Fairness in Foreclosures Act of 2011 - Declares that no action for a deficiency judgment arising from an obligation under a residential mortgage may be brought except in accordance with this Act.
Declares that no such deficiency judgment may be issued unless the court has determined that the foreclosure sale for the property securing repayment was conducted in accordance with specified requirements.
Specifies a formula for determining the total amount a plaintiff may recover in such a deficiency judgment.
Declares that no action for a deficiency judgment may be brought if the (nonrecourse) mortgage terms prohibit recovery after: (1) the residential property securing repayment of such obligation is sold at foreclosure sale, or (2) the mortgage is foreclosed in the manner provided under the law of the state in which the property is located.
Declares that if the mortgagor is a member of a low-income family: (1) no action may be brought for a deficiency judgment; and (2) a deficiency in recovery, from a foreclosure sale, of the full amount of the mortgage obligation may not be reported to any consumer reporting agency or disclosed to any person other than the mortgagor or the mortgagor's personal representative, unless such disclosure is otherwise required by law.
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3566 Introduced in House (IH)]
112th CONGRESS
1st Session
H. R. 3566
To ensure uniformity and fairness in deficiency judgments arising from
foreclosures on mortgages for single family homes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
December 6, 2011
Mr. Towns (for himself and Mr. Gutierrez) introduced the following
bill; which was referred to the Committee on the Judiciary
_______________________________________________________________________
A BILL
To ensure uniformity and fairness in deficiency judgments arising from
foreclosures on mortgages for single family homes.
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 ``Fairness in Foreclosures Act of
2011''.
SEC. 2. REQUIREMENTS FOR DEFICIENCY JUDGMENTS.
No action for a deficiency judgment arising from an obligation
under a residential mortgage may be brought except in accordance with
this Act.
SEC. 3. TIMING.
(a) Requirement.--An action for a deficiency judgment arising from
an obligation under a residential mortgage may be brought only during
whichever of the following periods terminates earlier:
(1) The 12-month period that begins upon the date of the
foreclosure sale for the residential property securing the
obligation under the mortgage.
(2) Such period as may be provided under the applicable
State law for bringing an action for such a deficiency
judgment.
(b) Satisfaction of Mortgage Obligation.--In the case of any
foreclosure on a residential mortgage, if no action for a deficiency
judgment arising from the obligation under the mortgage is brought
during the period provided in subsection (a), the proceeds of any
foreclosure sale conducted with respect to the residential property
securing repayment of the obligation owed under the mortgage,
regardless of amount, shall be deemed to be in full satisfaction of the
obligation under the mortgage and no action to recover a deficiency in
such amount may be brought after the expiration of such period.
SEC. 4. REQUIREMENT OF COMMERCIALLY REASONABLE SALE.
(a) Requirement.--No deficiency judgment arising from an obligation
under a residential mortgage may be issued unless the court has
determined that the foreclosure sale for the property securing
repayment of the obligation under the mortgage was conducted in
accordance with the following requirements:
(1) The sale was conducted in a recognized market in the
manner that is usual with respect to such market.
(2) The sale price of the property was current in a
recognized market at the time of disposition.
(3) The sale was otherwise in conformity with reasonable
commercial practices among dealers in property of the type
sold.
(b) Determination.--A party adversely affected by a deficiency
judgment may submit to the court evidence contradicting the commercial
reasonableness of the foreclosure sale and of any costs incurred in
such sale.
SEC. 5. AMOUNT.
(a) In General.--The total amount recovered by a plaintiff in a
deficiency judgment arising from an obligation under a residential
mortgage shall be the amount equal to--
(1) the sum of--
(A) the amount of obligation owed under the
mortgage, as of the date of the foreclosure sale for
the property, as determined by the court, with interest
on such amount from the date of the foreclosure sale at
the rate provided in the mortgage or related contract;
(B) if applicable, the amount owing on all prior
mortgages, liens, and encumbrances, with interest; and
(C) any reasonable costs for, and disbursements of,
the action for the deficiency judgment; less
(2) the greater of--
(A) the fair market value of the property, as
determined by an independent appraisal completed during
either of 10-day periods that begin and end upon the
date of the foreclosure sale; or
(B) the amount of the sale price of the property at
the foreclosure sale.
(b) Determination of Fair Market Value.--A party adversely affected
by a deficiency judgment may submit to the court evidence relevant to
establishing the fair market value of the property for purposes of
subsection (a)(2)(A).
SEC. 6. PROHIBITIONS ON DEFICIENCY JUDGMENTS.
