Thursday, April 30, 2009

U.S. Senate Defeats Mortgage “Cram-Down” Provisions in S. 896

Senate Bill 896, with provisions similar to H.R. 1106 (Conyers, D-MI), went down to defeat today.

The legistlation Senator Dick Durbin (Durbin D-IL) referred to as: “The Helping Families Save Their Homes in Bankruptcy Act,” failed to garner enough votes in the Senate to stave off defeat.

The handwriting in the Senate may have been on the Wall for some weeks now. Durbin has been unable to convince large U.S. Banks to drop their opposition to its passage. The Mortgage Bankers Association and the American Bankers Association advanced strong opposition to both H.R. 1106 and S. 896.

Had S. 896 it passed, it would have moved forward with the following provisions. It would have operated by:

1) Eliminating a provision of the bankruptcy law that prohibits modifications to mortgage loans on a debtor's principal residence, so that primary mortgages are treated the same as vacation homes and family farms.
2) Extending the time frame debtors are allowed for repayment, in order to reduce monthly payments to make the mortgage more affordable.

3) Permitting bankruptcy judges to replace escalating variable interest rates with a new interest rate that will keep the mortgage affordable over the long term while also compensating creditors appropriately for risk.
4) Waiving the bankruptcy counseling requirement for families for whom foreclosure will soon commence, so that precious time is not lost as families fight to save their homes.
5) Ensuring lenders provide proper notice when assessing fees and allow judges to waive prepayment penalties.
6) Maintaining debtors' legal claims against predatory lenders while in bankruptcy.

Since S. 896 failed, a bankruptcy judge in a CH 13 or CH 7 proceeding still may not change personal residential home debt.

After the S. 896 failed to pass, Durbin indicated he intended to redraft and reintroduce similiar legislation in the future.
Hugh Wood
Atlanta, GA


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WASHINGTON -- The Democratic-controlled Senate on Thursday defeated President Barack Obama's plan to spare hundreds of thousands of homeowners from foreclosure through bankruptcy.

A dozen Democrats joined Republicans in the 45-51 vote to scuttle the bill, which Obama had said was important to saving the economy and promised to push through Congress. But facing stiff opposition from banks, Obama did little to pressure lawmakers who worried it would encourage bankruptcy filings and spike interest rates.

"The vote today was a bipartisan rejection of an interest-rate hike, which is exactly the wrong solution for jobs, homeowners and the economy," said Senate Republican Leader Mitch McConnell of Kentucky.


Democratic leaders lamented that they were powerless, with the 45 votes falling far short of the 60 to overcome procedural hurdles. The newest Democrat, Sen. Arlen Specter of Pennsylvania, voted against it.

"The banks that are too big to fail are saying that 8 million Americans facing foreclosure are too little to count in this economy," said Senate Majority Whip Dick Durbin of Illinois, who championed the bill and had spent weeks negotiating with financial lobbyists in a bid to strike a deal.

Obama long has backed the proposal to give debt-ridden individuals the option of asking a bankruptcy judge to reduce their mortgage payment. He cited that support last fall as he privately lobbied skeptical Democrats to back the $700 billion Wall Street bailout. And once he was president, he had promised, he would push for its passage.

In February, the newly inaugurated president included the proposal as the stick in a housing plan full of carrots for the banking industry. The broader rescue plan encouraged, but did not require, lenders to cut homeowners' monthly payments and refinance loans for individuals whose home's market value has sunk below what they owe.

The following month, the House passed the bankruptcy legislation along party lines in a 234-191 vote.

But the bankruptcy option got only a tepid endorsement from Treasury Secretary Timothy Geithner. As debate on the measure brewed, Geithner was pushing for the creation of a government-sponsored program that would rely on private investors to buy the risky mortgage-backed securities weighing down the market.

The forced easing, or "cram-down," of a mortgage by a bankruptcy judge would have likely introduced additional uncertainty for investors.

Congressional Democrats also questioned the merits.

"Do I want to have my rate go up so that somebody else might be able to cram down" their mortgage payment? asked Sen. Ben Nelson, D-Neb., who voted against the bill.

In recent days, as it became clear the bill would fail, the administration did little to counter the aggressive lobbying by banks fighting the bill.

Spokeswomen at the Treasury Department and White House did not respond to requests for comment, and absent from the debate was any statement of administration policy.

Obama supporters blamed the banks.

"There was a lot of fear-mongering," said Andrew Jakabovics, associate director for housing and economics at the Center for American Progress in Washington. "The banks put on a good show, saying, 'Hey, if you force us to take more losses, we're going to go out of business.'"

Indeed, the banking industry had a direct line to Capitol Hill. Officials from some of the biggest banks, including JP Morgan Chase & Co., Bank of America Corp. and Wells Fargo & Co., as well as groups representing credit unions and community banks, negotiated for weeks with Durbin and other leading Senate Democrats.


Trying to win support, Durbin narrowed the provision substantially. The latest proposal would have restricted eligibility to homeowners already in foreclosure whose lender had not offered them better terms. Homes would also have to be worth less than $729,000 and apply to mortgage loans originated before 2009.

Durbin had offered the measure as an amendment to a housing bill aimed at easing the nation's credit crunch. That bill would guarantee bank deposits up to $250,000 through 2013.

The bill also would permanently increase the borrowing authority for the Federal Deposit Insurance Corp. from $30 billion to $100 billion. Increasing the FDIC's credit would allow the agency to reduce large new premiums it has begun charging banks to insure deposits.

The Senate is expected to vote on that measure next week. Durbin said he would try to restore the bankruptcy provision in conference with the House, although it was considered unlikely he would succeed.

"I'll be back," he said. "I'm not going to give up."

