Subtitle A: Residential Mortgage Loan Origination Standards
Duty of Care (Section 1402) – Requires all loan originators, subject to regulations prescribed by federal banking agencies in consultation with HUD and FTC to:
- be qualified and licensed and registered, when required
- include on all loan documents any unique identifier of mortgage originator provided by Nationwide Mortgage Licensing System and Registry. Requires CFPB to prescribe regulations requiring depository institutions to establish and maintain procedures to assure and monitor depository institution, operating subsidiary and employee compliance with requirements of section 1507 of SAFE.
Prohibition on Steering Incentives Prohibition
Prohibits mortgage originator from receiving from any person, or any person from paying mortgage originator, directly or indirectly, compensation that varies based on terms of loan (other than amount of principal).
With the exceptions below, generally prohibits a mortgage originator from receiving from any person other than consumer, who knows or has reason to know that a consumer has directly compensated or will directly compensate mortgage originator, from paying mortgage originator any fee or charge except bona fide third-party charges not retained by creditor, mortgage originator, or affiliate of creditor or mortgage originator.
Intended to prohibit yield spread premiums or other similar compensation based on terms including rate that would cause originator to “steer” borrower to particular mortgage products.
Does not limit compensation to originator based on principal amount of loan. Also, does not restrict person other than consumer from receiving, or person other than consumer from paying, origination fee or charge if
- originator does not receive any compensation directly from consumer
- consumer does not pay discount points, origination points or fees however denominated (other than bona fide third-party charges not retained by originator, creditor or affiliate of creditor or originator), except that Board may, by rule, waive or provide exemptions to restriction if Board determines waiver is in interest of consumers and public.
- Requires CFPB to prescribe regulations prohibiting mortgage originators from:
- steering any consumer to loan that
- consumer lacks reasonable ability to repay, or
- has predatory characteristics or effects such as equity stripping, excessive fees or abusive terms;
- steering any consumer from a “qualified mortgage” to “not qualified” mortgage when consumer qualifies for ”qualified mortgage
- abusive or unfair lending practices that promote disparities among consumers of equal creditworthiness but of different race, ethnicity, gender, or age
- mischaracterizing credit history of consumer or residential loans available to consumer
- mischaracterizing or inducing mischaracterization of appraised value of property securing extension of credit;
- if unable to suggest, offer or recommend to consumer loan that is not more expensive than loan for which consumer qualifies, discouraging consumer from seeking mortgage from another originator.
Establishes mortgage originators are liable for violations of new Section 129B of Truth in Lending Act including duty of care and prohibition against steering incentives. Maximum amount of liability to originators is greater of actual damages or an amount equal to 3 times total amount of direct and indirect compensation or gain accruing to mortgage originator for loan involved in violation, plus costs and reasonable attorney’s fees.
Regulations and Discretionary Regulatory Authority
Grants broad discretionary regulatory authority to CFPB to prohibit or condition terms, acts or practices relating to residential mortgage loans that CFPB finds abusive, unfair, deceptive, predatory, necessary or proper to ensure responsible affordable mortgage credit remains available to consumers, necessary or proper to ensure that responsible, affordable mortgage credit remains available to consumers in manner consistent with sections 129 B and C of TILA to prevent circumvention or evasion or facilitate compliance with sections or are not in interest of borrower.
Study of Shared Appreciation Mortgages
Requires HUD to conduct comprehensive study to determine prudent statutory and regulatory requirements for wide-spread use of shared appreciation mortgages and report to Congress within 6 months after date of enactment.