SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a)<<12 usc 4901 note.>> Short Title.--This Act may be cited
as the "Homeowners Protection Act of 1998".
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Termination of private mortgage insurance.
Sec. 4. Disclosure requirements.
Sec. 5. Notification upon cancellation or termination.
Sec. 6. Disclosure requirements for lender paid mortgage insurance.
Sec. 7. Fees for disclosures.
Sec. 8. Civil liability.
Sec. 9. Effect on other laws and agreements.
Sec. 10. Enforcement.
Sec. 11. Construction.
Sec. 12. Amendment to Higher Education Act of 1965.
Sec. 13. Effective date.
Sec. 14. Abolishment of the Thrift Depositor Protection Oversight Board.
SEC. 2.<<12 usc 4901>> DEFINITIONS.
In this Act, the following definitions shall apply:
(1) Adjustable rate mortgage.--The term "adjustable rate
mortgage" means a residential mortgage that has an interest
rate that is subject to change.
(2) Cancellation date.--The term "cancellation date"
means--
(A) with respect to a fixed rate mortgage, at the
option of the mortgagor, the date on which the principal
balance of the mortgage--
(i) based solely on the initial amortization
schedule for that mortgage, and irrespective of
the outstanding balance for that mortgage on that
date, is first scheduled to reach 80 percent of
the original value of the property securing the
loan; or
(ii) based solely on actual payments, reaches
80 percent of the original value of the property
securing the loan; and
(B) with respect to an adjustable rate mortgage, at
the option of the mortgagor, the date on which the
principal balance of the mortgage--
(i) based solely on amortization schedules for
that mortgage, and irrespective of the outstanding
balance for that mortgage on that date, is first
scheduled to reach 80 percent of the original
value of the property securing the loan; or
(ii) based solely on actual payments, first
reaches 80 percent of the original value of the
property securing the loan.
(3) Fixed rate mortgage.--The term "fixed rate mortgage"
means a residential mortgage that has an interest rate that is
not subject to change.
(4) Good payment history.--The term "good payment history"
means, with respect to a mortgagor, that the mortgagor has not--
(A) made a mortgage payment that was 60 days or
longer past due during the 12-month period beginning 24
months before the date on which the mortgage reaches the
cancellation date; or
(B) made a mortgage payment that was 30 days or
longer past due during the 12-month period preceding the
date on which the mortgage reaches the cancellation
date.
(5) Initial amortization schedule.--The term "initial
amortization schedule" means a schedule established at the time
at which a residential mortgage transaction is consummated with
respect to a fixed rate mortgage, showing--
(A) the amount of principal and interest that is due
at regular intervals to retire the principal balance and
accrued interest over the amortization period of the
loan; and
(B) the unpaid principal balance of the loan after
each scheduled payment is made.
(6) Mortgage insurance.--The term "mortgage insurance"
means insurance, including any mortgage guaranty insurance,
against the nonpayment of, or default on, an individual mortgage
or loan involved in a residential mortgage transaction.
(7) Mortgage insurer.--The term "mortgage insurer" means a
provider of private mortgage insurance, as described in this
Act, that is authorized to transact such business in the State
in which the provider is transacting such business.
(8) Mortgagee.--The term "mortgagee" means the holder of a
residential mortgage at the time at which that mortgage
transaction is consummated.
(9) Mortgagor.--The term "mortgagor" means the original
borrower under a residential mortgage or his or her successors
or assignees.
(10) Original value.--The term "original value", with
respect to a residential mortgage, means the lesser of the sales
price of the property securing the mortgage, as reflected in the
contract, or the appraised value at the time at which the
subject residential mortgage transaction was consummated.
(11) Private mortgage insurance.--The term "private
mortgage insurance" means mortgage insurance other than
mortgage insurance made available under the National Housing
Act, title 38 of the United States Code, or title V of the
Housing Act of 1949.
(12) Residential mortgage.--The term "residential
mortgage" means a mortgage, loan, or other evidence of a
security interest created with respect to a single-family dwelling that
is the primary residence of the mortgagor.
(13) Residential mortgage transaction.--The term
"residential mortgage transaction" means a transaction
consummated on or after the date that is 1 year after the date
of enactment of this Act, in which a mortgage, deed of trust,
purchase money security interest arising under an installment
sales contract, or equivalent consensual security interest is
created or retained against a single-family dwelling that is the
primary residence of the mortgagor to finance the acquisition,
initial construction, or refinancing of that dwelling.
(14) Servicer.--The term "servicer" has the same meaning
as in section 6(i)(2) of the Real Estate Settlement Procedures
Act of 1974, with respect to a residential mortgage.
(15) Single-family dwelling.--The term "single-family
dwelling" means a residence consisting of 1 family dwelling
unit.
(16) Termination date.--The term "termination date"
means--
(A) with respect to a fixed rate mortgage, the date
on which the principal balance of the mortgage, based
solely on the initial amortization schedule for that
mortgage, and irrespective of the outstanding balance
for that mortgage on that date, is first scheduled to
reach 78 percent of the original value of the property
securing the loan; and
(B) with respect to an adjustable rate mortgage, the
date on which the principal balance of the mortgage,
based solely on amortization schedules for that
mortgage, and irrespective of the outstanding balance
for that mortgage on that date, is first scheduled to
reach 78 percent of the original value of the property
securing the loan.
SEC.
3.<<12 usc 4902.>> TERMINATION OF PRIVATE MORTGAGE
INSURANCE.
