I 

112TH CONGRESS 

1ST SESSION H. R. 3566 

To ensure uniformity and fairness in deficiency judgments arising from 

foreclosures on mortgages for single family homes. 

IN THE HOUSE OF REPRESENTATIVES 

DECEMBER 6, 2011 

Mr. TOWNS (for himself and Mr. GUTIERREZ) introduced the following bill; 

which was referred to the Committee on the Judiciary 

A BILL 

To ensure uniformity and fairness in deficiency judgments 

arising from foreclosures on mortgages for single family 

homes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Fairness in Fore5 closures Act of 2011’’. 

6 SEC. 2. REQUIREMENTS FOR DEFICIENCY JUDGMENTS. 

7 No action for a deficiency judgment arising from an 

8 obligation under a residential mortgage may be brought 

9 except in accordance with this Act. 


smartinez on DSK6TPTVN1PROD with BILLS
2 

•HR 3566 IH

1 SEC. 3. TIMING. 

2 (a) REQUIREMENT.—An action for a deficiency judg3 ment arising from an obligation under a residential mort4 gage may be brought only during whichever of the fol5 lowing periods terminates earlier: 

6 (1) The 12-month period that begins upon the 

7 date of the foreclosure sale for the residential prop8 erty securing the obligation under the mortgage. 

9 (2) Such period as may be provided under the 

10 applicable State law for bringing an action for such 

11 a deficiency judgment. 

12 (b) SATISFACTION OF MORTGAGE OBLIGATION.—In 

13 the case of any foreclosure on a residential mortgage, if 

14 no action for a deficiency judgment arising from the obli15 gation under the mortgage is brought during the period 

16 provided in subsection (a), the proceeds of any foreclosure 

17 sale conducted with respect to the residential property se18 curing repayment of the obligation owed under the mort19 gage, regardless of amount, shall be deemed to be in full 

20 satisfaction of the obligation under the mortgage and no 

21 action to recover a deficiency in such amount may be 

22 brought after the expiration of such period. 

23 SEC. 4. REQUIREMENT OF COMMERCIALLY REASONABLE 

24 SALE. 

25 (a) REQUIREMENT.—No deficiency judgment arising 

26 from an obligation under a residential mortgage may be 


smartinez on DSK6TPTVN1PROD with BILLS
3 

•HR 3566 IH

1 issued unless the court has determined that the fore2 closure sale for the property securing repayment of the 

3 obligation under the mortgage was conducted in accord4 ance with the following requirements: 

5 (1) The sale was conducted in a recognized 

6 market in the manner that is usual with respect to 

7 such market. 

8 (2) The sale price of the property was current 

9 in a recognized market at the time of disposition. 

10 (3) The sale was otherwise in conformity with 

11 reasonable commercial practices among dealers in 

12 property of the type sold. 

13 (b) DETERMINATION.—A party adversely affected by 

14 a deficiency judgment may submit to the court evidence 

15 contradicting the commercial reasonableness of the fore16 closure sale and of any costs incurred in such sale. 

17 SEC. 5. AMOUNT. 

18 (a) IN GENERAL.—The total amount recovered by a 

19 plaintiff in a deficiency judgment arising from an obliga20 tion under a residential mortgage shall be the amount 

21 equal to— 

22 (1) the sum of— 

23 (A) the amount of obligation owed under 

24 the mortgage, as of the date of the foreclosure 

25 sale for the property, as determined by the 


smartinez on DSK6TPTVN1PROD with BILLS
4 

•HR 3566 IH

1 court, with interest on such amount from the 

2 date of the foreclosure sale at the rate provided 

3 in the mortgage or related contract; 

4 (B) if applicable, the amount owing on all 

5 prior mortgages, liens, and encumbrances, with 

6 interest; and 

7 (C) any reasonable costs for, and disburse8 ments of, the action for the deficiency judg9 ment; less 

10 (2) the greater of— 

11 (A) the fair market value of the property, 

12 as determined by an independent appraisal 

13 completed during either of 10-day periods that 

14 begin and end upon the date of the foreclosure 

15 sale; or 

16 (B) the amount of the sale price of the 

17 property at the foreclosure sale. 

18 (b) DETERMINATION OF FAIR MARKET VALUE.—A 

19 party adversely affected by a deficiency judgment may 

20 submit to the court evidence relevant to establishing the 

21 fair market value of the property for purposes of sub22 section (a)(2)(A). 

23 SEC. 6. PROHIBITIONS ON DEFICIENCY JUDGMENTS. 

24 (a) NONRECOURSE MORTGAGES.—No action for a 

25 deficiency judgment arising from the obligation under a 


smartinez on DSK6TPTVN1PROD with BILLS
5 

•HR 3566 IH

1 residential mortgage may be brought if the terms of the 

2 mortgage prohibit the recovery of any amount of the obli3 gation due under the mortgage after— 

4 (1) the residential property securing repayment 

5 of such obligation is sold at foreclosure sale; or 

6 (2) the mortgage is foreclosed in the manner 

7 provided under the law of the State in which the 

8 property is located. 

9 (b) LOW-INCOME MORTGAGORS.—In the case of any 

10 residential mortgage under which the mortgagor is a mem11 ber of a low-income family, the following shall apply: 

12 (1) PROHIBITION ON ACTION.—No action may 

13 be brought for a deficiency judgment arising from 

14 the obligation under such residential mortgage. 

