S 824 ISCommentsClose CommentsPermalink

112th CONGRESSCommentsClose CommentsPermalink

1st SessionCommentsClose CommentsPermalink

S. 824CommentsClose CommentsPermalink

To provide for enhanced mortgage-backed and asset-backed security investor protections, to prevent foreclosure fraud, and for other purposes.CommentsClose CommentsPermalink

IN THE SENATE OF THE UNITED STATESCommentsClose CommentsPermalink

April 14, 2011CommentsClose CommentsPermalink

Mr. BROWN of Ohio introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban AffairsCommentsClose CommentsPermalink

A BILLCommentsClose CommentsPermalink

To provide for enhanced mortgage-backed and asset-backed security investor protections, to prevent foreclosure fraud, 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 ‘Foreclosure Fraud and Homeowner Abuse Prevention Act of 2011’.CommentsClose CommentsPermalink

SEC. 2. DEFINITIONS.

For purposes of this Act, the following definitions shall apply:CommentsClose CommentsPermalink





(1) COMMISSION- The term ‘Commission’ means the Securities and Exchange Commission.CommentsClose CommentsPermalink





(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).CommentsClose CommentsPermalink





(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--CommentsClose CommentsPermalink





(A) a mortgage; orCommentsClose CommentsPermalink





(B) a collateralized mortgage obligation of mortgage-backed securities.CommentsClose CommentsPermalink





(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.CommentsClose CommentsPermalink





(5) SERVICER- The term ‘servicer’--CommentsClose CommentsPermalink





(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; andCommentsClose CommentsPermalink





(B) does not include any State or local housing agency.CommentsClose CommentsPermalink

SEC. 3. TRUST INDENTURE ACT PROTECTIONS.

(a) Definitions- Section 303 of the Trust Indenture Act of 1939 (15 U.S.C. 77ccc) is amended--CommentsClose CommentsPermalink





(1) in paragraph (7), by adding at the end the following: ‘Such term shall include mortgage-backed securities.’;CommentsClose CommentsPermalink





(2) in paragraph (10), by adding at the end the following: ‘Such term shall include servicers of mortgage-backed securities.’; andCommentsClose CommentsPermalink





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





‘(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--CommentsClose CommentsPermalink





‘(A) a mortgage; orCommentsClose CommentsPermalink





‘(B) a collateralized mortgage obligation of mortgage-backed securities.CommentsClose CommentsPermalink





‘(20) The term ‘servicer’--CommentsClose CommentsPermalink





‘(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; andCommentsClose CommentsPermalink





‘(B) does not include any State or local housing agency.’.CommentsClose CommentsPermalink





(b) Clarification of Exemptions- Section 304 of the Trust Indenture Act of 1939 (15 U.S.C. 77ddd) is amended--CommentsClose CommentsPermalink





(1) in paragraph (2), by inserting ‘other than residential mortgage-back securities’ after ‘securities’;CommentsClose CommentsPermalink





(2) in paragraph (4), by inserting ‘other than a residential mortgage-back security’ after ‘security’; andCommentsClose CommentsPermalink





(3) in paragraph (7), by inserting ‘other than a registered mortgage-back security’ after ‘security’.CommentsClose CommentsPermalink





(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:CommentsClose CommentsPermalink





‘(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.’.CommentsClose CommentsPermalink





(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:CommentsClose CommentsPermalink





‘(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.’.CommentsClose CommentsPermalink





(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:CommentsClose CommentsPermalink





‘(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.’.CommentsClose CommentsPermalink





(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’.CommentsClose CommentsPermalink





(g) Duties and Responsibilities of Servicers- Section 315(a) of the Trust Indenture Act of 1939 (15 U.S.C. 77ooo(a)) is amended--CommentsClose CommentsPermalink





(1) by striking ‘The indenture’ and inserting ‘(1) The indenture’;CommentsClose CommentsPermalink





(2) by redesignating existing paragraphs (1) and (2) as subparagraphs (A) and (B), respectively, and moving the margins 2 ems to the right; andCommentsClose CommentsPermalink





