Foreclosure Fraud and Homeowner Abuse Prevention Act of 2011 - Amends the Trust Indenture Act of 1939 to include within its purview mortgage-backed securities and their servicers.
Imposes upon each servicer of a mortgage-backed security a fiduciary duty, not waivable by an investor, to protect the economic interests of the investors as a whole in an asset-backed security.
Provides for removal of an indenture trustee that is a servicer of mortgage-backed securities if at least 50% of the investors petition the court for such removal.
Authorizes amendment of a pooling and servicing agreement with respect to any mortgage-backed security without the consent of a majority of the security holders if at least 25% of them petition the court for such action. Defines such an agreement as any contract establishing the transaction rights and duties of the parties to a mortgage-backed securitization transaction.
Amends the Securities Exchange Act of 1934 to direct the Securities and Exchange Commission (SEC) to promulgate specified requirements governing mortgage related securities.
Amends the Truth In Lending Act (TILA) to prohibit the servicer of a securitized residential mortgage loan (or an affiliate) from owning or holding any interest in any other residential mortgage loan that is secured by a consensual security interest on the same dwelling or residential real property that is subject to the security interest that secures the securitized residential mortgage loan.
Amends the Real Estate Settlement Procedures Act of 1974 (RESPA) to require all fees charged for a real estate settlement service in connection with a transaction involving a federally related mortgage loan, or incurred in connection with servicing such loan, to be reasonably related to the cost of providing the service.
Sets forth specified prohibitions, restrictions, or requirements for: (1) use of subsidiaries and insourcing, (2) force-placed insurance, (3) disclosures related to insurance coverage information, and (4) loss mitigation.
Amends TILA to: (1) prescribe the treatment of mistaken loan payments during the period that servicing of a loan is in transition, and (2) set limitations upon foreclosure proceedings.
Amends the Fair Debt Collection Practices Act to: (1) bring within its purview a securitized residential mortgage loan and its servicer, and (2) subject to civil liability a debt collector who violates such Act in connection with a debt secured by a consumer's residence.
Directs: (1) federal banking agencies to promulgate independent capital reserve standards for affiliates of mortgage-backed securities servicers, and (2) the SEC to promulgate regulations regarding treatment of delinquent loans.
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1783 Introduced in House (IH)]
112th CONGRESS
1st Session
H. R. 1783
To provide for enhanced mortgage-backed and asset-backed security
investor protections, to prevent foreclosure fraud, and for other
purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 5, 2011
Mr. Miller of North Carolina (for himself, Mr. George Miller of
California, Mr. Turner, Mr. Conyers, and Mr. Al Green of Texas)
introduced the following bill; which was referred to the Committee on
Financial Services
_______________________________________________________________________
A BILL
To provide for enhanced mortgage-backed and asset-backed security
investor protections, to prevent foreclosure fraud, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Foreclosure Fraud and Homeowner
Abuse Prevention Act of 2011''.
SEC. 2. DEFINITIONS.
For purposes of this Act, the following definitions shall apply:
(1) Commission.--The term ``Commission'' means the
Securities and Exchange Commission.
(2) Mortgage.--The term ``mortgage'' means a federally
related mortgage loan, as defined in section 3 of the Real
Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602).
(3) Mortgage-backed security.--The term ``mortgage-backed
security'' means an asset-backed security, as defined in
section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)), that is collateralized by--
(A) a mortgage; or
(B) a collateralized mortgage obligation of
mortgage-backed securities.
(4) Securitized residential mortgage loan.--The term
``securitized residential mortgage loan'' means any residential
mortgage loan that serves as collateral for a fixed-income or
other security that allows the holder of such security to
receive payments dependent on the cash flow from such
residential mortgage loan.
(5) Servicer.--The term ``servicer''--
(A) means any person responsible for the management
or collection of a pool of assets or making allocations
or distributions to holders of asset-backed securities;
and
(B) does not include any State or local housing
agency.
SEC. 3. TRUST INDENTURE ACT PROTECTIONS.
