15 U.S.C. § 1639b | Residential mortgage loan origination

(a)

Finding and purpose

(1)

Finding

The Congress finds that economic stabilization would be enhanced by the protection, limitation, and regulation of the terms of residential mortgage credit and the practices related to such credit, while ensuring that responsible, affordable mortgage credit remains available to consumers.

(2)

Purpose

section 1639c of this titleIt is the purpose of this section and to assure that consumers are offered and receive residential mortgage loans on terms that reasonably reflect their ability to repay the loans and that are understandable and not unfair, deceptive or abusive.

(b)

Duty of care

(1)

Standard

Subject to regulations prescribed under this subsection, each mortgage originator shall, in addition to the duties imposed by otherwise applicable provisions of State or Federal law—

(A)

12 U.S.C. 5101 be qualified and, when required, registered and licensed as a mortgage originator in accordance with applicable State or Federal law, including the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 [ et seq.]; and

(B)

include on all loan documents any unique identifier of the mortgage originator provided by the Nationwide Mortgage Licensing System and Registry.

(2)

Compliance procedures required

12 U.S.C. 5106The Bureau shall prescribe regulations requiring depository institutions to establish and maintain procedures reasonably designed to assure and monitor the compliance of such depository institutions, the subsidiaries of such institutions, and the employees of such institutions or subsidiaries with the requirements of this section and the registration procedures established under section 1507 of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 [].

(c)

Prohibition on steering incentives

(1)

In general

For any residential mortgage loan, no mortgage originator shall receive from any person and no person shall pay to a mortgage originator, directly or indirectly, compensation that varies based on the terms of the loan (other than the amount of the principal).

(2)

Restructuring of financing origination fee

(A)

In general

For any mortgage loan, a mortgage originator may not receive from any person other than the consumer and no person, other than the consumer, who knows or has reason to know that a consumer has directly compensated or will directly compensate a mortgage originator may pay a mortgage originator any origination fee or charge except bona fide third party charges not retained by the creditor, mortgage originator, or an affiliate of the creditor or mortgage originator.

(B)

Exception

Notwithstanding subparagraph (A), a mortgage originator may receive from a person other than the consumer an origination fee or charge, and a person other than the consumer may pay a mortgage originator an origination fee or charge, if—

(i)

the mortgage originator does not receive any compensation directly from the consumer; and

(ii)

the consumer does not make an upfront payment of discount points, origination points, or fees, however denominated (other than bona fide third party charges not retained by the mortgage originator, creditor, or an affiliate of the creditor or originator), except that the Bureau may, by rule, waive or provide exemptions to this clause if the Bureau determines that such waiver or exemption is in the interest of consumers and in the public interest.

(3)

Regulations

The Bureau shall prescribe regulations to prohibit—

(A)

mortgage originators from steering any consumer to a residential mortgage loan that—

(i)

section 1639c(a) of this title the consumer lacks a reasonable ability to repay (in accordance with regulations prescribed under ); or

(ii)

has predatory characteristics or effects (such as equity stripping, excessive fees, or abusive terms);

(B)

section 1639c(b)(2) of this title mortgage originators from steering any consumer from a residential mortgage loan for which the consumer is qualified that is a qualified mortgage (as defined in ) to a residential mortgage loan that is not a qualified mortgage;

(C)

abusive or unfair lending practices that promote disparities among consumers of equal credit worthiness but of different race, ethnicity, gender, or age; and

(D)

mortgage originators from—

(i)

mischaracterizing the credit history of a consumer or the residential mortgage loans available to a consumer;

(ii)

mischaracterizing or suborning the mischaracterization of the appraised value of the property securing the extension of credit; or

(iii)

if unable to suggest, offer, or recommend to a consumer a loan that is not more expensive than a loan for which the consumer qualifies, discouraging a consumer from seeking a residential mortgage loan secured by a consumer’s principal dwelling from another mortgage originator.

(4)

Rules of construction

No provision of this subsection shall be construed as—

(A)

permitting any yield spread premium or other similar compensation that would, for any residential mortgage loan, permit the total amount of direct and indirect compensation from all sources permitted to a mortgage originator to vary based on the terms of the loan (other than the amount of the principal);

(B)

limiting or affecting the amount of compensation received by a creditor upon the sale of a consummated loan to a subsequent purchaser;

(C)

restricting a consumer’s ability to finance, at the option of the consumer, including through principal or rate, any origination fees or costs permitted under this subsection, or the mortgage originator’s right to receive such fees or costs (including compensation) from any person, subject to paragraph (2)(B), so long as such fees or costs do not vary based on the terms of the loan (other than the amount of the principal) or the consumer’s decision about whether to finance such fees or costs; or

(D)

prohibiting incentive payments to a mortgage originator based on the number of residential mortgage loans originated within a specified period of time.