By ANNE FLAHERTY
The Associated Press
Thursday, April 30, 2009; 4:59 PM

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Here is the full text of S. 896 (failed in Senate :: 04/30/2009)



111th CONGRESSCommentsClose CommentsPermalink

1st SessionCommentsClose CommentsPermalink

S. 896CommentsClose CommentsPermalink

To prevent mortgage foreclosures and enhance mortgage credit availability.CommentsClose CommentsPermalink

IN THE SENATE OF THE UNITED STATESCommentsClose CommentsPermalink

April 24, 2009CommentsClose CommentsPermalink

Mr. DODD (for himself, Mr. DURBIN, and Mr. SCHUMER) introduced the following bill; which was read the first timeCommentsClose CommentsPermalink

April 27, 2009CommentsClose CommentsPermalink

Read the second time and placed on the calendarCommentsClose CommentsPermalink


A BILLCommentsClose CommentsPermalink

To prevent mortgage foreclosures and enhance mortgage credit availability.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title- This Act may be cited as 'Helping Families Save Their Homes Act of 2009'.CommentsClose CommentsPermalink

(b) Table of Contents- The table of contents of this Act is the following:CommentsClose CommentsPermalink

Sec. 1. Short title; table of contents.CommentsClose CommentsPermalink

TITLE I--PREVENTION OF MORTGAGE FORECLOSURES
Sec. 101. FHA loan modification program.CommentsClose CommentsPermalink

Sec. 102. Mortgage modification data collecting and reporting.CommentsClose CommentsPermalink

TITLE II--FORECLOSURE MITIGATION AND CREDIT AVAILABILITY
Sec. 201. Servicer safe harbor for mortgage loan modifications.CommentsClose CommentsPermalink

Sec. 202. Changes to HOPE for Homeowners Program.CommentsClose CommentsPermalink

Sec. 203. Requirements for FHA-approved mortgagees.CommentsClose CommentsPermalink

Sec. 204. Enhancement of liquidity and stability of insured depository institutions to ensure availability of credit and reduction of foreclosures.CommentsClose CommentsPermalink

Sec. 205. Application of GSE conforming loan limit to mortgages assisted with TARP funds.CommentsClose CommentsPermalink

Sec. 206. Mortgages on certain homes on leased land.CommentsClose CommentsPermalink

Sec. 207. Sense of Congress regarding mortgage revenue bond purchases.CommentsClose CommentsPermalink

TITLE III--MORTGAGE FRAUD
Sec. 301. Short title.CommentsClose CommentsPermalink

Sec. 302. Nationwide Mortgage Fraud Task Force.CommentsClose CommentsPermalink

TITLE IV--FORECLOSURE MORATORIUM PROVISIONS
Sec. 401. Sense of the Congress on foreclosures.CommentsClose CommentsPermalink

TITLE I--PREVENTION OF MORTGAGE FORECLOSURESCommentsClose CommentsPermalink

SEC. 101. FHA LOAN MODIFICATION PROGRAM.
(a) In General- Subsection (a) of section 204 of the National Housing Act (12 U.S.C. 1710(a)) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink

'(10) LOAN MODIFICATION PROGRAM-CommentsClose CommentsPermalink

'(A) AUTHORITY- The Secretary may carry out a program solely to encourage loan modifications for eligible delinquent mortgages through the payment of insurance benefits and assignment of the mortgage to the Secretary and the subsequent modification of the terms of the mortgage according to a loan modification approved by the mortgagee.CommentsClose CommentsPermalink

'(B) PAYMENT OF BENEFITS AND ASSIGNMENT- Under the program under this paragraph, the Secretary may pay insurance benefits for a mortgage, in the amount determined in accordance with paragraph (5)(A), without reduction for any amounts modified, but only upon the assignment, transfer, and delivery to the Secretary of all rights, interest, claims, evidence, and records with respect to the mortgage specified in clauses (i) through (iv) of paragraph (1)(A).CommentsClose CommentsPermalink

'(C) DISPOSITION- After modification of a mortgage pursuant to this paragraph, the Secretary may provide insurance under this title for the mortgage. The Secretary may subsequently--CommentsClose CommentsPermalink

'(i) re-assign the mortgage to the mortgagee under terms and conditions as are agreed to by the mortgagee and the Secretary;CommentsClose CommentsPermalink

'(ii) act as a Government National Mortgage Association issuer, or contract with an entity for such purpose, in order to pool the mortgage into a Government National Mortgage Association security; orCommentsClose CommentsPermalink

'(iii) re-sell the mortgage in accordance with any program that has been established for purchase by the Federal Government of mortgages insured under this title, and the Secretary may coordinate standards for interest rate reductions available for loan modification with interest rates established for such purchase.CommentsClose CommentsPermalink

'(D) LOAN SERVICING- In carrying out the program under this section, the Secretary may require the existing servicer of a mortgage assigned to the Secretary under the program to continue servicing the mortgage as an agent of the Secretary during the period that the Secretary acquires and holds the mortgage for the purpose of modifying the terms of the mortgage. If the mortgage is resold pursuant to subparagraph (C)(iii), the Secretary may provide for the existing servicer to continue to service the mortgage or may engage another entity to service the mortgage.'.CommentsClose CommentsPermalink

(b) Amendment to Partial Claim Authority- Paragraph (1) of section 230(b) of the National Housing Act (12 U.S.C. 1715u(b)(1)) is amended by striking '12 of the monthly mortgage payments' and inserting '30 percent of the unpaid principal balance of the mortgage'.CommentsClose CommentsPermalink

(c) Implementation- The Secretary of Housing and Urban Development may implement the amendments made by this section through notice or mortgagee letter.CommentsClose CommentsPermalink

SEC. 102. MORTGAGE MODIFICATION DATA COLLECTING AND REPORTING.
(a) Reporting Requirements- Not later than 120 days after the date of the enactment of this Act, and quarterly thereafter, the Comptroller of the Currency, in coordination with the Director of the Office of Thrift Supervision, shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate, the Committee on Financial Services of the House of Representatives, and the Joint Economic Committee on the volume of mortgage modifications reported to the Office of the Comptroller of the Currency and the Office of Thrift Supervision, under the mortgage metrics program of each such Office, during the previous quarter, including the following:CommentsClose CommentsPermalink