(a) Definitions.--Section 303 of the Trust Indenture Act of 1939
(15 U.S.C. 77ccc) is amended--
(1) in paragraph (7), by adding at the end the following:
``Such term shall include mortgage-backed securities.'';
(2) in paragraph (10), by adding at the end the following:
``Such term shall include servicers of mortgage-backed
securities.''; and
(3) by adding at the end the following:
``(19) The term `mortgage-backed security' means an asset-
backed security, as defined in section 3(a) of the Securities
Exchange Act of 1934, that is collateralized by--
``(A) a mortgage; or
``(B) a collateralized mortgage obligation of
mortgage-backed securities.
``(20) The term `servicer'--
``(A) means any person responsible for the
management or collection of a pool of assets or making
allocations or distributions to holders of asset-backed
securities; and
``(B) does not include any State or local housing
agency.''.
(b) Clarification of Exemptions.--Section 304 of the Trust
Indenture Act of 1939 (15 U.S.C. 77ddd) is amended--
(1) in paragraph (2), by inserting ``other than residential
mortgage-back securities'' after ``securities'';
(2) in paragraph (4), by inserting ``other than a
residential mortgage-back security'' after ``security''; and
(3) in paragraph (7), by inserting ``other than a
registered mortgage-back security'' after ``security''.
(c) Fiduciary Duty.--Section 315 of the Trust Indenture Act of 1939
(15 U.S.C. 77ooo) is amended by adding at the end the following:
``(f) Each servicer of a mortgage-backed security shall have a
fiduciary duty to protect the economic interests of the investors as a
whole in an asset-backed security, which duty may not be waived by the
investor.''.
(d) Removal of Trustee.--Section 310 of the Trust Indenture Act of
1939 (15 U.S.C. 77jjj) is amended by adding at the end the following:
``(3) An indenture trustee that is a servicer of mortgage
backed securities may be removed if not fewer than 50 percent
of the investors petition a court of competent jurisdiction for
the removal of such trustee.''.
(e) Amendment of Pooling and Servicing Agreement.--Section 316 of
the Trust Indenture Act of 1939 (15 U.S.C. 77ppp) is amended by adding
at the end the following:
``(d) Notwithstanding any other provision of this title, a pooling
and servicing agreement with respect to any mortgage-backed security
may be amended without the consent of a majority of the holders of such
security, if not fewer than 25 percent thereof petition a court of
competent jurisdiction for such action. For purposes of this subsection
a `pooling and servicing agreement' is any contract or a substantially
similar document establishing the transaction rights and duties of the
parties to any mortgage-backed securitization transaction.''.
(f) Penalty.--Section 325 of the Trust Indenture Act of 1939 (15
U.S.C. 77yyy) is amended by striking ``$10,000'' and inserting
``$40,000''.
(g) Duties and Responsibilities of Servicers.--Section 315(a) of
the Trust Indenture Act of 1939 (15 U.S.C. 77ooo(a)) is amended--
(1) by striking ``The indenture'' and inserting ``(1) The
indenture'';
(2) by redesignating existing paragraphs (1) and (2) as
subparagraphs (A) and (B), respectively, and moving the margins
2 ems to the right; and
(3) by adding at the end the following:
``(2) Paragraph (1) shall not apply with respect to an
indenture that is a mortgage-backed security. An indenture
trustee of such a security shall have a duty to verify the
correctness of any such statements.''.
SEC. 4. MORTGAGE RELATED SECURITY SERVICER ADVANCES.
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is
amended by inserting after section 15G the following new section:
``SEC. 15H. MORTGAGE RELATED SECURITIES SERVICER ADVANCES.
