I 

114TH CONGRESS 

1ST SESSION H. R. 3519 

To establish pilot programs to encourage the use of shared appreciation 

mortgage modifications, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 16, 2015 

Mr. ELLISON introduced the following bill; which was referred to the 

Committee on Financial Services 

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 2015’’. 

6 SEC. 2. FINDINGS. 

7 The 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) Homeowners struggling to make payments 

4 on homes with mortgages that are deeply under5 water are some of the most at risk of foreclosure. 

6 (3) A properly carried out principal modifica7 tion program will preserve the assets of the Govern8 ment-sponsored mortgage enterprises assets and re9 duce taxpayer losses, consistent with the mission of 

10 the Federal Housing Finance Agency as the enter11 prises’ conservator, and will help foster a more resil12 ient national housing market. 

13 SEC. 3. SHARED APPRECIATION MORTGAGE MODIFICATION 

14 PILOT PROGRAMS. 

15 (a) DEFINITIONS.—In this section— 

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

17 home improvement described in table 4 of Publica18 tion 530 of the Internal Revenue Service, or any 

19 successor thereto; 

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

21 mortgage— 

22 (A) that is— 

23 (i) sold to the Federal National Mort24 gage Association, the Government National 


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1 Mortgage Association, or the Federal 

2 Home Loan Mortgage Corporation; or 

3 (ii) insured under title II of the Na4 tional Housing Act (12 U.S.C. 1707 et 

5 seq.); 

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

7 the primary residence of a homeowner; 

8 (C) that has an outstanding principal bal9 ance of an amount that is greater than the ap10 praised value of the real property securing the 

11 mortgage, on or about the date on which the 

12 homeowner is approved to participate in the 

13 pilot program under subsection (b); 

14 (D) with respect to which the homeowner 

15 is, both as of the date of the enactment of this 

16 Act and as of the date of the modification 

17 under a pilot program under subsection (b)— 

18 (i) not fewer than 60 days delinquent; 

19 or 

20 (ii) at risk of imminent default; and 

21 (E) of a homeowner who has a documented 

22 financial hardship that prevents or will prevent 

23 the homeowner from making mortgage pay24 ments; 


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1 (3) the term ‘‘Director’’ means the Director of 

2 the Federal Housing Finance Agency; 

3 (4) the term ‘‘enterprise’’ has the same mean4 ing as in section 1303 of the Federal Housing En5 terprises Financial Safety and Soundness Act of 

6 1992 (12 U.S.C. 4502); 

7 (5) the term ‘‘homeowner’’ means the mort8 gagor under a covered mortgage; 

9 (6) the term ‘‘investor’’ means— 

10 (A) the mortgagee under a covered mort11 gage; or 

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

13 collateralizes an asset-backed security, as de14 fined in section 3(a) of the Securities Exchange 

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

16 the asset-backed security; 

17 (7) the term ‘‘pilot program’’ means a pilot pro18 gram established under subsection (b); and 

19 (8) the term ‘‘shared appreciation mortgage 

20 modification’’ means a modification of a covered 

21 mortgage in accordance with subsection (c). 

22 (b) PILOT PROGRAMS ESTABLISHED.—The Director 

23 of the Federal Housing Finance Agency and the Federal 

24 Housing Commissioner, in consultation with the Secretary 

25 of the Treasury, shall each establish a pilot program to 


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1 encourage, through assistance provided under the Home 

2 Affordable Modification Program under the Making Home 

3 Affordable initiative of the Secretary of the Treasury, the 

4 use of shared appreciation mortgage modifications that 

5 are designed to return greater cash flow to investors than 

6 other loss-mitigation activities, including foreclosure, and 

7 result in positive net present value for the investor. 

8 (c) SHARED APPRECIATION MORTGAGE MODIFICA9 TION.—For purposes of the pilot program, a shared appre10 ciation mortgage modification shall— 

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

12 mortgage— 

13 (A) to 115 percent immediately upon such 

14 modification, by immediately reducing the 

15 amount of principal under the covered mortgage 

16 accordingly; and 

17 (B) to 95 percent within 3 years, by reduc18 ing the amount of principal under the covered 

mortgage by 1 19 ⁄3 at the end of each year for 3 

20 years; 

21 (2) reduce the interest rate for a covered mort22 gage, if a reduction of principal under paragraph (1) 

23 would not result in a reduced monthly payment that 

24 is affordable to the homeowner; 


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1 (3) reduce the amount of any periodic payment 

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

3 amount payable by the homeowner is equal to the 

4 amount that would be payable by the homeowner if, 

5 on the date on which the shared appreciation mort6 gage modification takes effect— 

7 (A) all reductions of the amount of prin8 cipal under paragraph (1) had been made; and 

9 (B) any reduction in the interest rate 

10 under paragraph (2) for which the covered 

11 mortgage is eligible had been made; 

12 (4) require the homeowner to pay to the inves13 tor after refinancing or selling the real property se14 curing a covered mortgage a percentage of the 

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

16 such increase) in the value of the real property dur17 ing the period beginning on the date on which the 

18 homeowner was approved to participate in the pilot 

19 program and ending on the date of the refinancing 

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

21 investor reduced the amount of principal under the 

22 covered mortgage under paragraph (1); and 

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

24 investor after taking into account the principal reVerDate Sep 11 2014 00:41 Sep 18, 2015 Jkt 049200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3519.IH H3519

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1 duction under paragraph (1) and, if necessary, any 

2 interest rate reduction under paragraph (2). 