(1) A copy of the data collection instrument currently used by the Office of the Comptroller of the Currency and the Office of Thrift Supervision to collect data on loan modifications.CommentsClose CommentsPermalink

(2) The total number of mortgage modifications resulting in each of the following:CommentsClose CommentsPermalink

(A) Additions of delinquent payments and fees to loan balances.CommentsClose CommentsPermalink

(B) Interest rate reductions and freezes.CommentsClose CommentsPermalink

(C) Term extensions.CommentsClose CommentsPermalink

(D) Reductions of principal.CommentsClose CommentsPermalink

(E) Deferrals of principal.CommentsClose CommentsPermalink

(F) Combinations of modifications described in subparagraph (A), (B), (C), (D), or (E).CommentsClose CommentsPermalink

(3) The total number of mortgage modifications in which the total monthly principal and interest payment resulted in the following:CommentsClose CommentsPermalink

(A) An increase.CommentsClose CommentsPermalink

(B) Remained the same.CommentsClose CommentsPermalink

(C) Decreased less than 10 percent.CommentsClose CommentsPermalink

(D) Decreased between 10 percent and 20 percent.CommentsClose CommentsPermalink

(E) Decreased 20 percent or more.CommentsClose CommentsPermalink

(4) The total number of loans that have been modified and then entered into default, where the loan modification resulted in--CommentsClose CommentsPermalink

(A) higher monthly payments by the homeowner;CommentsClose CommentsPermalink

(B) equivalent monthly payments by the homeowner;CommentsClose CommentsPermalink

(C) lower monthly payments by the homeowner of up to 10 percent;CommentsClose CommentsPermalink

(D) lower monthly payments by the homeowner of between 10 percent to 20 percent; orCommentsClose CommentsPermalink

(E) lower monthly payments by the homeowner of more than 20 percent.CommentsClose CommentsPermalink

(b) Data Collection-CommentsClose CommentsPermalink

(1) REQUIRED-CommentsClose CommentsPermalink

(A) IN GENERAL- Not later than 60 days after the date of the enactment of this Act, the Comptroller of the Currency and the Director of the Office of Thrift Supervision, shall issue mortgage modification data collection and reporting requirements to institutions covered under the reporting requirement of the mortgage metrics program of the Comptroller or the Director.CommentsClose CommentsPermalink

(B) INCLUSIVENESS OF COLLECTIONS- The requirements under subparagraph (A) shall provide for the collection of all mortgage modification data needed by the Comptroller of the Currency and the Director of the Office of Thrift Supervision to fulfill the reporting requirements under subsection (a).CommentsClose CommentsPermalink

(2) REPORT- The Comptroller of the Currency shall report all requirements established under paragraph (1) to each committee receiving the report required under subsection (a).CommentsClose CommentsPermalink

TITLE II--FORECLOSURE MITIGATION AND CREDIT AVAILABILITYCommentsClose CommentsPermalink

SEC. 201. SERVICER SAFE HARBOR FOR MORTGAGE LOAN MODIFICATIONS.
(a) Safe Harbor-CommentsClose CommentsPermalink

(1) LOAN MODIFICATIONS AND WORKOUT PLANS- Notwithstanding any other provision of law, and notwithstanding any investment contract between a servicer and a securitization vehicle or investor, a servicer that acts consistent with the duty set forth in section 129A(a) of Truth in Lending Act (15 U.S.C. 1639a) shall not be liable for entering into a loan modification, workout, or other loss mitigation plan, including, but not limited to, disposition, including any modification or refinancing undertaken pursuant to standard loan modification, sale, or disposition guidelines issued by the Secretary of the Treasury or his designee under the Emergency Economic Stabilization Act of 2008, with respect to any such mortgage that meets all of the criteria set forth in paragraph (2)(B) to--CommentsClose CommentsPermalink

(A) any person, based on that person's ownership of a residential mortgage loan or any interest in a pool of residential mortgage loans or in securities that distribute payments out of the principal, interest and other payments in loans on the pool;CommentsClose CommentsPermalink

(B) any person who is obligated pursuant to a derivatives instrument to make payments determined in reference to any loan or any interest referred to in subparagraph (A); orCommentsClose CommentsPermalink

(C) any person that insures any loan or any interest referred to in subparagraph (A) under any law or regulation of the United States or any law or regulation of any State or political subdivision of any State.CommentsClose CommentsPermalink

(2) ABILITY TO MODIFY MORTGAGES-CommentsClose CommentsPermalink

(A) ABILITY- Notwithstanding any other provision of law, and notwithstanding any investment contract between a servicer and a securitization vehicle or investor, a servicer--CommentsClose CommentsPermalink

(i) shall not be limited in the ability to modify mortgages, the number of mortgages that can be modified, the frequency of loan modifications, or the range of permissible modifications; andCommentsClose CommentsPermalink

(ii) shall not be obligated to repurchase loans from or otherwise make payments to the securitization vehicle on account of a modification, workout, or other loss mitigation plan for a residential mortgage or a class of residential mortgages that constitute a part or all of the mortgages in the securitization vehicle,CommentsClose CommentsPermalink

if any mortgage so modified meets all of the criteria set forth in subparagraph (B).CommentsClose CommentsPermalink

(B) CRITERIA- The criteria under this subparagraph with respect to a mortgage are as follows:CommentsClose CommentsPermalink

(i) Default on the payment of such mortgage has occurred or is reasonably foreseeable.CommentsClose CommentsPermalink

(ii) The property securing such mortgage is occupied by the mortgagor of such mortgage.CommentsClose CommentsPermalink

(iii) The servicer reasonably and in good faith believes that the anticipated recovery on the principal outstanding obligation of the mortgage under the particular modification or workout plan or other loss mitigation action will exceed, on a net present value basis, the anticipated recovery on the principal outstanding obligation of the mortgage to be realized through foreclosure.CommentsClose CommentsPermalink

(3) APPLICABILITY- This subsection shall apply only with respect to modifications, workouts, and other loss mitigation plans initiated before January 1, 2012.CommentsClose CommentsPermalink