``(a) Commission Rulemaking Required.--Promptly after the date of
enactment of this section, the Commission shall, after consultation
with the appropriate Federal banking agencies (as defined in section 3
of the Federal Deposit Insurance Act (12 U.S.C. 1813)) and the Bureau
of Consumer Financial Protection where appropriate, issue regulations--
``(1) to require each servicer of a mortgage related
security to notify investors therein of any advances to the
securitization vehicle;
``(2) to prohibit the primary servicer of a mortgage
related security from advancing delinquent payments of
principal and interest by mortgagors for more than 3 payment
periods, unless financing or reimbursement facilities to fund
or reimburse the primary servicers are available;
``(3) to prohibit the commingling of homeowners' monthly
mortgage payments with the assets of the servicer of a mortgage
related security, other than as necessary to clear payments
received, but not to exceed 2 business days;
``(4) to provide for recoupment, from any current or former
senior executive or director of a servicer of a mortgage
related security who has been convicted of any violation of the
securities laws, any compensation received during the 3-year
period preceding the date of the violation that the Commission
determines was connected to such violation, including any
unjust enrichment related to such violation, except that, in
the case of fraud, no time limit shall apply;
``(5) to allow for the controlling holder of a mortgage
related security to appoint and remove the servicers of such
security, where the servicer has not been in substantial
compliance with its duties under applicable law and all
relevant agreements, as determined by the Commission;
``(6) to require each pooling and servicing agreement
related to a mortgage related security to specify separate and
independent servicers for default (in this section referred to
as the `mandatory special servicer') and transactions
processing; and
``(7) to require existing or future loans comprising the
mortgage related security be transferred to the mandatory
special servicer, if such loans are more than 60 days
delinquent or where the holder and servicer find that there is
a significant risk of default, based on all the facts and
circumstances, in which case, such mandatory special servicer
shall be compensated through an untranched, prorated interest
in the assets of the mortgage related security, beginning at 1
percent.
For purposes of this subsection a `pooling and servicing agreement' is
any contract establishing the transaction rights and duties of the
parties to any mortgage-backed securitization transaction.
``(b) Compensation.--The rules of the Commission under this section
shall include a definition of the term `compensation' to mean any
financial remuneration, including salary, bonuses, incentives,
benefits, severance, deferred compensation, or golden parachute
benefits, and any profits realized from the sale of the securities of
the company.''.
SEC. 5. LIMITATION ON MORTGAGES HELD BY LOAN SERVICERS.
(a) Limitation.--The Truth in Lending Act (15 U.S.C. 1631 et seq.)
is amended by inserting before section 130 (15 U.S.C. 1640) the
following new section:
``SEC. 129I. LIMITATIONS ON MORTGAGES HELD BY LOAN SERVICERS.
``(a) Limitation.--Neither the servicer of a securitized
residential mortgage loan, nor any affiliate of such servicer, may own,
or hold any interest in, any other residential mortgage loan that is
secured by a mortgage, deed of trust, or other equivalent consensual
security interest on the same dwelling or residential real property
that is subject to the mortgage, deed of trust, or other security
interest that secures the securitized residential mortgage loan
serviced by the servicer.
``(b) Definitions.--For purposes of this section, the following
definitions shall apply:
``(1) Affiliate.--The term `affiliate' means, with respect
to a servicer, any person or entity that controls, is
controlled by, or is under common control with such servicer,
as the Board shall prescribe by regulation.
``(2) Residential mortgage loan.--The term `residential
mortgage loan' means any consumer credit transaction that is
secured by a mortgage, deed of trust, or other equivalent
consensual security interest on a dwelling or on residential
real property that includes a dwelling, other than a consumer
credit transaction under an open end credit plan or an
extension of credit relating to a plan described in section
101(53D) of title 11, United States Code.
``(3) Securitized residential mortgage loan.--The term
`securitized residential mortgage loan' means any residential
mortgage loan that serves as collateral for a fixed-income or
other security that allows the holder of such security to
receive payments dependent on the cash flow from such
residential mortgage loan.
``(4) Servicer.--The term `servicer'--
``(A) has the meaning provided in section 129A,
except that such term includes a person who receives
any payments from a mortgagor, including any amounts
for escrow accounts, and makes payments to the owner of
the loan or other third parties, including payments
made after default, pursuant to the terms of the
relevant contracts; and
``(B) excludes State and local housing agencies.
``(c) Interests.--For purposes of subsection (a), ownership of, or
holding an interest in a securitized residential mortgage loan includes
ownership of, or holding an interest in--
``(1) a pool of securitized residential mortgage loans that
contains such securitized residential mortgage loan; or
``(2) any security based on or backed by a pool of
securitized residential mortgage loans that contains such
securitized residential mortgage loan.''.
(b) Clerical Amendment.--The table of sections for chapter 2 of the
Truth in Lending Act is amended by inserting before the item relating
to section 130 the following new item:
``Sec. 129I. Limitations on mortgages held by loan servicers.''.
