Amends the Truth in Lending Act to require lenders to establish a best practices plan, meeting certain criteria, to ensure compliance with such Act for high cost mortgages.
Proscribes unfair or deceptive acts or practices in providing mortgage lending services for either a subprime federally related mortgage loan or for mortgage brokerage services for such a loan. Sets forth civil penalties for violations.
Consumer Fairness Act - Amends the Consumer Credit Protection Act to declare unenforceable a written provision in any consumer contract or transaction which requires binding arbitration to resolve any controversy arising out of such transaction or contract, or the refusal to perform all or any part of the transaction. (Permits post-controversy arbitration agreements.)
Amends the Community Development Banking and Financial Institutions Act of 1994 to authorize the Community Development Financial Institutions Fund to make grants to nonprofit community development corporations to educate and train borrowers and community groups regarding illegal and inappropriate predatory lending practices.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1994 Introduced in House (IH)]
109th CONGRESS
1st Session
H. R. 1994
To protect home buyers from predatory lending practices.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 28, 2005
Mrs. Jones of Ohio (for herself, Ms. DeLauro, Mr. Cummings, Ms.
Millender-McDonald, Mr. Grijalva, Mr. Owens, Ms. Kilpatrick of
Michigan, Mr. Jefferson, and Mr. Jackson of Illinois) introduced the
following bill; which was referred to the Committee on Financial
Services
_______________________________________________________________________
A BILL
To protect home buyers from predatory lending practices.
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 ``Predatory Mortgage Lending Practices
Reduction Act''.
SEC. 2. CERTIFICATION REQUIREMENTS FOR MORTGAGE LENDERS AND BROKERS.
(a) In General.--The Real Estate Settlement Procedures Act of 1974
is amended by inserting after section 12 (12 U.S.C. 2610) the following
new section:
``SEC. 13. CERTIFICATION REQUIREMENTS FOR MORTGAGE LENDERS AND BROKERS.
``(a) Requirement.--No person may, in connection with a subprime
federally mortgage related loan, provide mortgage lending services or
mortgage brokerage services unless such person is, at the time of the
provision of such services, certified by the Secretary pursuant to this
section as having been adequately trained with regard to subprime
lending.
``(b) Standards and Examination.--
``(1) In general.--The Secretary shall, by regulation,
establish requirements, standards, and procedures for testing
and certifying persons providing mortgage lending services or
mortgage brokerage services in connection with a subprime,
federally related mortgage loans.
``(2) Examination.--Such standards and procedures shall
require, for certification under this section, that the
individual shall demonstrate, by written examination, knowledge
regarding the following areas:
``(A) Federal law.--The requirements and
limitations under Federal laws regarding mortgage
lending, including the Truth in Lending Act, the Fair
Credit Reporting Act, the Equal Credit Opportunity Act,
the Real Estate Settlement Procedures Act of 1974, the
Home Ownership and Equity Protection Act of 1994, the
Home Mortgage Disclosure Act of 1975, and the Fair
Housing Act.
``(B) Subprime lending.--Legal and appropriate
practices, methods, conventions, and terms of subprime
lending in all lending functions, including advertising
and marketing, consumer education and counseling,
origination, underwriting, closing, servicing,
information technology, and internal control policies
and procedures.
``(C) Predatory lending.--Illegal and inappropriate
practices, methods, practices, and terms of predatory
lending. The Secretary shall, by regulation, define the
term `predatory lending' for purposes of this
subsection.
``(D) Law regarding competency to contract.--Basic
contract law regarding competency and incapacity to
contract.
``(c) Decertification.--The Secretary shall establish standards and
procedures for suspension and revocation of the certification under
this section, which shall--
``(1) provide the individual subject to suspension or
revocation an opportunity to be heard; and
``(2) provide for suspension or revocation in such
instances as the Secretary determines appropriate, which shall
include an agency determination or a judgment by a court of
competent jurisdiction that a certified individual has engaged
in an act or practice that is unfair or deceptive under section
5 of the Predatory Mortgage Lending Practices Reduction Act.
