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FEDERAL RESERVE BANK OF NEW YORK January 31, 1991 National Affordable Housing Act Requirements Affecting Mortgage Lenders and Servicers To All State Member Banks, and Others Concerned, in the Second Federal Reserve District: On November 28, 1990, the President signed the Cranston-Gonzalez National Affordable Housing Act (the Act), which has several provisions affecting mortgage lenders and servicers. The Act’s numerous provisions include disclosure requirements for the transfer of mortgage servicing, for escrow accounts and for prepayment of FHA loans (copies of the relevant provisions are attached). The Act also extends the deadline and modifies the requirements for the home ownership counseling program. This letter provides a general overview of the various requirements. I. Mortgage servicing provisions Section 941 of the Act amends the Real Estate Settlement Procedures Act (RESPA) and requires detailed dis closure relating to the assignment, sale or transfer (“transfer”) o f mortgage servicing. The disclosure requirements apply only to federally related mortgage loans subject to RESPA. RESPA is applicable to first mortgage loans for one- to four-family residential properties (including mobile-home properties) where the property is located in a state and a transfer of the legal title is required. Disclosures at application Disclosures provided at time of application must state whether servicing may be transferred while the loan is outstanding or, if the originating lender does not service any federally related mortgage loans, that there is a present intent to transfer the servicing. The originating lender must also disclose, among other things, the percentage of all loans transferred for each of the three most recent calendar years, and an estimate of the percentage of loans which will be transferred in the one-year period after origination. Current servicer’s disclosures at time of transfer The current servicer must provide notice not less than 15 days before the effective date of transfer of servicing. Alternatively, notice may be provided at settlement. The notice must include the effective date of the transfer; the current and new servicers’ names, addresses and telephone numbers; the date on which the current servicer will cease accepting payments and the date on which the new servicer will begin accepting payments; and information on the continued availability of optional insurance. New servicer’s disclosures at time of transfer The same notice as that provided by the current servicer must be provided by the new servicer not more than 15 days after the effective date o f transfer (unless the current servicer was the originating lender and provided the notice at settlement). Other provisions under Section 941 • The servicer must make payments from the borrower’s required escrow account (for taxes, insurance pre miums etc.) in a timely manner as payments become due. • Servicers are prohibited from assessing a late fee for 60 days after transfer when the payment is timely but has been sent to the wrong servicer. • The servicer must provide a written acknowledgement of a borrower’s written inquiry about the servicing of a loan within 20 days of receipt and either correct the error or explain why the account is correct within 60 days. • The servicer may not provide information concerning a borrower’s overdue payment to a consumer reporting agency (credit bureau) for 60 days after receipt of the borrower’s written inquiry.- Liability Failure to comply with any of the mortgage servicing provisions may subject the servicer to significant liability. The liability provisions are similar to those for a violation of the Truth in Lending Act. Liability may be avoided if within 60 days after discovering an error, the servicer notifies the borrower o f the error and makes appropriate adjustments in the account. Effective date Section 941 of the Act does not state when servicers must begin to comply with its provisions. The Department of Housing and Urban Development (HUD) is required within 90 days of enactment to develop both a model dis closure statement and a form of acknowledgement for the disclosures at application. Section 941 does not require HUD to develop model disclosure forms with respect to any provisions of Section 941 other than those concerning disclosures at application. Conceivably, compliance was required as of November 29, 1990 for the other provisions, if not for all of the disclosures required by this Section. Board staff will request an opinion from H U D ’s Office of General Counsel on the effective-date issue, but ser vicers should