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





‘(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.’.CommentsClose CommentsPermalink

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:CommentsClose CommentsPermalink

‘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--CommentsClose CommentsPermalink





‘(1) to require each servicer of a mortgage related security to notify investors therein of any advances to the securitization vehicle;CommentsClose CommentsPermalink





‘(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;CommentsClose CommentsPermalink





‘(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;CommentsClose CommentsPermalink





‘(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;CommentsClose CommentsPermalink





‘(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;CommentsClose CommentsPermalink





‘(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; andCommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





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.CommentsClose CommentsPermalink





‘(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.’.CommentsClose CommentsPermalink

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:CommentsClose CommentsPermalink

‘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.CommentsClose CommentsPermalink





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





‘(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.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(4) SERVICER- The term ‘servicer’--CommentsClose CommentsPermalink





‘(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; andCommentsClose CommentsPermalink





‘(B) excludes State and local housing agencies.CommentsClose CommentsPermalink





‘(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--CommentsClose CommentsPermalink





‘(1) a pool of securitized residential mortgage loans that contains such securitized residential mortgage loan; orCommentsClose CommentsPermalink





‘(2) any security based on or backed by a pool of securitized residential mortgage loans that contains such securitized residential mortgage loan.’.CommentsClose CommentsPermalink





(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:CommentsClose CommentsPermalink





‘Sec. 129I. Limitations on mortgages held by loan servicers.’.CommentsClose CommentsPermalink





(c) Applicability- The amendment made by subsection (a) shall apply--CommentsClose CommentsPermalink





(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; andCommentsClose CommentsPermalink





(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.CommentsClose CommentsPermalink





(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:CommentsClose CommentsPermalink





‘(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.’.CommentsClose CommentsPermalink

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 subsectionsCommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(f) Restriction on Use of Subsidiaries and Insourcing-CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(2) INSOURCING DEFINED- For purposes of this subsection, the term ‘insourcing’ means providing for services to be conducted by the servicer’s affiliated entities.’.CommentsClose CommentsPermalink





(b) Force-Placed Insurance- Section 6 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605) is amended--CommentsClose CommentsPermalink





(1) in subsection (l), by adding at the end the following new paragraph:CommentsClose CommentsPermalink





‘(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.’;CommentsClose CommentsPermalink





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





‘(n) Disclosures Related to Insurance Coverage Information-CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(2) DISCLOSURE- Each borrower who receives a notice described under paragraph (1) shall disclose such information to the servicer.’.CommentsClose CommentsPermalink





(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:CommentsClose CommentsPermalink





‘(o) Loss Mitigation-CommentsClose CommentsPermalink





‘(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--CommentsClose CommentsPermalink





‘(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; andCommentsClose CommentsPermalink





‘(B) a single point of contact for the borrower for all loss mitigation activities.CommentsClose CommentsPermalink





‘(2) GENERAL LOSS MITIGATION REQUIREMENTS- Each servicer of a federally related mortgage loan, or agents of such servicer, shall--CommentsClose CommentsPermalink





‘(A) maintain adequate staffing and systems for tracking borrower documents and information that are relevant to foreclosure, loss mitigation, bankruptcy, and other servicing operations;CommentsClose CommentsPermalink





‘(B) maintain adequate staffing and caseload limits for employees responsible for handling foreclosure, loss mitigation, bankruptcy, and related communication with borrowers and housing counselors;CommentsClose CommentsPermalink





‘(C) set reasonable minimum experience, education, and training requirements for loan modification staff; andCommentsClose CommentsPermalink





‘(D) document electronically each action on a foreclosure, loan modification, bankruptcy, or other servicing file, including all communication with the borrower and other parties.CommentsClose CommentsPermalink





‘(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).CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(6) ADDITIONAL REQUIREMENTS RELATED TO TRANSFER OF LOANS-CommentsClose CommentsPermalink





‘(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--CommentsClose CommentsPermalink





‘(i) inform the successor servicer (including a subservicer) whether a loan modification is pending;CommentsClose CommentsPermalink





