PREDATORY LENDING: BACKGROUND ON THE ISSUE AND OVERVIEW OF LEGISLATION IN THE 106TH CONGRESS

CRS Report for Congress
Predatory Lending: Background on the Issue and
th
Overview of Legislation in the 106 Congress
March 7, 2001
Bruce E. Foote
Analyst in Housing
Domestic Social Policy Division

Congressional Research Service The Library of Congress

Predatory Lending: Background on the Issue and
Overview of Legislation in the 106^th Congress
Summary
This report presents an overview of the predatory lending issue, a summary of
present law, a summary of joint HUD and Treasury recommendations to address the
issue, and a side-by-side summary of five bills introduced in the 106^th Congress that
addressed the issue. Though no action occurred on these bills, the issue is expected
to continue in the 107^th Congress.
The Home Ownership and Equity Protection Act of 1994 (Subtitle B of Title I
of P.L. 103-325) amended the Truth in Lending Act (TILA) to provide new consumer
protections for certain “high cost loans.” Basically, the law defines a high cost loan
as a loan secured by the principal residence of the borrower, but which is not used for
the purchase of the residence, and which meets one of the following conditions: (1)
the annual percentage rate on the loan exceeds the rate on comparable Treasury
securities by more than 10 percentage points, or (2) the total points and fees paid by
the borrower at or before loan closing exceed the greater of $465 or 8% of the total
loan amount.
Current law does not prohibit high interest rates and high fees, but the law
requires special disclosures when such rates and fees are present. All five bills would
approach the problem by amending TILA to redefine high cost loans such that the
special disclosures would be triggered at lower interest rates.
The proposed legislation would have amended current law to make existing
prohibitions stronger or create additional prohibitions. For example, under present
law, mortgages with 5-year terms or more may not be written such that a large
payment is due at the loan term (balloon mortgages). All the bills except H.R. 4213
would have prohibited all balloon mortgages. S. 2405 would have prohibited lenders
from charging points and fees on a high cost mortgage which is being used to
refinance a high cost mortgage from the same lender.
S. 2405 would have prohibited high cost mortgages unless the lender has
received certification that the prospective borrower has received counseling from an
approved agency, while H.R. 4250 and S. 2415 would have required the lender to
provide the borrower with a disclosure statement recommending such counseling, as
well as the contact information for certified counseling agencies.
H.R. 3901 would have amended the Home Mortgage Disclosure Act to require
lenders to report information on the interest rates charged on loans. This would
enable regulators to track and identify high interest rate loans and lenders with high
costs. H.R. 4213 would have amended the Real Estate Settlement Procedures Act to
add additional disclosure requirements. H.R. 4250 would have amended the Fair
Credit Reporting Act.

Contents
Introduction ................................................ 1
Current Law...............................................1
The HUD-Treasury Report....................................2
Legislation Introduced in the 106^th Congress.......................3
Miscellaneous Amendments...................................28
List of Tables
Table 1. Side-by-Side Summary of the Bills...........................5

Predatory Lending: Background on the
Issue and Overview of Legislation in the
th
106 Congress
Introduction
The market for mortgage loans may be considered as a dual mortgage market.
Borrowers with fair to good credit ratings may be able to obtain loans on the “prime”
mortgage market. They are able to obtain the loans with the lowest interest rates and
costs. Borrowers with blemished credit histories obtain mortgage loans on the
“subprime” mortgage market, and obtain the loans with higher interest rates and loan
fees than are obtainable in the prime market. The problem is that some subprime
lenders have been making loans on terms that are regarded as “predatory.” While
existing laws have addressed some of the problems of predatory lending, many issues
remain.
This issue was the subject of legislation introduced in the 106^th Congress, and is
one of the issues listed in the oversight plan for the House Committee on Financial^th
Services for the 107 Congress.
Current Law
In 1993, testimony before the Congress indicated that some communities which
lacked access to traditional lending institutions were being victimized by second
mortgage lenders, home improvement contractors, and finance companies who
peddled high interest rate home equity loans with high loan fees to cash-poor
homeowners. It was suggested that homeowners were offered home improvement
loans and credit consolidation loans. Borrowers, who may not have fully understood
the terms of the loans, and who may not have been offered adequate disclosures of
the loan terms, often had to struggle to meet overwhelming mortgage payments, and
too often they ultimately lost their homes through foreclosure.
Congress decided that legislation was needed to address the issue and protect
such homeowners. The issue was addressed in Subtitle B of Title I of the Riegle
Community Development and Regulatory Improvement Act of 1994 (P.L. 103-325);
the subtitle is cited as the Home Ownership and Equity Protection Act of 1994. This
subtitle amended the Truth in Lending Act (TILA) to provide new consumer
protections for certain “high cost loans.”
Basically, the law defines a high cost loan as a loan secured by the principal
residence of the borrower, but which is not used for the purchase of the residence,
and which meets one of the following conditions: (1) the annual percentage rate on
the loan exceeds the rate on comparable Treasury securities by more than 10