be aware that compliance could be required immediately. II. Mortgage escrow account provisions Section 942 of the Act pertains only to escrow accounts and has its own liability provisions. It requires several disclosures about escrow accounts, including a notice of any shortage of funds in the account. Disclosures at closing The servicer must provide a statement at closing or within 45 days itemizing charges to be paid during the first 12-month period after settlement and stating the anticipated dates of such payments. If the statement is provided at closing, it may be incorporated into the uniform settlement statement (HUD-1). Annual disclosures The servicer must provide an annual statement itemizing amounts placed in escrow by the borrower and paid out o f the account by the servicer. Servicers may not impose a fee for preparation and mailing of this statement. The first annual statement must cover the 12-month period beginning January 1, 1991 and should be mailed not later than January 30, 1992, and annually thereafter. The requirements o f Section 942 will apply to loans out standing as of January 1, 1991, in addition to those originated after that date. Liability HUD may impose a fine of $50 for each failure to provide an initial statement not to exceed $100,000 in a 12-month period. If the failure to comply is deemed intentional, each violation is subject to a $100 penalty with no limit on the total liability. III. Disclosure for prepayment of FHA loans Secton 329 of the Act requires disclosures concerning prepayment of FHA loans. When an FHA loan is prepaid, interest is collected from the date of payment through the scheduled payment date. The Section requires servicers o f FHA-insured loans to provide borrowers at or before closing with a written notice (to be prescribed by HUD) describing requirements the borrower must fulfill to avoid the accrual o f interest after prepayment o f an FHA loan. 2 It also requires an annual written notice stating the amount of principal outstanding. The annual notice must also describe requirements the borrower must fulfill to avoid the accrual of interest after prepayment of an FHA loan. Effective date HUD has 90 days from November 28, 1990 to issue regulations for the provisions of Section 329. The provisions concerning disclosures at closing will apply to loans executed after the expiration of a 90-day period following the effective date of the regulations. The annual statement requirement applies to FHA loans outstanding as of the ex piration of the 90-day period following the effective date of the regulations. IV. Home ownership counseling Section 577 of the Act requires lenders to inform borrowers within 45 days of an initial loan default of the avail ability of home ownership counseling. Lenders were previously required to notify delinquent borrowers of the avail ability of counseling but no specific time frame was required. The Section extends the housing-counseling require ments through September 30, 1992. Effective date The counseling notification provisions are effective immediately. * * * Questions on this matter may be directed to our Compliance Examinations Department (Tel. No. 212-720-5914). Ja m e s K. H o d g e t t s , Chief Compliance Examiner 3 Excerpts from National Affordable Housing Act Subtitle C—Regulatory Programs SE C 941. MORTGAGE SERVICING TRANSFER DISCLOSURE The R eal Estate Settlem ent Procedures A ct o f 1974 (IS U.S.C 2601 et seq.) is am ended by inserting after section $ the follow ing new section: “servic in g of mortgage loans and ad m inistratio n of escrow ACCOUNTS “S e c 6. (a) Disclosure to A pplicant R elating to A ssignm ent , S ale , or Transfer of L oan S ervicing .— “(1 ) I n g e n e ra l —Each person who makes a federally related mortgage loan sh a ll disclose to each person who applies for any such loan, a t the tim e o f application for the loan — *XA) w hether the servicing o f any such loan may be as signed, sold, or transferred to any other person at any tim e w hile such loan is outstanding; *%B) fo r each o f the m ost recent 3 calendar years complet ed (at the tim e o f such application), the percentage (round ed to the nearest quartile) o f loans made by such person for w hich the servicing has been assigned, sold, or transferred as o f the end o f the most recent calendar year completed, except th a t— ‘W fo r any loan application during the 12-month period beginning on the date o f the enactment o f the Cranston-Gonzalez N ational Affordable Housing Act, the inform ation disclosed under this subparagraph m ay be fo r only the m ost recent calendar year complet ed, and fo r any loan application during