‘(ii) ensure that the successor servicer shall accept and continue processing prior loan modification requests; andCommentsClose CommentsPermalink





‘(iii) ensure that successor servicer shall honor trial and permanent loan modification agreements entered into by the transferring servicer.CommentsClose CommentsPermalink





‘(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.’.CommentsClose CommentsPermalink





(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--CommentsClose CommentsPermalink





(1) in subparagraph (D), by striking ‘or’ at the end;CommentsClose CommentsPermalink





(2) in subparagraph (E), by striking the period and inserting ‘; or’; andCommentsClose CommentsPermalink





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





‘(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.’.CommentsClose CommentsPermalink





(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:CommentsClose CommentsPermalink





‘(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--CommentsClose CommentsPermalink





‘(1) the payment amounts due under the loan agreement;CommentsClose CommentsPermalink





‘(2) the date and time when such payments must be received;CommentsClose CommentsPermalink





‘(3) the location where such payments must be received; andCommentsClose CommentsPermalink





‘(4) a list of each payment received by the servicer, along with how such payment was allocated to the amounts owed by the borrower.’.CommentsClose CommentsPermalink





(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:CommentsClose CommentsPermalink





‘(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:CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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--CommentsClose CommentsPermalink





‘(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);CommentsClose CommentsPermalink





‘(B) required to pay all actual damages, including emotional distress, regardless of whether there was detrimental reliance on the part of the borrower; andCommentsClose CommentsPermalink





‘(C) liable for attorneys fees.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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.’.CommentsClose CommentsPermalink

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--CommentsClose CommentsPermalink





(1) in paragraph (1), by inserting ‘, including any servicer with respect to a securitized residential mortgage loan,’ before ‘shall notify’; andCommentsClose CommentsPermalink





(2) by striking paragraph (2) and inserting the following:CommentsClose CommentsPermalink





‘(2) DEFINITIONS- For purposes of this subsection--CommentsClose CommentsPermalink





‘(A) the term ‘mortgage loan’ means any consumer credit transaction that is secured by the principal dwelling of a consumer; andCommentsClose CommentsPermalink





‘(B) the terms ‘servicer’ and ‘securitized residential mortgage loan’ have the same meanings as in section 129I(b).’.CommentsClose CommentsPermalink





(b) Safe Harbor for Mistaken Payments; Fees- Section 131 of the Truth in Lending Act (15 U.S.C. 1641) is amended--CommentsClose CommentsPermalink





(1) by redesignating subsection (g) as subsection (i); andCommentsClose CommentsPermalink





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





‘(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.CommentsClose CommentsPermalink





‘(h) Fee Waivers Upon Transfer-CommentsClose CommentsPermalink





‘(1) IN GENERAL- A creditor, including a servicer, may not impose or collect--CommentsClose CommentsPermalink





‘(A) any fee that is not listed as having been incurred in--CommentsClose CommentsPermalink





‘(i) the notice to the consumer of the transfer of a securitized residential mortgage loan from the previous creditor or servicer; orCommentsClose CommentsPermalink





‘(ii) the notice to the consumer from the new creditor or servicer; orCommentsClose CommentsPermalink





‘(B) any fee that is not specified on the monthly statement to the consumer as having been incurred.CommentsClose CommentsPermalink





‘(2) DEFINITIONS- For purposes of this subsection, the terms ‘servicer’ and ‘securitized residential mortgage loan’ have the same meanings as in section 129I(b).’.CommentsClose CommentsPermalink

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--CommentsClose CommentsPermalink





(1) by redesignating subsections (f) and (g) as subsections (h) and (i), respectively;CommentsClose CommentsPermalink





(2) in subsection (i), as so redesignated--CommentsClose CommentsPermalink





(A) by redesignating paragraphs (1) through (3) as paragraphs (2) through (4), respectively; andCommentsClose CommentsPermalink





(B) by inserting before paragraph (2), as so redesignated, the following:CommentsClose CommentsPermalink





‘(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.’; andCommentsClose CommentsPermalink





(3) by inserting after subsection (e) the following:CommentsClose CommentsPermalink





