II 

112TH CONGRESS 

2D SESSION S. 2093 

To establish pilot programs to encourage the use of shared appreciation 

mortgage modifications, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 9, 2012 

Mr. MENENDEZ introduced the following bill; which was read twice and 

referred to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To establish pilot programs to encourage the use of shared 

appreciation mortgage modifications, and for other purposes. 

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 ‘‘Preserving American 

5 Homeownership Act of 2012’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds the following: 

8 (1) The stability of the economy, housing mar9 ket, and neighborhoods of the United States depends 


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1 upon reducing the number of foreclosures in the 

2 United States. 

3 (2) Underwater homeowners have an incentive 

4 to walk away from their homes, contributing greatly 

5 to the increase in foreclosures. 

6 SEC. 3. SHARED APPRECIATION MORTGAGE MODIFICATION 

7 PILOT PROGRAMS. 

8 (a) DEFINITIONS.—In this section— 

9 (1) the term ‘‘capital improvement’’ means a 

10 home improvement described in table 4 of Publica11 tion 530 of the Internal Revenue Service, or any 

12 successor thereto; 

13 (2) the term ‘‘covered mortgage’’ means a 

14 mortgage— 

15 (A) that is— 

16 (i) sold to the Federal National Mort17 gage Association, the Government National 

18 Mortgage Association, or the Federal 

19 Home Loan Mortgage Corporation; or 

20 (ii) insured under title II of the Na21 tional Housing Act (12 U.S.C. 1707 et 

22 seq.); 

23 (B) that is secured by real property that is 

24 the primary residence of a homeowner; 


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1 (C) that is in an amount that is greater 

2 than the appraised value of the real property 

3 securing the mortgage on or about the date on 

4 which the homeowner is approved to participate 

5 in the pilot program under subsection (b); 

6 (D) with respect to which the home7 owner— 

8 (i) is not fewer than 60 days delin9 quent; or 

10 (ii) is at risk of imminent default; and 

11 (E) of a homeowner who has a documented 

12 financial hardship that prevents or will prevent 

13 the homeowner from making mortgage pay14 ments; 

15 (3) the term ‘‘enterprise’’ has the same mean16 ing as in section 1303 of the Federal Housing En17 terprises Financial Safety and Soundness Act of 

18 1992 (12 U.S.C. 4502); 

19 (4) the term ‘‘homeowner’’ means the mort20 gagor under a covered mortgage; 

21 (5) the term ‘‘investor’’ means— 

22 (A) the mortgagee under a covered mort23 gage; or 

24 (B) in the case of a covered mortgage that 

25 collateralizes an asset-backed security, as deVerDate Mar 15 2010 04:24 Feb 10, 2012 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2093.IS S2093

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1 fined in section 3(a) of the Securities Exchange 

2 Act of 1934 (15 U.S.C. 78c(a)), the trustee for 

3 the asset-backed security; 

4 (6) the term ‘‘pilot program’’ means a pilot pro5 gram established under subsection (b); and 

6 (7) the term ‘‘shared appreciation mortgage 

7 modification’’ means a modification of a covered 

8 mortgage in accordance with subsection (c). 

9 (b) PILOT PROGRAMS ESTABLISHED.—The Director 

10 of the Federal Housing Finance Agency and the Federal 

11 Housing Commissioner shall each establish a pilot pro12 gram to encourage the use of shared appreciation mort13 gage modifications that are designed to return greater 

14 cash flow to investors than other loss-mitigation activities, 

15 including foreclosure, and result in positive net present 

16 value for the investor. 

17 (c) SHARED APPRECIATION MORTGAGE MODIFICA18 TION.—For purpose of the pilot program, a shared appre19 ciation mortgage modification shall— 

20 (1) reduce the loan-to-value ratio of a covered 

21 mortgage to 95 percent within 3 years, by reducing 

22 the amount of principal under the covered mortgage 

by 1 23 ⁄3 at the end of each year for 3 years; 

24 (2) reduce the interest rate for a covered mort25 gage, if a reduction of principal under paragraph (1) 


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1 would not result in a reduced monthly payment that 

2 is affordable to the homeowner; 

3 (3) reduce the amount of any periodic payment 

4 required to be made by the homeowner, so that the 

5 amount payable by the homeowner is equal to the 

6 amount that would be payable by the homeowner if, 

7 on the date on which the shared appreciation mort8 gage modification takes effect— 

9 (A) all reductions of the amount of prin10 cipal under paragraph (1) had been made; and 

11 (B) any reduction in the interest rate 

12 under paragraph (2) for which the covered 

13 mortgage is eligible had been made; 

14 (4) require the homeowner to pay to the inves15 tor after refinancing or selling the real property se16 curing a covered mortgage a percentage of the 

17 amount of any increase (not to exceed 50 percent of 

18 such increase) in the value of the real property dur19 ing the period beginning on the date on which the 

20 homeowner was approved to participate in the pilot 

21 program and ending on the date of the refinancing 

22 or sale that is equal to the percentage by which the 

23 investor reduced the amount of principal under the 

24 covered mortgage under paragraph (1); and 


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1 (5) result in a positive net present value for the 

2 investor after taking into account the principal re3 duction under paragraph (1) and, if necessary, any 

4 interest rate reduction under paragraph (2). 