``(d) Renewal of Certification.--The Secretary shall provide that
certification under this section shall be effective for a specified
period of time, as determined by the Secretary. The Secretary shall
establish standards and procedures for recertification of individuals
whose certifications are expiring. The Secretary shall establish a
procedure for notifying certified individuals of the expiration of
their certifications.
``(e) Information and Training.--
``(1) In general.--The Secretary shall make available, for
persons engaged in providing mortgage lending services and
mortgage brokerage services, information and training in the
areas described in subsection (b)(2). Such information and
training shall be made available through classes, written
materials, and the World Wide Web.
``(2) Contracts.--The Secretary may enter into such
agreements and contracts as the Secretary considers necessary
to make information and training under this subsection
available.
``(3) Authorization of appropriations.--For providing
information and training under this subsection, there are
authorized to be appropriated to the Secretary $2,000,000 for
each of fiscal years 2006 and 2007.
``(f) Definitions.--For purposes of this section, the following
definitions shall apply:
``(1) Mortgage brokerage services.--The term `mortgage
brokerage services' means the bringing together of a borrower
and lender to obtain a federally related mortgage loan and the
rendering of settlement services, by a person who is not an
employee or exclusive agent of a lender.
``(2) Mortgage lending services.--The term `mortgage
lending services' means services relating to the origination of
a federally related mortgage loan, including the taking of loan
applications, loan processing, and the underwriting and funding
of a loan.
``(3) Prime lending rate.--The term `prime lending rate'
means, with respect to a lender, the lowest interest rate
charged by such lender to its most creditworthy customers.
``(4) Subprime.--
``(A) In general.--The term `subprime' means, with
respect to a federally related mortgage loan, that the
borrower under the loan, or the loan terms, exhibit
characteristics that indicate that the loan is subject
to a significantly higher risk of default than
federally related mortgage loans made to borrowers at
prime lending rates.
``(B) Regulations.--The Secretary shall prescribe
regulations to carry out this paragraph, which shall
specify characteristics referred to in subparagraph (A)
that indicate a higher risk of default and shall
establish criteria based on such characteristics for
determining whether a federally related mortgage loan
is a subprime loan. Such characteristics shall
include--
``(i) higher loan fees or penalties;
``(ii) higher interest rates;
``(iii) higher debt-to-income ratios;
``(iv) a history of loan delinquency;
``(v) higher loan-to-value ratios;
``(vi) lower credit scores or other credit
ratings;
``(vii) more recent declaration of
bankruptcy;
``(viii) lack of a credit history; and
``(ix) any other factors that the Secretary
considers appropriate.''.
(b) Regulations.--Not later than 6 months after the date of the
enactment of this Act, the Secretary of Housing and Urban Development
shall issue regulations pursuant to section 19(a) of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C. 2617(a)) as may be
necessary to carry out the amendment made by subsection (a) of this
section.
SEC. 3. LENDER REQUIREMENTS FOR HIGH COST MORTGAGES.
Section 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended
by adding at the end the following new subsections:
``(m) Best Practices Plan.--
``(1) In general.--Any creditor who extends credit in
connection with a mortgage referred to in section 103(aa) shall
establish and maintain a best practices plan, in accordance
with regulations which the Board shall prescribe, to ensure
compliance with the requirements of this title.
``(2) Requirements.--The best practices plan established
under paragraph (1) by any creditor shall require the creditor,
and any subcontractor or agent of the creditor to--
``(A) provide all employees of the creditor,
subcontractor, or agent who are involved in any aspect
of an extension of credit in connection with a mortgage
referred to in section 103(aa), and any subcontractor
or agent of such creditor so involved, with such
training in the best practices plan of the creditor as
the Board determines by regulation to be appropriate;
and
``(B) periodically review and evaluate the
performance of such employees, contractors, and agents
under the best practices plan.