‘(f) Limitation on Foreclosure Proceedings-CommentsClose CommentsPermalink





‘(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--CommentsClose CommentsPermalink





‘(A) has determined whether the mortgagor is eligible for an affordable loan modification; andCommentsClose CommentsPermalink





‘(B) has made such a modification, if the mortgagor is eligible for a modification.CommentsClose CommentsPermalink





‘(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--CommentsClose CommentsPermalink





‘(A) the servicer--CommentsClose CommentsPermalink





‘(i) determines that the mortgagor is not eligible for a modification;CommentsClose CommentsPermalink





‘(ii) notifies the mortgagor of the determination under clause (i); andCommentsClose CommentsPermalink





‘(iii) provides the mortgagor--CommentsClose CommentsPermalink





‘(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;CommentsClose CommentsPermalink





‘(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;CommentsClose CommentsPermalink





‘(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;CommentsClose CommentsPermalink





‘(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;CommentsClose CommentsPermalink





‘(V) a complete and unaltered copy of the pooling or servicing agreement in electronic format; andCommentsClose CommentsPermalink





‘(VI) the alternatives to foreclosure available to the mortgagor, including deed in lieu of foreclosures and short sales; orCommentsClose CommentsPermalink





‘(B) a mortgagor--CommentsClose CommentsPermalink





‘(i) declines an affordable modification in writing; orCommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





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.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(4) ELIGIBILITY- A mortgagor shall be eligible to participate in an affordable loan modification program if--CommentsClose CommentsPermalink





‘(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; andCommentsClose CommentsPermalink





‘(B) they are not an individual who has abandoned the principal residence securing the federally related mortgage loan.CommentsClose CommentsPermalink





‘(5) CERTIFICATION OF DETERMINATION OF ELIGIBILITY REQUIRED FOR SALE-CommentsClose CommentsPermalink





‘(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--CommentsClose CommentsPermalink





‘(i) the mortgagee may not sell the property securing the mortgage; andCommentsClose CommentsPermalink





‘(ii) no person that purchases the property securing the mortgage may initiate an action to recover possession of the property.CommentsClose CommentsPermalink





‘(B) VIOLATIONS- A sale of property in violation of this paragraph shall be void.CommentsClose CommentsPermalink





‘(C) CONTENTS- The Director of the Bureau of Consumer Financial Protection shall, by rule, determine the contents of the certification required under this subsection.CommentsClose CommentsPermalink





‘(g) Earned Principal Forgiveness-CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(2) EARNED PRINCIPAL FORGIVENESS-CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(C) EXCEPTIONS-CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(D) RULES OF CONSTRUCTION-CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(E) PRINCIPAL FORGIVENESS-CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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:CommentsClose CommentsPermalink





‘(I) The date that is 1 year after the date on which the affordable loan modification begins.CommentsClose CommentsPermalink





‘(II) The date that is 2 years after the date on which the affordable loan medication begins.CommentsClose CommentsPermalink





‘(III) The date that is 3 years after the date on which the affordable loan modification begins.CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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--CommentsClose CommentsPermalink





‘(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; andCommentsClose CommentsPermalink





‘(B) use the mortgage note interest rate in effect at the time of a reduction in principal.CommentsClose CommentsPermalink





‘(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.’.CommentsClose CommentsPermalink

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--CommentsClose CommentsPermalink





(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.’; andCommentsClose CommentsPermalink





(2) by adding at the end the following:CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(10) SERVICER- The term ‘servicer’--CommentsClose CommentsPermalink





‘(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; andCommentsClose CommentsPermalink





‘(B) does not include any State or local housing agency.’.CommentsClose CommentsPermalink





(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:CommentsClose CommentsPermalink





‘(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.CommentsClose CommentsPermalink





‘(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.’.CommentsClose CommentsPermalink





(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.CommentsClose CommentsPermalink

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.CommentsClose CommentsPermalink





(b) Treatment of Delinquent Loans-CommentsClose CommentsPermalink





(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.CommentsClose CommentsPermalink





(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)).CommentsClose CommentsPermalink