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View Diary: Anti-predatory lending bill moving fast (20 comments)

Comment Preferences

  •  HR 3915 high-cost mortgages (0+ / 0-)

    SEC. 301
    ...
    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 loan 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 8 percentage points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor; 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 10 percentage points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor;

    `(ii) the total points and fees payable in connection with the loan exceed--

    `(I) in the case of a loan for $20,000 or more, 5 percent of the total loan amount; or

    `(II) in the case of a loan for less than $20,000, the lesser of 8 percent of the total loan amount or $1,000; or

    `(iii) the loan documents permit the creditor to charge or collect prepayment fees or penalties more than 30 months after the loan 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 loan 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 loan 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 loan in which the rate may vary at any time during the term of the loan for any reason, the interest charged on the loan at the maximum rate that may be charged during the term of the loan.'.
    ....
    Points and Fees...

    `(B) all compensation paid directly or indirectly by a consumer or creditor to a mortgage broker from any source, including a mortgage broker that originates a loan in the name of the broker in a table-funded transaction;';

    ...
    `(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) except as provided in subsection (cc), the maximum prepayment fees and penalties which may be charged or collected under the terms of the loan documents;

    `(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'.

    ....
    In the case of open-end loans, 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 loan documents, plus the minimum additional fees the consumer would be required to pay to draw down an amount equal to the total credit line.'.
    ....
    EXCLUSION OF BONA FIDE DISCOUNT POINTS- The discount points described in 1 of the following subparagraphs shall be excluded from determining the amounts of points and fees with respect to a high-cost mortgage...:

    `(A) 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 the required net yield for a 90-day standard mandatory delivery commitment for a reasonably comparable loan from either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, whichever is greater.

    `(B) Unless 2 bona fide discount points have been excluded under subparagraph (A), up to and including 1 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 2 percentage points the required net yield for a 90-day standard mandatory delivery commitment for a reasonably comparable loan from either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, whichever is greater.
    ....
    `(2) DEFINITION- 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 .

    `(3) EXCEPTION FOR INTEREST RATE REDUCTIONS INCONSISTENT WITH INDUSTRY NORMS- Paragraph (1) 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.
    ....
    `(4) ALLOWANCE OF CONVENTIONAL PREPAYMENT PENALTY- Subsection (aa)(1)(4)(E) shall not apply so as to include a prepayment penalty or fee that is authorized by law other than this title and may be imposed pursuant to the terms of a high-cost mortgage (or other consumer credit transaction secured by the consumer's principal dwelling) if--

    `(A) the annual percentage rate applicable with respect to such mortgage or transaction (as determined for purposes of subsection (aa)(1)(A)(i))--

    `(i) in the case of a first mortgage on the consumer's principal dwelling, does not exceed by more than 2 percentage points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor; or

    `(ii) in the case of a subordinate or junior mortgage on the consumer's principal dwelling, does not exceed by more than 4 percentage points the yield on such Treasury securities; and

    `(B) the total amount of any prepayment fees or penalties permitted under the terms of the high-cost mortgage or transaction does not exceed 2 percent of the amount prepaid.'
    ....
    No Balloon Payments- No high-cost mortgage may contain a scheduled payment that is more than twice as large as the average of earlier scheduled payments. This subsection shall not apply when the payment schedule is adjusted to the seasonal or irregular income of the consumer.'
    ....
    PRESUMPTION OF VIOLATION- There shall be a presumption that a creditor has violated this subsection if the creditor engages in a pattern or practice of making high-cost mortgages without verifying or documenting the repayment ability of consumers with respect to such loans.
    ....
    PROHIBITION ON EXTENDING CREDIT WITHOUT REGARD TO PAYMENT ABILITY OF CONSUMER-

    `(A) IN GENERAL- A creditor may not extend credit to a consumer under a high-cost mortgage unless a reasonable creditor would believe at the time the loan is closed that the consumer or consumers that are residing or will reside in the residence subject to the mortgage will be able to make the scheduled payments associated with the loan, based upon a consideration of current and expected income, current obligations, employment status, and other financial resources, other than equity in the residence.