(a) Borrower Cancellation.--A requirement for private mortgage
insurance in connection with a residential mortgage transaction shall be
canceled on the cancellation date, if the mortgagor--
(1) submits a request in writing to the servicer that
cancellation be initiated;
(2) has a good payment history with respect to the
residential mortgage; and
(3) has satisfied any requirement of the holder of the
mortgage (as of the date of a request under paragraph (1)) for--
(A) evidence (of a type established in advance and
made known to the mortgagor by the servicer promptly
upon receipt of a request under paragraph (1)) that the
value of the property securing the mortgage has not
declined below the original value of the property; and
(B) certification that the equity of the mortgagor
in the residence securing the mortgage is unencumbered
by a subordinate lien.
(b) Automatic Termination.--A requirement for private mortgage
insurance in connection with a residential mortgage transaction shall
terminate with respect to payments for that mortgage insurance made by
the mortgagor--
(1) on the termination date if, on that date, the mortgagor
is current on the payments required by the terms of the
residential mortgage transaction; or
(2) on the date after the termination date on which the
mortgagor becomes current on the payments required by the terms
of the residential mortgage transaction.
(c) Final Termination.--If a requirement for private mortgage
insurance is not otherwise canceled or terminated in accordance with
subsection (a) or (b), in no case may such a requirement be imposed
beyond the first day of the month immediately following the date that is
the midpoint of the amortization period of the loan if the mortgagor is
current on the payments required by the terms of the mortgage.
(d) No Further Payments.--No payments or premiums may be required
from the mortgagor in connection with a private mortgage insurance
requirement terminated or canceled under this section--
(1) in the case of cancellation under subsection (a), more
than 30 days after the later of--
(A) the date on which a request under subsection
(a)(1) is received; or
(B) the date on which the mortgagor satisfies any
evidence and certification requirements under subsection
(a)(3);
(2) in the case of termination under subsection (b), more
than 30 days after the termination date or the date referred to
in subsection (b)(2), as applicable; and
(3) in the case of termination under subsection (c), more
than 30 days after the final termination date established under
that subsection.
(e) Return of Unearned Premiums.--
(1) In general.--Not later than 45 days
after the termination or cancellation of a private mortgage
insurance requirement under this section, all unearned premiums
for private mortgage insurance shall be returned to the
mortgagor by the servicer.
(2) Transfer of funds to servicer.--Not
later than 30 days after notification by the servicer of
termination or cancellation of private mortgage insurance under
this Act with respect to a mortgagor, a mortgage insurer that is
in possession of any unearned premiums of that mortgagor shall
transfer to the servicer of the subject mortgage an amount equal
to the amount of the unearned premiums for repayment in
accordance with paragraph (1).
(f) Exceptions for High Risk Loans.--
(1) In general.--The termination and cancellation provisions
in subsections (a) and (b) do not apply to any residential
mortgage or mortgage transaction that, at the time at which the
residential mortgage transaction is consummated, has high risks
associated with the extension of the loan--
(A) as determined in accordance with guidelines
published by the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation, in the
case of a mortgage loan with an original principal
balance that does not exceed the applicable annual
conforming loan limit for the secondary market
established pursuant to
section 305(a)(2) of the Federal Home Loan Mortgage
Corporation Act, so as to require the imposition or
continuation of a private mortgage insurance requirement
beyond the terms specified in subsection (a) or (b) of
section 3; or
(B) as determined by the mortgagee in the case of
any other mortgage, except that termination shall
occur--
(i) with respect to a fixed rate mortgage, on
the date on which the principal balance of the
mortgage, based solely on the initial amortization
schedule for that mortgage, and irrespective of
the outstanding balance for that mortgage on that
date, is first scheduled to reach 77 percent of
the original value of the property securing the
loan; and
(ii) with respect to an adjustable rate
mortgage, on the date on which the principal
balance of the mortgage, based solely on
amortization schedules for that mortgage, and
irrespective of the outstanding balance for that
mortgage on that date, is first scheduled to reach
77 percent of the original value of the property
securing the loan.
(2) Termination at midpoint.--A private mortgage insurance
requirement in connection with a residential mortgage or
mortgage transaction described in paragraph (1) shall terminate
in accordance with subsection (c).
(3) Rule of construction.--Nothing in this subsection may be
construed to require a mortgage or mortgage transaction
described in paragraph (1)(A) to be purchased by the Federal
National Mortgage Association or the Federal Home Loan Mortgage
Corporation.
(4) GAO report.--Not later than 2 years after the date of the
enactment of this Act, the Comptroller General of the United States
shall submit to the Congress a report describing the volume and
characteristics of residential mortgages and residential mortgage
transactions that, pursuant to paragraph (1) of this subsection, are
exempt from the application of subsections (a) and (b). The report
shall--
(A) determine the number or volume of such mortgages
and transactions compared to residential mortgages and
residential mortgage transactions that are not
classified as high-risk for purposes of paragraph (1);
and
(B) identify the characteristics of such mortgages
and transactions that result in their classification
(for purposes of paragraph (1)) as having high risks
associated with the extension of the loan and describe
such characteristics, including--
(i) the income levels and races of the
mortgagors involved;
(ii) the amount of the downpayments involved
and the downpayments expressed as percentages of
the acquisition costs of the properties involved;
(iii) the types and locations of the
properties involved;
(iv) the mortgage principal amounts; and
(v) any other characteristics of such
mortgages and transactions that may contribute to
their classification as high risk for purposes of
paragraph (1), including whether such mortgages
are purchase-money mortgages or refinancings and
whether and to what extent such loans are low-
documentation loans.
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