the 12-month period beginning 1 year after the date o f the enactment o f the Cranston-Gonzalez N ational Affordable Housing Act, the inform ation disclosed under this subpara graph m ay be fo r the m ost recent 2 calendar years com pleted,; and *Xii) th is subparagraph may not be construed to reauire the inclusion, in the percentage disclosed, o f any loans the servicing o f which has been assigned, sold, or transferred by the person m aking the loan to a trans feree servicer th a t is an affiliate or subsidiary o f such person; and “(C) i f the person who makes the loan does not engage in the servicing o f any federally related mortgage loans, that there is a present intent on the part o f such person (at the tim e o f such application) to assign, sell, or transfer the servicing o f such loan to another person. “(2) M odel disclosure statem ents .—Not later than 90 days after the date o f the enactm ent o f the Cranston-Gonzalez N a tional A ffordable H ousing A ct, the Secretary shall develop a model disclosure statem ent fo r notification to applicants under paragraph (1) w ith respect to servicing procedures, transfer prac tices and requirements, and com plaint resolution. The model statem ent sh a ll provide fo r the person originating the loan to disclose their capacity to service loans and the best available es tim ate o f the percentage o f a ll loans made by such person for which the servicing w u l be assigned, sold, or transferred during the 12-month period beginning upon the origination. The esti mate sh a ll be expressed as one o f the following range o f possi bilities—between 0 and 25 percent, between 26 and 50 percent, between 51 and 75 percent, or between 76 and 100 percent This paragraph m ay not be construed to require the inclusion, in the estim ate disclosed, o f any loans the servicing o f which w ill be assigned, sold, or transferred by the person originating the loan to a transferee servicer th a t is an a ffilia te or subsidiary o f such person “(3) S ignature of applicant .—A ny disclosure o f the infor m ation required under paragraph (1) shall not be effective for purposes o f th is section unless the disclosure is accompanied by a w ritten statem ent, in such form as the Secretary shall develop before the expiration o f the 90-day period beginning on the date o f the enactm ent o f the Cranston-Gonzalez National Affordable Housing Act, th a t the applicant has read and understood the disclosure and th a t is evidenced by the signature o f the appli cant a t the place where such statem ent appears in the applica tion. “(b) N otice b y Transferor of L o an S ervicing a t Tim e of Transfer .— *W N otice requirem ent .—Each servicer o f any federally re lated mortgage loan sh a ll notify the borrower in writing o f any assignment, sale, or transfer o f the servicing o f the loan to any other person. “(SJ Tim e op n o tic e — “(A) I n general .—Except as provided under subpara graphs (B) and (C), the notice required under paragraph (1) sh a ll be m ade to the borrower not less than 15 days before the effective date o f transfer o f the servicing o f the mort gage loan (w ith respect to w hich such notice is made). rW ) E xception for c ertain proceedings.—The notice required under paragraph (1) sh a ll be made to the borrower not 'more than SO days a fter the effective date o f assign ment, sale, or transfer o f the servicing o f the mortgage loan (w ith respect to w hich such notice is made) in any case in which the assignm ent, sale, or transfer o f the servicing o f the mortgage loan is preceded by— “(i) term ination o f the contract fo r servicing the loan for cause; “(ii) commencement o f proceedings for bankruptcy o f the servicer, or ‘(Hi) commencement o f proceedings by the Federal Deposit Insurance Corporation or the Resolution Trust Corporation fo r conservatorship or receivership o f the servicer (or an en tity by which the servicer is owned or controlled). “(C) E xception for notice provided a t closing.—The provisions o f subparagraphs (A) and (B) shall not apply to any assignment, sale, or transfer o f the servicing o f any mortgage loan i f the person who makes the loan provides to the borrower, a t settlem ent (w ith respect to the property for which the mortgage loan is made), written notice under paragraph (3) o f such transfer. “(3) Contents of n o t ic e — The notice required under para graph (1) sh a ll include the follow ing information: *XA) The effective date o f transfer o f the servicing de scribed in such paragraph “(B) The name, address, and toll-free or collect call tele phone number o f the transferee servicer. “(C) A toll-free or collect call telephone number for (i) an individual employed by the transferor servicer, or (ii) the departm ent o f the transferor servicer, that can be contacted by the borrower to answer inquiries relating to the transfer of servicing. “(D) The name and toll-free or collect call telephone number for (i) an ind ivid u a l employed by the transferee ser vicer, or (ii) the departm ent o f the transferee servicer, that can be contacted by the borrower to answer inquiries relat ing to the transfer o f servicing. 