(b) Reporting- Each servicer that engages in loan modifications or workout plans subject to the safe harbor in subsection (a) shall report to the Secretary on a regular basis regarding the extent, scope and results of the servicer's modification activities. The Secretary shall prescribe regulations specifying the form, content, and timing of such reports.CommentsClose CommentsPermalink

(c) Definitions- For purposes of this section, the following definitions shall apply:CommentsClose CommentsPermalink

(1) SECRETARY- The term 'Secretary' means the Secretary of the Treasury.CommentsClose CommentsPermalink

(2) SECURITIZATION VEHICLE- The term 'securitization vehicle' means a trust, corporation, partnership, limited liability entity, special purpose entity, or other structure that--CommentsClose CommentsPermalink

(A) is the issuer, or is created by the issuer, of mortgage pass-through certificates, participation certificates, mortgage-backed securities, or other similar securities backed by a pool of assets that includes residential mortgage loans; andCommentsClose CommentsPermalink

(B) holds such mortgages.CommentsClose CommentsPermalink

SEC. 202. CHANGES TO HOPE FOR HOMEOWNERS PROGRAM.
(a) Program Changes- Section 257 of the National Housing Act (12 U.S.C. 1715z-23) is amended--CommentsClose CommentsPermalink

(1) in subsection (c)--CommentsClose CommentsPermalink

(A) in the heading for paragraph (1), by striking 'THE BOARD' and inserting 'SECRETARY';CommentsClose CommentsPermalink

(B) in paragraph (1), by striking 'Board' inserting 'Secretary, after consultation with the Board,'; andCommentsClose CommentsPermalink

(C) by adding after paragraph (2) the following:CommentsClose CommentsPermalink

'(3) DUTIES OF BOARD- The Board shall advise the Secretary regarding the establishment and implementation of the HOPE for Homeowners Program.'.CommentsClose CommentsPermalink

(2) by striking 'Board' each place such term appears in subsections (e), (h)(1), (h)(3), (j), (l), (n), (s)(3), and (v) and inserting 'Secretary';CommentsClose CommentsPermalink

(3) in subsection (e)--CommentsClose CommentsPermalink

(A) by striking paragraph (1) and inserting the following:CommentsClose CommentsPermalink

'(1) BORROWER CERTIFICATION-CommentsClose CommentsPermalink

'(A) NO INTENTIONAL DEFAULT OR FALSE INFORMATION- The mortgagor shall provide a certification to the Secretary that the mortgagor has not intentionally defaulted on the existing mortgage or mortgages and has not knowingly, or willfully and with actual knowledge, furnished material information known to be false for the purpose of obtaining the eligible mortgage to be insured and has not been convicted under Federal or State law for fraud during the 10-year period ending upon the insurance of the mortgage under this section.CommentsClose CommentsPermalink

'(B) LIABILITY FOR REPAYMENT- The mortgagor shall agree in writing that the mortgagor shall be liable to repay to the Secretary any direct financial benefit achieved from the reduction of indebtedness on the existing mortgage or mortgages on the residence refinanced under this section derived from misrepresentations made by the mortgagor in the certifications and documentation required under this paragraph, subject to the discretion of the Secretary.';CommentsClose CommentsPermalink

(B) in paragraph (4)(A), by striking '; subject to standards established by the Board under subparagraph (B),';CommentsClose CommentsPermalink

(C) in paragraph (7), by striking 'and provided that' and all that follows through 'new second lien' and inserting 'and except that the Secretary may, under such terms and conditions as the Secretary may establish, permit the establishment of a second lien on a property under an eligible mortgage to be insured, for the purpose of facilitating payment of closing or refinancing costs by a State or locality using funds provided under the HOME Investment Partnerships program under title II of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12721 et seq.) or the community development block grants program under title I of the Housing and Community Development Act of 1974 (42 U.S.C. 5301 et seq.) or by a State or local housing finance agency';CommentsClose CommentsPermalink

(D) in paragraph (9)--CommentsClose CommentsPermalink

(i) by striking 'by procuring (A) an income tax return transcript of the income tax return of the mortgagor, or (B)' and inserting 'in accordance with procedures and standards that the Secretary shall establish, which may include requiring the mortgagee to procure'; andCommentsClose CommentsPermalink

(ii) by striking 'and by any other method, in accordance with procedures and standards that the Board shall establish';CommentsClose CommentsPermalink

(E) by striking subparagraph (10);CommentsClose CommentsPermalink

(F) in paragraph (11), by inserting before the period at the end the following: ', except that the Secretary may provide exceptions to such latter requirement (relating to present ownership interest) for any mortgagor who has inherited a property or for any mortgagor who has relocated to a new jurisdiction, and is in the process of trying to sell such property or has been unable to sell such property due to adverse market conditions';CommentsClose CommentsPermalink

(G) by redesignating paragraph (11) as paragraph (10); andCommentsClose CommentsPermalink

(H) by adding at the end:CommentsClose CommentsPermalink

'(11) BAN ON MILLIONAIRES- The mortgagor shall not have a net worth, as of the date the mortgagor first applies for a mortgage to be insured under the Program under this section, that exceeds $1,000,000.';CommentsClose CommentsPermalink

(4) in subsection (h)(2)--CommentsClose CommentsPermalink

(A) by striking 'The Board shall prohibit the Secretary from paying' and inserting 'The Secretary shall not pay'; andCommentsClose CommentsPermalink

(B) by inserting after the period at the end the following: 'In implementing this provision with respect to a failure by a mortgagor to make a first payment, the Secretary shall establish policies and timing of endorsements as consistent as is possible with endorsement policies established with respect to mortgages insured under section 203(b)';CommentsClose CommentsPermalink

(5) in subsection (i)--CommentsClose CommentsPermalink

(A) by inserting ', after weighing maximization of participation with consideration of collection of premiums,' after 'Secretary shall';CommentsClose CommentsPermalink

(B) in paragraph (1), by striking 'equal to 3 percent' and inserting 'not more than 2 percent'; andCommentsClose CommentsPermalink

