text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Home Equity Protection Act of 
  1993''.
  
  SEC. 2. CONSUMER PROTECTIONS FOR HIGH COST MORTGAGES.
  
      (a) Definition.--Section 103 of the Truth in Lending Act (15 U.S.C. 
  1602) is amended by adding after subsection (z) the following new 
  subsection:
      ``(aa) The term `high cost mortgage' means a consumer credit 
  transaction, other than a residential mortgage transaction, that is 
  secured by a consumer's principal dwelling and that satisfies at least 
  1 of the following conditions:
              ``(1) The annual percentage rate at consummation of the 
          transaction will exceed by more than 10 percentage points the 
          rate of interest on obligations of the United States having a 
          period of maturity of 1 year on the fifteenth day of the month 
          before such consummation.
              ``(2) All points and fees payable by the consumer at or 
          before closing will exceed the greater of--
                      ``(A) 8 percent of the amount financed, minus fees 
                  and points; or
                      ``(B) $400.''.
      (b) Material Disclosures.--Section 103(u) of the Truth in Lending 
  Act (15 U.S.C. 1602(u)) is amended--
              (1) by striking ``and the due dates'' and inserting ``, the 
          due dates''; and
              (2) by inserting before the period ``, and the disclosures 
          for high cost mortgages required by section 129(a))''.
      (c) Definition of Creditor Clarified.--Section 103(f) of the Truth 
  in Lending Act (15 U.S.C. 1602(f)) is amended by adding at the end the 
  following: ``Any person who originates 2 or more high cost mortgages in 
  any 12-month period or any person who originates 1 or more high cost 
  mortgages through a loan broker shall be considered to be a creditor 
  for purposes of section 129.''.
      (d) Disclosures Required and Certain Terms Prohibited.--The Truth 
  in Lending Act (15 U.S.C. 1601 et seq.) is amended by inserting after 
  section 128 the following new section:
  
  ``SEC. 129. REQUIREMENTS FOR HIGH COST MORTGAGES.
  
      ``(a) Disclosures.--In addition to any other disclosures required 
  under this title, for each high cost mortgage, the creditor shall 
  provide the following written disclosures in clear language and in 
  conspicuous type size and format, segregated from other information as 
  a separate document:
              ``(1) 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 
          meet your obligations under the loan.'.
              ``(2) The initial annual percentage rate.
              ``(3) The consumer's gross monthly cash income, as verified 
          by the creditor, the total initial monthly payment, and the 
          amount of funds that will remain to meet other obligations of 
          the consumer.
              ``(4) In the case of a variable rate loan, a statement that 
          the annual percentage rate and the interest rate could 
          increase, and the maximum interest rate and payment.
              ``(5) In the case of a variable rate loan with an initial 
          annual percentage rate that is different than the one which 
          would be applied using the contract index after the initial 
          period, a statement of the period of time the initial rate will 
          be in effect, and the rate or rates that will go into effect 
          after the initial period is over, assuming that current 
          interest rates prevail.
              ``(6) A statement that the consumer is not required to 
          complete the transaction merely because he or she has received 
          disclosures or signed a loan application.
              ``(7) A statement as follows: `Under Federal law, this is a 
          high cost mortgage. You may be able to obtain a less expensive 
          loan.'.
      ``(b) Time of Disclosures.--The disclosures required by this 
  section shall be given no later than 3 business days prior to 
  consummation of the transaction. A creditor may not change the terms of 
  the loan after providing the disclosures required by this section.
      ``(c) No Prepayment Penalty.--
              ``(1) In general.--A high cost mortgage may not contain 
          terms under which a consumer must pay a prepayment penalty for 
          paying all or part of the principal prior to the date on which 
          such principal is due. If the date of maturity of the high cost 
          mortgage is accelerated for any reason, the consumer is 
          entitled to a rebate that complies with paragraph (2). No high 
          cost mortgage shall provide for a default interest rate that is 
          higher than the interest rate provided by the note for a 
          performing loan.
              ``(2) Rebate computation.--For purposes of this subsection, 
          any method of computing rebates of a finance charge less 
          favorable to the consumer than the actuarial method using 
          simple interest is a prepayment penalty.
              ``(3) Certain other fees prohibited.--An agreement to 
          refinance a high cost mortgage by the same creditor or an 
          affiliate of the creditor may not require the consumer to pay 
          points, discount fees, or prepaid finance charges on the 
          portion of the loan refinanced. For the purpose of this 
          paragraph, the term `affiliate' has the same meaning as it does 
          in section 2(k) of the Bank Holding Company Act of 1956.
      ``(d) No Balloon Payments.--A high cost mortgage may not include 
  terms under which the aggregate amount of the regular periodic payments 
  would not fully amortize the outstanding principal balance.
      ``(e) No Negative Amortization.--A high cost mortgage may not 
  include terms under which the outstanding principal balance will 
  increase over the course of the loan.
      ``(f) No Prepaid Payments.--A high cost mortgage may not include 
  terms under which more than 2 periodic payments required under the loan 
  are consolidated and paid in advance from the loan proceeds provided to 
  the consumer.
      ``(g) Unfair, Deceptive, or Evasive Acts Prohibited.--Creditors of 
  contracts governed by this section shall not commit, in the making, 
  servicing, or collecting of a high cost mortgage, any act or practice 
  which is unfair or deceptive, including any of the following:
              ``(1) Entering into a home equity loan if there is no 
          reasonable probability that the homeowner will be able to make 
          payments according to the terms of the loan.
              ``(2) Taking advantage of the borrower's infirmities, lack 
          of education or sophistication, or language skills, necessary 
          to understand fully the terms of the transaction.
              ``(3) Refinancing other loans owed by the homeowner which 
          had not been accelerated by reason of default of the homeowner 
          prior to the application for the home equity loan, unless the 
          new loan is at a lower interest rate or has lower monthly 
          payments.
              ``(4) Financing a mortgage broker's commission, unless the 
          borrower entered into a separate written contract with the 
          broker prior to the date of application for the home equity 
          loan, which stated the dollar amount of the commission, and 
          which was provided to the borrower prior to the application.
              ``(5) Taking action or interfering with any other consumer 
          protection laws or regulation designed to protect the 
          homeowner.
              ``(6) Assisting in the falsification of information on the 
          application for a home equity loan.
              ``(7) Disbursing to a home improvement contractor more than 
          80 percent of funds due under a home improvement contract which 
          exceeds $10,000, before the completion of the work due under 
          the home improvement contract, or making any disbursement for a 
          home improvement contract in a form other than an instrument 
          jointly payable to the borrower and the contractor.
              ``(8)(A) Engaging in any other unfair, deceptive, or 
          unconscionable conduct which creates a likelihood of confusion 
          or misunderstanding.
              ``(B) Any attempt to evade the provisions of this section 
          by any devise, subterfuge, or pretense whatsoever is deemed to 
          be unfair conduct under this paragraph.
      ``(h) Right of Rescission.--For the purpose of section 125, any 
  contract with provisions prohibited by this section is deemed to not 
  include material disclosures required under this title. Any provision 
  in a high cost mortgage which violates section 125 shall not be 
  enforceable.''.
  
