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[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3789 Introduced in House (IH)]

112th CONGRESS
  2d Session
                                H. R. 3789

    To amend the Truth in Lending Act to establish clear regulatory 
       standards for mortgage servicers, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            January 18, 2012

 Ms. DeLauro introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL

 
    To amend the Truth in Lending Act to establish clear regulatory 
       standards for mortgage servicers, 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 ``Regulation of Mortgage Servicing Act 
of 2012''.

SEC. 2. STANDARDS FOR MORTGAGE SERVICERS.

    (a) In General.--Chapter 2 of the Truth in Lending Act (15 U.S.C. 
1631) is amended by adding at the end the following new section:

``SEC. 129I. STANDARDS FOR SERVICERS OF RESIDENTIAL MORTGAGES.

    ``(a) Definitions.--In this section, the following definitions 
shall apply:
            ``(1) Alternative to foreclosure.--The term `alternative to 
        foreclosure'--
                    ``(A) means a course of action with respect to a 
                mortgage offered by a servicer to a borrower as an 
                alternative to a covered foreclosure action; and
                    ``(B) includes a short sale and a deed in lieu of 
                foreclosure.
            ``(2) Borrower.--The term `borrower' means a mortgagor 
        under a mortgage who is in default or at risk of imminent 
        default, as determined by the Director, by rule.
            ``(3) Covered foreclosure action.--The term `covered 
        foreclosure action' means a judicial or nonjudicial 
        foreclosure.
            ``(4) Independent reviewer.--The term `independent 
        reviewer'--
                    ``(A) means an entity that has the expertise and 
                capacity to determine whether a borrower is eligible to 
                participate in a loan modification program; and
                    ``(B) includes--
                            ``(i) an entity that is not a servicer; or
                            ``(ii) a division within a servicer that is 
                        independent of, and not under the same 
                        immediate supervision as, any division that 
                        makes determinations with respect to 
                        applications for loan modifications or 
                        alternatives to foreclosure.
            ``(5) Loan modification program.--The term `loan 
        modification program'--
                    ``(A) means a program or procedure designed to 
                change the terms of a mortgage in the case of the 
                default, delinquency, or imminent default or 
                delinquency of a mortgagor; and
                    ``(B) includes--
                            ``(i) a loan modification program 
                        established by the Federal Government, 
                        including the Home Affordable Modification 
                        Program of the Department of the Treasury; and
                            ``(ii) a loan modification program 
                        established by a servicer.
            ``(6) Mortgage.--The term `mortgage' means a federally 
        related mortgage loan, as defined in section 3 of the Real 
        Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602(3)), 
        that is secured by a first or subordinate lien on residential 
        real property that is the primary residence of the borrower.
            ``(7) Servicer.--The term `servicer'--
                    ``(A) has the same meaning as in section 6(i) of 
                the Real Estate Settlement Procedures Act of 1974 (12 
                U.S.C. 2605(i)); and
                    ``(B) includes a person responsible for servicing a 
                pool of mortgages.
    ``(b) Single Point of Contact.--
            ``(1) Case manager required.--A servicer shall assign 1 
        case manager to each borrower that seeks a loan modification or 
        an alternative to foreclosure.
            ``(2) Duties of case manager.--The case manager assigned 
        under paragraph (1) shall be an individual who--
                    ``(A) manages the communications between the 
                servicer and the borrower;
                    ``(B) has the authority to make decisions about the 
                eligibility of the borrower for a loan modification or 
                an alternative to foreclosure;
                    ``(C) is available to communicate with the borrower 
                by telephone and email during business hours; and
                    ``(D) remains assigned to the borrower until the 
                earliest of--
                            ``(i) the date on which the borrower 
                        accepts a loan modification or an alternative 
                        to foreclosure;
                            ``(ii) the date on which the servicer 
                        forecloses on the mortgage of the borrower; or
                            ``(iii) the date on which a release of the 
                        mortgage of the borrower is recorded in the 
                        appropriate land records office, as determined 
                        by the Director, by rule.
            ``(3) Assistance for case managers.--A servicer may assign 
        an employee to assist a case manager assigned under paragraph 
        (1), if the case manager remains available to communicate with 
