To amend title 11 of the United States Code with respect to modification of certain mortgages on principal residences, and for other purposes.

Summary: Helping Families Save their Homes in Bankruptcy Act of 2009 - (Sec. 1) Amends federal bankruptcy law governing a Chapter 13 debtor (adjustment of debts of an individual with regular income). Excludes from computation of debts the secured or unsecured portions of: (1) debts secured by the debtor's principal residence if the current value of that residence is less than the secured debt limit; or (2) debts secured or formerly secured by a debtor's principal residence that was either sold in foreclosure or surrendered to the creditor if the current value of such real property is less than the secured debt limit.

(Sec. 2) Declares the credit counseling requirement inapplicable to a Chapter 13 debtor who certifies that he or she has received notice that the holder of a claim secured by the debtor's principal residence may commence a foreclosure on the debtor's principal residence.

(Sec. 3) Requires the court to disallow a claim for a loan secured by a security interest in the debtor's principal residence that is subject to remedy for damages or rescission due to violations of the Truth in Lending Act, notwithstanding prior entry of a foreclosure judgment. Prohibits construction of such disallowance to modify, impair, or supersede any other right of the debtor.

(Sec. 4) Allows modification of claim holders' rights in connection with a foreclosure notice for a chapter 13 debtor whose loan originated before the effective date of this Act. Allows changing an adjustable rate of interest to a fixed rate, and extending the repayment period.

Prescribes conditions for reducing a claim under this Act if the debtor receives net proceeds from the sale of the principal residence before receiving a discharge in bankruptcy.

Establishes requirements for modification of other kinds of claims for a loan secured by a security interest in the debtor's principal residence.

(Sec. 5) Denies debtor liability for certain fees and charges incurred while the bankruptcy case is pending and arising from a debt secured by the debtor's principal residence, unless the claim holder observes specified requirements.

(Sec. 6) Adds to conditions for court confirmation of a plan in bankruptcy that: (1) the holder of a claim for a loan secured by the debtor's principal residence retain the lien securing the claim until the later of the payment of such claim as reduced and modified or the discharge of a debtor from all debts; and (2) the plan modifies the claim in good faith and the court finds that the debtor did not obtain the modified claim by the debtor's material misrepresentation, false pretenses, or actual fraud.

(Sec. 7) Excludes from final discharge of a debtor from all debts: (1) any payments to claim holders whose rights are modified under this Act; and (2) any unpaid portion of a claim as reduced.

(Sec. 8) Prohibits the construction of this Act to modify any obligation of the Federal Housing Administration (FHA), the Veterans Administration (VA), or the Department of Agriculture under a contract that guarantees or insures payment of a loan secured by a security interest in a principal residence.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Helping Families Save Their Homes in 
Bankruptcy Act of 2009''.

SEC. 2. ELIGIBILITY FOR RELIEF.

    Section 109 of title 11, United States Code, is amended--
            (1) by adding at the end of subsection (e) the following: 
        ``For purposes of this subsection, the computation of debts 
        shall not include the secured or unsecured portions of--
            ``(1) debts secured by the debtor's principal residence if 
        the current value of such residence is less than the secured 
        debt limit; or
            ``(2) debts secured or formerly secured by real property 
        that was the debtor's principal residence that was sold in 
        foreclosure or that the debtor surrendered to the creditor if 
        the current value of such real property is less than the 
        secured debt limit.'', and
            (2) by adding at the end of subsection (h) the following:
    ``(5) The requirements of paragraph (1) shall not apply in a case 
under chapter 13 with respect to a debtor who submits to the court a 
certification that the debtor has received notice that the holder of a 
claim secured by the debtor's principal residence may commence a 
foreclosure on the debtor's principal residence.''.

SEC. 3. PROHIBITING CLAIMS ARISING FROM VIOLATIONS OF THE TRUTH IN 
              LENDING ACT.

    Section 502(b) of title 11, United States Code, is amended--
            (1) in paragraph (8) by striking ``or'' at the end,
            (2) in paragraph (9) by striking the period at the end and 
        inserting ``; or'', and
            (3) by adding at the end the following:
            ``(10) the claim for a loan secured by a security interest 
        in the debtor's principal residence is subject to a remedy for 
        rescission under the Truth in Lending Act notwithstanding the 
        prior entry of a foreclosure judgment, except that nothing in 
        this paragraph shall be construed to modify, impair, or 
        supersede any other right of the debtor.''.