percentage points, or (2) the total points and fees paid by the borrower at or before
loan closing exceed the greater of $465 or 8% of the total loan amount.¹
The law does not limit the interest rate and loan fees that lenders may charge.
Limits are placed on the provisions that may be included in high cost loans, and the
loans must meet certain disclosure requirements:
!At least 3 business days before completing the transaction, a borrower must be
given special disclosures. This gives the borrower a 3-day “cooling off period”
before becoming obligated under the loan. This is in addition to the 3-day
cooling-off period during which the borrower may cancel the loan after
completing the transaction. One disclosure must contain the following
statement, “You are not required to complete this transaction merely because
you have received these disclosures or have signed a loan application. If you
obtain this loan, the lender will have a mortgage on your home. You could
lose your home, and any money you have put into it, if you do not meet your
obligations under the loan”;
!For loans with terms of less than 5 years the payment schedule must be such
that the loan is completely repaid at the end of the loan term;
!The loan may not have a payment schedule which would cause the loan
balance to increase, and there may not be a penalty for paying off the loan prior
to its maturity date;
!A lender may not engage in the practice of extending mortgage loans without
regard to the borrower’s ability to make the scheduled payments; and
!A borrower has the right to rescind the loan if the lender fails to furnish the
required disclosures or if the loan documents include one or more of the
prohibited terms.
The HUD-Treasury Report
In addition to legislation proposed in the 106^th Congress, recommendations to
curb predatory lending were detailed in a joint report released last year by the
Department of Housing and Urban Development (HUD) and the Department of the
Treasury.
The National Task Force on Predatory Lending, convened in March 2000, was
chaired by Andrew Cuomo, who was Secretary of HUD, and co-chaired by Lawrence
Summers, who was Secretary of the Treasury. Members of the Task Force included
a wide range of parties interested in and affected by the predatory lending issue.
Between April and May 2000, the Task Force held five forums around the country for
Task Force members, and each forum had a specific theme: Atlanta, GA – The Impact
of Predatory Lending on Minorities; Los Angeles, CA - The Elderly and Predatory
Lending; New York, NY - Funding Sources for Predatory Lending; Baltimore, MD -

¹A figure of $400 was enacted but the Federal Reserve adjusts that number annually based
on the annual percentage change reflected in the Consumer Price Index that is in effect on June^st^st
1 of a given year, and the adjusted amount will become effective on January 1 of the next
year. For 2001, the adjusted dollar amount is $465.

The Role of Other Key, Non-lender Players; and Chicago, IL - State and Local
Initiatives to Curb Predatory Lending.
In June 2000, the Task Force released a report detailing recommendations for
legislative, regulatory, and other steps that would help curb predatory lending
practices. The report, “Curbing Predatory Home Mortgage Lending,” proposes a
four-point plan to address predatory lending practices:
!Improve Consumer Literacy and Disclosures. The report proposes that
lenders be required to recommend that applicants for high-cost loans avail
themselves of home mortgage counseling, that lenders disclose credit scores
to all borrowers upon request, and that lenders give borrowers more timely and
more accurate information on loan costs and terms;
!Prohibit Harmful Sales Practices in the Mortgage Market. The report
recommends the banning of practices such as loan “flipping” and lending to
borrowers without regard to their ability to repay the loan. It is also suggested
that new requirements be imposed on mortgage brokers to document the
appropriateness of a high-cost loan for certain applicants, and that lenders who
report to credit bureaus should be required to provide “full-file” payment
history for their mortgage customers;
!Restrict Abusive Terms and Conditions on High-Cost Loans. The report
recommends that Congress increase the number of borrowers in the subprime
market covered by legislative protections; further restrict balloon payments on
high-cost loans; restrict prepayment penalties and the financing of points and
fees; prohibit mandatory arbitration agreements on high-cost loans; and ban
lump-sum credit life insurance and similar products;
!Improve Market Structure. The report recommends the award of
Community Reinvestment Act (CRA) credit to lenders that promote borrowers
from the subprime to prime mortgage market, and the denial of CRA credit
to lenders for the origination or purchase of loans that violate applicable
lending laws. It is recommended that lenders disclose the incidence of high-
cost loans in pools of mortgage-backed securities and that the incidence of
such loans be disclosed in the offering documents for the securities. The report
recommends that Congress enact legislation which clarifies the authority of
HUD and the Federal Housing Finance Board to issue regulations which
prohibit the Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, and the Federal Home Loan Banks from purchasing
loans with predatory features.
Several of the Task Force recommendations were included in legislation
introduced in the 106^th Congress and described in this report.
Legislation Introduced in the 106^th Congress
As noted above, current law does not prohibit high interest rates and high fees,
but the law requires special disclosures when such rates and fees are present. Some
argue that the rates and fees are so high under current law that lenders can charge
rates and fees which are less than those levels and the loans may still be regarded as
predatory. All five bills that were proposed in the 106^t^h Congress would have
approached the problem by amending the Truth in Lending Act (TILA) to redefine