(C) in paragraph (2), by striking 'equal to 1.5 percent' and inserting 'not more than 1 percent';CommentsClose CommentsPermalink

(6) in subsection (k)--CommentsClose CommentsPermalink

(A) by striking the subsection heading and inserting 'Exit Fee';CommentsClose CommentsPermalink

(B) in paragraph (1), in the matter preceding subparagraph (A), by striking 'such sale or refinancing' and inserting 'the mortgage being insured under this section'; andCommentsClose CommentsPermalink

(C) in paragraph (2), by striking 'and the mortgagor' and all that follows through the end and inserting 'may, upon any sale or disposition of the property to which the mortgage relates, be entitled to up to 50 percent of appreciation, up to the appraised value of the home at the time when the mortgage being refinanced under this section was originally made. The Secretary may share any amounts received under this paragraph with the holder of the eligible mortgage refinanced under this section.';CommentsClose CommentsPermalink

(7) in the heading for subsection (n), by striking 'the Board' and inserting 'Secretary';CommentsClose CommentsPermalink

(8) in subsection (p), by striking 'Under the direction of the Board, the' and inserting 'The';CommentsClose CommentsPermalink

(9) in subsection (s)--CommentsClose CommentsPermalink

(A) in the first sentence of paragraph (2), by striking 'Board of Directors of' and inserting 'Advisory Board for'; andCommentsClose CommentsPermalink

(B) in paragraph (3)(A)(ii), by striking 'subsection (e)(1)(B) and such other' and inserting 'such';CommentsClose CommentsPermalink

(10) in subsection (v), by inserting after the period at the end the following: 'The Secretary shall conform documents, forms, and procedures for mortgages insured under this section to those in place for mortgages insured under section 203(b) to the maximum extent possible consistent with the requirements of this section.'; andCommentsClose CommentsPermalink

(11) by adding at the end the following new subsections:CommentsClose CommentsPermalink

'(x) Payment to Existing Loan Servicer- The Secretary may establish a payment to the servicer of the existing senior mortgage for every loan insured under the HOPE for Homeowners Program in an amount, for each such loan, that does not exceed $1,000.CommentsClose CommentsPermalink

'(y) Auctions- The Secretary, with the concurrence of the Board, shall, if feasible, establish a structure and organize procedures for an auction to refinance eligible mortgages on a wholesale or bulk basis.'.CommentsClose CommentsPermalink

(b) Reducing TARP Funds To Offset Costs of Program Changes- Paragraph (3) of section 115(a) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5225) is amended by inserting ', as such amount is reduced by $2,316,000,000,' after '$700,000,000,000'.CommentsClose CommentsPermalink

SEC. 203. REQUIREMENTS FOR FHA-APPROVED MORTGAGEES.
(a) Mortgagee Review Board- Paragraph (2) of section 202(c) of the National Housing Act (12 U.S.C. 1708(c)) is amended--CommentsClose CommentsPermalink

(1) in subparagraph (E), by inserting 'and' after the semicolon;CommentsClose CommentsPermalink

(2) in subparagraph (F), by striking '; and' and inserting a period; andCommentsClose CommentsPermalink

(3) by striking subparagraph (G).CommentsClose CommentsPermalink

(b) Limitations on Participation and Mortgagee Approval and Use of Name- Section 202 of the National Housing Act (12 U.S.C. 1708) is amended--CommentsClose CommentsPermalink

(1) by redesignating subsections (d), (e), and (f) as subsections (e), (f), and (g), respectively;CommentsClose CommentsPermalink

(2) by inserting after subsection (c) the following new subsection:CommentsClose CommentsPermalink

'(d) Limitations on Participation in Origination and Mortgagee Approval-CommentsClose CommentsPermalink

'(1) REQUIREMENT- Any person or entity that is not approved by the Secretary to serve as a mortgagee, as such term is defined in subsection (c)(7), shall not participate in the origination of an FHA-insured loan except as authorized by the Secretary.CommentsClose CommentsPermalink

'(2) ELIGIBILITY FOR APPROVAL- In order to be eligible for approval by the Secretary, an applicant mortgagee shall not be, and shall not have any officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, or loan originator of the applicant mortgagee who is--CommentsClose CommentsPermalink

'(A) currently suspended, debarred, under a limited denial of participation (LDP), or otherwise restricted under part 24 or 25 of title 24 of the Code of Federal Regulations, or any successor regulations to such parts, or under similar provisions of any other Federal agency;CommentsClose CommentsPermalink

'(B) under indictment for, or has been convicted of, an offense that reflects adversely upon the applicant's integrity, competence or fitness to meet the responsibilities of an approved mortgagee;CommentsClose CommentsPermalink

'(C) subject to unresolved findings contained in a Department of Housing and Urban Development or other governmental audit, investigation, or review;CommentsClose CommentsPermalink

'(D) engaged in business practices that do not conform to generally accepted practices of prudent mortgagees or that demonstrate irresponsibility;CommentsClose CommentsPermalink

'(E) convicted of, or who has pled guilty or nolo contendre to, a felony related to participation in the real estate or mortgage loan industry--CommentsClose CommentsPermalink

'(i) during the 7-year period preceding the date of the application for licensing and registration; orCommentsClose CommentsPermalink

'(ii) at any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering;CommentsClose CommentsPermalink

'(F) in violation of provisions of the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any applicable provision of State law; orCommentsClose CommentsPermalink

'(G) in violation of any other requirement as established by the Secretary.CommentsClose CommentsPermalink

'(3) RULEMAKING AND IMPLEMENTATION- The Secretary shall conduct a rulemaking to carry out this subsection. The Secretary shall implement this subsection not later than the expiration of the 60-day period beginning upon the date of the enactment of this subsection by notice, mortgagee letter, or interim final regulations, which shall take effect upon issuance.'; andCommentsClose CommentsPermalink

(3) by adding at the end the following new subsection:CommentsClose CommentsPermalink

