HR 6076 IHCommentsClose CommentsPermalink

To amend the Truth in Lending Act to permit deferrals on certain home mortgage foreclosures for a limited period to allow homeowners to take remedial action, to require home mortgage servicers to provide advance notice of any upcoming reset of the mortgage interest rate, and for other purposes.CommentsClose CommentsPermalink

May 15, 2008

Ms. MATSUI introduced the following bill; which was referred to the Committee on Financial ServicesCommentsClose CommentsPermalink

To amend the Truth in Lending Act to permit deferrals on certain home mortgage foreclosures for a limited period to allow homeowners to take remedial action, to require home mortgage servicers to provide advance notice of any upcoming reset of the mortgage interest rate, and for other purposes.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.

This Act may be cited as the `Home Retention and Economic Stabilization Act of 2008'.CommentsClose CommentsPermalink

SEC. 2. FORECLOSURE DEFERMENT.

(a) In General- Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by inserting after section 128 the following new section:CommentsClose CommentsPermalink

`Sec. 128A. Foreclosure deferment and reset notification for certain mortgages

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





`(1) DEFERMENT PAYMENT AMOUNT- The term `deferment payment amount' means the amount of the monthly payment that is due on an eligible deferred-foreclosure mortgage during the deferment period.CommentsClose CommentsPermalink





`(2) DEFERMENT PERIOD- The term `deferment period' means the period that--CommentsClose CommentsPermalink





`(A) begins when the eligible deferred-foreclosure consumer sends notice of the exercise of the deferral right under subsection (b)(1) with respect to an eligible deferred-foreclosure mortgage to the creditor or servicer; andCommentsClose CommentsPermalink





`(B) ends on the earliest of the following applicable dates:CommentsClose CommentsPermalink





`(i) The date that is 270 days after the beginning of the period.CommentsClose CommentsPermalink





`(ii) The end of the 30-day period beginning on any due date for any deferment payment (on such mortgage, in accordance with this section) which remains unpaid as of the end of such 30-day period.CommentsClose CommentsPermalink





`(iii) The date on which the creditor or servicer enters into a qualified loan modification or workout plan with the consumer.CommentsClose CommentsPermalink





`(iv) The date on which the deferment is terminated by judicial order.CommentsClose CommentsPermalink





`(3) DEFERMENT PERIOD TRIGGER- The term `deferment period trigger' means the date on which the consumer becomes eligible for a deferment under subsection (b)(1) with respect to an eligible deferred-foreclosure mortgage and occurs--CommentsClose CommentsPermalink





`(A) in the case of a subprime mortgage, on the earlier of the date of any adjustment or reset of the interest rate on such mortgage or the date by which the consumer is 60 days delinquent on mortgage payments; andCommentsClose CommentsPermalink





`(B) in the case of a negative amortization mortgage, the date of the first increase in the minimum monthly payment due under such mortgage after the origination of such mortgage.CommentsClose CommentsPermalink





`(4) ELIGIBLE DEFERRED-FORECLOSURE MORTGAGE- The term `eligible deferred-foreclosure mortgage' means a subprime mortgage or a negative amortization mortgage, that was entered into before January 1, 2008, and has reached the deferment period trigger.CommentsClose CommentsPermalink





`(5) ELIGIBLE DEFERRED-FORECLOSURE CONSUMER- The term `eligible deferred-foreclosure consumer' means a consumer who--CommentsClose CommentsPermalink





`(A) is a mortgagor on an eligible deferred-foreclosure mortgage;CommentsClose CommentsPermalink





`(B) has resided at the property secured by such mortgage since the mortgage transaction was entered into and intends to reside at such property at least until the end of the deferment period;CommentsClose CommentsPermalink





`(C) has a current monthly income that, when multiplied by 12, is less than 200 percent of the area median annual income for the relevant family size in the State in which the residence is located; andCommentsClose CommentsPermalink





`(D) during the deferment period, responds to reasonable inquiries from a creditor or servicer with respect to an eligible deferred-foreclosure mortgage.CommentsClose CommentsPermalink





`(6) NEGATIVE AMORTIZATION MORTGAGE- The term `negative amortization mortgage' means a consumer credit transaction secured by the consumer's principal residence with the potential for negative amortization of the outstanding principal balance and under which the minimum monthly payment of principal and interest required increases after the date of origination.CommentsClose CommentsPermalink





`(7) QUALIFIED LOAN MODIFICATION OR WORKOUT PLAN- The term `qualified loan modification or workout plan' means a modification or plan that--CommentsClose CommentsPermalink





`(A) is scheduled to remain in place until the deferred-foreclosure consumer sells or refinances the property;CommentsClose CommentsPermalink





`(B) does not provide for a repayment schedule that results in negative amortization at any time or in a balloon payment;CommentsClose CommentsPermalink