(c) Applicability.--The amendment made by subsection (a) shall
apply--
(1) with respect to the servicer (or affiliate of the
servicer) of a residential mortgage loan that is originated
after the date of enactment of this Act, on such date of
enactment; and
(2) with respect to the servicer (or affiliate of the
servicer) of a residential mortgage loan that is originated on
or before the date of enactment of this Act, upon the
expiration of the 12-month period beginning on such date of
enactment.
(d) Enforcement Provisions.--Section 130 of the Truth in Lending
Act (15 U.S.C. 1640) is amended by adding at the end the following:
``(m) Servicers.--This section shall apply to servicers (as that
term is defined in section 129I) in the same manner, and to the same
extent as it applies to creditors.''.
SEC. 6. REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 IMPROVEMENTS.
(a) RESPA Fees and Restrictions.--Section 8 of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C. 2607) is amended by adding
at the end the following new subsections:
``(e) Fees To Be Reasonably Related to Costs.--All fees charged for
the rendering of a real estate settlement service in connection with a
transaction involving a federally related mortgage loan or incurred in
connection with servicing such loan shall be reasonably related to the
cost of providing the service.
``(f) Restriction on Use of Subsidiaries and Insourcing.--
``(1) In general.--No servicer of a residential mortgage
loan shall render a real estate settlement service in
connection with a transaction involving a federally related
mortgage loan through a subsidiary of such person or through
insourcing.
``(2) Insourcing defined.--For purposes of this subsection,
the term `insourcing' means providing for services to be
conducted by the servicer's affiliated entities.''.
(b) Force-Placed Insurance.--Section 6 of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C. 2605) is amended--
(1) in subsection (l), by adding at the end the following
new paragraph:
``(5) Requirement to continue insurance.--If a borrower's
insurance policy has not been paid, the servicer shall make
payments on the current policy or seek reinstatement of such
policy where necessary and then make such payments, unless the
policy has been terminated for reasons other than nonpayment.
Where escrow funds are not available, the servicer shall
advance such funds. If the current policy cannot be continued
and force-placed insurance is provided, the costs and the
coverage should be substantially equivalent to that provided in
a standard homeowner's insurance policy.'';
(2) by adding at the end the following new subsection:
``(n) Disclosures Related to Insurance Coverage Information.--
``(1) Notice.--Each servicer of a federally related
mortgage loan shall notify the borrower of such loan that the
borrower is required to disclose to the servicer the borrower's
property insurance coverage information.
``(2) Disclosure.--Each borrower who receives a notice
described under paragraph (1) shall disclose such information
to the servicer.''.
(c) Loss Mitigation.--Section 6 of the Real Estate Settlement
Procedures Act of 1974 (12 U.S.C. 2605), as amended by subsection (b),
is further amended by adding at the end the following new subsection:
``(o) Loss Mitigation.--
``(1) Single electronic record and single point of
contact.--Each servicer of a federally related mortgage loan,
or agents of such servicer, shall, with respect to the
borrower, establish--
``(A) a single electronic record for each account,
the contents of which shall be accessible throughout
the servicer, or agents of such servicer, including to
all loss mitigation staff, all foreclosure staff, and
all bankruptcy staff; and
``(B) a single point of contact for the borrower
for all loss mitigation activities.
``(2) General loss mitigation requirements.--Each servicer
of a federally related mortgage loan, or agents of such
servicer, shall--
``(A) maintain adequate staffing and systems for
tracking borrower documents and information that are
relevant to foreclosure, loss mitigation, bankruptcy,
and other servicing operations;
``(B) maintain adequate staffing and caseload
limits for employees responsible for handling
foreclosure, loss mitigation, bankruptcy, and related
communication with borrowers and housing counselors;
``(C) set reasonable minimum experience, education,
and training requirements for loan modification staff;
and
``(D) document electronically each action on a
foreclosure, loan modification, bankruptcy, or other
servicing file, including all communication with the
borrower and other parties.
``(3) Team leaders.--Each servicer of a federally related
mortgage loan shall establish a single individual to coordinate
the servicer's departments handling the activities described
under subparagraphs (A), (B), and (C) under paragraph (2).