high cost loans such that the special disclosures would be triggered at lower interest
rates. Some consumer groups would welcome the proposed changes but might argue
that what is really needed is a return to usury legislation – restricting the rate of
interest that may be charged. It is likely that such an approach would be resisted by
lenders and their representatives.
As introduced in the 106^t^h Congress, the proposed legislation would have
amended current law to make existing prohibitions stronger or create additional
prohibitions. For example, under present law, mortgages with 5-year terms or more
may not be written such that a large payment is due at the loan term (balloon
mortgages). All the bills except H.R. 4213 would have prohibited all balloon
mortgages. S. 2405 would have prohibited lenders from charging points and fees on
a high cost mortgage which is being used to refinance a high cost mortgage from the
same lender.
It has been argued by consumer groups that predatory lenders take advantage
of the financial ignorance of the target market. So, S. 2405 would have prohibited
high cost mortgages unless the lender has received certification that the prospective
borrower had received counseling from an approved agency, while H.R. 4250 and S.
2415 would have required the lender to provide the borrower with a disclosure
statement recommending such counseling, as well as the contact information for
certified counseling agencies.
Consumer groups also argue that borrowers have incomplete legal protection
from predatory lending. Enforcement authority would have been increased under S.
2405 by several means. In addition to existing penalties under current law, predatory
lenders would be subject to penalties contained in the Bank Holding Company Act of
1956. Thus, the company and individual officers could be subject to fines and
incarceration. The bill would have provided that certain violations would be deemed
as unfair and deceptive practices under the Federal Trade Commission Act. High cost
loans would not count towards meeting the lending needs of the community under the
Community Reinvestment Act. This would remove the incentive to make certain
loans.
H.R. 3901 would have amended the Home Mortgage Disclosure Act to require
lenders to report information on the interest rates charged on loans. This would
enable regulators to track and identify high interest rate loans and lenders with high
costs. H.R. 4213 would have amended the Real Estate Settlement Procedures Act to
add additional disclosure requirements. H.R. 4250 would have amended the Fair
Credit Reporting Act.
Other than hearings, no action was taken on any of the bills during the 106^t^h
Congress. A side-by-side summary of the bills is presented in the following table.

Table 1. Side-by-Side Summary of the Bills
H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
Home Mortgage Disclosure Act Amendments (HMDA)
MaintainingNo provisionLenders would beNo provisionNo provisionNo provision
information onrequired to maintain
interest ratesinformation on the
annual percentage rate
of mortgage loans and
home improvement
loans originated by the
ⁱ^{ki/CRS-RL30885}institution and togroup the information
^g/waccording to census
^s^.ortract, income level,
^le^akracial characteristics,
^://wikiand gender.
^h^ttpReportingNo ProvisionRegulators would beNo provisionNo provisionNo provision

requirementsprohibited from
exempting lending
institutions from the
reporting requirements
of HMDA. Current
exemptions would
cease to be effective
upon the enactment of
the bill.

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
Truth in Lending Act Amendments
Definition ofDefines aDefines a high costDefines a coveredDefines a coveredDefines a covered
high costcoveredmortgage as amortgage as a loanmortgage as a loanmortgage as a loan
mortgagemortgage as amortgage loansecured by thesecured by thesecured by the
loan secured bysecured by theprincipal residence ofprincipal residence ofprincipal residence
the principalprincipal residence ofthe borrower, butthe borrower, butof the borrower,
residence of thethe borrower, butwhich is not used forwhich is not used forbut which is not
borrower, butwhich is not used forthe purchase of thethe purchase of theused for the
which is notthe purchase of theresidence, and whichresidence, and whichpurchase of the
used for theresidence, and whichmeets one of themeets one of theresidence, is not a
purchase of themeets one of thefollowing conditions:following conditions:reverse mortgage,
ⁱ^{ki/CRS-RL30885}residence, andfollowing conditions:(1) the annual(1) the transaction isand which meets
^g/wwhich meets one(1) the annualpercentage rate on thesecured by a firstone of the
^s^.orof the followingpercentage rate on theloan exceeds the ratemortgage on thefollowing
^le^akconditions: (1)loan exceeds theon comparableconsumer’s principalconditions: (1) the
the annualweekly average yieldTreasury securities byresidence and thetransaction is
^://wikipercentage rateon 1-year Treasurymore than 8annual percentage ratesecured by a first
^h^ttpon the loansecurities by morepercentage points, inon the loan exceedsmortgage on the
exceeds the ratethan 5 percentagethe case of athe rate on comparableconsumer’s
on comparablepoints, (2) thetransaction secured byTreasury securities byprincipal residence
Treasurymortgage is ana first-lien securitymore than 6and the annual
securities byadjustable rate loan oninterest in thepercentage points, (2)percentage rate on
more than 10which annualproperty, or 9the transaction isthe loan exceeds
percentagepercentage rate ispercentage points, insecured by athe rate on
points, or (2)reasonably expected tothe case of asubordinate mortgagecomparable
the total pointsincrease by more thantransaction secured byon the consumer’sTreasury securities
and fees paid by5 percentage pointsa subordinate-lienprincipal residenceby more than 6
the borrower atabove the weeklysecurity in theand the annualpercentage points,
or before loanaverage yield of 1-property, or (2) thepercentage rate on the(2) the transaction
closing exceedyear Treasurytotal points and feesloan exceeds the rateis secured by a
the greater ofsecurities, (3) thepaid by the borroweron comparablesubordinate
$451 or 8% ofpotential or scheduledat or before loanTreasury securities bymortgage on the
the total loanincreases in the annualclosing exceed themore than 8consumer’s
amount. It doespercentage rate of thegreater of $451 or 8%percentage points, orprincipal residence

