A bill to establish penalties for servicers that fail to timely evaluate the applications of homeowners under home loan modification programs.

Summary: Mortgage Modification Reform Act of 2010 - Prohibits a residential mortgage servicer from initiating or continuing a foreclosure on a homeowner's mortgage if: (1) the homeowner applied for a loan modification under a home loan modification program either before receiving notice of the foreclosure or within 30 days after receiving it; and (2) the servicer has not yet determined that the homeowner does not qualify under a home loan modification program.

Directs the Secretary of the Treasury to establish a process by which a homeowner may request review of a servicer's denial of an application for either a trial or a permanent loan modification.

Subjects servicers to administrative penalties for wrongful denial of a loan modification application.

Requires servicers to evaluate loan applications in the order received, and to notify the homeowner within three months after the date of application submission.

Requires the Secretary to reduce servicer incentive payments for tardy evaluations by servicers of loan modification applications.

Prohibits servicers from imposing a delinquency fee upon homeowners while the loan modification application is pending.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Mortgage Modification Reform Act of 
2010''.

SEC. 2. DEFINITIONS.

    In this Act--
            (1) the term ``covered trial loan modification'' means a 
        trial loan modification--
                    (A) offered by a servicer to a homeowner under a 
                home loan modification program; and
                    (B) for which the servicer has received from the 
                homeowner the information required for a trial loan 
                modification;
            (2) the term ``home loan modification program'' means a 
        home loan modification program put into effect by the Secretary 
        under title I of division A of the Emergency Economic 
        Stabilization Act of 2008 (12 U.S.C. 5211 et seq.), including 
        the Home Affordable Modification Program;
            (3) the term ``homeowner'' means an individual who applies 
        for a home loan modification under a home loan modification 
        program;
            (4) the term ``permanent loan modification'' means any 
        agreement reached between a homeowner and a servicer on a long-
        term basis, as determined by the Secretary, under a home loan 
        modification program;
            (5) the term ``qualified counselor'' means a qualified 
        counselor described in section 255(f) of the National Housing 
        Act (12 U.S.C. 1715z-20(f));
            (6) the term ``Secretary'' means the Secretary of the 
        Treasury;
            (7) the term ``servicer'' has the same meaning as in 
        section 129 of the Truth in Lending Act (15 U.S.C. 1639a) 
        (relating to the duties of servicers of residential mortgages), 
        as added by section 201(b) of the Helping Families Save Their 
        Homes Act of 2009 (Public Law 111-22; 123 Stat. 1638);
            (8) the term ``servicer incentive payment'' means a payment 
        that is made by the Secretary to a servicer--
                    (A) in exchange, or as an incentive, for making a 
                loan modification under a home loan modification 
                program; and
                    (B) at the time the servicer makes an offer of a 
                trial or permanent modification to a homeowner; and
            (9) the term ``trial loan modification'' means any 
        agreement reached between a homeowner and a servicer on a 
        temporary basis, as determined by the Secretary, under a home 
        loan modification program.

SEC. 3. FORECLOSURE.

    A servicer may not initiate or continue a foreclosure proceeding 
with respect to the mortgage of a homeowner if--
            (1) the homeowner submitted an application for a loan 
        modification under a home loan modification program--
                    (A) before receiving a notice of foreclosure from 
                the servicer; or
                    (B) not later than 30 days after the homeowner 
                received a notice of foreclosure from the servicer; and
            (2) the servicer has not made a determination, as described 
        in section 5(a) that the homeowner does not qualify for a loan 
        modification under a home loan modification program.

SEC. 4. PROCESS FOR REVIEW OF IMPROPER DENIALS.

    (a) Process for Review.--
            (1) In general.--The Secretary shall establish a process by 
        which a homeowner may request the Secretary to review a denial 
        by a servicer of an application by the homeowner for a trial 
        loan modification or permanent loan modification.
            (2) Qualified counselors.--The process established under 
        paragraph (1) shall include the use of qualified counselors to 
        report wrongful denials of trial loan modifications and 
        permanent loan modifications.
            (3) Supporting documentation.--The Secretary shall require 
        a servicer to submit supporting documentation with respect to 
        any denial by the servicer of an application by a homeowner for 
        a trial loan modification or permanent loan modification that 
        is reviewed by the Secretary under the process established 
        under paragraph (1).
    (b) Penalties.--If the Secretary determines after a review under 
the process established under subsection (a) that a servicer has 
wrongly denied the application of a homeowner for a trial loan 
modification or a permanent loan modification, the Secretary shall 
impose a penalty on the servicer.