        the borrower by telephone and email.
    ``(c) Determination of Eligibility for Loan Modification Program or 
Alternative to Foreclosure Required Before Foreclosure.--
            ``(1) Initiation of covered foreclosure actions.--A 
        servicer may not initiate a covered foreclosure action against 
        a borrower unless the servicer has--
                    ``(A) completed a full review of the file of the 
                borrower to determine whether the borrower is eligible 
                for a loan modification or an alternative to 
                foreclosure;
                    ``(B) made a reasonable effort to obtain the 
                information necessary to determine whether the borrower 
                is eligible for a loan modification or an alternative 
                to foreclosure, as described in paragraph (3); and
                    ``(C) offered the borrower a loan modification or 
                an alternative to foreclosure, if the borrower is 
                eligible for the loan modification or alternative to 
                foreclosure.
            ``(2) Suspension of covered foreclosure actions.--
                    ``(A) In general.--A servicer shall suspend a 
                covered foreclosure action that was initiated before 
                the date of enactment of this section until the 
                servicer--
                            ``(i) completes a full review of the file 
                        of the borrower to determine whether the 
                        borrower is eligible for a loan modification or 
                        an alternative to foreclosure;
                            ``(ii) notifies the borrower of the 
                        determination under clause (i); and
                            ``(iii) offers the borrower a loan 
                        modification or an alternative to foreclosure, 
                        if the borrower is eligible for a loan 
                        modification or an alternative to foreclosure.
                    ``(B) Suspension.--During the period of the 
                suspension under subparagraph (A), a servicer may not--
                            ``(i) send a notice of foreclosure to a 
                        borrower;
                            ``(ii) conduct or schedule a sale of the 
                        residential real property securing the mortgage 
                        of the borrower; or
                            ``(iii) cause final judgment to be entered 
                        against the borrower.
                    ``(C) Reasonable efforts.--A servicer is not 
                required to suspend a covered foreclosure action under 
                subparagraph (A) if the servicer--
                            ``(i) makes a reasonable effort to obtain 
                        information necessary to determine whether the 
                        borrower is eligible for a loan modification or 
                        an alternative to foreclosure, as described in 
                        paragraph (3); and
                            ``(ii) documents that the servicer has not 
                        received information necessary to determine 
                        whether the borrower is eligible for a loan 
                        modification or an alternative to foreclosure 
                        before the end of the applicable period under 
                        paragraph (3).
                    ``(D) Rule of construction.--Nothing in this 
                section may be construed to require a servicer to delay 
                an unavoidable foreclosure, such as foreclosure that 
                results from a borrower abandoning the residential real 
                property securing the mortgage of such borrower.
            ``(3) Reasonable effort to obtain necessary information.--A 
        servicer shall be deemed to have made a reasonable effort to 
        obtain information necessary to determine whether the borrower 
        is eligible for a loan modification or an alternative to 
        foreclosure if such servicer takes the following steps:
                    ``(A) 30-day period after delinquency.--
                            ``(i) In general.--During the 30-day period 
                        beginning on the date of delinquency of the 
                        borrower, the servicer shall attempt to 
                        establish contact with the borrower by--
                                    ``(I) making not fewer than 4 
                                telephone calls to the telephone number 
                                on record for the borrower, at 
                                different times of the day; and
                                    ``(II) sending not fewer than 2 
                                written notices to the borrower at the 
                                address on record for the borrower, at 
                                least 1 of which shall be delivered by 
                                certified mail, requesting that the 
                                borrower contact the servicer.
                            ``(ii) Contact not established.--In the 
                        case that a servicer is not able to establish 
                        contact with the borrower by telephone under 
                        subclause (I) of clause (i) or such borrower 
                        does not respond to the notices sent under 
                        subclause (II) of such clause, such servicer 
