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described in paragraph (1) or (2) of the following paragraphs, but not both, shall be excluded: ‘‘(1) Up to and including 2 bona fide discount points payable by the consumer in connection with the mortgage, but only if the interest rate from which the mortgage’s interest rate will be discounted does not exceed by more than 1 percentage point— ‘‘(A) the average prime offer rate, as defined in section 129C; or ‘‘(B) if secured by a personal property loan, the average rate on a loan in connection with which insurance is pro- vided under title I of the National Housing Act (12 U.S.C. 1702 et seq.). ‘‘(2) Unless 2 bona fide discount points have been excluded under paragraph (1), up to and including 1 bona fide discount point payable by the consumer in connection with the mortgage, but only if the interest rate from which the mortgage’s interest rate will be discounted does not exceed by more than 2 percent- age points— ‘‘(A) the average prime offer rate, as defined in section 129C; or ‘‘(B) if secured by a personal property loan, the average rate on a loan in connection with which insurance is pro- vided under title I of the National Housing Act (12 U.S.C. 1702 et seq.). ‘‘(3) For purposes of paragraph (1), the term ‘bona fide discount points’ means loan discount points which are know- ingly paid by the consumer for the purpose of reducing, and which in fact result in a bona fide reduction of, the interest rate or time-price differential applicable to the mortgage. ‘‘(4) Paragraphs (1) and (2) shall not apply to discount points used to purchase an interest rate reduction unless the amount of the interest rate reduction purchased is reasonably consistent with established industry norms and practices for secondary mortgage market transactions.’’.

SEC. 1432. AMENDMENTS TO EXISTING REQUIREMENTS FOR CERTAIN
MORTGAGES.
Repeal. (a) PREPAYMENT PENALTY PROVISIONS.—Section 129(c)(2) of the
Truth in Lending Act (15 U.S.C. 1639(c)(2)) is hereby repealed.
(b) NO BALLOON PAYMENTS.—Section 129(e) of the Truth in
Lending Act (15 U.S.C. 1639(e)) is amended to read as follows:
‘‘(e) NO BALLOON PAYMENTS.—No high-cost mortgage may con-
tain a scheduled payment that is more than twice as large as
the average of earlier scheduled payments. This subsection shall
not apply when the payment schedule is adjusted to the seasonal
or irregular income of the consumer.’’.

SEC. 1433. ADDITIONAL REQUIREMENTS FOR CERTAIN MORTGAGES.
(a) ADDITIONAL REQUIREMENTS FOR CERTAIN MORTGAGES.—Sec-
tion 129 of the Truth in Lending Act (15 U.S.C. 1639) is amended—
(1) by redesignating subsections (j), (k), (l) and (m) as
subsections (n), (o), (p), and (q) respectively; and
(2) by inserting after subsection (i) the following new sub-
sections:

LAWS ‘‘(j) RECOMMENDED DEFAULT.—No creditor shall recommend or encourage default on an existing loan or other debt prior to and in connection with the closing or planned closing of a high-costPUBLIC with on anorris VerDate Nov 24 2008 22:28 Sep 03, 2010 Jkt 089139 PO 00203 Frm 00786 Fmt 6580 Sfmt 6581 E:\PUBLAW\PUBL203.111 PUBL203