`(C) does not require the deferred-foreclosure consumer to pay additional points and fees; andCommentsClose CommentsPermalink





`(D) is reasonably affordable to the deferred-foreclosure consumer over the life of the loan.CommentsClose CommentsPermalink





`(8) SUBPRIME MORTGAGE- The term `subprime mortgage' means--CommentsClose CommentsPermalink





`(A) any residential mortgage loan that constitutes a first lien on the dwelling or real property securing the loan and either--CommentsClose CommentsPermalink





`(i) has an annual percentage rate that equals or exceeds the yield on securities issued by the Secretary of the Treasury under chapter 31 of title 31, United States Code, that bear comparable periods of maturity by more than 3 percentage points; orCommentsClose CommentsPermalink





`(ii) has an annual percentage rate that equals or exceeds the most recent conventional mortgage rate, or such other annual percentage rate as may be established by the Board by regulation, by more than 175 basis points; andCommentsClose CommentsPermalink





`(B) any residential mortgage loan that is not the first lien on the dwelling or real property securing the loan and either--CommentsClose CommentsPermalink





`(i) has an annual percentage rate that equals or exceeds the yield on securities issued by the Secretary of the Treasury under chapter 31 of title 31, United States Code, that bear comparable periods of maturity by more than 5 percentage points; orCommentsClose CommentsPermalink





`(ii) has an annual percentage rate that equals or exceeds the most recent conventional mortgage rate, or such other annual percentage rate as may be established by the Board by regulation, by more than 375 basis points.CommentsClose CommentsPermalink





`(b) Right to Deferment of Institution of or Action on Foreclosure-CommentsClose CommentsPermalink





`(1) RIGHT ESTABLISHED- Any eligible deferred-foreclosure consumer shall have the right to defer any initiation of a foreclosure, whether judicial or nonjudicial, or any action in connection with a foreclosure already instituted, including any foreclosure sale, with respect to any eligible deferred-foreclosure mortgage by any creditor, servicer, or holder of such mortgage, or any other person acting on behalf of any such creditor, servicer, or holder, until the end of the deferment period.CommentsClose CommentsPermalink





`(2) ENFORCEMENT OF RIGHT- An eligible deferred-foreclosure consumer may defend against a foreclosure or bring an action in any court of competent or general jurisdiction to compel compliance with the right of the consumer under paragraph (1) to defer any initiation of a foreclosure or any action in connection with a foreclosure already instituted, including any foreclosure sale, with respect to any eligible deferred-foreclosure mortgage.CommentsClose CommentsPermalink





`(c) Notice to Consumer Before Any Foreclosure Action-CommentsClose CommentsPermalink





`(1) NOTICE OF RIGHT REQUIRED- Before initiating any foreclosure with respect to any eligible deferred-foreclosure mortgage, the creditor or servicer shall notify, by personal service, any eligible deferred-foreclosure consumer with respect to such mortgage of such consumer's right under subsection (b) to defer the initiation of foreclosure.CommentsClose CommentsPermalink





`(2) CONTENTS OF NOTICE- The Board shall prescribe, by regulations under sections 105 and 122, the content and format, including the size of the font, of the notices under paragraph (1) in a manner that maximizes the likelihood that the consumer will obtain and understand all the information necessary to exercise the right to defer any action to institute foreclosure, including--CommentsClose CommentsPermalink





`(A) the manner and format for obtaining such deferral, including a sample notice form, an identification form, and a certification form for the consumer to use in complying with subsection (d)(1);CommentsClose CommentsPermalink





`(B) contact information for the creditor or servicer, as the case may be and any third party involved in foreclosure proceedings, including State or local officials; andCommentsClose CommentsPermalink





`(C) contact information for obtaining any counseling concerning the exercise of such deferral from a counselor approved by the appropriate State housing finance agency or the Secretary of Housing and Urban Development.CommentsClose CommentsPermalink





`(3) TIMING- No foreclosure action or proceeding with respect to any eligible deferred-foreclosure mortgage shall be valid unless the creditor or servicer has provided the notice required under this subsection to the consumer at least 30 days before instituting any such action or proceeding and at least once during each subsequent 30-day period until the foreclosure becomes final.CommentsClose CommentsPermalink





`(d) Institution of Deferment-CommentsClose CommentsPermalink





`(1) PROCEDURE REQUIRED- Any eligible deferred-foreclosure consumer who chooses to exercise a deferment right under subsection (b) shall provide--CommentsClose CommentsPermalink





`(A) notice of the exercise of such to the servicer or other person described in the notice to the consumer under subsection (e) by any reasonable means including by mail, service whether directly or to any agent, including at the address of any registered agent;CommentsClose CommentsPermalink





`(B) a clear identification of the eligible deferred-foreclosure consumer and the address of the property securing the mortgage; andCommentsClose CommentsPermalink