5 (d) DETERMINATION OF VALUE OF HOME.— 

6 (1) IN GENERAL.—For purposes of this section, 

7 the value of real property securing a covered mort8 gage shall be determined by a licensed appraiser who 

9 is independent of and does not otherwise do business 

10 with the homeowner, servicer, investor, or an affil11 iate of the homeowner, servicer, or investor. 

12 (2) TIME FOR DETERMINATION.—The value of 

13 real property securing a covered mortgage shall be 

14 determined on a date that is as close as practicable 

15 to the date on which a homeowner begins to partici16 pate in a pilot program. 

17 (3) COST.— 

18 (A) RESPONSIBILITY FOR COST.— 

19 (i) INITIAL COST.—The investor shall 

20 pay the cost of an appraisal under para21 graph (1). 

22 (ii) DEDUCTION FROM HOMEOWNER

23 SHARE.—At the option of the investor, the 

24 cost of an appraisal under paragraph (1) 

25 may be added to the amount paid by the 


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1 homeowner to the investor under sub2 section (c)(4). 

3 (B) REASONABLENESS OF COST.—The 

4 cost of an appraisal under paragraph (1) shall 

5 be reasonable, as determined by the Director of 

6 the Federal Housing Finance Agency and the 

7 Federal Housing Commissioner. 

8 (4) SECOND APPRAISAL.—At the time of refi9 nancing or sale of real property securing a covered 

10 mortgage, the investor may request a second ap11 praisal of the value of the real property, at the ex12 pense of the investor, by a licensed appraiser who is 

13 independent of and does not otherwise do business 

14 with the homeowner, servicer, investor, or an affil15 iate of the homeowner, servicer, or investor, if the 

16 investor believes that the sale price or claimed value 

17 at the time of the refinancing is not an accurate re18 flection of the fair market value of the real property. 

19 (e) ELIGIBILITY FOR REDUCTION OF PRINCIPAL.— 

20 Each pilot program shall provide that a homeowner is not 

21 eligible for a reduction in the amount of principal under 

22 a covered mortgage under a shared appreciation mortgage 

23 modification if, after the homeowner begins participating 

24 in the pilot program, the homeowner— 


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1 (1) is delinquent on more than 3 payments 

2 under the shared appreciation mortgage modification 

3 during any of the 3 successive 1-year periods begin4 ning on the date on which the shared appreciation 

5 mortgage modification is made; and 

6 (2) fails to be current with all payments de7 scribed in paragraph (1) before the end of each 1- 

8 year period described in paragraph (1). 

9 (f) NOTIFICATION.— 

10 (1) IN GENERAL.—Each pilot program shall re11 quire that the servicer of a covered mortgage trans12 mit to each homeowner participating in the pilot 

13 program written notice, in clear and simple lan14 guage, of how to maintain and submit any docu15 mentation of capital improvements that is necessary 

16 to ensure that the shares of any increase in the 

17 value of the real property securing the covered mort18 gage to which the investor and the homeowner are 

19 entitled are determined accurately. 

20 (2) TIMING.—The pilot program shall require 

21 that a servicer provide the notice described in para22 graph (1)— 

23 (A) before the homeowner accepts a shared 

24 appreciation mortgage modification; and 


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1 (B) before the homeowner sells or refi2 nances the real property securing the covered 

3 mortgage. 

4 (g) PARTICIPATION BY SERVICERS.—The Director of 

5 the Federal Housing Finance Agency shall require each 

6 enterprise to require that any servicer of a covered mort7 gage in which the enterprise is an investor participate in 

8 the pilot program of the Federal Housing Finance Agency 

9 by offering shared appreciation mortgage modifications to 

10 a random and statistically significant sampling of home11 owners with covered mortgages. 

12 (h) STUDIES AND REPORTS.—The Director of the 

13 Federal Housing Finance Agency and the Federal Hous14 ing Commissioner shall— 

15 (1) conduct annual studies of the pilot program 

16 of the Federal Housing Finance Agency and the 

17 Federal Housing Administration, respectively; and 

18 (2) submit a report to Congress containing the 

19 results of each study at the end of each of the 3 suc20 cessive 1-year periods beginning on the date on 

21 which the pilot program is established. 

22 (i) TERMINATION.—On and after the date that is 2 

23 years after the date of enactment of this Act, the Director 

24 of the Federal Housing Finance Agency and the Federal 

25 Housing Commissioner may not enter into any agreement 


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1 under the pilot program with respect to a shared apprecia2 tion mortgage modification. 

Æ 


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