'(h) Use of Name- The Secretary shall, by regulation, require each mortgagee approved by the Secretary for participation in the FHA mortgage insurance programs of the Secretary--CommentsClose CommentsPermalink

'(1) to use the business name of the mortgagee that is registered with the Secretary in connection with such approval in all advertisements and promotional materials, as such terms are defined by the Secretary, relating to the business of such mortgagee in such mortgage insurance programs; andCommentsClose CommentsPermalink

'(2) to maintain copies of all such advertisements and promotional materials, in such form and for such period as the Secretary requires.'.CommentsClose CommentsPermalink

(c) Change of Status- The National Housing Act is amended by striking section 532 (12 U.S.C. 1735f-10) and inserting the following new section:CommentsClose CommentsPermalink

'SEC. 532. CHANGE OF MORTGAGEE STATUS.
'(a) Notification- Upon the occurrence of any action described in subsection (b), an approved mortgagee shall immediately submit to the Secretary, in writing, notification of such occurrence.CommentsClose CommentsPermalink

'(b) Actions- The actions described in this subsection are as follows:CommentsClose CommentsPermalink

'(1) The debarment, suspension of a Limited Denial of Participation (LDP), or application of other sanctions, fines, or penalties applied to the mortgagee or to any officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, or loan originator of the mortgagee pursuant to applicable provisions of State or Federal law.CommentsClose CommentsPermalink

'(2) The revocation of a State-issued mortgage loan originator license issued pursuant to the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any other similar declaration of ineligibility pursuant to State law.'.CommentsClose CommentsPermalink

(d) Civil Money Penalties- Section 536 of the National Housing Act (12 U.S.C. 1735f-14) is amended--CommentsClose CommentsPermalink

(1) in subsection (b)--CommentsClose CommentsPermalink

(A) in paragraph (1)--CommentsClose CommentsPermalink

(i) in the matter preceding subparagraph (A), by inserting 'or any of its owners, officers, or directors' after 'mortgagee or lender';CommentsClose CommentsPermalink

(ii) in subparagraph (H), by striking 'title I' and all that follows through 'Act of 1989)' and inserting 'title I or II'; andCommentsClose CommentsPermalink

(iii) by inserting after subparagraph (J) the following:CommentsClose CommentsPermalink

'(K) Violation of section 202(d) of this Act (12 U.S.C. 1708(d)).'; andCommentsClose CommentsPermalink

(B) in paragraph (2)--CommentsClose CommentsPermalink

(i) in subparagraph (B), by striking 'or' at the end;CommentsClose CommentsPermalink

(ii) in subparagraph (C), by striking the period at the end and inserting '; or'; andCommentsClose CommentsPermalink

(iii) by adding at the end the following new subparagraph:CommentsClose CommentsPermalink

'(D) causing or participating in any of the violations set forth in paragraph (1) of this subsection.'; andCommentsClose CommentsPermalink

(2) in subsection (g), by striking 'The term' and all that follows through the end of the sentence and inserting 'For purposes of this section, a person acts knowingly when a person has actual knowledge of acts or should have known of the acts.'.CommentsClose CommentsPermalink

(e) Expanded Review of FHA Mortgagee Applicants and Newly Approved Mortgagees- Not later than the expiration of the 3-month period beginning upon the date of the enactment of this Act, the Secretary of Housing and Urban Development shall--CommentsClose CommentsPermalink

(1) expand the existing process for reviewing new applicants for approval for participation in the mortgage insurance programs of the Secretary for mortgages on 1- to 4-family residences for the purpose of identifying applicants who represent a high risk to the Mutual Mortgage Insurance Fund; andCommentsClose CommentsPermalink

(2) implement procedures that, for mortgagees approved during the 12-month period ending upon such date of enactment--CommentsClose CommentsPermalink

(A) expand the number of mortgages originated by such mortgagees that are reviewed for compliance with applicable laws, regulations, and policies; andCommentsClose CommentsPermalink

(B) include a process for random reviews of such mortgagees and a process for reviews that is based on volume of mortgages originated by such mortgagees.CommentsClose CommentsPermalink

SEC. 204. ENHANCEMENT OF LIQUIDITY AND STABILITY OF INSURED DEPOSITORY INSTITUTIONS TO ENSURE AVAILABILITY OF CREDIT AND REDUCTION OF FORECLOSURES.
(a) Permanent Increase in Deposit Insurance-CommentsClose CommentsPermalink

(1) AMENDMENTS TO FEDERAL DEPOSIT INSURANCE ACT- Effective upon the date of the enactment of this Act, section 11(a) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)) is amended--CommentsClose CommentsPermalink

(A) in paragraph (1)(E), by striking '$100,000' and inserting '$250,000';CommentsClose CommentsPermalink

(B) in paragraph (1)(F)(i), by striking '2010' and inserting '2015';CommentsClose CommentsPermalink

(C) in subclause (I) of paragraph (1)(F)(i), by striking '$100,000' and inserting '$250,000';CommentsClose CommentsPermalink

(D) in subclause (II) of paragraph (1)(F)(i), by striking 'the calendar year preceding the date this subparagraph takes effect under the Federal Deposit Insurance Reform Act of 2005' and inserting 'calendar year 2008'; andCommentsClose CommentsPermalink

(E) in paragraph (3)(A), by striking ', except that $250,000 shall be substituted for $100,000 wherever such term appears in such paragraph'.CommentsClose CommentsPermalink

(2) AMENDMENT TO FEDERAL CREDIT UNION ACT- Section 207(k) of the Federal Credit Union Act (12 U.S.C. 1787(k)) is amended--CommentsClose CommentsPermalink

(A) in paragraph (3)--CommentsClose CommentsPermalink

(i) by striking the opening quotation mark before '$250,000';CommentsClose CommentsPermalink

(ii) by striking ', except that $250,000 shall be substituted for $100,000 wherever such term appears in such section'; andCommentsClose CommentsPermalink

(iii) by striking the closing quotation mark after the closing parenthesis; andCommentsClose CommentsPermalink