``(4) Limit on employee activities.--With respect to
employees of a servicer of a federally related mortgage loan
who handle delinquent loans or mandatory special servicers, the
Bureau shall issue regulations setting a reasonable limit on
the number of cases that may be handled by each such employee.
``(5) Mandatory special servicer defined.--For purposes of
this subsection, the term `mandatory special servicer' has the
meaning given such term in section 15H(a)(6) of the Securities
Exchange Act of 1934.
``(6) Additional requirements related to transfer of
loans.--
``(A) To successor servicers.--For any ordinary
transfer of servicing to a successor servicer of a
federally related mortgage loan or subservicer, the
transferring servicer shall--
``(i) inform the successor servicer
(including a subservicer) whether a loan
modification is pending;
``(ii) ensure that the successor servicer
shall accept and continue processing prior loan
modification requests; and
``(iii) ensure that successor servicer
shall honor trial and permanent loan
modification agreements entered into by the
transferring servicer.
``(B) To mandatory special servicers.--A servicer
of a federally related mortgage loan shall refer any
loan that is 60 or more days delinquent to an
independent mandatory special servicer or subservicer
who shall agree to the loss mitigation requirements of
this subsection.''.
(d) Application of Payments.--Section 6(k)(1) of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C. 2605(k)) is amended--
(1) in subparagraph (D), by striking ``or'' at the end;
(2) in subparagraph (E), by striking the period and
inserting ``; or''; and
(3) by adding at the end the following new subparagraph:
``(F) apply payments, including partial payments,
made by a borrower to any fees before first applying
such payments to any outstanding scheduled principal or
interest payments.''.
(e) Monthly Servicing Statements.--Section 6 of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C. 2605), as amended by
subsection (c), is further amended by adding at the end the following
new subsection:
``(p) Monthly Servicing Statements.--The Bureau shall issue
regulations requiring each servicer of a federally related mortgage
loan to provide borrowers with a monthly servicing statement that
clearly describes--
``(1) the payment amounts due under the loan agreement;
``(2) the date and time when such payments must be
received;
``(3) the location where such payments must be received;
and
``(4) a list of each payment received by the servicer,
along with how such payment was allocated to the amounts owed
by the borrower.''.
(f) Unfair and Deceptive Acts or Practices Violations.--Section 19
of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2617)
is amended by adding at the end the following new subsection:
``(e) Authority of the Bureau With Respect to UDAP Violations.--The
Bureau's authority with respect to unfair and deceptive acts or
practices by servicers of federally related mortgage loans shall be the
same as its authority with respect to unfair and deceptive acts or
practices under the Consumer Financial Protection Act of 2010.
Notwithstanding such authority, the following shall apply:
``(1) Service.--The Bureau shall provide the servicer in
violation with notification of such violation via personal
service and such notification shall include a notice of the
servicer's rights and any bond requirements the servicer may be
subject to by reason of such violation.
``(2) Damages.--Notwithstanding amounts specified under the
Federal Trade Commission Act, a servicer convicted of unfair
and deceptive acts or practices with respect to a federally
related mortgage loan shall be--
``(A) fined, regardless of whether there was a
pattern or practice of such violations, statutory
damages of not more than $10,000 for each such
violation (such amount to be adjusted annually
beginning 1 year after the date of enactment of the
Foreclosure Fraud and Homeowner Abuse Prevention Act of
2011 by the percentage corresponding to the annual
percentage increase in the Consumer Price Index for all
urban consumers);
``(B) required to pay all actual damages, including
emotional distress, regardless of whether there was
detrimental reliance on the part of the borrower; and
``(C) liable for attorneys fees.
``(3) Bar to foreclosure.--In any judicial or non-judicial
foreclosure proceeding, it shall be a bar to foreclosure that
the servicer of the federally related mortgage loan on the
property to be foreclosed violated any provision of this
section.
``(4) Statute of limitations.--The statute of limitations
for a servicer's violation of unfair and deceptive acts or
practices laws with respect to a federally related mortgage
loan shall be 3 years from the date on which violation
occurs.''.
SEC. 7. TRANSFER NOTIFICATION UNDER TILA.