`(C) a certification that at least 1 consumer borrower with respect to such mortgage resides at the property secured by such mortgage and intends to reside at such property at least until the end of the deferment period.CommentsClose CommentsPermalink





`(2) SUFFICIENCY OF NOTICE-CommentsClose CommentsPermalink





`(A) IN GENERAL- Notice and delivery of an affidavit under paragraph (1) may be made by any reasonable means including by mail, service whether directly or to any agent, including at the address of any registered agent with the secretary of state for the State in which the property is located, or any attorney representing the consumer, or by such means as the terms of the mortgage or regulations prescribed by the Board may provide.CommentsClose CommentsPermalink





`(B) OTHER PARTIES- If any court, any sheriff or other official designated under State law, or any other person authorized under State law and the contracts of the parties to maintain any foreclosure proceeding or conduct any foreclosure sale receives, directly or indirectly, a copy of any notice provided under this subsection by an eligible deferred-foreclosure consumer with respect to any eligible deferred-foreclosure mortgage, no foreclosure action may be taken by the court, sheriff, official, or other person with respect to such mortgage during the applicable deferred-foreclosure period.CommentsClose CommentsPermalink





`(3) ACKNOWLEDGMENT-CommentsClose CommentsPermalink





`(A) IN GENERAL- Any creditor, servicer, or holder of an eligible deferred-foreclosure mortgage, or any other person acting on behalf of any such creditor, servicer, or holder, who receives a notice from a consumer under paragraph (2) shall acknowledge to the consumer the receipt of the notice of the exercise of the deferment right under subsection (b) before the end of the 10-business day period beginning on the date of such receipt.CommentsClose CommentsPermalink





`(B) CONTENTS OF NOTICE- The acknowledgment provided to any eligible deferred-foreclosure consumer under subparagraph (A) shall include the date on which the next payment is due on the eligible deferred-foreclosure mortgage, the deferment payment amount, the date on which each subsequent payment is due, and the address or the delivery method for each such payment that is acceptable to the recipient.CommentsClose CommentsPermalink





`(4) MONTHLY PAYMENT NOTICES- Each periodic statement of account submitted by the creditor or servicer with respect to any eligible deferred-foreclosure mortgage during the period while any deferment right under subsection (b) is in effect shall include--CommentsClose CommentsPermalink





`(A) the due date and the amount of the next payment due on such mortgage;CommentsClose CommentsPermalink





`(B) the address or the delivery method for such payment;CommentsClose CommentsPermalink





`(C) the date on which the deferral of the foreclosure will terminate; andCommentsClose CommentsPermalink





`(D) a notice that failure to make such payment in a timely manner will jeopardize the continuation of the deferral of the foreclosure.CommentsClose CommentsPermalink





`(e) Deferment Payment-CommentsClose CommentsPermalink





`(1) IN GENERAL- During the deferment period with respect to any eligible deferred-foreclosure mortgage for which any deferment right has been exercised under subsection (b), monthly payments shall continue to be made by the consumer with respect to such mortgage.CommentsClose CommentsPermalink





`(2) AMOUNT OF PAYMENT- The deferment payment amount for purposes of monthly payments under paragraph (1) with respect to any eligible deferred-foreclosure mortgage shall be--CommentsClose CommentsPermalink





`(A) in the case of any subprime mortgage, the lesser of--CommentsClose CommentsPermalink





`(i) the minimum monthly payment of principal and interest on the date the loan was originated; orCommentsClose CommentsPermalink





`(ii) a monthly payment based on the outstanding loan principal plus a rate of interest calculated at a fixed annual percentage rate, in an amount equal to the most recent conventional mortgage rate plus a 100 basis point premium for risk, amortized over a period of 30 years minus the period of time since the origination of the loan; andCommentsClose CommentsPermalink





`(B) in the case of any negative amortization mortgage, the amount of the first minimum monthly payment due under the mortgage after the origination of such mortgage.CommentsClose CommentsPermalink





`(3) AMORTIZATION OF DIFFERENCE- The difference between the amount of any monthly payment due under the terms of any eligible deferred-foreclosure mortgage and the deferment payment amount shall be amortized over the life of the mortgage beginning after the deferred-foreclosure period in accordance with regulations which the Board shall prescribe.CommentsClose CommentsPermalink





`(4) CHARGES PROHIBITED- No creditor or servicer may impose any late fee or other fee or charge during the deferment period with respect to any eligible deferred-foreclosure mortgage for which any deferment right has been exercised under subsection (b) or in connection with the exercise of such deferment right.CommentsClose CommentsPermalink