(B) in paragraph (5), by striking '$100,000' and inserting '$250,000'.CommentsClose CommentsPermalink

(3) REPEAL OF EESA PROVISION- Section 136 of the Emergency Economic Stabilization Act (12 U.S.C. 5241) is hereby repealed.CommentsClose CommentsPermalink

(b) Extension of Restoration Plan Period- Section 7(b)(3)(E)(ii) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(3)(E)(ii)) is amended by striking '5-year period' and inserting '8-year period'.CommentsClose CommentsPermalink

(c) FDIC and NCUA Borrowing Authority-CommentsClose CommentsPermalink

(1) FDIC- Section 14(a) of the Federal Deposit Insurance Act (12 U.S.C. 1824(a)) is amended by striking '$30,000,000,000' and inserting '$100,000,000,000'.CommentsClose CommentsPermalink

(2) NCUA- Section 203(d)(1) of the Federal Credit Union Act (12 U.S.C. 1783(d)(1)) is amended by striking '$100,000,000' and inserting '$6,000,000,000'.CommentsClose CommentsPermalink

(d) Expanding Systemic Risk Special Assessments- Section 13(c)(4)(G)(ii) of the Federal Deposit Insurance Act (12 U.S.C. 1823(c)(4)(G)(ii)) is amended to read as follows:CommentsClose CommentsPermalink

'(ii) REPAYMENT OF LOSS-CommentsClose CommentsPermalink

'(I) IN GENERAL- The Corporation shall recover the loss to the Deposit Insurance Fund arising from any action taken or assistance provided with respect to an insured depository institution under clause (i) from 1 or more special assessments on insured depository institutions, depository institution holding companies (with the concurrence of the Secretary of the Treasury with respect to holding companies), or both, as the Corporation determines to be appropriate.CommentsClose CommentsPermalink

'(II) TREATMENT OF DEPOSITORY INSTITUTION HOLDING COMPANIES- For purposes of this clause, sections 7(c)(2) and 18(h) shall apply to depository institution holding companies as if they were insured depository institutions.CommentsClose CommentsPermalink

'(III) REGULATIONS- The Corporation shall prescribe such regulations as it deems necessary to implement this clause. In prescribing such regulations, defining terms, and setting the appropriate assessment rate or rates, the Corporation shall establish rates sufficient to cover the losses incurred as a result of the actions of the Corporation under clause (i) and shall consider: the types of entities that benefit from any action taken or assistance provided under this subparagraph; economic conditions, the effects on the industry, and such other factors as the Corporation deems appropriate and relevant to the action taken or the assistance provided. Any funds so collected that exceed actual losses shall be placed in the Deposit Insurance Fund.'.CommentsClose CommentsPermalink

(e) Establishment of a National Credit Union Share Insurance Fund Restoration Plan Period- Section 202(c)(2) of the Federal Credit Union Act (12 U.S.C. 1782(c)(2)) is amended by adding at the end the following new subparagraph:CommentsClose CommentsPermalink

'(D) FUND RESTORATION PLANS-CommentsClose CommentsPermalink

'(i) IN GENERAL- Whenever--CommentsClose CommentsPermalink

'(I) the Board projects that the equity ratio of the Fund will, within 6 months of such determination, fall below the minimum amount specified in subparagraph (C) for the designated equity ratio; orCommentsClose CommentsPermalink

'(II) the equity ratio of the Fund actually falls below the minimum amount specified in subparagraph (C) for the equity ratio without any determination under sub-clause (I) having been made,CommentsClose CommentsPermalink

the Board shall establish and implement a Share Insurance Fund restoration plan within 90 days that meets the requirements of clause (ii) and such other conditions as the Board determines to be appropriate.CommentsClose CommentsPermalink

'(ii) REQUIREMENTS OF RESTORATION PLAN- A Share Insurance Fund restoration plan meets the requirements of this clause if the plan provides that the equity ratio of the Fund will meet or exceed the minimum amount specified in subparagraph (C) for the designated equity ratio before the end of the 5-year period beginning upon the implementation of the plan (or such longer period as the Board may determine to be necessary due to extraordinary circumstances).CommentsClose CommentsPermalink

'(iii) TRANSPARENCY- Not more than 30 days after the Board establishes and implements a restoration plan under clause (i), the Board shall publish in the Federal Register a detailed analysis of the factors considered and the basis for the actions taken with regard to the plan.'.CommentsClose CommentsPermalink

SEC. 205. APPLICATION OF GSE CONFORMING LOAN LIMIT TO MORTGAGES ASSISTED WITH TARP FUNDS.
In making any assistance available to prevent and mitigate foreclosures on residential properties, including any assistance for mortgage modifications, using any amounts made available to the Secretary of the Treasury under title I of the Emergency Economic Stabilization Act of 2008, the Secretary shall provide that the limitation on the maximum original principal obligation of a mortgage that may be modified, refinanced, made, guaranteed, insured, or otherwise assisted, using such amounts shall not be less than the dollar amount limitation on the maximum original principal obligation of a mortgage that may be purchased by the Federal Home Loan Mortgage Corporation that is in effect, at the time that the mortgage is modified, refinanced, made, guaranteed, insured, or otherwise assisted using such amounts, for the area in which the property involved in the transaction is located.CommentsClose CommentsPermalink

SEC. 206. MORTGAGES ON CERTAIN HOMES ON LEASED LAND.
Section 255(b)(4) of the National Housing Act (12 U.S.C. 1715z-20(b)(4)) is amended by striking subparagraph (B) and inserting:CommentsClose CommentsPermalink

'(B) under a lease that has a term that ends no earlier than the minimum number of years, as specified by the Secretary, beyond the actuarial life expectancy of the mortgagor or comortgagor, whichever is the later date.'.CommentsClose CommentsPermalink

SEC. 207. SENSE OF CONGRESS REGARDING MORTGAGE REVENUE BOND PURCHASES.
It is the sense of the Congress that the Secretary of the Treasury should use amounts made available in this Act to purchase mortgage revenue bonds for single-family housing issued through State housing finance agencies and through units of local government and agencies thereof.CommentsClose CommentsPermalink

