loans that do not include the purchase of real property from
6.5 percent to 10 percent for loans between $50,000 and $75,000
and from 8.5 percent to 10 percent for loans under $50,000. The
bill would also raise the fees cap that trigger HOEPA
protections to the greater of 5 percent of the total
transaction amount or $3,000, whichever is greater. According
to Home Mortgage Disclosure Act (HMDA) data, obtained from the
Consumer Bureau, this new interest rate trigger would have
exempted 58 percent of manufactured home loans originated in
2013 from HOEPA protections. HOEPA is an essential protection
tool for consumers and we support policy ensuring that all
vulnerable homeowners are protected under the statute,
including owners of manufactured homes.
For these reasons, we oppose H.R. 1699.
Maxine Waters.
Michael E. Capuano.
Wm. Lacy Clay.
Keith Ellison.
Nydia M. Velazquez.
Al Green.
Carolyn B. Maloney.
Emanuel Cleaver.
Gwen Moore.
Denny Heck.
[all]