`(f) Notice of Reset and Alternatives- During the 1-month period that ends 120 days before the date on which, in the case of a subprime mortgage, the interest rate in effect during the introductory period of the mortgage adjusts or resets to a variable interest rate, or in the case of a negative amortization mortgage, the minimum monthly payment of principal and interest required first increases from the amount of the first such minimum monthly payment due under the mortgage after the origination of such mortgage, the creditor or servicer of such loan shall provide a written notice, separate and distinct from all other correspondence to the consumer, that includes the following:CommentsClose CommentsPermalink





`(1) Any index or formula used--CommentsClose CommentsPermalink





`(A) in the case of any subprime mortgage, in determining the annual percentage rate applicable as of the effective date of such reset or adjustment; andCommentsClose CommentsPermalink





`(B) in the case of any negative amortization mortgage, in making increases in the minimum monthly payments due, and a source of information about the index or formula.CommentsClose CommentsPermalink





`(2) A good faith estimate, based on accepted industry standards and disclosed in a clear and conspicuous manner, of the creditor or servicer of the amount of the monthly payment that will apply after the date of the adjustment or reset, or increase, as applicable, and the assumptions on which this estimate is based.CommentsClose CommentsPermalink





`(3) A list of alternatives consumers may pursue before the date of adjustment or reset, or increase, as applicable, and descriptions of the actions consumers must take to pursue these alternatives, including--CommentsClose CommentsPermalink





`(A) refinancing;CommentsClose CommentsPermalink





`(B) renegotiation of loan terms;CommentsClose CommentsPermalink





`(C) payment forbearances;CommentsClose CommentsPermalink





`(D) pre-foreclosure sales; andCommentsClose CommentsPermalink





`(E) any payment assistance available from the State in which the property is located.CommentsClose CommentsPermalink





`(4) The names, addresses, telephone numbers, and Internet addresses of counseling agencies or programs reasonably available to the consumer that have been certified or approved and made publicly available by the Secretary of Housing and Urban Development or a State housing finance authority (as defined in section 1301 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989).CommentsClose CommentsPermalink





`(5) The address, telephone number, and Internet address for the State housing finance authority (as so defined) for the State in which the consumer resides.CommentsClose CommentsPermalink





`(g) Most Recent Conventional Mortgage Rate- For purposes of subsection (f)(1)(A)(ii), the term `most recent conventional mortgage rate' means the contract interest rate on commitments for fixed-rate first mortgages most recently published in the Federal Reserve Statistical Release on selected interest rates (daily or weekly), and commonly referred to as the H.15 release (or any successor publication), in the week preceding a date of determination for purposes of applying this subsection.CommentsClose CommentsPermalink





`(h) Duty of Consumer To Maintain Property-CommentsClose CommentsPermalink





`(1) IN GENERAL- Any eligible deferred-foreclosure consumer for whom a deferment of foreclosure is in effect under this section with respect to any eligible deferred-foreclosure mortgage may 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





`(2) ENFORCEMENT- Any consumer may be liable to any creditor or servicer for any violation of paragraph (1) under section 130(a)(1) and for such purposes section 130(a) shall be applied by substituting `consumer' for `creditor' each place such term appears.CommentsClose CommentsPermalink





`(i) Declaration of Rights- In addition to the right of any party to a mortgage to seek a declaratory judgment under section 2201 of title 28, United States Code, any such party may apply prior to the end of the deferment period to any State court of competent or general jurisdiction for an order establishing the rights, duties, and conditions imposed on or applicable to any party to the mortgage, including the terms and conditions of a deferment.CommentsClose CommentsPermalink





`(j) Coordination With State Law-CommentsClose CommentsPermalink





`(1) IN GENERAL- No provision of this section shall be construed as annulling, altering, or affecting the laws of any State relating to deferment of foreclosures, except to the extent that those laws are inconsistent with the provisions of this section, and then only to the extent of the inconsistency.CommentsClose CommentsPermalink





`(2) RULE OF CONSTRUCTION- A State law is not inconsistent with this section if the protection such law affords any consumer is greater than the protection afforded by this subsection.'.CommentsClose CommentsPermalink





(b) Clerical Amendment- The table of sections for chapter 2 of the Truth in Lending Act is amended by inserting after the item relating to section 128 the following new item:CommentsClose CommentsPermalink





`128A. Foreclosure deferment and reset notification for certain mortgages.'.CommentsClose CommentsPermalink

SEC. 3. AUTHORIZATION OF APPROPRIATIONS FOR HOUSING COUNSELING.

There is authorized to be appropriated for fiscal year 2008, $200,000,000 for the Neighborhood Reinvestment Corporation, for carrying out foreclosure mitigation activities under the terms and conditions contained in the second paragraph under the heading `Neighborhood Reinvestment Corporation--Payment to the Neighborhood Reinvestment Corporation' in title III of division K of Public Law 110-161 (121 Stat. 2441), which may include use for costs of providing additional counselors, translators, and other staffers and costs of providing additional computers and improving databases and overall operations to better assist mortgagor families.CommentsClose CommentsPermalink