SEC. 4. AUTHORITY TO MODIFY CERTAIN MORTGAGES.

    Section 1322 of title 11, United States Code, is amended--
            (1) in subsection (b)--
                    (A) by redesignating paragraph (11) as paragraph 
                (12),
                    (B) in paragraph (10) by striking ``and'' at the 
                end, and
                    (C) by inserting after paragraph (10) the 
                following:
            ``(11) notwithstanding paragraph (2) and otherwise 
        applicable nonbankruptcy law, with respect to a claim for a 
        loan originated before the effective date of this paragraph and 
        secured by a security interest in the debtor's principal 
        residence that is the subject of a notice that a foreclosure 
        may be commenced with respect to such loan, modify the rights 
        of the holder of such claim (and the rights of the holder of 
        any claim secured by a subordinate security interest in such 
        residence)--
                    ``(A) by providing for payment of the amount of the 
                allowed secured claim as determined under section 
                506(a)(1);
                    ``(B) if any applicable rate of interest is 
                adjustable under the terms of such security interest by 
                prohibiting, reducing, or delaying adjustments to such 
                rate of interest applicable on and after the date of 
                filing of the plan;
                    ``(C) by modifying the terms and conditions of such 
                loan--
                            ``(i) to extend the repayment period for a 
                        period that is no longer than the longer of 40 
                        years (reduced by the period for which such 
                        loan has been outstanding) or the remaining 
                        term of such loan, beginning on the date of the 
                        order for relief under this chapter; and
                            ``(ii) to provide for the payment of 
                        interest accruing after the date of the order 
                        for relief under this chapter at a fixed annual 
                        rate equal to the currently applicable average 
                        prime offer rate as of the date of the order 
                        for relief under this chapter, corresponding to 
                        the repayment term determined under the 
                        preceding paragraph, as published by the 
                        Federal Financial Institutions Examination 
                        Council in its table entitled `Average Prime 
                        Offer Rates--Fixed', plus a reasonable premium 
                        for risk; and
                    ``(D) by providing for payments of such modified 
                loan directly to the holder of the claim; and'', and
            (2) by adding at the end the following:
    ``(g) A claim may be reduced under subsection (b)(11)(A) only on 
the condition that if the debtor sells the principal residence securing 
such claim, before receiving a discharge under this chapter and 
receives net proceeds from the sale of such residence, then the debtor 
agrees to pay to such holder--
            ``(1) if such residence is sold in the 1st year occurring 
        after the effective date of the plan, 80 percent of the amount 
        of the difference between the sales price and the amount of 
        such claim (plus costs of sale and improvements), but not to 
        exceed the amount of the allowed secured claim determined as if 
        such claim had not been reduced under such subsection;
            ``(2) if such residence is sold in the 2d year occurring 
        after the effective date of the plan, 60 percent of the amount 
        of the difference between the sales price and the amount of 
        such claim (plus costs of sale and improvements), but not to 
        exceed the amount of the allowed secured claim determined as if 
        such claim had not been reduced under such subsection;
            ``(3) if such residence is sold in the 3d year occurring 
        after the effective date of the plan, 40 percent of the amount 
        of the difference between the sales price and the amount of 
        such claim (plus costs of sale and improvements), but not to 
        exceed the amount of the allowed secured claim determined as if 
        such claim had not been reduced under such subsection; and
            ``(4) if such residence is sold in the 4th year occurring 
        after the effective date of the plan, 20 percent of the amount 
        of the difference between the sales price and the amount of 
        such claim (plus costs of sale and improvements), but not to 
        exceed the amount of the allowed secured claim determined as if 
        such claim had not been reduced under such subsection.
    ``(h) With respect to a claim of the kind described in subsection 
(b)(11), the plan may not contain a modification under the authority of 
subsection (b)(11)--
            ``(1) in a case commenced under this chapter after the 
        expiration of the 15-day period beginning on the effective date 
        of this subsection, unless--
                    ``(A) the debtor certifies that the debtor 
                attempted, not less than 15 days before the 
                commencement of the case, to contact the holder of such 
                claim (or the entity collecting payments on behalf of 
                such holder) regarding modification of the loan that is 
                the subject of such claim; or
                    ``(B) a foreclosure sale is scheduled to occur on a 
                date in the 30-day period beginning on the date the 
                case is commenced; and
            ``(2) in any other case pending under this chapter, unless 
        the debtor certifies that the debtor attempted to contact the 
        holder of such claim (or the entity collecting payments on 
        behalf of such holder) regarding modification of the loan that 
        is the subject of such claim, before--
                    ``(A) filing a plan under section 1321 that 
                contains a modification under the authority of 
                subsection (b)(11); or
                    ``(B) modifying a plan under section 1323 or 1329 
                to contain a modification under the authority of 
                subsection (b)(11).''.