3 (d) DETERMINATION OF VALUE OF HOME.— 

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

5 the value of real property securing a covered mort6 gage shall be determined by a licensed appraiser who 

7 is independent of and does not otherwise do business 

8 with the homeowner, servicer, investor, or an affil9 iate of the homeowner, servicer, or investor, except 

10 that, where available, such value may be determined 

11 using a reliable estimate of value provided by an 

12 automated valuation model of an enterprise. 

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

14 real property securing a covered mortgage shall be 

15 determined on a date that is as close as practicable 

16 to the date on which a homeowner begins to partici17 pate in a pilot program. 

18 (3) COST.— 

19 (A) RESPONSIBILITY FOR COST.— 

20 (i) INITIAL COST.—The investor shall 

21 pay the cost of an appraisal or other deter22 mination of value under paragraph (1). 

23 (ii) DEDUCTION FROM HOMEOWNER

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

25 cost of an appraisal or other determination 


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1 of value under paragraph (1) may be 

2 added to the amount paid by the home3 owner to the investor under subsection 

4 (c)(4). 

5 (B) REASONABLENESS OF COST.—The 

6 cost of an appraisal or other determination of 

7 value under paragraph (1) shall be reasonable, 

8 as determined by the Director and the Federal 

9 Housing Commissioner. 

10 (4) SECOND APPRAISAL.—At the time of refi11 nancing or sale of real property securing a covered 

12 mortgage, the investor may request a second ap13 praisal of the value of the real property, at the ex14 pense of the investor, by a licensed appraiser who is 

15 independent of and does not otherwise do business 

16 with the homeowner, servicer, investor, or an affil17 iate of the homeowner, servicer, or investor, if the 

18 investor believes that the sale price or claimed value 

19 at the time of the refinancing is not an accurate re20 flection of the fair market value of the real property. 

21 (e) ELIGIBILITY FOR REDUCTION OF PRINCIPAL.— 

22 Each pilot program shall provide that a homeowner is not 

23 eligible for a reduction in the amount of principal under 

24 a covered mortgage under a shared appreciation mortgage 


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1 modification if, after the homeowner begins participating 

2 in the pilot program, the homeowner— 

3 (1)(A) is delinquent on more than 3 payments 

4 under the shared appreciation mortgage modification 

5 during any of the 3 successive 1-year periods begin6 ning on the date on which the shared appreciation 

7 mortgage modification is made; and 

8 (B) fails to be current with all payments de9 scribed in paragraph (1) before the end of each 1- 

10 year period described in paragraph (1); or 

11 (2) obtains a mortgage, loan, or credit, or in12 curs any other debt, that creates any additional lien 

13 on the residence that is subject to the covered mort14 gage for which the shared appreciation mortgage 

15 modification or for which such residence is used as 

16 collateral. 

17 The Director shall require, as a condition for participation 

18 in a pilot program by a homeowner, that the homeowner 

19 enter into such agreements as the Director considers nec20 essary to ensure compliance with this subsection. 

21 (f) NOTIFICATION.— 

22 (1) IN GENERAL.—Each pilot program shall re23 quire that the servicer of a covered mortgage trans24 mit to each homeowner participating in the pilot 

25 program written notice, in clear and simple lanVerDate Sep 11 2014 00:41 Sep 18, 2015 Jkt 049200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H3519.IH H3519

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1 guage, of how to maintain and submit any docu2 mentation of capital improvements that is necessary 

3 to ensure that the shares of any increase in the 

4 value of the real property securing the covered mort5 gage to which the investor and the homeowner are 

6 entitled are determined accurately. 

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

8 that a servicer provide the notice described in para9 graph (1)— 

10 (A) before the homeowner accepts a shared 

11 appreciation mortgage modification; and 

12 (B) before the homeowner sells or refi13 nances the real property securing the covered 

14 mortgage. 

15 (g) PARTICIPATION BY SERVICERS.—The Director 

16 shall require each enterprise to require that any servicer 

17 of a covered mortgage in which the enterprise is an inves18 tor participate in the pilot program of the Federal Hous19 ing Finance Agency by offering shared appreciation mort20 gage modifications to a random and statistically signifi21 cant sampling of homeowners with covered mortgages. 

22 (h) MORTGAGE INSURANCE.—The Director shall— 

23 (1) provide that an enterprise may negotiate re24 garding a shared appreciation mortgage modification 

25 of a covered mortgage with any provider of mortgage 


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1 insurance for a mortgage on the property subject to 

2 the covered mortgage; and 

3 (2) allow advance claim agreements with re4 spect to such mortgage insurance policies. 

5 (i) MAINTENANCE OF LIEN STATUS.—A shared ap6 preciation mortgage modification of a covered mortgage 

7 under a pilot program under this section shall not impair 

8 the priority status of liens on the residence that is subject 

9 to the mortgage. 

10 (j) STUDIES AND REPORTS.—The Director and the 

11 Federal Housing Commissioner shall— 

12 (1) conduct annual studies of the pilot pro13 grams of the Federal Housing Finance Agency and 

14 the Federal Housing Administration, respectively; 

15 and 

16 (2) submit a report to the Congress containing 

17 the results of each study at the end of each of the 

18 3 successive 1-year periods beginning on the date on 

19 which the pilot program is established. 

20 (k) TERMINATION.—On and after the date that is 2 

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

22 and the Federal Housing Commissioner may not enter 

23 into any agreement under the pilot program with respect 

24 to a shared appreciation mortgage modification. 

Æ 


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