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
not refer to suchloan are controlled byof the total loan(3) the total points andand the annual
mortgages asthe lender and are notamount.fees paid by thepercentage rate on
high costdirectly tied toborrower wouldthe loan exceeds
mortgages.changes in a publiclyexceed the greater ofthe rate on
available rate not$1000 or 5% of thecomparable
controlled by thetotal loan amount.Treasury securities
lender, or (4) theProvides thatby more than 8
points and fees on theintroductory ratespercentage points,
loan cannot bewould not be takenor (3) the total
financed.into account.points and fees
paid by the
ⁱ^{ki/CRS-RL30885}borrower wouldexceed the greater
^g/wof $1000 or 5% of
^s^.orthe total loan
^le^akamount. Provides
^://wikithat introductoryrates would not be
^h^ttptaken into account.
Calculation ofNo provisionProvides that if theNo provisionNo provisionIn calculating
points and feesinterest rate fromwhether points and
which the loan is to befees exceed the
discounted does notlimits established
exceed by more than 1above, would
percentage point theprovide that points
required yield onand fees include all
comparable loans tocompensation paid
be delivered to Fanniedirectly or
Mae or Freddie Mac,indirectly to a
then up to 2 discountmortgage broker;
points payable by theeach of the charges
borrower may belisted in Section
excluded from the106(e) of the Truth
calculation of totalin Lending Act; the

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
points and fees; andcost of premiums
further provides that iffinanced by the
the interest rate fromlender for life,
which the loan is to becredit, health,
discounted does notunemployment,
exceed by more than 2disability, or health
percentage points theinsurance; and any
required yield onprepayment
comparable loans topenalty.
be delivered to Fannie
Mae or Freddie Mac,
ⁱ^{ki/CRS-RL30885}then up to 1 discountpoint payable by the
^g/wborrower may be
^s^.orexcluded from the
^le^akcalculation of total
^://wikipoints and fees.
^h^ttpDefinition ofPoints and feesPoints and fees wouldNo provisionPoints and fees wouldPoints and fees
points and feesare defined tobe defined to includebe defined to includewould be defined to
include all itemsall compensation paidall compensation paidmean (1) finance
included in thedirectly or indirectly todirectly or indirectly tocharges (other than
finance chargea mortgage broker,a mortgage broker;interest), as defined
except interest,including a broker thateach of the chargesby the Federal
alloriginates a loan in itslisted in SectionReserve, (2) real
compensationown name in a table-106(e) of the Truth inestate related fees,
paid tofunded transaction.Lending Act; the costas defined by the
mortgageof premiums financedFederal Reserve, if
brokers, andby the lender for life,the lender or an
each of thecredit, health,affiliate receives
charges listed inunemployment,direct or indirect
Section 106(e)disability, or healthcompensation, (3)
of the Truth ininsurance; and anythe cost of
Lending Act.prepayment penalty.premiums financed
by the lender for

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
life, credit, health,
unemployment,
disability, or health
insurance; (4) and
any prepayment
penalty.
ExclusionsNo provisionPoints and fees wouldNo provisionNo provisionPoints and fees
fromnot include taxes, andwould not include
definition ofother charges forfees paid to public
points andobtaining the securityofficials in
fees.interest in thereference to the
ⁱ^{ki/CRS-RL30885}property, or for feessecurity interest, or
^g/wpaid to parties otherfees paid for such
^s^.orthan the lender orthings as
^le^akmortgage broker (orappraisals,
their affiliates) forsurveys, property
^://wikisuch things as pestinspections, and
^h^ttpinspections,flood certification,
appraisals,if the fees are not
inspections, notarypaid to the lender,
fees, or title, fire oror mortgage
flood insurancebroker, or their
premiums. associates.
Defining aIncludes in theWould amend currentNo provisionWould amend currentNo provision

creditordefinition oflaw to include in thelaw to include in the
creditor anydefinition of creditordefinition of creditor
person whoany person who actedany person who acted
originates 2 oras a mortgage brokeras a mortgage broker
more mortgagesbetween loanbetween loan
in any 12-monthoriginators andoriginators and
period or anyborrowers on moreborrowers on more
person whothan five homes withinthan five homes within
originates onethe past 12 months.the past 12 months,

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
or moreand any creditor
mortgagesaffiliated party would
through abe considered a
mortgage creditor.
broker.
DefiningNo provisionNo provisionNo provisionA creditor-affiliatedNo provision
creditor-party would be defined
affiliated partyas (1) any director,
officer, employee,
controlling
stockholder, or agent
ⁱ^{ki/CRS-RL30885}of a creditor, (2) any
^g/wperson who has filed
^s^.oror is required to file a
^le^akchange of control for
an insured depository
^://wikiinstitution, or (3) any
^h^ttpperson who conducts
the affairs of or
controls the lending
practices of a creditor.
RequiredLenders mustNo provisionThis section of currentLenders would have toNo provision

disclosuresprovidelaw would be deleted.provide borrowers
borrowers withwith additional
disclosuresdisclosures which
which state:state that (1) the
“You are notinterest rate on the
required toloan is higher than
complete thismost people pay and
transactiontherefore the chance of
merely becauselosing the home is
you havegreater, (2) a lower
received theseinterest-rate loan may