  SEC. 3. STATE AUTHORITY TO REGULATE HIGH RATE MORTGAGE LOANS.
  
      The authority of States to establish limitations on the interest, 
  fees, and other terms of a first mortgage which--
              (1) is secured by a first lien on residential real 
          property; and
              (2) is not used to finance the acquisition of that 
          property;
  is not preempted by section 501 of the Depository Institutions 
  Deregulation and Monetary Control Act of 1980 (12 U.S.C. 1735f-7a) or 
  the Alternative Mortgage Transaction Parity Act of 1982 (12 U.S.C. 3801 
  et seq.).
  
  SEC. 4. CIVIL LIABILITY.
  
      (a) Damages.--Section 130(a) of the Truth in Lending Act (15 U.S.C. 
  1640(a)) is amended--
              (1) by striking ``and'' at the end of paragraph (2)(B);
              (2) by striking the period at the end of paragraph (3) and 
          inserting ``; and''; and
              (3) by inserting after paragraph (3) the following new 
          paragraph:
              ``(4) in case of a failure to comply with any requirement 
          under section 129, all finance charges and fees.''.
      (b) State Attorney General Enforcement.--Section 130(e) of the 
  Truth in Lending Act (15 U.S.C. 1640(e)) is amended by adding at the 
  end the following: ``An action to enforce a violation of section 129 
  may also be brought by the appropriate State attorney general in a 
  court of competent jurisdiction, within 5 years after the date on which 
  the violation occurs.''.
      (c) Assignee Liability.--Section 131 of the Truth in Lending Act 
  (15 U.S.C. 1641) is amended by adding at the end the following new 
  subsection:
      ``(d) High Cost Mortgages.--
              ``(1) In general.--In addition to any other liability 
          imposed under this title, any person who purchases or is 
          otherwise assigned a high cost mortgage shall be subject to all 
          claims and defenses with respect to the mortgage that the 
          consumer could assert against the creditor of the mortgage.
              ``(2) Damages.--Relief under this subsection shall be 
          limited to the sum of--
                      ``(A) an offset of all remaining indebtedness; and
                      ``(B) the total amount paid by the consumer in 
                  connection with the transaction.
              ``(3) Notice.--Any person who sells or otherwise assigns a 
          high cost mortgage shall include a prominent notice of the 
          potential liability under this subsection as determined by the 
          Board.''.
  
  SEC. 5. EFFECTIVE DATE.
  
      This Act shall be effective 60 days after the promulgation of 
  regulations by the Board of Governors of the Federal Reserve System, 
  which shall occur not later than 180 days following the date of 
  enactment of this Act.
target: Home Equity Protection Act of 1993 - Amends the Truth in Lending Act to require the creditor of each high cost mortgage to provide certain clearly written, conspicuous disclosures regarding the risks associated with such mortgages. 
  Prohibits such mortgages from containing:  (1) a prepayment penalty for paying all or part of the principal prior to the date on which the balance is due; (2) certain refinancing fees; (3) balloon payments; (4) negative amortization; (5) certain prepared payments; and (6) specified unfair, deceptive, or evasive acts. 
  Declares that State authority to regulate certain high rate mortgage loans is not preempted by specified Federal statutes. 
  Includes within the creditor's liability for damages for noncompliance with this Act all finance charges and fees paid by the consumer. 
  Empowers the appropriate State attorney general to bring an action to enforce this Act.  Subjects an assignee of a high cost mortgage to all the claims and defenses that the consumer could assert against the creditor.
feat_title: Home Equity Protection Act of 1993