(a) In General.--Section 131(g) of the Truth in Lending Act (15
U.S.C. 1641(g)) is amended--
(1) in paragraph (1), by inserting ``, including any
servicer with respect to a securitized residential mortgage
loan,'' before ``shall notify''; and
(2) by striking paragraph (2) and inserting the following:
``(2) Definitions.--For purposes of this subsection--
``(A) the term `mortgage loan' means any consumer
credit transaction that is secured by the principal
dwelling of a consumer; and
``(B) the terms `servicer' and `securitized
residential mortgage loan' have the same meanings as in
section 129I(b).''.
(b) Safe Harbor for Mistaken Payments; Fees.--Section 131 of the
Truth in Lending Act (15 U.S.C. 1641) is amended--
(1) by redesignating subsection (g) as subsection (i); and
(2) by inserting after subsection (f) the following:
``(g) Treatment of Mistaken Loan Payments After Transfer.--During
the 60-day period beginning on the effective date of transfer of the
servicing of any securitized residential mortgage loan, a late fee may
not be imposed on the consumer with respect to any payment on such
loan, and no such payment may be treated as late for any other purpose,
if the payment is received by the transferor servicer (rather than the
transferee servicer who should properly receive payment) before the due
date applicable to such payment.
``(h) Fee Waivers Upon Transfer.--
``(1) In general.--A creditor, including a servicer, may
not impose or collect--
``(A) any fee that is not listed as having been
incurred in--
``(i) the notice to the consumer of the
transfer of a securitized residential mortgage
loan from the previous creditor or servicer; or
``(ii) the notice to the consumer from the
new creditor or servicer; or
``(B) any fee that is not specified on the monthly
statement to the consumer as having been incurred.
``(2) Definitions.--For purposes of this subsection, the
terms `servicer' and `securitized residential mortgage loan'
have the same meanings as in section 129I(b).''.
SEC. 8. LOAN MODIFICATIONS; DUAL TRACK PROCEEDINGS PROHIBITED.
(a) In General.--Section 129A of the Truth in Lending Act (as such
section is redesignated by section 1402(a)(1) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act) is amended--
(1) by redesignating subsections (f) and (g) as subsections
(h) and (i), respectively;
(2) in subsection (i), as so redesignated--
(A) by redesignating paragraphs (1) through (3) as
paragraphs (2) through (4), respectively; and
(B) by inserting before paragraph (2), as so
redesignated, the following:
``(1) the term `affordable loan modification' means an
agreement to reduce the amount of scheduled regular payments
under a mortgage note, including any reduction of the principal
amount of the mortgage note, that is reflected in a permanent
change to the terms of the mortgage note under such terms as
the Bureau of Consumer Financial Protection shall define.'';
and
(3) by inserting after subsection (e) the following:
``(f) Limitation on Foreclosure Proceedings.--
``(1) Initiation of foreclosure.--A servicer may not
initiate or continue a nonjudicial foreclosure or a judicial
foreclosure against a mortgagor that is otherwise authorized
under State law, unless the servicer--
``(A) has determined whether the mortgagor is
eligible for an affordable loan modification; and
``(B) has made such a modification, if the
mortgagor is eligible for a modification.
``(2) Foreclosure proceedings permitted.--Notwithstanding
paragraph (1), a servicer may initiate or continue a judicial
or nonjudicial foreclosure under State law against a mortgagor,
if--
``(A) the servicer--
``(i) determines that the mortgagor is not
eligible for a modification;
``(ii) notifies the mortgagor of the
determination under clause (i); and
``(iii) provides the mortgagor--
``(I) a copy of any net present
value calculation made by the servicer
in relation to an affordable loan
modification, including any information
providing a basis for such net present
value calculation;
``(II) a copy of any note, deed of
trust, or other document necessary to
establish the right of the mortgagee to
foreclose on the mortgage, including
proof of assignment of the mortgage to
the mortgagee and the right of the
mortgagee to enforce the relevant note
under the law of the State in which the
real property securing the mortgage is
located;
``(III) a copy of any language in
the pooling or servicing agreement with
respect to the mortgage that the
servicer believes prevents a
modification of the mortgage note;
``(IV) a copy of all correspondence
between the servicer and the mortgagees
and investors in which the servicer
attempts to obtain permission to make a
modification;
``(V) a complete and unaltered copy
of the pooling or servicing agreement
in electronic format; and
``(VI) the alternatives to
foreclosure available to the mortgagor,
including deed in lieu of foreclosures
and short sales; or
``(B) a mortgagor--
``(i) declines an affordable modification
in writing; or
``(ii) does not respond to the servicer's
outreach activities (as defined by the
Secretary of Housing and Urban Development) to
obtain underlying information to complete an
application or obtain consent to an affordable
modification.