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
disclosures orbe available and
have signed aborrower has the right
loanto seek counseling
application. Ifservices and consult
you obtain thiswith other lenders to
loan, the lenderfind a cheaper loan,
will have aand (3) if the loan is
mortgage onbeing taken to repay
your home.other loans the
You could loseborrower should look
your home, andat the total payment
ⁱ^{ki/CRS-RL30885}any money youhave put into it,amount in addition tothe monthly payment.
^g/wif you do not
^s^.ormeet your
^le^akobligations
^://wikiunder the loan.”
^h^ttpProhibitingFor a high costWould amend currentNo provision.Would amend currentA high cost
balloonmortgagelaw to strike “having alaw to strike “having amortgage would be
mortgageshaving a term ofterm of less than 5term of less than 5prohibited from
less than 5years.”years.”having terms under
years, thewhich any
paymentscheduled payment
schedule mustis more than twice
be such that thethe average of all
loan isother scheduled
completely payments.

repaid at the
end of the loan
term.

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
ProhibitingNo provisionWould provide that aNo provisionWould provide that aWould provide that
lender callhigh cost mortgagehigh cost mortgagea high cost
provisionscould not includecould not includemortgage could not
terms which give theterms which give theinclude terms
lender the option oflender the option ofwhich give the
prematurelyprematurelylender the option of
demanding fulldemanding fullprematurely
repayment of the loanrepayment of the loandemanding full
except in cases ofexcept in cases ofrepayment of the
default or some otherbona fide default.loan except in
provision unrelated tocases of default, a
ⁱ^{ki/CRS-RL30885}the payment schedule.due-on-saleprovision, or some
^g/wother provision
^s^.orunrelated to the
^le^akpayment schedule.
^://wikiNo fees forNo provisionLenders would beNo provisionLenders would beLenders would be
^h^ttploanprohibited fromprohibited fromprohibited from
modificationscharging borrowers acharging borrowers acharging the
fee for modifying thefee for modifying theborrower any fee
terms or deferring theterms or deferring thefor modifying,
payments due on apayments due on arenewing,
high cost mortgage.high cost mortgageextending, or
unless (1) the actionamending the terms
would provide aof a high cost
material benefit to themortgage, or for
borrower and (2) thedeferring the
fee does not exceedpayments due on

0.5% of the total loansuch a mortgage.

amount or, in the case
of a loan of $60,000
or less, the fee does
not exceed $300.

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
CounselingNo provisionLenders would beNo provisionLenders would beLenders would be
requirementprohibited fromprohibited fromprohibited from
originating a high costoriginating a high costoriginating a high
mortgage prior tomortgage unless thecost mortgage
receiving certificationborrower has beenunless the lender
from a HUD-certifiedprovided with (1) allhas received
housing counselingwarnings andcertification that
agency that thedisclosures regardingthe borrower has
borrower has receivedthe risks of thereceived counseling
counseling on themortgage, (2) aon the advisability
advisability of theseparate writtenof the transaction
ⁱ^{ki/CRS-RL30885}transaction.statementrecommending that thefrom a counselorapproved by HUD,
^g/wborrower takea state housing
^s^.oradvantage of homefinance agency, or
^le^akownership and creditother appropriate
^://wikicounseling prior toagreeing to the termsregulatory agency.
^h^ttpof the mortgage, and
(3) a written statement
containing the names,
addresses and
telephone numbers of
certified or approved
counseling agencies.
No mandatoryNo provisionA high cost mortgageNo provisionA high cost mortgageA high cost
arbitrationwould not bewould not bemortgage would
permitted to includepermitted to includenot be permitted to
terms under which aterms requiringinclude terms under
mandatory arbitrationarbitration or otherwhich a mandatory
clause limits the rightnonjudicial proceduresarbitration clause
of the borrower toas the method oflimits the right of
seek relief through theresolving disputes.the borrower to
courts.This provision wouldseek relief through

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
not, however, precludethe courts.
borrowers from using
arbitration or other
nonjudicial methods
for settling disputes.
No mortgage
provision or
agreement between the
parties would be
interpreted as
preventing a borrower
ⁱ^{ki/CRS-RL30885}from bringing courtaction to seek
^g/wdamages or other
^s^.or relief.
^le^ak
ProhibitingNo provisionThe mortgageNo provisionIn general, wouldNo provision

^://wikievasionsrequirements of TILAprohibit lenders from
^h^ttpwould apply to partiestaking any action,
who (1) seek to evadesuch as (1) reciprocal
coverage byarrangements with
structuring theother lenders or
transaction as andivision of the
open-end credit plantransaction into
when the loan wouldseparate parts, with
have been a high costthe intent to evade
mortgage if structuredcoverage under TILA,
as a closed-end loan,(2) structuring or
(2) divide therestructuring a
transaction intoconsumer credit
separate parts with thetransaction as another
intent of evadingloan form such as a
coverage under TILA,business loan with the
or (3) engage in anyintent to evade
other subterfuge tocoverage under TILA
evade coverage.or (3) any action

