Preventing Abandoned Foreclosures and Preserving Communities Act of 2016

Summary: Preventing Abandoned Foreclosures and Preserving Communities Act of 2016 This bill amends the Real Estate Settlement Procedures Act of 1974 to require a servicer of a federally related or federally backed mortgage loan to&nbsp;provide, with respect to foreclosure proceedings,&nbsp;specified notice to the borrower and applicable taxing district. Unless specified requirements are met, a servicer of a loan insured by the Federal Housing Administration and backed by either the Federal National Mortgage Association (Fannie Mae)&nbsp;or the Federal Home Loan Mortgage Corporation (Freddie Mac) may not abandon an initiated foreclosure. The Consumer Financial Protection&nbsp;Bureau must establish a database of abandoned foreclosures. The Government Accountability Office shall conduct a study on abandoned foreclosures.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Preventing Abandoned Foreclosures 
and Preserving Communities Act of 2016''.

SEC. 2. NOTIFICATION REQUIREMENTS FOR SERVICERS THAT INITIATE 
              FORECLOSURE PROCEEDINGS.

    The Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601 
et seq.) is amended--
            (1) in section 3 (12 U.S.C. 2602)--
                    (A) in paragraph (8), by striking ``and'' at the 
                end;
                    (B) in paragraph (9), by striking the period at the 
                end and inserting ``; and''; and
                    (C) by adding at the end the following:
            ``(10) the term `enterprise' has the meaning given the term 
        in section 1303 of the Federal Housing Enterprises Financial 
        Safety and Soundness Act of 1992 (12 U.S.C. 4502).''; and
            (2) in section 6 (12 U.S.C. 2605), by adding at the end the 
        following:
    ``(n) Notices Relating to Foreclosure.--
            ``(1) Definition.--In this subsection, the term `covered 
        loan' means--
                    ``(A) a federally related mortgage loan; or
                    ``(B) a non-performing loan purchased from a 
                Federal agency or an enterprise.
            ``(2) Initial notice requirement.--
                    ``(A) In general.--A servicer of a covered loan 
                that makes the first notice or filing required by 
                applicable State law for a judicial or non-judicial 
                foreclosure process against a borrower and any other 
                record owners shall notify the borrower and any other 
                record owners in writing that, until the date on which 
                the deed and title for the property for which the 
                covered loan was made are transferred to another 
                person, the borrower and any other record owners--
                            ``(i) may remain in the property until such 
                        time as the borrower and any other record 
                        owners are required to vacate the property 
                        under State law; and
                            ``(ii) shall, to the extent required under 
                        State law, be responsible for the payment of 
                        any taxes, assessments, and other fees 
                        associated with the property.
                    ``(B) State law requirements.--A servicer of a 
                covered loan is not required to provide the written 
                notice described in subparagraph (A) if the servicer 
                provides notice to the borrower and any other record 
                owners, under applicable State law, of the information 
                described in subparagraph (A).
            ``(3) Notice of charge-off and release of lien.--
                    ``(A) In general.--If a servicer of a covered loan 
                makes the first notice or filing required by applicable 
                State law for a judicial or non-judicial foreclosure 
                process against a borrower and any other record owners 
                and subsequently charges off the covered loan and 
                releases the lien on the property for which the covered 
                loan was made, the servicer shall provide prompt 
                notice, in writing, of the charge-off and release to--
                            ``(i) the borrower and any other record 
                        owners, which shall include a statement that--
                                    ``(I) the title to the property is 
                                no longer encumbered by the lien;
                                    ``(II) the covered loan has been 
                                discharged;
                                    ``(III) the borrower and any other 
                                record owners may face income tax 
                                consequences related to the discharged 
                                covered loan; and
                                    ``(IV) the borrower and any other 
                                record owners may want to consult a tax 
                                advisor; and
                            ``(ii) the taxing district in which the 
                        property is located.
                    ``(B) Required attempts.--A servicer that is 
                required to provide notice to a borrower and any other 