15 (2) PROHIBITION ON REPORTING DEFICIENCY

16 TO CREDIT AGENCIES.—A deficiency in recovery, 

17 from a foreclosure sale for the property securing re18 payment of the obligation due under the mortgage, 

19 of the full amount of the obligation may not be re20 ported to any consumer reporting agency (as such 

21 term is defined in section 603 of the Fair Credit Re22 porting Act (15 U.S.C. 1681a)) or disclosed to any 

23 person other than the mortgagor or a personal rep24 resentative of the mortgagor, unless such disclosure 

25 is otherwise required by law. 


smartinez on DSK6TPTVN1PROD with BILLS
6 

•HR 3566 IH

1 A determination of whether a family is a low-income fam2 ily for purposes of this subsection shall be based on the 

3 income of the family as of the date of the foreclosure sale 

4 or any other date during either of the 30-day periods be5 ginning and ending on the date of such sale, and shall 

6 be based upon information obtained from the mortgagor 

7 during the foreclosure process. 

8 SEC. 7. DEFINITIONS. 

9 For purposes of this Act, the following definitions 

10 shall apply: 

11 (1) DEFICIENCY JUDGMENT.—The term ‘‘defi12 ciency judgment’’ means a judgment, lien, or court 

13 order, as provided for under State law, for recovery 

14 in whole or in part, as determined by a court as just 

15 and equitable, after a foreclosure or foreclosure sale 

16 of the property securing repayment of the obligation 

17 owed under a residential mortgage, of the portion of 

18 the obligation that remains unsatisfied after applica19 tion of the proceeds of such sale to the obligation. 

20 (2) FORECLOSURE SALE.—The term ‘‘fore21 closure sale’’ means, with respect to the residential 

22 property securing repayment of the obligation under 

23 a residential mortgage, the sale of the property pur24 suant to foreclosure on the mortgage, whether judi25 cial or nonjudicial, undertaken in accordance with 


smartinez on DSK6TPTVN1PROD with BILLS
7 

•HR 3566 IH

1 the laws of the State in which the property is lo2 cated, under which the proceeds of such sale are ap3 plied to such obligation. 

4 (3) LOW-INCOME FAMILY.—The term ‘‘low-in5 come family’’ has the meaning given such term in 

6 section 3(b) of the United States Housing Act of 

7 1937 (42 U.S.C. 1437a(b)). 

8 (4) MORTGAGE.— 

9 (A) IN GENERAL.—The term ‘‘mortgage’’ 

10 means a deed of trust, mortgage, deed to secure 

11 debt, security agreement, or any other form of 

12 instrument under which any property (real, per13 sonal, or mixed), or any interest in property 

14 (including leaseholds, life estates, reversionary 

15 interests, and any other estates under applica16 ble State law), is conveyed in trust, mortgaged, 

17 encumbered, pledged, or otherwise rendered 

18 subject to a lien for the purpose of securing the 

19 payment of money or the performance of an ob20 ligation. 

21 (B) CONDOMINIUMS AND COOPERA22 TIVES.—Such term includes a first mortgage 

23 given to secure— 

24 (i) the unpaid purchase price of a fee 

25 interest in, or a long-term leasehold interVerDate Mar 15 2010 02:33 Dec 07, 2011 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3566.IH H3566

smartinez on DSK6TPTVN1PROD with BILLS
8 

•HR 3566 IH

1 est in, a one-family unit in a multifamily 

2 project, including a project in which the 

3 dwelling units are attached or are manu4 factured housing units, semi-detached, or 

5 detached, and an undivided interest in the 

6 common areas and facilities that serve the 

7 project; or 

8 (ii) repayment of a loan made to fi9 nance the purchase of stock or membership 

10 in a cooperative housing corporation the 

11 permanent occupancy of dwelling units of 

12 which is restricted to members of such cor13 poration, where the purchase of such stock 

14 or membership entitles the purchaser to 

15 the permanent occupancy of one of such 

16 units. 

17 (5) RESIDENTIAL MORTGAGE.— 

18 (A) IN GENERAL.—The term ‘‘residential 

19 mortgage’’ means a mortgage the primary pur20 pose of which is the purchase or financing of a 

21 permanent 1- to 4-family dwelling that is used 

22 as the principal residence of the mortgagor. 

23 (B) DETERMINATION.—A determination of 

24 whether a mortgage is a residential mortgage 

25 for purposes of this Act shall be made based on 


smartinez on DSK6TPTVN1PROD with BILLS
9 

•HR 3566 IH

1 the purpose of the mortgage as of the time the 

2 loan was made, as determined based upon infor3 mation obtained during the application process 

4 for the mortgage. 

5 SEC. 8. APPLICABILITY AND PREEMPTION. 

6 (a) APPLICABILITY.—This Act shall apply with re7 spect to any action for a deficiency judgment arising from 

8 an obligation under a residential mortgage brought in any 

9 State or Federal court. 

10 (b) PREEMPTION.—The provisions of this Act shall 

11 preempt any State law to the extent that such law is in12 consistent with the limitations contained in such provi13 sions. The provisions of this Act shall not preempt any 

14 State law that provides for defenses or places limitations 

15 on a person’s liability in addition to those contained in 

16 this Act or otherwise imposes greater restrictions that 

17 those provided in this Act. 

Æ 


smartinez on DSK6TPTVN1PROD with BILLS