TITLE III--MORTGAGE FRAUDCommentsClose CommentsPermalink

SEC. 301. SHORT TITLE.
This title may be cited as the 'Nationwide Mortgage Fraud Task Force Act of 2009'.CommentsClose CommentsPermalink

SEC. 302. NATIONWIDE MORTGAGE FRAUD TASK FORCE.
(a) Establishment- There is established in the Department of Justice the Nationwide Mortgage Fraud Task Force (hereinafter referred to in this section as the 'Task Force') to address mortgage fraud in the United States.CommentsClose CommentsPermalink

(b) Support- The Attorney General shall provide the Task Force with the appropriate staff, administrative support, and other resources necessary to carry out the duties of the Task Force.CommentsClose CommentsPermalink

(c) Executive Director- The Attorney General shall appoint one staff member provided to the Task Force to be the Executive Director of the Task Force and such Executive Director shall ensure that the duties of the Task Force are carried out.CommentsClose CommentsPermalink

(d) Branches- The Task Force shall establish, oversee, and direct branches in each of the 10 States determined by the Attorney General to have the highest concentration of mortgage fraud.CommentsClose CommentsPermalink

(e) Mandatory Functions- The Task Force, including the branches of the Task Force established under subsection (d), shall--CommentsClose CommentsPermalink

(1) establish coordinating entities, and solicit the voluntary participation of Federal, State, and local law enforcement and prosecutorial agencies in such entities, to organize initiatives to address mortgage fraud, including initiatives to enforce State mortgage fraud laws and other related Federal and State laws;CommentsClose CommentsPermalink

(2) provide training to Federal, State, and local law enforcement and prosecutorial agencies with respect to mortgage fraud, including related Federal and State laws;CommentsClose CommentsPermalink

(3) collect and disseminate data with respect to mortgage fraud, including Federal, State, and local data relating to mortgage fraud investigations and prosecutions; andCommentsClose CommentsPermalink

(4) perform other functions determined by the Attorney General to enhance the detection of, prevention of, and response to mortgage fraud in the United States.CommentsClose CommentsPermalink

(f) Optional Functions- The Task Force, including the branches of the Task Force established under subsection (d), may--CommentsClose CommentsPermalink

(1) initiate and coordinate Federal mortgage fraud investigations and, through the coordinating entities established under subsection (e), State and local mortgage fraud investigations;CommentsClose CommentsPermalink

(2) establish a toll-free hotline for--CommentsClose CommentsPermalink

(A) reporting mortgage fraud;CommentsClose CommentsPermalink

(B) providing the public with access to information and resources with respect to mortgage fraud; andCommentsClose CommentsPermalink

(C) directing reports of mortgage fraud to the appropriate Federal, State, and local law enforcement and prosecutorial agency, including to the appropriate branch of the Task Force established under subsection (d);CommentsClose CommentsPermalink

(3) create a database with respect to suspensions and revocations of mortgage industry licenses and certifications to facilitate the sharing of such information by States;CommentsClose CommentsPermalink

(4) make recommendations with respect to the need for and resources available to provide the equipment and training necessary for the Task Force to combat mortgage fraud; andCommentsClose CommentsPermalink

(5) propose legislation to Federal, State, and local legislative bodies with respect to the elimination and prevention of mortgage fraud, including measures to address mortgage loan procedures and property appraiser practices that provide opportunities for mortgage fraud.CommentsClose CommentsPermalink

(g) Definition- In this section, the term 'mortgage fraud' means a material misstatement, misrepresentation, or omission relating to the property or potential mortgage relied on by an underwriter or lender to fund, purchase, or insure a loan.CommentsClose CommentsPermalink

TITLE IV--FORECLOSURE MORATORIUM PROVISIONSCommentsClose CommentsPermalink

SEC. 401. SENSE OF THE CONGRESS ON FORECLOSURES.
(a) In General- It is the sense of the Congress that mortgage holders, institutions, and mortgage servicers should not initiate a foreclosure proceeding or a foreclosure sale on any homeowner until the foreclosure mitigation provisions, like the Hope for Homeowners program, as required under title II, and the President's 'Homeowner Affordability and Stability Plan' have been implemented and determined to be operational by the Secretary of Housing and Urban Development and the Secretary of the Treasury.CommentsClose CommentsPermalink

(b) Scope of Moratorium- The foreclosure moratorium referred to in subsection (a) should apply only for first mortgages secured by the owner's principal dwelling.CommentsClose CommentsPermalink

(c) FHA-Regulated Loan Modification Agreements- If a mortgage holder, institution, or mortgage servicer to which subsection (a) applies reaches a loan modification agreement with a homeowner under the auspices of the Federal Housing Administration before any plan referred to in such subsection takes effect, subsection (a) shall cease to apply to such institution as of the effective date of the loan modification agreement.CommentsClose CommentsPermalink

(d) Duty of Consumer to Maintain Property- Any homeowner for whose benefit any foreclosure proceeding or sale is barred under subsection (a) from being instituted, continued , or consummated with respect to any homeowner mortgage should not, with respect to any property securing such mortgage, destroy, damage, or impair such property, allow the property to deteriorate, or commit waste on the property.CommentsClose CommentsPermalink

(e) Duty of Consumer to Respond to Reasonable Inquiries- Any homeowner for whose benefit any foreclosure proceeding or sale is barred under subsection (a) from being instituted, continued, or consummated with respect to any homeowner mortgage should respond to reasonable inquiries from a creditor or servicer during the period during which such foreclosure proceeding or sale is barred.CommentsClose CommentsPermalink

Calendar No. 52CommentsClose CommentsPermalink

111th CONGRESSCommentsClose CommentsPermalink

1st SessionCommentsClose CommentsPermalink

S. 896CommentsClose CommentsPermalink

A BILL


& & &


Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084

www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
Phone: 404-633-4100
Fax: 404-633-0068


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