                record owners under subparagraph (A)(i)--
                            ``(i) shall make not less than 3 attempts 
                        to provide the notice, where the servicer 
                        makes--
                                    ``(I) not less than 2 attempts to 
                                provide the notice by telephone; and
                                    ``(II) not less than 1 attempt to 
                                provide the notice in writing; and
                            ``(ii) shall attempt to locate the borrower 
                        and any other record owners and provide the 
                        notice if the servicer has information that the 
                        borrower and any other record owners no longer 
                        reside at the property.
                    ``(C) Language.--A servicer shall provide the 
                notice under subparagraph (A)(i) in the preferred 
                language of the borrower if the servicer has 
                information that the borrower has indicated a preferred 
                language other than English.
            ``(4) Standard notification forms.--The Bureau may develop 
        and issue standard forms, which may be submitted in paper or 
        electronic format, for the provision of the notices required 
        under paragraphs (2) and (3).
            ``(5) Database of abandoned foreclosures.--
                    ``(A) Definition.--In this paragraph, the term 
                `abandoned foreclosure' means a covered loan--
                            ``(i) that is secured by a property that 
                        was the principal residence of the borrower--
                                    ``(I) at the time of the 
                                origination of the covered loan; or
                                    ``(II) when the servicer of the 
                                covered loan made the first notice or 
                                filing required by applicable State law 
                                for a judicial or non-judicial 
                                foreclosure process;
                            ``(ii) that is not an open-end credit or 
                        reverse mortgage loan; and
                            ``(iii) where the servicer of the covered 
                        loan--
                                    ``(I) has made the first notice or 
                                filing required by applicable State law 
                                for a judicial or non-judicial 
                                foreclosure process; and
                                    ``(II) has--
                                            ``(aa) ceased to pursue 
                                        additional action in the 
                                        foreclosure process; or
                                            ``(bb) charged off the 
                                        covered loan and released the 
                                        lien on the property for which 
                                        the covered loan was made.
                    ``(B) Database.--Not later than 3 years after the 
                date of enactment of this subsection, the Bureau shall 
                establish, maintain, and periodically update a database 
                of abandoned foreclosures.
                    ``(C) Contents.--The database established under 
                subparagraph (B) shall include, for each abandoned 
                foreclosure--
                            ``(i) the address information for the 
                        property;
                            ``(ii) the status of the deed or title to 
                        the property;
                            ``(iii) the number of days the borrower was 
                        delinquent before the servicer initiated the 
                        foreclosure;
                            ``(iv) the outstanding amount of the 
                        covered loan at the time the servicer initiated 
                        the foreclosure;
                            ``(v) the date on which the servicer 
                        initiated the foreclosure;
                            ``(vi) the date on which the servicer 
                        charged off the covered loan and released the 
                        lien; and
                            ``(vii) the amount of the covered loan 
                        charged off by the servicer.
                    ``(D) Accessibility.--The Bureau may, at the 
                discretion of the Director of the Bureau, provide 
                access to the database established under subparagraph 
                (B) to taxing districts.
                    ``(E) Protection of information.--The Bureau shall 
                take appropriate and necessary steps to ensure the 
                protection of personally identifiable information in 
                the database established under subparagraph (B).
            ``(6) Rule of construction.--Nothing in this section shall 
        be construed to preempt or prohibit any provision of State law 
        with respect to notice provided to borrowers relating to a 
        foreclosure, except to the extent that the requirements of this 
        section provide greater notice to such a borrower.''.