SEC. 5. PENALTIES FOR SERVICERS THAT DO NOT TIMELY EVALUATE HOMEOWNERS.

    (a) Time for Evaluation of Homeowners.--Not later than 3 months 
after the date on which a homeowner submits an application for a loan 
modification to a servicer that participates in a home loan 
modification program, the servicer shall--
            (1) evaluate the application of the homeowner; and
            (2) notify the homeowner that--
                    (A) the homeowner is qualified for a trial loan 
                modification or a permanent loan modification under the 
                home loan modification program; or
                    (B) the servicer has denied the application.
    (b) Priority for Evaluating Amendments.--
            (1) Priority.--A servicer that participates in a home loan 
        modification program shall evaluate the applications of 
        homeowners for loan modifications in the order in which the 
        servicer receives the applications.
            (2) Prohibition.--A servicer that participates in a home 
        loan modification program may not select the order in which the 
        applications of homeowners are evaluated for loan 
        modifications--
                    (A) on the basis of--
                            (i) the income of the homeowner that made 
                        the application; or
                            (ii) the value of the loan for which a 
                        modification is requested; or
                    (B) for any reason other than the time at which the 
                servicer receives the applications.
    (c) Late Fees for Servicers.--
            (1) Reduced servicer incentive payments for loans 
        individual homeowners.--The Secretary shall reduce the amount 
        of any servicer incentive payment with respect to the loan 
        modification of an individual homeowner by 10 percent for each 
        full month that--
                    (A) follows the date that is 3 months after the 
                date on which the homeowner submits an application for 
                a loan modification to the servicer; and
                    (B) precedes the date on which the servicer 
                notifies the homeowner under subsection (a)(2).
            (2) Reduced payments for all loans.--If the Secretary 
        determines that, on the date that is 3 months after the date of 
        enactment of this Act, less than 75 percent of all homeowners 
        who applied to a servicer for loan modifications under a home 
        loan modification program have been evaluated within 3 months 
        of the date of the application, the Secretary shall reduce by 
        25 percent the amount of any servicer incentive payment the 
        servicer would otherwise be eligible to receive under the home 
        loan modification program.
    (d) Delinquency Fees Charged to Homeowners.--No servicer may impose 
a fee on a homeowner due to delinquency during the period beginning on 
the date on which the homeowner submits an application to the servicer 
for a loan modification and ending on the date on which the homeowner 
receives notice under subsection (a)(2).
    (e) Collection and Report of Data.--
            (1) Collection of data.--Each servicer shall report to the 
        Secretary, at such time and in such manner as the Secretary may 
        determine, data relating to the processing by the servicer of 
        applications for loan modifications.
            (2) Report of data.--The Secretary shall publish a monthly 
        report containing the data collected under paragraph (1).

SEC. 6. REDUCED PAYMENTS FOR FAILURE TO EVALUATE HOMEOWNERS FOR 
              PERMANENT MODIFICATIONS.

    If the Secretary determines that, on the date that is 3 months 
after the date of enactment of this Act, less than 70 percent of all 
covered trial loan modifications offered by a servicer have been 
evaluated for conversion to permanent loan modifications before the 
date that is 3 months after the date on which the servicer and the 
homeowner entered into an agreement for a trial loan modification, the 
Secretary shall reduce by 25 percent the amount of any servicer 
incentive payment the servicer would otherwise be eligible to receive 
under the home loan modification program. Such reduction shall be in 
addition to any other reduction in payment that may have been imposed 
on the servicer for any other violation of this Act.

SEC. 7. RULE OF CONSTRUCTION RELATING TO PAYMENTS TO HOMEOWNERS.

    Nothing in this Act may be construed to require a reduction of a 
payment by the Secretary made on behalf or for the benefit of a 
homeowner in connection with a loan modification.