PROHIBITION ON STEERING INCENTIVES.

SEC. 1403. PROHIBITION ON STEERING INCENTIVES. Section 129B of the Truth in Lending Act (as added by section 1402(a)) is amended by inserting after subsection (b) the following new subsection:“(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 124 STAT. 2140 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 Board may, by rule, waive or provide exemptions to this clause if the Board determines that such waiver or exemption is in the interest of consumers and in the public interest.“(3) Regulations.—The Board shall prescribe regulations to prohibit—“(A) mortgage originators from steering any consumer to a residential mortgage loan that—“(i) the consumer lacks a reasonable ability to repay (in accordance with regulations prescribed under section 129C(a)); or“(ii) has predatory characteristics or effects (such as equity stripping, excessive fees, or abusive terms);“(B) 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 section 129C(b)(2)) 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 124 STAT. 2141 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.”.