2 “(E) The date on w hich the transferor servicer who is servicing the mortgage loan before the assignment, sale, or transfer w ill cease to accept paym ents relating to the loan and the date on which the transferee servicer w ill begin to accept such payments. “(F) A ny inform ation concerning the effect the transfer may have, i f any, on the terms o f or the continued avail ability o f mortgage life or disability insurance or any other type o f optional insurance and w hat action, i f any, the bor rower m ust take to m aintain coverage. ‘YG) A statem ent th a t the assignment, sale, or transfer o f the servicing o f the mortgage loan does not affect any term or condition o f the security instrum ents other than terms directly related to the servicing o f such loan. “(c) N otice b y Transferee of L o an S ervicing a t Tim e of Transfer .— ‘YD N otice requirem ent .—Each transferee servicer to whom the servicing o f any federally related mortgage loan is assigned, sold, or transferred sh a ll notify the borrower o f any such as signment, sale, or transfer. “(!) Tim e of notice .— “(A) I n general .—Except as provided in subparagraphs (B) and (C), the notice required under paragraph (1) shall be made to the borrower not more them 15 days after the effective date o f transfer o f the servicing o f the mortgage loan (w ith respect to w hich such notice is made). “(B) Exception for c ertain proceedings.—The notice required under paragraph (1) sh a ll be made to the borrower not more than SO days a fter the effective date o f assign ment, sale, or transfer o f the servicing o f the mortgage loan (with respect to which such notice is made) in any case in which the assignment, sale, or transfer o f the servicing o f the mortgage loan is preceded by— “(V term ination o f the contract for servicing the loan fo r cause; ‘YU) commencement o f proceedings for bankruptcy o f the servicer; or *YUi) commencement o f proceedings by the Federal Deposit Insurance Corporation or the Resolution Trust Corporation for conservatorship or receivership o f the servicer (or an entity by w hich the servicer is owned or controlled). “(C) Exception for notice provided a t c l o s in g . — The provisions o f subparagraphs (A) and (B) sh a ll not apply to any assignment, sale, or transfer o f the servicing o f any mortgage loan i f the person who makes the loan provides to the borrower, a t settlem ent (w ith respect to the property for which the mortgage loan is made), w ritten notice under paragraph (S) o f such transfer. “(3) Contents of notice.—A n y notice required under para graph (1) shall include the inform ation described in subsection (bX3). “(d) Treatm ent of L oan Pa ym e n ts D uring Transfer Period .—During the 60-day period beginning on the effective date o f transfer o f the servicing o f any federally related mortgage loan, a late fee may not be imposed on the borrower w ith respect to any pay m ent on such loan arid no such paym ent m ay be treated as late for any other purposes, i f the paym ent is received by the transferor serv icer (rather than the transferee servicer who should properly receive payment) before the due date applicable to such paym ent ‘Ye) D uty of L oan S ervicer T o R espond to B orrower Inquir ies .— “(1) N otice of receipt of in q u iry .— ‘YA) I n general.—I f any servicer o f a federally related mortgage loan receives a qualified w ritten request from the 3 borrower (or an agent o f the borrower) fo r inform ation re lating to the servicing o f such loan, the servicer sh a ll pro vide a written response acknowledging receipt o f the corre spondence w ithin SO days (excluding legal public holidays, Saturdays, and Sundays) unless the action requested is taken w ithin such period. “(B) Qualified w ritten request .—For purposes o f this subsection, a qualified w ritten request sh a ll be a written correspondence, other than notice on a paym ent coupon or other paym ent m edium supplied by the servicer, th a t — “(i) includes, or otherwise enables the servicer to identify, the name and account o f the borrower, and “(ii) includes a statem ent o f the reasons for the belief o f the borrower, to the extent applicable, th a t the ac count is in error or provides su fficien t detail to the ser vicer regarding other inform ation sought by the bor rower. *W A ction w ith respect to in q u iry .