For purposes of subparagraph (A), a `pooling and servicing
agreement' is any contract establishing the transaction rights
and duties of the parties to any mortgage-backed securitization
transaction.
``(3) Bar to foreclosure.--Failure to comply with the
requirements of this subsection shall be a bar to the
foreclosure of a mortgage, deed of trust, or substantially
similar instrument.
``(4) Eligibility.--A mortgagor shall be eligible to
participate in an affordable loan modification program if--
``(A) such person is a mortgagor under a federally
related loan secured by the principal residence of the
mortgagor, or is eligible to assume such a federally
related mortgage loan, who is unable to make payments
on a federally related mortgage loan under such
criteria as the Director of the Bureau of Consumer
Financial Protection shall define, in consultation with
the Secretary of Housing and Urban Development and the
Secretary of the Treasury; and
``(B) they are not an individual who has abandoned
the principal residence securing the federally related
mortgage loan.
``(5) Certification of determination of eligibility
required for sale.--
``(A) Sale of property prohibited.--If the servicer
of a mortgage does not file a certification with the
appropriate land records office in the jurisdiction
where the property securing the mortgage is located,
stating that the servicer has determined the
eligibility of the mortgagor for an affordable loan
modification--
``(i) the mortgagee may not sell the
property securing the mortgage; and
``(ii) no person that purchases the
property securing the mortgage may initiate an
action to recover possession of the property.
``(B) Violations.--A sale of property in violation
of this paragraph shall be void.
``(C) Contents.--The Director of the Bureau of
Consumer Financial Protection shall, by rule, determine
the contents of the certification required under this
subsection.
``(g) Earned Principal Forgiveness.--
``(1) In general.--If, after reducing mortgage note
principal under earned principal forgiveness provided in
paragraph (2), a target affordable regular mortgage payment has
not been achieved, the servicer of the mortgage shall comply
with the affordable loan modification plan modification
waterfall steps of interest rate reduction, term extension, and
principal forbearance, as necessary to achieve a target
affordable regular mortgage payment.
``(2) Earned principal forgiveness.--
``(A) Principal reduction.--The Bureau shall
determine standards by which a mortgagor who has
received an affordable loan modification shall remain
in good standing in order to participate in a reduction
in mortgage note principal under this subsection.
``(B) Principal reduction required.--Except as
provided under subparagraph (C), a servicer shall offer
a mortgager an affordable loan modification having the
maximum amount of principal reduction that results in a
positive net present value calculation.
``(C) Exceptions.--
``(i) Greater principal reduction.--A
servicer may offer a greater principal
reduction, if such a reduction is consistent
with the terms of any contract with respect to
the mortgage.
``(ii) Loan-to-value ratio.--A servicer is
not required to offer an affordable loan
modification having a principal reduction that
would result in a loan-to-value ratio of less
than 100 percent.
``(D) Rules of construction.--
``(i) Maximum amount of principal
reduction.--A principal reduction amount may be
considered the maximum amount if it is within
$1,000 of the actual maximum amount.
``(ii) Positive net present value
calculation.--A net present value calculation
shall be deemed to be `positive' if the net
present value result for an affordable loan
modification scenario is greater than the net
present value result if no affordable loan
modification is made. Net present value shall
be calculated as the benefit of all investors
in a securitization rather than the benefit of
any particular class of investors.
``(E) Principal forgiveness.--
``(i) Treatment of principal reduction
amount.--Any amount of principal reduction
under subparagraph (B) shall be treated as non-
interest-bearing principal forbearance until
the dates described under clause (ii). The
principal reduction described in this
subparagraph shall be deemed to be separate
from and exclusive of any other forbearance
that may be offered in conjunction with a
modification under an affordable loan
modification program.
