[Congressional Bills 110th Congress]
[From the U.S. Government Printing Office]
[S. 3738 Introduced in Senate (IS)]
110th CONGRESS
2d Session
S. 3738
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.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
December 11 (legislative day, December 10), 2008
Mr. Menendez introduced the following bill; which was read twice and
referred to the Committee on Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
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.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Home Retention and Economic
Stabilization Act of 2008''.
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:
``Sec. 128A. Foreclosure deferment and reset notification for certain
mortgages
``(a) Definitions.--For purposes of this section, the following
definitions shall apply:
``(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.
``(2) Deferment period.--The term `deferment period' means
the period that--
``(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; and
``(B) ends on the earliest of the following
applicable dates:
``(i) The date that is 270 days after the
beginning of the period.
``(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.
``(iii) The date on which the creditor or
servicer enters into a qualified loan
modification with the consumer.
``(iv) The date on which the deferment is
terminated by judicial order.
``(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--
``(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;
and
``(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.
``(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.
``(5) Eligible deferred-foreclosure consumer.--The term
`eligible deferred-foreclosure consumer' means a consumer who--
``(A) is a mortgagor on an eligible deferred-
foreclosure mortgage;
``(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;
``(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; and
``(D) during the deferment period, responds to
reasonable inquiries from a creditor or servicer with
respect to an eligible deferred-foreclosure mortgage.
``(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.
``(7) Qualified loan modification.--
``(A) In general.--The term `qualified loan
modification' means a permanent, sustainable loan
modification.
``(B) FDIC regulations.--Not later than 60 days
after the date of enactment of the Home Retention and
Economic Stabilization Act of 2008, the Chair of the
Federal Deposit Insurance Corporation shall promulgate
rules establishing under what circumstances a loan
modification will qualify as permanent and sustainable.
``(8) Subprime mortgage.--The term `subprime mortgage'
means--
``(A) any residential mortgage loan that
constitutes a first lien on the dwelling or real
property securing the loan and either--
``(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; or
``(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; and
``(B) any residential mortgage loan that is not the
first lien on the dwelling or real property securing
the loan and either--
``(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; or
``(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.
``(b) Right to Deferment of Institution of or Action on
Foreclosure.--
``(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.
``(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.
``(c) Notice to Consumer Before Any Foreclosure Action.--
``(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.
``(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--
``(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);
``(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; and
``(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.
``(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.
``(d) Institution of Deferment.--
``(1) Procedure required.--Any eligible deferred-
foreclosure consumer who chooses to exercise a deferment right
under subsection (b) shall provide--
``(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;
``(B) a clear identification of the eligible
deferred-foreclosure consumer and the address of the
property securing the mortgage; and
``(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.
``(2) Sufficiency of notice.--
``(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.
``(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.
``(3) Acknowledgment.--
``(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.
``(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.
``(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--
``(A) the due date and the amount of the next
payment due on such mortgage;
``(B) the address or the delivery method for such
payment;
``(C) the date on which the deferral of the
foreclosure will terminate; and
``(D) a notice that failure to make such payment in
a timely manner will jeopardize the continuation of the
deferral of the foreclosure.
``(e) Deferment Payment.--
``(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.
``(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--
``(A) in the case of any subprime mortgage, the
lesser of--
``(i) the minimum monthly payment of
principal and interest on the date the loan was
originated; or
``(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; and
``(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.
``(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.
``(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.
``(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:
``(1) Any index or formula used--
``(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; and
``(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.
``(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.
``(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--
``(A) refinancing;
``(B) renegotiation of loan terms;
``(C) payment forbearances;
``(D) pre-foreclosure sales; and
``(E) any payment assistance available from the
State in which the property is located.
``(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).
``(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.
``(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.
``(h) Duty of Consumer To Maintain Property.--
``(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.
``(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.
``(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.
``(j) Coordination With State Law.--
``(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.
``(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.''.
(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:
``128A. Foreclosure deferment and reset notification for certain
mortgages.''.
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.
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