12 U.S.C. § 2604 — Home buying information booklets

(a) Preparation and distribution. At least once every 5 years, the Director of the Bureau of Consumer Financial Protection (the “Director”) must prepare a booklet to help consumers applying for federally related mortgage loans understand the nature and costs of real-estate settlement services. The Director must prepare the booklet in languages and cultural styles the Director considers appropriate so it is understandable and accessible to homebuyers of different ethnic and cultural backgrounds. The Director must distribute the booklets to every lender that makes federally related mortgage loans. The Director must also give those lenders location-based lists of homeownership counselors certified under section 1701x(e), for use in meeting subsection (c)’s requirement. (b) Contents. The Director prescribes each booklet’s form and detail. In addition to other information the Director may provide, the booklet must include the following information in plain and understandable language: (1) a description and explanation of the nature and purpose of costs connected with a real-estate settlement or a federally related mortgage loan. This must include general information about the mortgage process and, at a minimum, specific information about (A) balloon payments; (B) prepayment penalties; (C) the advantages of prepayment; and (D) the trade-off between closing costs and the interest rate over the life of the loan; (2) an explanation and sample of the uniform settlement statement required by section 2603; (3) a list and explanation of lending practices, including practices prohibited by the Truth in Lending Act or other applicable Federal law, and other unfair practices and unreasonable or unnecessary charges that a prospective buyer should avoid in a real-estate settlement; (4) a list and explanation of questions a consumer obtaining a federally related mortgage loan should ask about the loan, including whether the consumer will be able to repay it, whether the consumer shopped enough for it, whether its terms include prepayment penalties or balloon payments, and whether it will benefit the borrower; (5) an explanation of the right to rescind certain transactions under sections 125 and 129 of the Truth in Lending Act [15 U.S.C. 1635, 1639]; (6) a brief explanation of variable-rate mortgages and a reference to the booklet called “Consumer Handbook on Adjustable Rate Mortgages,” published by the Director, or to a suitable replacement booklet that the Director later adopts under that section; (7) a brief explanation of home-equity lines of credit and a reference to the pamphlet required under section 127A of the Truth in Lending Act [15 U.S.C. 1637a]; (8) information about homeownership counseling services made available pursuant to section 1701x(a)(4), a recommendation that the consumer use those services, and notice that a list of certified providers of homeownership counseling in the area, with their contact information, is available; (9) an explanation of the nature and purpose of escrow accounts when used with loans secured by residential real estate, and the requirements for those accounts under section 2609; (10) an explanation of the choices available to buyers of residential real estate when selecting people to provide services needed for a real-estate settlement; (11) an explanation of a consumer’s responsibilities, liabilities, and obligations in a mortgage transaction; (12) an explanation of the nature and purpose of real-estate appraisals, including the difference between an appraisal and a home inspection; (13) notice that the Office of Housing of the Department of Housing and Urban Development has made a brochure about loan fraud publicly available, along with a World Wide Web address and toll-free telephone number for getting the brochure; and (14) an explanation of flood insurance and its availability under the National Flood Insurance Program or from a private insurance company, whether or not the real estate is in an area having special flood hazards. The booklet must also include this statement: “Although you may not be required to maintain flood insurance on all structures, you may still wish to do so, and your mortgage lender may still require you to do so to protect the collateral securing the mortgage. If you choose to not maintain flood insurance on a structure, and it floods, you are responsible for all flood losses relating to that structure.” The booklet must take into consideration differences in real-estate settlement procedures among the States and territories of the United States and among separate political subdivisions within the same State and territory. (c) Estimate of charges. Each lender must include with the booklet a good-faith estimate, as prescribed by the Bureau, of the amount or range of charges for specific settlement services the borrower is likely to incur in connection with the settlement. The lender must also include a reasonably complete or updated list of homeownership counselors who are certified under section 1701x(e) and located in the lender’s area. (d) Distribution to applicants. Each lender described in subsection (a) must provide the booklet to each person from whom it receives, or for whom it prepares, a written application to borrow money to finance the purchase of residential real estate. The lender must provide the version most appropriate for the person receiving it. The lender must deliver it or mail it no later than 3 business days after receiving the application. The lender does not have to provide it if the lender denies the credit application before the 3-day period ends. (e) Lender printing and distribution. Lenders may print and distribute booklets if the Bureau approves their form and content as meeting subsection (b).