``(n) Good Faith Resolution of Complaints.--A creditor, and any
agent or assignee of the creditor----
``(1) shall make a good faith effort to resolve any
consumer complaint concerning improper or questionable lending
practices with respect to a mortgage referred to in section
103(aa) before the end of the 60-day period beginning on the
date the complaint is received by the creditor, agent or
assignee; and
``(2) may take no action, directly or indirectly, including
seeking any remedy in law or equity, to collect the amount of
any mortgage referred to in paragraph (1), or any part of such
amount, or otherwise enforce the mortgage against the consumer
or the property securing the mortgage, during such 60-day
period (and any time limit for bringing an action to collect
any such amount shall toll during such period and any civil
action filed before the beginning of such period in any court
shall be suspended during such period).
``(o) Prohibition on Charges not Previously Disclosed.--A creditor,
or an agent or assignee of a creditor, may not impose any charge or
fee, or attempt to collect any charge or fee, in connection with a
mortgage referred to in section 103(aa) that was not disclosed before
the mortgage was executed, or impose or attempt to collect any charge
or fee that was so disclosed in an amount in excess of the amount
disclosed, unless the creditor or assignee establishes, in accordance
with regulations which the Board shall prescribe, that the charge or
fee is reasonable and could not have reasonably been foreseen at the
time the mortgage was executed.
``(p) Plain Description and Disclosure Requirement.--
``(1) Charges and fees.--Notwithstanding any other
provision of this title, all disclosures of charges and fees
required under this title with regard to a mortgage referred to
in section 103(aa), shall be separately enumerated and clearly
labeled, stated, and described, including charges described in
clause (ii) or (iii) of section 128(a)(2)(A).
``(2) Rescission and other rights.--The disclosure required
under the penultimate sentence of section 125(a) in connection
with a mortgage referred to in section 103(aa), together with a
summary of the consumer's rights, shall be provided to the
consumer in clear and plain language not less than 24 hours
before the mortgage is executed.''.
SEC. 4. UNFAIR AND DECEPTIVE ACTS AND PRACTICES.
(a) Prohibition.--It shall be unlawful, in providing any mortgage
lending services for a subprime federally related mortgage loan or any
mortgage brokerage services for such a loan, to engage in any unfair or
deceptive act or practice.
(b) Rulemaking Proceedings.--The Secretary of Housing and Urban
Development, the Board of Governors of the Federal Reserve System, and
the Federal Trade Commission may jointly issue--
(1) interpretive rules and general statements of policy
with respect to unfair or deceptive acts or practices in the
provision of mortgage lending services for a subprime federally
related mortgage loan and mortgage brokerage services for such
a loan, within the meaning of subsection (a); and
(2) regulations defining with specificity acts or practices
which are unfair or deceptive in the provision of mortgage
lending services for a subprime federally related mortgage loan
or mortgage brokerage services for such a loan, within the
meaning of subsection (a).
(c) Compliance Enforcement.--Any violation of a regulation issued
under subsection (b)(2) shall be treated as a violation of a
requirement imposed under the Truth in Lending Act and compliance with
such regulation shall be enforceable under sections 108 and 130 of such
Act.
(d) Definitions.--For purposes of this section, the terms
``mortgage brokerage services'', ``mortgage lending services'', and
``subprime'' have the meanings given such terms in section 13(f) of the
Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2611(f)).
(e) Penalties.--
(1) First violation.--In addition to the enforcement
provisions referred to in subsection (c), each person who
violates this section shall forfeit and pay a civil penalty of
not more than $10,000 for each day any such violation
continues.
(2) Subsequent violations.--In the case of any person on
whom a civil penalty has been imposed under paragraph (1),
paragraph (1) shall be applied by substituting ``$20,000'' for
``$10,000'' with respect to all subsequent violations.