SEC. 5. COMBATING EXCESSIVE FEES.

    Section 1322(c) of title 11, United States Code, is amended--
            (1) in paragraph (1) by striking ``and'' at the end,
            (2) in paragraph (2) by striking the period at the end and 
        inserting a semicolon, and
            (3) by adding at the end the following:
            ``(3) the debtor, the debtor's property, and property of 
        the estate are not liable for a fee, cost, or charge that is 
        incurred while the case is pending and arises from a debt that 
        is secured by the debtor's principal residence except to the 
        extent that--
                    ``(A) the holder of the claim for such debt files 
                with the court (annually or, in order to permit filing 
                consistent with clause (ii), at such more frequent 
                periodicity as the court determines necessary) notice 
                of such fee, cost, or charge before the earlier of--
                            ``(i) 1 year after such fee, cost, or 
                        charge is incurred; or
                            ``(ii) 60 days before the closing of the 
                        case; and
                    ``(B) such fee, cost, or charge--
                            ``(i) is lawful under applicable 
                        nonbankruptcy law, reasonable, and provided for 
                        in the applicable security agreement; and
                            ``(ii) is secured by property the value of 
                        which is greater than the amount of such claim, 
                        including such fee, cost, or charge;
            ``(4) the failure of a party to give notice described in 
        paragraph (3) shall be deemed a waiver of any claim for fees, 
        costs, or charges described in paragraph (3) for all purposes, 
        and any attempt to collect such fees, costs, or charges shall 
        constitute a violation of section 524(a)(2) or, if the 
        violation occurs before the date of discharge, of section 
        362(a); and
            ``(5) a plan may provide for the waiver of any prepayment 
        penalty on a claim secured by the debtor's principal 
        residence.''.

SEC. 6. CONFIRMATION OF PLAN.

    Section 1325(a) of title 11, United States Code, is amended--
            (1) in paragraph (8) by striking ``and'' at the end,
            (2) in paragraph (9) by striking the period at the end and 
        inserting a semicolon, and
            (3) by inserting after paragraph (9) the following:
            ``(10) notwithstanding subclause (I) of paragraph 
        (5)(B)(i), whenever the plan modifies a claim in accordance 
        with section 1322(b)(11), the plan provides that the holder of 
        such claim retain the lien until the later of--
                    ``(A) the payment of such holder's allowed secured 
                claim; or
                    ``(B) discharge under section 1328; and
            ``(11) whenever the plan modifies a claim in accordance 
        with section 1322(b)(11), the court finds that such 
        modification is in good faith and that the debtor did not 
        obtain the extension, renewal, or refinancing of credit that 
        gives rise to a modified claim by the debtor's material 
        misrepresentation, false pretenses, or actual fraud.''.

SEC. 7. DISCHARGE.

    Section 1328 of title 11, United States Code, is amended--
            (1) in subsection (a)--
                    (A) by inserting ``(other than payments to holders 
                of claims whose rights are modified under section 
                1322(b)(11))'' after ``paid'', and
                    (B) in paragraph (1) by inserting ``or, to the 
                extent of the unpaid portion of an allowed secured 
                claim, provided for in section 1322(b)(11)'' after 
                ``1322(b)(5)'', and
            (2) in subsection (c)(1) by inserting ``or, to the extent 
        of the unpaid portion of an allowed secured claim, provided for 
        in section 1322(b)(11)'' after ``1322(b)(5)''.

SEC. 8. RULE OF CONSTRUCTION.

    Nothing in this Act or the amendments made by this Act shall be 
construed to modify any obligation of the Federal Housing 
Administration, the Veterans Administration, or the Department of 
Agriculture under a contract that guarantees or insures the payment of 
any part of a loan secured by a security interest in a principal 
residence.

SEC. 9. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

    (a) Effective Date.--Except as provided in subsection (b), this Act 
and the amendments made by this Act shall take effect on the date of 
the enactment of this Act.
    (b) Application of Amendments.--The amendments made by this Act 
shall apply with respect to cases commenced under title 11 of the 
United States Code before, on, or after the date of the enactment of 
this Act.