—N ot later than 60 days (excluding legal public holidays, Saturdays, and Sundays) after the receipt from any borrower o f any qualified written re quest under paragraph (1) and, i f applicable, before taking any action w ith respect to the inquiry o f the borrower, the servicer shall— “(A) make appropriate corrections in the account o f the borrower, including the crediting o f any late charges or penalties, and transm it to the borrower a w ritten notifica tion o f such correction (which sh a ll include the name and telephone number o f a representative o f the servicer who can provide assistance to the borrower); “(B) after conducting an investigation, provide the bor rower w ith a w ritten explanation or clarification that in cludes— “CO to the extent applicable, a statem ent o f the rea sons for which the servicer believes the account o f the borrower is correct as determ ined by the servicer, and “(ii) the name and telephone num ber o f an individ ual employed by, or the office or departm ent of, the ser vicer who can provide assistance to the borrower, or “(C) after conducting an investigation, provide the bor rower w ith a written explanation or clarification th a t in cludes— “(V information requested by the borrower or an ex planation o f why the inform ation requested is unavail able or cannot be obtained by the servicer; and “(ii) the name and telephone num ber o f an individ ual employed by, or the office or departm ent of, the ser vicer who can provide assistance to the borrower. ‘W Protection op credit ratin g .—D uring the €Oday period beginning on the date o f the servicer's receipt from any borrower o f a qualified w ritten request relating to a dispute re garding the borrower’s payments, a servicer m ay not provide in formation regarding any overdue paym ent, owed by such bor rower and relating to such period or q ualified w ritten request, to any consumer reporting agency (as such term is defined under section 603 o f the Fair Credit Reporting Act). “(f) Damages and Costs.— Whoever fa ils to comply w ith any pro vision o f this section shall be liable to the borrower fo r each such failure in the following amounts: “(1) Individuals.—In the case o f any action by an individ ual, an amount equal to the sum of— “(A) any actual damages to the borrower as a result o f the failure; and “(B) any additional damages, as the court may allow, in the case o f a pattern or practice o f noncompliance w ith the 4 requirements o f this section, in an am ount not to exceed $ 1, 000. “(2) Class actions.—In the case o f a class action, an am ount equal to the sum of— TA) any actual damages to each o f the borrowers in the class as a result o f the failure; and “(B) any additional damages, as the court may allow, in the case o f a pattern or practice o f noncompliance w ith the requirements o f this section, in an am ount not greater than $1,000 for each member o f the class, except th a t the total am ount o f damages under this subparagraph in any class action may not exceed the lesser o f— TO $500,000; or T V 1 percent o f the net worth o f the servicer. T$) Costs.—I n addition to the am ounts under paragraph (1) or (2), in the case o f any successful action under this section, the costs o f the action, together w ith any attorneys fees incurred in connection w ith such action as the court m ay determ ine to be reasonable under the circumstances. T V N onliability .—A transferor or transferee servicer shall not be liable under this subsection fo r any failure to comply w ith any requirement under this section if, w ithin 60 days after discovering an error (whether pursuant to a fin a l w ritten exam ination report or the servicers own procedures) and before the commencement o f an action under th is subsection and the re ceipt o f written notice o f the error from the borrower, the ser vicer notifies the person concerned o f the error and m akes w hat ever adjustm ents are necessary in the appropriate account to ensure that the person w ill not be required to pay an am ount in excess o f any am ount that the person otherwise w ould have p a id . “(g) A d m inistratio n of E scrow A ccounts.—I f the terms o f any federally related mortgage loan require the borrower to m ake pay m ents to the servicer o f the loan for deposit into an escrow account fo r the purpose o f assuring payment o f taxes, insurance prem ium s, and other charges w ith respect to the property, the servicer sh a ll m ake paym ents from the escrow account for such taxes, insurance prem ium s, and other charges in a tim ely m anner as such paym ents become due. “(h) Preem ption of Conflicting S tate L A W S.