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
which Federal Reserve
Board regulations
define as constituting
bad faith efforts to
evade or circumvent
TILA requirements.
The Federal Reserve
Board would be
directed to prescribe
such regulations.
ⁱ^{ki/CRS-RL30885}
^g/w
^s^.or
^le^akDue diligenceNo provisionNo provisionNo provisionNo provisionWould direct
parties who
^://wikipurchase interests
^h^ttpin high cost
mortgages to
exercise due
diligence in
determining
whether the
requirements of
TILA have been
met.
Prohibition onNo provisionLenders would beLenders would beLenders would beFor all mortgages,
encouragingprohibited fromprohibited fromprohibited fromwould amend
defaultencouraging default onencouraging default onencouraging default oncurrent law to
existing debt onexisting debt on highexisting debt on highprohibit lenders
conventionalcost mortgages.cost mortgages.from encouraging
mortgages.default on existing
debt prior to or in
connection with a
loan that refinances

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
that existing debt
and would prohibit
the loans from
including terms
under which the
interest rate that
applies after
default is higher
than the rate that
applies before
default.
ⁱ^{ki/CRS-RL30885}
^g/wLiability forFailure toWould provide thatNo provisionNo provisionNo provision
^s^.ordamagecomply with thethe maximum
^le^akAct’s provisionsdamages could be the
regardinggreater of (1) the
^://wikicertainamount determined
^h^ttpmortgages mayunder current law or
result in the(2) the principal and
lender beingthe finance charge on
liable forthe mortgage.
damages for the
sum of all
finance charges
and fees paid by
the borrower.
PrepaymentA high costNo provisionWould delete items (1)Would provide thatWould amend
penaltiesmortgage mayand (2) under currentprepayment penaltiescurrent law to
containlaw, and amend themay not exceed 3% ofprohibit
prepaymentlaw to permitthe loan amount andprepayment
penalties if (1)prepayment penaltiesthat no prepaymentpenalties on all
the borrower’sas long as (1) thepenalties are permittedmortgages which
monthly debtpenalty does notif the loan is repaidfinance the
paymentsexceed 3% of the loanafter a 2-year period.purchase or
(including theamount whenWithin that 2-yearconstruction of the

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
mortgage) is notprepayment occursperiod, no penaltiesborrower’s
greater thanduring the first year ofwould be permitted ifresidence.

50% of thethe loan, (2) thethe borrower financed
borrower’spenalty does notpoints and fees that
gross incomeexceed 2% of the loantotal 3% or more of
and theamount whenthe mortgage amount.
borrower’sprepayment occurs
income andduring the second year
expenses haveof the loan, or (3) the
been verified,penalty does not
(2) theexceed 1% of the loan
ⁱ^{ki/CRS-RL30885}mortgage is notbeing prepaidamount whenprepayment occurs
^g/wwith fundsduring the third year
^s^.orobtained byof the loan. Would
^le^akrefinancing theprohibit penalties on
^://wikiloan from thesame lender orloans prepaid after thethird year.
^h^ttpone of its
affiliates (3) the
penalty does not
apply after 5
years, and (4)
the penalty is
not prohibited
under other law.

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
ProhibitingA high costNo provisionWould amend currentNo provisionIdentical to current
advancemortgage maylaw to provide that nolaw.
paymentsnot includerequired payments
terms undermay be paid in
which moreadvance from the loan
than twoproceeds.
required
payments are
paid in advance
from the loan
proceeds.
ⁱ^{ki/CRS-RL30885}LimitingNo provisionNo provisionWould amend currentNo provisionNo provision
^g/wrefinancinglaw to provide that a
^s^.ormortgage which is less
^le^akthan 1 year old may
not be refinanced with
^://wikia high cost mortgage
^h^ttpunless all points and
fees are based solely
on the new
transaction, or the
annual percentage rate
is 2 or more
percentage points
lower than the rate on
the existing loan.
Reporting toNo provisionNo provisionWould requireNo provisionNo provision

credit bureausquarterly reports of
both favorable and
unfavorable payment
history regarding
borrowers with high
cost mortgages.

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
No profitingNo provisionNo provisionLenders would beNo provisionNo provision
fromprohibited from
foreclosuresprofiting from the
foreclosure sale of
property secured by
high cost mortgages.
ProvidingNo provisionNo provisionWould require thatNo provisionNo provision
payofflenders holding high
informationcost mortgages
provide borrowers
payoff information
ⁱ^{ki/CRS-RL30885}within 3 business days
^g/wof receiving such a
^s^.or request.
^le^ak
^://wiki
^h^ttpAssessingLenders areNo provisionNo provisionWould amend currentWould prohibit
ability to payprohibited fromlaw to require that thehigh cost
making highlender determine thatmortgages unless
cost mortgagesone or more of thethe lender has
without regardborrowers will be ableverified that, after
to theto make the scheduledobtaining the loan,
borrower’spayments withoutthe borrower’s
ability to repayregard to the equity intotal monthly debt
the obligation.the property.would not exceed
50% of the
borrower’s
monthly gross
income.