                        shall, following a third party review under 
                        subsection (d), notify the borrower that the 
                        servicer intends to initiate or continue a 
                        covered foreclosure action.
                    ``(B) Contact established with borrower.--In the 
                case that a servicer is able to establish contact with 
                the borrower under subparagraph (A)(i), the servicer 
                shall--
                            ``(i) notify the borrower, in writing, that 
                        the servicer lacks information necessary to 
                        determine whether the borrower is eligible for 
                        a loan modification or an alternative to 
                        foreclosure; and
                            ``(ii) send the borrower a written request 
                        that the borrower transmit to the servicer, not 
                        later than 30 days after the date on which such 
                        request sent by the servicer is postmarked, all 
                        information necessary to determine whether the 
                        borrower is eligible for a loan modification or 
                        an alternative to foreclosure.
                    ``(C) Necessary information not received.--In the 
                case that the servicer does not receive from the 
                borrower all information requested under clause (ii) of 
                subparagraph (B) within the time period described in 
                such subparagraph, the servicer shall send the borrower 
                an additional written request that the borrower 
                transmit to the servicer, not later than 15 days after 
                the date on which such request sent by the servicer is 
                postmarked, all information necessary to determine 
                whether the borrower is eligible for a loan 
                modification or an alternative to foreclosure.
                    ``(D) Notification of foreclosure.--In the case 
                that the servicer does not receive from the borrower 
                all information requested under subparagraph (C) within 
                the time period described in such subparagraph, the 
                servicer shall, following a third party review under 
                subsection (d), notify the borrower that the servicer 
                intends to initiate or continue a covered foreclosure 
                action.
    ``(d) Third Party Review.--
            ``(1) In general.--Unless otherwise provided for in this 
        subsection, before a servicer notifies a borrower that the 
        borrower is not eligible for a loan modification or an 
        alternative to foreclosure, the servicer shall obtain the 
        services of an independent reviewer to--
                    ``(A) review the file of the borrower; and
                    ``(B) determine whether the borrower is eligible 
                for a loan modification or an alternative to 
                foreclosure.
            ``(2) Exemption.--Paragraph (1) shall not apply to a 
        servicer that is a community financial institution, as defined 
        in section 2(10) of the Federal Home Loan Bank Act (12 U.S.C. 
        1422(10)).
    ``(e) Bar to Foreclosure Actions.--
            ``(1) In general.--Subject to paragraph (2), a violation of 
        this Act shall be a bar to a covered foreclosure action.
            ``(2) Effect of subsequent compliance.--If a servicer is in 
        compliance with this section, the servicer may bring or proceed 
        with a covered foreclosure action, without regard to a prior 
        violation of this section by the servicer.
    ``(f) Liability.--
            ``(1) In general.--A servicer that fails to comply with any 
        requirement imposed under this section shall be liable to a 
        borrower in the same manner that a creditor who fails to comply 
        with any requirement under this chapter is liable to a person 
        under section 130.
            ``(2) Joint and several liability.--A creditor or assignee 
        that is connected to a mortgage serviced by a servicer that 
        fails to comply with any requirement imposed under this section 
        shall, with respect to that mortgage, have joint and several 
        liability with such servicer for such failure to comply.''.
    (b) Table of Contents.--The table of contents of chapter 2 of such 
Act is amended by adding at the end the following new item:

``129I. Standards for servicers of residential mortgages.''.

SEC. 3. REGULATIONS.

    Not later than 90 days after the date of enactment of this Act, the 
Director of the Bureau of Consumer Financial Protection, in 
consultation with the Secretary of Housing and Urban Development and 
the Secretary of the Treasury, shall issue regulations to carry out the 
amendments made by this Act.

SEC. 4. REPORT.

    Not later than 1 year after the date of enactment of this Act, the 
Director of the Bureau of Consumer Financial Protection shall submit to 
Congress a report that contains--
            (1) an evaluation of the effect of the amendments made by 
        this Act on--
                    (A) State law; and
                    (B) communication between servicers and borrowers; 
                and
            (2) a description of any problems concerning the 
        implementation of this Act.
                                 <all>
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