SEC. 3. SELLER AND SERVICER ELIGIBILITY.

    (a) Enterprises.--
            (1) In general.--Not later than 90 days after the date of 
        enactment of this Act, the Federal Housing Finance Agency shall 
        promulgate a rule that provides that a seller or servicer of a 
        mortgage loan held by the Federal National Mortgage Association 
        or the Federal Home Loan Mortgage Corporation (or an affiliate 
        thereof)--
                    (A) may not, with respect to the mortgage loan--
                            (i) make the first notice or filing 
                        required by applicable State law for a judicial 
                        or non-judicial foreclosure process; and
                            (ii) following the notice or filing, cease 
                        to pursue additional action in the foreclosure 
                        process or charge off the mortgage loan unless 
                        the seller or servicer contemporaneously 
                        records a release of the mortgage loan in the 
                        registry of deeds in which the mortgage is 
                        recorded, which release shall include a 
                        discharge of the debt secured by the mortgage 
                        loan; and
                    (B) with respect to the servicer of the mortgage 
                loan, is required to comply with the notice 
                requirements under paragraphs (1) and (2) of section 
                6(n) of the Real Estate Settlement Procedures Act of 
                1974, as added by section 2 of this Act.
            (2) Rule of construction.--Nothing in paragraph (1) shall 
        be construed to inhibit or preclude a seller or servicer of a 
        mortgage loan described in paragraph (1) from continuing or 
        initiating loss mitigation during the foreclosure process, 
        including participating in any available mediation program or 
        process under State law.
    (b) Federal Housing Administration.--Section 203 of the National 
Housing Act (12 U.S.C. 1709) is amended by adding at the end the 
following:
    ``(y) Prohibition on Abandoned Foreclosures.--
            ``(1) In general.--To be eligible to service a mortgage 
        insured under this section, a servicer may not, with respect to 
        the mortgage--
                    ``(A) make the first notice or filing required by 
                applicable State law for a judicial or non-judicial 
                foreclosure process; and
                    ``(B) following the notice or filing, cease to 
                pursue additional action in the foreclosure process or 
                charge off the mortgage unless the servicer 
                contemporaneously records a release of the mortgage in 
                the registry of deeds in which the mortgage is 
                recorded, which release shall include a discharge of 
                the debt secured by the mortgage.
            ``(2) Required notice.--A servicer of a mortgage insured 
        under this section shall comply with the notice requirements 
        under paragraphs (2) and (3) of section 6(n) of the Real Estate 
        Settlement Procedures Act of 1974.
            ``(3) Rule of construction.--Nothing in paragraph (1) shall 
        be construed to inhibit or preclude a servicer of a mortgage 
        from continuing or initiating loss mitigation during the 
        foreclosure process, including participating in any available 
        mediation program or process under State law.''.

SEC. 4. GAO STUDY ON ABANDONED FORECLOSURES.

    (a) Definitions.--In this section:
            (1) Abandoned foreclosure.--The term ``abandoned 
        foreclosure'' means a covered loan--
                    (A) that is secured by a property that was the 
                principal residence of the borrower--
                            (i) at the time of the origination of the 
                        covered loan; or
                            (ii) when the servicer of the covered loan 
                        made the first notice or filing required by 
                        applicable State law for a judicial or non-
                        judicial foreclosure process;
                    (B) that is not an open-end credit or reverse 
                mortgage loan; and
                    (C) where the servicer of the covered loan--
                            (i) has made the first notice or filing 
                        required by applicable State law for a judicial 
                        or non-judicial foreclosure process; and
                            (ii) has--
                                    (I) ceased to pursue additional 
                                action in the foreclosure process; or
                                    (II) charged off the covered loan 
                                and released the lien on the property 
                                for which the covered loan was made.
            (2) Covered loan.--The term ``covered loan'' means--
                    (A) a federally related mortgage loan; or
                    (B) a non-performing loan purchased from a Federal 
                agency or an enterprise.
            (3) Enterprise.--The term ``enterprise'' has the meaning 
        given the term in section 1303 of the Federal Housing 
        Enterprises Financial Safety and Soundness Act of 1992 (12 
        U.S.C. 4502).
            (4) Federally related mortgage loan.--The term ``federally 
        related mortgage loan'' has the meaning given the term in 
        section 3 of the Real Estate Settlement Procedures Act of 1974 
        (12 U.S.C. 2602).
    (b) Study.--Not later than 1 year after the date of enactment of 
this Act, the Comptroller General of the United States shall submit to 
Congress, the Committee on Banking, Housing, and Urban Affairs of the 
Senate, and the Committee on Financial Services of the House of 
Representatives a report on--
            (1) the incidence and concentration of abandoned 
        foreclosures;
            (2) the impact of abandoned foreclosures on neighborhood 
        and community property values, including the propensity of 
        abandoned foreclosures to lead to foreclosures on neighboring 
        properties; and
            (3) the best available methods to collect information on 
        abandoned foreclosures, taking into account the cost of 
        collecting that information.
    (c) Recommendations.--The report submitted under subsection (b) may 
include recommendations for additional requirements or conditions for 
servicers with respect to charging off covered loans or releasing liens 
on abandoned foreclosures.

SEC. 5. RULE OF CONSTRUCTION.

    Nothing in this Act or the amendments made by this Act shall be 
construed to limit the rights of a tenant to remain in a property 
during a foreclosure process that are in effect under Federal or State 
law as of the date of enactment of this Act.