``(ii) Reduction of principal.--The
servicer of a mortgage modified under an
affordable loan modification plan shall reduce
the unpaid balance of the principal of the
mortgage by an amount equal to \1/3\ of the
total amount of the principal reduction under
subparagraph (B) on each of the following
dates:
``(I) The date that is 1 year after
the date on which the affordable loan
modification begins.
``(II) The date that is 2 years
after the date on which the affordable
loan medication begins.
``(III) The date that is 3 years
after the date on which the affordable
loan modification begins.
``(iii) Limitation.--The Bureau may not
require a servicer to reduce mortgage note
principal to an amount that is less than the
market value of the property securing the
mortgage at the time of the reduction in
principal.
``(3) Calculation of target affordable regular mortgage
payment.--For purposes of this subsection, the target
affordable regular mortgage payment shall be calculated under
such terms as the Bureau shall define. Such terms shall--
``(A) be based on a fully amortizing principal and
interest payment over the remainder of the term of the
mortgage, as modified by a reduction in principal; and
``(B) use the mortgage note interest rate in effect
at the time of a reduction in principal.
``(4) Treatment of subordinate liens.--The Bureau shall
prescribe rules establishing procedures governing the treatment
of any whole loan owned by the creditor (or any of its
affiliates) and secured by a subordinate lien on a property
owned by a mortgagor participating in an affordable loan
modification program.''.
SEC. 9. FAIR DEBT COLLECTION PRACTICES ACT AMENDMENTS.
(a) Applicability to Servicers.--Section 803 of the Fair Debt
Collection Practices Act (15 U.S.C. 1692a) is amended--
(1) in paragraph (6), by inserting before ``The term does
not'' the following: ``The term includes any servicer of a
securitized residential mortgage loan who uses any
instrumentality of interstate commerce or the mails in the
collection of any debts in relation to any such securitized
residential mortgage loan.''; and
(2) by adding at the end the following:
``(9) Securitized residential mortgage loan.--The term
`securitized residential mortgage loan' means any residential
mortgage loan that serves as collateral for a fixed-income or
other security that allows the holder of such security to
receive payments dependent on the cash flow from such
residential mortgage loan.
``(10) Servicer.--The term `servicer'--
``(A) means any person responsible for the
management or collection of a pool of securitized
residential mortgage loans or making allocations or
distributions to holders of asset-backed securities;
and
``(B) does not include any State or local housing
agency.''.
(b) Civil Liability.--Section 813 of the Fair Debt Collection
Practices Act (15 U.S.C. 1692k) is amended by adding at the end the
following:
``(f) Any debt collector that violates any provision of this title
with respect to a debt secured by the residence of the consumer shall
be liable to such consumer in the amount of $10,000 per violation.
``(g) After the end of the 1-year period beginning on the date of
the enactment of this subsection, amounts of penalties specified under
this section shall be annually adjusted to reflect inflation.''.
(c) Rulemaking.--The Bureau of Consumer Financial Protection shall,
not later than 270 days after the date of enactment of this Act, issue
rules to carry out the amendments made by this section.
SEC. 10. REGULATION OF SERVICER AFFILIATES BY BANKING AGENCIES.
(a) Capital Reserve Standards.--Each of the appropriate Federal
banking agencies (as defined in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813)) shall promulgate regulations to
establish independent capital reserve standards for any servicer of a
federally related mortgage that is affiliated with a financial
institution that is subject to regulation by that agency.
(b) Treatment of Delinquent Loans.--
(1) In general.--The Securities and Exchange Commission
shall issue regulations to provide that, for purposes of
generally accepted accounting principles, any federally related
mortgage loan that is 120 days or more delinquent and that has
not been the subject of a modification or a debt restructuring,
as provided in section 129A of the Truth in Lending Act shall
be marked to market.
(2) Insured depository institution treatment.--An
appropriate Federal banking agency (as defined under section 3
of the Federal Deposit Insurance Act (12 U.S.C. 1813)) may not
find the regulations issues pursuant to paragraph (1) to be
inconsistent with the objectives described under section
37(a)(1) of the Federal Deposit Insurance Act (12 U.S.C.
1831n(a)(1)).
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
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