(d)

Liability for violations

(1)

In general

section 1640 of this title 1

1 So in original. Probably should be “in such section.”

For purposes of providing a cause of action for any failure by a mortgage originator, other than a creditor, to comply with any requirement imposed under this section and any regulation prescribed under this section, shall be applied with respect to any such failure by substituting “mortgage originator” for “creditor” each place such term appears in each such subsection.

(2)

Maximum

The maximum amount of any liability of a mortgage originator under paragraph (1) to a consumer for any violation of this section shall not exceed the greater of actual damages or an amount equal to 3 times the total amount of direct and indirect compensation or gain accruing to the mortgage originator in connection with the residential mortgage loan involved in the violation, plus the costs to the consumer of the action, including a reasonable attorney’s fee.

(e)

Discretionary regulatory authority

(1)

In general

section 1639c of this title section 1639c of this titleThe Bureau shall, by regulations, prohibit or condition terms, acts or practices relating to residential mortgage loans that the Bureau finds to be abusive, unfair, deceptive, predatory, necessary or proper to ensure that responsible, affordable mortgage credit remains available to consumers in a manner consistent with the purposes of this section and , necessary or proper to effectuate the purposes of this section and , to prevent circumvention or evasion thereof, or to facilitate compliance with such sections, or are not in the interest of the borrower.

(2)

Application

section 1604 of this titleThe regulations prescribed under paragraph (1) shall be applicable to all residential mortgage loans and shall be applied in the same manner as regulations prescribed under .

(f)

Timeshare plans

This section and any regulations promulgated thereunder do not apply to an extension of credit relating to a plan described in section 101(53D) of title 11.

Pub. L. 90–321, title I, § 129B Pub. L. 111–203, title X, § 1100A(2)July 21, 2010124 Stat. 2107(, as added and amended , title XIV, §§ 1402(a)(2), 1403–1405(a), , , 2139–2141.)

Editorial Notes

References in Text

Pub. L. 110–289July 30, 2008122 Stat. 2810 section 5101 of Title 12The Secure and Fair Enforcement for Mortgage Licensing Act of 2008, referred to in subsec. (b)(1)(A), is title V of div. A of , , , also known as the S.A.F.E. Mortgage Licensing Act of 2008, which is classified generally to chapter 51 (§ 5101 et seq.) of Title 12, Banks and Banking. For complete classification of this Act to the Code, see Short Title note set out under and Tables.

Amendments

Pub. L. 111–203, § 1100A(2)2010—, substituted “Bureau” for “Board” wherever appearing.

Pub. L. 111–203, § 1403Subsec. (c). , added subsec. (c).

Pub. L. 111–203, § 1404Subsec. (d). , added subsec. (d).

Pub. L. 111–203, § 1405(a)Subsecs. (e), (f). , added subsecs. (e) and (f).

Effective Date of 2010 Amendment

section 1100A(2) of Pub. L. 111–203 section 1100H of Pub. L. 111–203 section 552a of Title 5Amendment by effective on the designated transfer date, see , set out as a note under , Government Organization and Employees.

Pub. L. 111–203 section 1400(c) of Pub. L. 111–203 section 1601 of this titleAmendment by sections 1403–1405(a) of effective on the date on which final regulations implementing that amendment take effect, or on the date that is 18 months after the designated transfer date if such regulations have not been issued by that date, see , set out as a note under .

Statutory Notes and Related Subsidiaries

Effective Date

section 1400(c) of Pub. L. 111–203 section 1601 of this titleSection effective on the date on which final regulations implementing such section take effect, or on the date that is 18 months after the designated transfer date if such regulations have not been issued by that date, see , set out as an Effective Date of 2010 Amendment note under .

Rule of Construction

Pub. L. 111–203, title XIV, § 1415July 21, 2010124 Stat. 2153

15 U.S.C. 1639b 15 U.S.C. 1601“Except as otherwise expressly provided in section 129B or 129C of the Truth in Lending Act [, 1639c] (as added by this title), no provision of such section 129B or 129C shall be construed as superseding, repealing, or affecting any duty, right, obligation, privilege, or remedy of any person under any other provision of the Truth in Lending Act [ et seq.] or any other provision of Federal or State law.”

, , , provided that:

section 1415 of Pub. L. 111–203 section 5301 of Title 12[For definition of “State” as used in , set out above, see , Banks and Banking.]