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
DeliveringAny mortgageNo provisionNo provisionA high cost mortgageNo provision
disclosureswhich containswhich contains a
a provisionprovision prohibited
prohibited byby this section or does
this section ofnot contain a provision
the Act will berequired by the
deemed to havesection, or a lender
failed to deliverwho fails to comply
the requiredwith this section by
disclosures.act or omission will be
treated as a failure to
ⁱ^{ki/CRS-RL30885}deliver the requireddisclosures.
^g/w
^s^.orProhibitingNo provisionNo provisionNo provisionWould prohibit highWould prohibit all
^le^aksingle premiumcost mortgages frommortgages under
insurance.being written whichwhich any credit
^://wikirequire the advancelife, credit
^h^ttppayment of a singledisability, credit
premium for insuranceunemployment, or
on the life, health,other life or health
employment, orinsurance is
property of thefinanced in the loan
borrower regardless ofexcept for
whether the insuranceinsurance paid
would be paid by themonthly by the
borrower or added toborrower which
the mortgage.may be canceled at
any time at the
option of the
borrower.

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
Limits onNo provisionNo provisionNo provisionSubject to current law,Lenders would be
financingpoints and fees thatprohibited from
points and feesmay be financed on aoriginating high
high cost mortgagecost mortgages that
would be limited to thedirectly or
greater of $600 or 3%indirectly finance
of the loan amount.(1) any prepayment
Lenders would bepenalties if the
prohibited frommortgage is being
financing anyprepaid with funds
prepayment penaltiesobtained by
ⁱ^{ki/CRS-RL30885}if the mortgage isbeing prepaid withrefinancing a highrate loan from the
^g/wfunds obtained bysame lender or one
^s^.orrefinancing a high rateof its affiliates, (2)
^le^akloan from the sameany points and
^://wikilender or one of itsaffiliates.fees, or (3) anyother charges
^h^ttpAdditionally, lenderspayable to third
would be prohibitedparties.

from financing any
point, fees or other
charges if the new
mortgage is being
obtained to refinance a
high rate loan from the
same lender or one of
its affiliates.

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
Right ofProvides that,No provisionNo provisionWould provide that aNo provision
rescissionon any creditborrower’s waiver of
transactionthe right of rescission
which iswould not be effective
secured by theif (1) the waiver was
principalrequired by the lender
residence of theas a condition of the
borrower, theloan, (2) the lender
borrower hasadvised or encouraged
the right tothe borrower to waive
rescind thethe right of rescission,
ⁱ^{ki/CRS-RL30885}contract within3 business days.or (3) the lender had adiscussion with the
^g/wborrower about the
^s^.orwaiver during a period
^le^akto be determined by
^://wikithe Federal ReserveBoard.
^h^ttp
IndividualProvides thatNo provisionNo provisionWould amend the lawNo provision

damagesfor a violationto provide that
of TILAdamages for an
involving aindividual may be up
transactionto $10,000.
secured by a
dwelling or real
property an
individual may
be awarded
damages of not
less than $200
or greater than
$2,000.

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
Class actionProvides that inNo provisionNo provisionWould amend the lawNo provision
damagesa class actionto provide that
involvingdamages would be the
violations ofgreater of (1) $10,000
TILA damagestimes the number of
may be theindividuals in the class
lesser ofor (2) 2% of the net
$500,000 or 1%worth of the lender.
of the net worth
of the lender.
Preemption ofNo provisionNo provisionWould provide thatNo provisionNo provision
ⁱ^{ki/CRS-RL30885}state lawthe provisions enacted
^g/wunder this bill could
^s^.ornot be preempted by
^le^akany state law.
^://wiki
^h^ttpStatute ofProvides that aNo provisionNo provisionAmends the law toNo provision
limitationsborrower mayprovide that a
bring a courtborrower may bring a
action forcourt action within 3
violations ofyears of the violation.
TILA within 1
year of the
violation.
GeneralNo provisionWould amend TILA toWould amend
prohibitions onprovide the followingcurrent law to
all homelimitations andapply the following
purchaseprohibitions toprohibitions and
mortgage loansconventionallimitations to all
or allmortgages whichmortgage loans
mortgagesqualify for sale towhich finance the
which qualifyFannie Mae: (1)purchase or
for sale tolenders would beconstruction of the
Fannie Maeprohibited fromborrower’s

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
charging fees for earlyresidence: (1)
payoff of mortgages,would prohibit
(2) mortgages may notprepayment
have a paymentpenalties for
schedule which wouldpaying all or part
cause the loan balanceof the principal
to increase, (3) abefore the due date
lender may not engage(2) would prohibit
in the practice oflenders from
extending mortgagesencouraging
without regard to thedefault on existing
ⁱ^{ki/CRS-RL30885}borrower’s ability tomake the scheduleddebt prior to or inconnection with a
^g/wpayments, (4) lendersloan that refinances
^s^.orwould be prohibitedthat existing debt
^le^akfrom refinancingand would prohibit
^://wikiconventionalmortgages when therethe loans fromincluding terms
^h^ttpis no tangible financialunder which the
benefit to theinterest rate that
borrower, (5) lendersapplies after
would be prohibiteddefault is higher
from encouragingthan the rate that
default on existingapplies before
debt on conventionaldefault, (3) would
mortgages, (6) lendersprohibit mortgages
would be prohibitedunder which any
from trying tocredit life, credit
influence the realdisability, credit
estate appraiserunemployment, or
evaluating theother life or health
conventionalinsurance is
mortgage, (7) lendersfinanced in the loan
would be prohibitedexcept for
from financing credit,insurance paid
health, or lifemonthly by the