    `(B) PRESUMPTION OF ABILITY- For purposes of this subsection, there shall be a rebuttable presumption that a consumer is able to make the scheduled payments to repay the obligation if, at the time the loan is consummated, the consumer's total monthly debts, including amounts under the loan, do not exceed 50 percent of his or her monthly gross income as verified by tax returns, payroll receipts, or other third-party income verification.'
    ....
    No creditor shall recommend or encourage default on an existing loan or other debt prior to and in connection with the closing or planned closing of a high-cost mortgage that refinances all or any portion of such existing loan or debt.

    `(k) Late Fees-

    `(1) IN GENERAL- No creditor may impose a late payment charge or fee in connection with a high-cost mortgage --

    `(A) in an amount in excess of 4 percent of the amount of the payment past due;

    `(B) unless the loan documents specifically authorize the charge or fee;

    `(C) before the end of the 15-day period beginning on the date the payment is due, or in the case of a loan on which interest on each installment is paid in advance, before the end of the 30-day period beginning on the date the payment is due; or

    `(D) more than once with respect to a single late payment.

    `(2) COORDINATION WITH SUBSEQUENT LATE FEES- If a payment is otherwise a full payment for the applicable period and is paid on its due date or within an applicable grace period, and the only delinquency or insufficiency of payment is attributable to any late fee or delinquency charge assessed on any earlier payment, no late fee or delinquency charge may be imposed on such payment.

    `(3) FAILURE TO MAKE INSTALLMENT PAYMENT- If, in the case of a loan agreement the terms of which provide that any payment shall first be applied to any past due principal balance, the consumer fails to make an installment payment and the consumer subsequently resumes making installment payments but has not paid all past due installments, the creditor may impose a separate late payment charge or fee for any principal due (without deduction due to late fees or related fees) until the default is cured.

    `(l) Acceleration of Debt- No high-cost mortgage may contain a provision which permits the creditor, in its sole discretion, to accelerate the indebtedness. This provision shall not apply when repayment of the loan has been accelerated by default, pursuant to a due-on-sale provision, or pursuant to a material violation of some other provision of the loan documents unrelated to the payment schedule.

    `(m) Restriction on Financing Points and Fees- No creditor may directly or indirectly finance, in connection with any high-cost mortgage , any of the following:

    `(1) Any prepayment fee or penalty payable by the consumer in a refinancing transaction if the creditor or an affiliate of the creditor is the noteholder of the note being refinanced.

    `(2) Any points or fees.'
    ....
    A creditor may not take any action in connection with a high-cost mortgage --

    `(1) to structure a loan transaction as an open-end credit plan or another form of loan for the purpose and with the intent of evading the provisions of this title; or

    `(2) to divide any loan transaction into separate parts for the purpose and with the intent of evading provisions of this title.'
    ....
    A creditor may not charge a consumer any fee to modify, renew, extend, or amend a high-cost mortgage , or to defer any payment due under the terms of such mortgage , unless the modification, renewal, extension or amendment results in a lower annual percentage rate on the mortgage for the consumer and then only if the amount of the fee is comparable to fees imposed for similar transactions in connection with consumer credit transactions that are secured by a consumer's principal dwelling and are not high-cost mortgages.'.
    ....
    Payoff Statement-

    `(1) FEES-

    `(A) IN GENERAL- Except as provided in subparagraph (B), no creditor or servicer may charge a fee for informing or transmitting to any person the balance due to pay off the outstanding balance on a high-cost mortgage .

    `(B) TRANSACTION FEE- When payoff information referred to in subparagraph (A) is provided by facsimile transmission or by a courier service, a creditor or servicer may charge a processing fee to cover the cost of such transmission or service in an amount not to exceed an amount that is comparable to fees imposed for similar services provided in connection with consumer credit transactions that are secured by the consumer's principal dwelling and are not high-cost mortgages.

    `(C) FEE DISCLOSURE- Prior to charging a transaction fee as provided in subparagraph (B), a creditor or servicer shall disclose that payoff balances are available for free pursuant to subparagraph (A).

    `(D) MULTIPLE REQUESTS- If a creditor or servicer has provided payoff information referred to in subparagraph (A) without charge, other than the transaction fee allowed by subparagraph (B), on 4 occasions during a calendar year, the creditor or servicer may thereafter charge a reasonable fee for providing such information during the remainder of the calendar year.

    `(2) PROMPT DELIVERY- Payoff balances shall be provided within a reasonable time but in any event no more than 5 business days after receiving a request by a consumer or a person authorized by the consumer to obtain such information.'.

    (e) Pre-Loan Counseling Required

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