(a) Nonrecourse Mortgages.--No action for a deficiency judgment
arising from the obligation under a residential mortgage may be brought
if the terms of the mortgage prohibit the recovery of any amount of the
obligation due under the mortgage after--
(1) the residential property securing repayment of such
obligation is sold at foreclosure sale; or
(2) the mortgage is foreclosed in the manner provided under
the law of the State in which the property is located.
(b) Low-Income Mortgagors.--In the case of any residential mortgage
under which the mortgagor is a member of a low-income family, the
following shall apply:
(1) Prohibition on action.--No action may be brought for a
deficiency judgment arising from the obligation under such
residential mortgage.
(2) Prohibition on reporting deficiency to credit
agencies.--A deficiency in recovery, from a foreclosure sale
for the property securing repayment of the obligation due under
the mortgage, of the full amount of the obligation may not be
reported to any consumer reporting agency (as such term is
defined in section 603 of the Fair Credit Reporting Act (15
U.S.C. 1681a)) or disclosed to any person other than the
mortgagor or a personal representative of the mortgagor, unless
such disclosure is otherwise required by law.
A determination of whether a family is a low-income family for purposes
of this subsection shall be based on the income of the family as of the
date of the foreclosure sale or any other date during either of the 30-
day periods beginning and ending on the date of such sale, and shall be
based upon information obtained from the mortgagor during the
foreclosure process.
SEC. 7. DEFINITIONS.
For purposes of this Act, the following definitions shall apply:
(1) Deficiency judgment.--The term ``deficiency judgment''
means a judgment, lien, or court order, as provided for under
State law, for recovery in whole or in part, as determined by a
court as just and equitable, after a foreclosure or foreclosure
sale of the property securing repayment of the obligation owed
under a residential mortgage, of the portion of the obligation
that remains unsatisfied after application of the proceeds of
such sale to the obligation.
(2) Foreclosure sale.--The term ``foreclosure sale'' means,
with respect to the residential property securing repayment of
the obligation under a residential mortgage, the sale of the
property pursuant to foreclosure on the mortgage, whether
judicial or nonjudicial, undertaken in accordance with the laws
of the State in which the property is located, under which the
proceeds of such sale are applied to such obligation.
(3) Low-income family.--The term ``low-income family'' has
the meaning given such term in section 3(b) of the United
States Housing Act of 1937 (42 U.S.C. 1437a(b)).
(4) Mortgage.--
(A) In general.--The term ``mortgage'' means a deed
of trust, mortgage, deed to secure debt, security
agreement, or any other form of instrument under which
any property (real, personal, or mixed), or any
interest in property (including leaseholds, life
estates, reversionary interests, and any other estates
under applicable State law), is conveyed in trust,
mortgaged, encumbered, pledged, or otherwise rendered
subject to a lien for the purpose of securing the
payment of money or the performance of an obligation.
(B) Condominiums and cooperatives.--Such term
includes a first mortgage given to secure--
(i) the unpaid purchase price of a fee
interest in, or a long-term leasehold interest
in, a one-family unit in a multifamily project,
including a project in which the dwelling units
are attached or are manufactured housing units,
semi-detached, or detached, and an undivided
interest in the common areas and facilities
that serve the project; or
(ii) repayment of a loan made to finance
the purchase of stock or membership in a
cooperative housing corporation the permanent
occupancy of dwelling units of which is
restricted to members of such corporation,
where the purchase of such stock or membership
entitles the purchaser to the permanent
occupancy of one of such units.
(5) Residential mortgage.--
(A) In general.--The term ``residential mortgage''
means a mortgage the primary purpose of which is the
purchase or financing of a permanent 1- to 4-family
dwelling that is used as the principal residence of the
mortgagor.
(B) Determination.--A determination of whether a
mortgage is a residential mortgage for purposes of this
Act shall be made based on the purpose of the mortgage
as of the time the loan was made, as determined based
upon information obtained during the application
process for the mortgage.
SEC. 8. APPLICABILITY AND PREEMPTION.
(a) Applicability.--This Act shall apply with respect to any action
for a deficiency judgment arising from an obligation under a
residential mortgage brought in any State or Federal court.
(b) Preemption.--The provisions of this Act shall preempt any State
law to the extent that such law is inconsistent with the limitations
contained in such provisions. The provisions of this Act shall not
preempt any State law that provides for defenses or places limitations
on a person's liability in addition to those contained in this Act or
otherwise imposes greater restrictions that those provided in this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on the Judiciary.
Referred to the Subcommittee on Courts, Commercial and Administrative Law.
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