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
insurance inborrower which
conventionalmay be cancelled at
mortgages, and (8) if aany time at the
conventional mortgageoption of the
is negotiated in aborrower, and (4)
language other thanwould prohibit
English, then thelenders from
borrower must berefinancing existing
provided withmortgages unless
disclosures that arethe new loan would
written in thatbe of tangible net
ⁱ^{ki/CRS-RL30885}language.benefit to theborrower when
^g/wconsidering the
^s^.orterms of both
^le^akloans, the cost of
^://wikithe new loan, andthe ability of the
^h^ttpborrower to repay
the new loan.
Fair Credit Reporting Act Amendments
Reporting toNo provisionNo provisionNo provisionWould provide thatNo provision

credit bureauslenders involved in
high cost mortgages
report the payment
history of borrowers
to nationwide credit
reporting agencies at
least quarterly or more
frequently as required
by regulation or by the
guidelines of
participants in the
secondary mortgage
market.

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
Real Estate Settlement Procedures Act Amendments
Form forDirects theNo provisionWould amend the lawNo provisionNo provision

statement ofregulators toto read “Such form
settlementprescribe ashall conspicuously
costsstandard formand clearly itemize all
for thecharges imposed
statement ofdirectly upon the
settlement costsborrower and all
and providescharges imposed
that “such formdirectly upon the seller
shall(whether paid outside
ⁱ^{ki/CRS-RL30885}conspicuouslyof closing or
^g/wand clearlyotherwise) in
^s^.oritemize allconnection with the
^le^akchargessettlement. This
imposed uponsubsection shall not be
^://wikithe borrowerconstrued to require
^h^ttpand all chargesthat the standard form
imposed uponshall itemize fees
the seller inearned by any
connection withsettlement service
the settlementprovided in connection
...” with the transaction to
the extent such fees
are paid by the lender
and reflect the present
value of interest
yielded by the
federally related
mortgage loan.”

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
Booklet forDirects HUD toNo provisionWould amend the lawNo provisionNo provision
consumersprepare andto require that the
distribute abooklet include an
booklet to helpexplanation of the fact
borrowersthat a mortgage broker
understand themay be compensated
nature and costfor its services by
of payments from the
real estateborrower, by
settlementpayments from the
services.lender, or by some
ⁱ^{ki/CRS-RL30885}combination of both.
^g/w
^s^.or
^le^akGood faithDirects lendersNo provisionWould amend presentNo provisionNo provision
estimate ofto include alaw to direct lenders to
^://wikisettlementgood faithinclude a good faith
^h^ttpcostsestimate of theestimate of the amount
amount ofof settlement charges
settlement“likely to be imposed
charges “adirectly upon the
borrower isborrower.”
likely to incur.”
Disclosures inNo provisionNo provisionWould amend the lawNo provisionNo provision

good faithto require that the
estimategood faith estimate
include the following
statement, “If you
obtain this loan, the
lender will have a
mortgage on your
home. You could lose
your home, and any
money you have put
into it, if you do not

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
meet your obligations
under the loan.”
Miscellaneous Amendments
AdditionalNo provisionNo provisionNo provisionNo provisionWould provide
enforcementthat, in addition to
authorityexisting penalties,
violations of the
Truth in Lending
Act covering high
cost mortgages
ⁱ^{ki/CRS-RL30885}would be subject to
^g/wpenalties contained
^s^.orin the Bank
^le^akHolding Company
Act of 1956.
^://wiki
^h^ttpUnfair andNo provisionNo provisionNo provisionNo provisionWould provide that
deceptivea creditor would be
practicesdeemed to have
engaged in an
unfair or deceptive
act or practice
under the Federal
Trade Commission
Act if it
intentionally: (1)
structures a high
cost mortgage as
an open end credit
plan, (2) provides
misleading
information to a
consumer or
otherwise engages
in fraudulent

H.R. 4250/S. 2415
H.R. 4213, thePredatory LendingS. 2405, the
H.R. 3901, the Anti-Consumer MortgageConsumerPredatory
Predatory LendingProtection Act ofProtection Act ofLending
ProvisionCurrent lawAct of 200020002000Deterrence Act
behavior, or (3)
engages in any
subterfuge intended
to misrepresent the
terms of the
agreement.
MeetingNo provisionNo provisionNo provisionNo provisionWould provide that
communityhigh cost loans
needsmay not be counted
towards
determining
ⁱ^{ki/CRS-RL30885}whether an
^g/winstitution is
^s^.ormeeting its
^le^ak Community
Reinvestment Act
^://wikirequirement to
^h^ttpserve the lending
needs of its
community.
Violations would
be enforced by the
Federal Trade
Commission.