-N otw ithstandany provision o f any law or regulation o f any State, a person makes a federally related mortgage loan or a servicer sh a ll be considered to have complied w ith the provisions o f any such State law or regulation requiring notice to a borrower a t the tim e o f appli cation for a loan or transfer o f the servicing o f a loan i f such person or servicer complies w ith the requirements under this section regard ing tim ing, content, and procedures for notification o f the borrower, “(i) Definitions .—For purposes o f this section: T V E ffective date of transfer .— The term *effective date o f transfer* means the date on which the mortgage paym ent o f a borrower is first due to the transferee servicer o f a mortgage loan pursuant to the assignment, sale, or transfer o f the servic ing o f the mortgage loan. T 2) S ervicer .—The term *servicer* means the person respon sible for servicing o f a loan (including the person who m akes or holds a loan i f such person also services the loan). The term does not include— TA ) the Federal Deposit Insurance Corporation or the Resolution Trust Corporation, in connection w ith assets ac quired, assigned, sold, or transferred pursuant to section 13(c) o f the Federal Deposit Insurance A ct or as receiver or conservator o f an insured depository institution; and *W) the Government N ational Mortgage Association, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Resolution Trust Corpora tion, or the Federal Deposit Insurance Corporation, in any X 5 case in which the assignment, sale, or transfer o f the servic ing o f the mortgage loan is preceded by — ,Xi) term ination o f the contract fo r servicing the loan for cause; ‘Xu) commencement o f proceedings fo r bankruptcy o f the servicer, or “(iii) commencement o f proceedings by the Federal Deposit Insurance Corporation or the Resolution Trust Corporation for conservatorship or receivership o f the servicer (or an entity by which the servicer is owned or controlled). “(3) S ervicing .—The term ‘servicing ’ means receiving any scheduled periodic payments from a borrower pursuant to the terms o f any loan, including am ounts for escrow accounts de scribed in section 10, and m aking the paym ents o f principal and interest and such other paym ents w ith respect to the amounts received from the borrower as m ay be required pursu ant to the terms o f the loan. SE C $42. MORTGAGE ESCROW ACCOUNTS. (a) I n General .—Section 10 o f the R eal Estate Settlem ent Proce dures A ct o f 1974 (IS U S C 1609) is am ended — (1) by inserting “(a) I n Ge n e r a l — ” after the section designa tion; and (2) by adding a t the end the follow ing new subsections: *Xb) N otification of S hortage in E scrow A ccount.—I f the terms o f any federally related mortgage loan require the borrower to m ake payments to the servicer (as the term is defined in section 6(i)) o f the loan for deposit into an escrow account fo r the purpose o f as suring paym ent o f taxes, insurance prem ium s, and other charges w ith respect to the property, the servicer sh a ll notify the borrower not less than annually o f any shortage o f fu n d s in the escrow ac count *Xc) E scrow A ccount S tatem ents.— “(1) I n itia l statem ent .— *XA) In g en eral —A ny servicer th a t has established an escrow account in connection w ith a federally related mort gage loan sh a ll subm it to the borrower fo r which the escrow account has been established a statem ent clearly item izing the estim ated taxes, insurance premiums, and other charges that are reasonably anticipated to be paid from the escrow account during the first 12 m onths after the establishm ent o f the account and the anticipated dates o f such payments. U(B) Tim e of subm ission .—The statem ent required under subparagraph (A) sh a ll be subm itted to the borrower at closing w ith respect to the property for which the mortgage loan is made or not later than the expiration o f the 45-day period beginning on the date o f the establishm ent o f the escrow account *XC) I n itia l statem ent a t closing .—A n y servicer may subm it the statem ent required under subparagraph (A) to the borrower a t closing and may incorporate such statem ent in the uniform settlem ent statem ent required under section 4. Not later than the expiration o f the 90-day period begin ning on the date o f the enactm ent o f the Cranston-Gonzalez N ational Affordable Housing Act, the Secretary sh a ll issue regulations prescribing any changes necessary to the uni form settlem ent statem ent under section 4 th a t specify how the statem ent required under subparagraph (A) o f this sec tion sh a ll be incorporated in the uniform settlem ent state m ent *X2) A nnu al statem ent .