(3) Assessment.--The agency referred to in subsection (a)
or (c) of section 108 of the Truth in Lending Act with respect
to any person described in paragraph (1) shall assess any
penalty under this subsection to which such person is subject.
SEC. 5. PROHIBITION ON CERTAIN ARBITRATION CLAUSES.
(a) In General.--The Consumer Credit Protection Act (15 U.S.C. 1601
et seq.) is amended by adding at the end the following new title:
``TITLE X--DISPUTE RESOLUTION
``SEC. 1001. SHORT TITLE.
``This title may be cited as the `Consumer Fairness Act'.
``SEC. 1002. DEFINITIONS.
``For purposes of this title, the following definitions shall
apply:
``(1) Consumer.--The term `consumer' means any individual.
``(2) Consumer transaction.--The term `consumer
transaction' means the sale or rental of goods or services, the
extension of credit, or the provision of any other financial
product or service, to an individual in a transaction entered
into primarily for personal, family, or household purposes,
including any consumer credit transaction that is secured by
the consumer's principal dwelling.
``(3) Consumer contract.--The term `consumer contract'
means any written, standardized form contract between the
parties to a consumer transaction.
``SEC. 1003. PROHIBITION ON ARBITRATION CLAUSES IMPOSED ON CONSUMERS
WITHOUT THEIR CONSENT.
``(a) In General.--A written provision in any consumer transaction
or consumer contract which requires binding arbitration to resolve any
controversy arising out of such transaction or contract, or the refusal
to perform the whole or any part of the transaction shall not be
enforceable.
``(b) Post-Controversy Agreements.--Subsection (a) shall not apply
with respect to a written agreement to determine by binding arbitration
an existing controversy arising out of a consumer transaction or
consumer contract if the written agreement has been entered into by the
parties to the consumer transaction or consumer contract after the
controversy has arisen.
``(c) Coordination With Other Law.--No provision of this section
shall be construed as annulling, altering, affecting, or superseding
any Federal law, or the laws of any State, relating to arbitration in
connection with consumer transactions or consumer contracts, except to
the extent that those laws are inconsistent with the provisions of this
section, and then only to the extent of the inconsistency.''.
(b) Applicability.--The amendments made by this section shall apply
to all consumer transactions and consumer contracts entered into on, or
after the date of the enactment of this Act and to all controversies
pending or filed on, or arising after, the date of the enactment of
this Act.
SEC. 6. GRANTS TO COMMUNITY DEVELOPMENT CORPORATIONS FOR PREDATORY
LENDING EDUCATION.
(a) In General.--The Community Development Banking and Financial
Institutions Act of 1994 (12 U.S.C. 4701 et seq.) is amended by adding
at the end the following new section:
``SEC. 122. GRANTS TO COMMUNITY DEVELOPMENT CORPORATIONS FOR PREDATORY
LENDING EDUCATION.
``(a) In General.--To the extent amounts are made available under
subsection (d), the Fund may make grants to nonprofit community
development corporations to provide education and training to
borrowers, potential borrowers, and community groups regarding illegal
and inappropriate practices, methods, practices, and terms of predatory
lending.
``(b) Selection.--The selection of community development
corporations to receive grants under this section shall be at the
discretion of the Fund and in accordance with criteria established by
the Fund.
``(c) Grant Amounts.--The Fund may establish a limitation on the
amount received by any single community development corporation from
grants under this section for any single fiscal year.
``(d) Authorization of Appropriations.--There is authorized to be
appropriated to the Fund for grants under this section $2,000,000 for
each of fiscal years 2006 and 2007.''.
(b) Amendment to Table of Contents.--The table of contents in
section 1(b) of the Riegle Community Development and Regulatory
Improvement Act of 1994 (12 U.S.C. 4701 note) is amended by inserting
after the item relating to section 121 the following new item:
``122. Grants to community development corporations for predatory
lending education.''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
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