— . “(A) I n g en eral —A ny servicer th a t has established or continued an escrow account in connection w ith a federally 6 related mortgage loan sh a ll subm it to the borrower for which the escrow account has been established or continued a statem ent clearly itemizing, for each period described in subparagraph (B) (during which the servicer services the escrow account), the am ount o f the borrower’s current m onthly payment, the portion o f the m onthly paym ent being placed in the escrow account, the total am ount p a id into the escrow account during the period, the total am ount p a id out o f the escrow account during the period fo r taxes, insurance premiums, and other charges (as separately iden tified), and the balance in the escrow account a t the conclu sion o f the period. “(B) Tim e of subm ission .— The statem ent reauired under subparagraph (A) shall be subm itted to the borrower not less than once for each 12-month period, the fir st such period beginning on the first January 1st th a t occurs a fter the date o f the enactment o f the Cranston-Gonzalez N ation a l Affordable Housing Act, and shall be subm itted not more than 30 days after the conclusion o f each such 1-year period *Xd) Pen alties — ’XV I n general.—In the case o f each failure to subm it a statem ent to a borrower as required under subsection (c), the Secretary sh a ll assess to the lender or escrow servicer fa ilin g to subm it the statem ent a civil penalty o f $50 for each such fa il ure, but the total am ount imposed on such lender or escrow ser vicer fo r a ll such failures during any 12-month period referred to in subsection (b) may not exceed $100,000. *X2) Intentional violations.—I f any failure to w hich para graph (1) applies is due to intentional disregard o f the require m ent to subm it the statement, then, w ith respect to such fa il ure— “(A) the penalty imposed under paragraph (1) sh a ll be $100; and “(JB) in the case o f any penalty determ ined under subparagraph (A), the $100,000 lim itation under paragraph (1) sh a ll not apply. (b) Pro h ibitio n of Fees for E scrow A ccount S tatem ents .— Section 12 o f the Real Estate Settlem ent Procedures A ct o f 1974 (12 U.S.C. 2610) is amended — (1) by inserting after the first comma the following, “or by a servicer (as the term is defined under section 6(i)),"; (2) by striking “lender’*the second place it appears and insert ing “lender or servicer"; (3) by striking “6 ” and inserting “10(c)"; and (4) by striking the section heading and inserting the follow ing new section heading ’’pro h ibitio n of fees for preparation op truth -in -lbndzng , uniform settlement , and escrow account statem en ts ’’. SE C SIS. DISCLOSURE r e g a r d in g in t e r e s t d u e u p o n m o r t g a g e p r e paym en t. Section 203 o f the National Housing A ct (12 U.S.C. 1709), as am ended by the preceding provisions o f this Act, is further am ended by adding a t the end the following new subsection: “(8X1) Each mortgagee (or servicer) w ith respect to a mortgage under th is section shall provide each mortgagor o f such mortgagee (or servicer) w ritten notice, not less than annually, containing a statem ent o f the am ount outstanding for prepayment o f the p rinci p a l am ount o f the mortgage and describing any requirements the mortgagor m ust fu lfill to prevent the accrual o f any interest on such principal am ount after the date o f any prepaym ent This paragraph sh a ll apply to any insured mortgage outstanding on or after the ex piration o f the 90-day period beginning on the date o f effectiveness 7 o f fin a l regulations implementing this paragraph. lW Each mortgagee (or servicer) w ith respect to a mortgage under th is section shall, a t or before closing w ith respect to any such m ort gage, provide the mortgagor w ith w ritten notice (in such form as the Secretary sh a ll prescribe, by regulation, before the expiration o f the 90-day period beginning upon the date o f the enactment o f the Cranston-Gonzalez N ational Affordable Housing Act) describing any re quirem ents the mortgagor m ust fu lfill upon prepayment o f the p rin cipal am ount o f the mortgage to prevent the accrual o f any interest on the principal am ount after the date o f such prepaym ent This paragraph sh a ll apply to any mortgage executed after the expiration o f the period under paragraph (1). . 8
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