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[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[S. 1582 Introduced in Senate (IS)]

114th CONGRESS
  1st Session
                                S. 1582

   To establish pilot programs to encourage the use of shared equity 
            mortgage modifications, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             June 16, 2015

  Mr. Menendez (for himself and Ms. Warren) 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 equity 
            mortgage modifications, 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 ``Preserving American Homeownership 
Act of 2015''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) High national, regional, or local foreclosure rates 
        destabilize the economy, housing market, and neighborhoods of 
        the United States.
            (2) Shared equity mortgage modifications can provide 
        alternatives to foreclosures that benefit both underwater 
        homeowners and mortgage investors.

SEC. 3. SHARED EQUITY MORTGAGE MODIFICATION PILOT PROGRAMS.

    (a) Definitions.--In this section--
            (1) the term ``covered mortgage'' means a mortgage--
                    (A) that is--
                            (i) purchased by, guaranteed by, or 
                        otherwise sold to the Federal National Mortgage 
                        Association, the Government National Mortgage 
                        Association, or the Federal Home Loan Mortgage 
                        Corporation; or
                            (ii) insured under title II of the National 
                        Housing Act (12 U.S.C. 1707 et seq.);
                    (B) that is secured by real property that is the 
                primary or secondary residence of a homeowner;
                    (C) that is in an amount that is greater than the 
                appraised value of the real property securing the 
                mortgage on or about the date on which the homeowner is 
                approved to participate in the pilot program under 
                subsection (b);
                    (D) with respect to which the homeowner--
                            (i) is not fewer than 90 days delinquent; 
                        or
                            (ii) is at risk of imminent default;
                    (E) of a homeowner who has a documented financial 
                hardship that prevents or will prevent the homeowner 
                from making mortgage payments; and
                    (F) that may, at the discretion of the Director of 
                the Federal Housing Finance Agency with respect to 
                mortgage-backed securities or participation 
                certificates issued by an enterprise or of the 
                Secretary of Housing and Urban Development with respect 
                to mortgage-backed securities issued by the Government 
                National Mortgage Association, respectively, be made 
                part of any security instrument that may combine or 
                separate the mortgage note and equity position in the 
                real property securing the mortgage;
            (2) the term ``enterprise'' has the meaning given that term 
        in section 1303 of the Federal Housing Enterprises Financial 
        Safety and Soundness Act of 1992 (12 U.S.C. 4502);
            (3) the term ``equity value of the real property'' means, 
        with respect to a covered mortgage, the difference between the 
        value of the real property securing the covered mortgage upon 
        the time of sale (or refinance) and the initial principal 
        obligation amount owed on the covered mortgage, less any 
        transaction costs associated with the sale or refinancing, 
        provided that if the equity value is negative at time of sale 
        (or refinance), no payment is due to the investor;
            (4) the term ``homeowner'' means the mortgagor under a 
        covered mortgage;
            (5) the term ``investor'' means--
                    (A) the mortgagee under a covered mortgage; or
                    (B) in the case of a covered mortgage that 
                collateralizes an asset-backed security, as defined in 
                section 3(a) of the Securities Exchange Act of 1934 (15 
                U.S.C. 78c(a)), the trustee for the asset-backed 
                security;
            (6) the term ``pilot program'' means a pilot program 
        established under subsection (b); and
            (7) the term ``shared equity mortgage modification'' means 
        a modification of a covered mortgage in accordance with 
        subsection (c).
    (b) Pilot Programs Established.--Not later than 1 year after the 
date of enactment of this Act, the Director of the Federal Housing 
Finance Agency and the Federal Housing Commissioner shall each 
establish a pilot program to encourage the use of shared equity 
mortgage modifications that are designed to return greater net present 
value to investors than other loss-mitigation activities, including 
foreclosure.
    (c) Shared Equity Mortgage Modification.--For purposes of a pilot 
program, a shared equity mortgage modification shall--
            (1) reduce the loan-to-value ratio of a covered mortgage to 
        100 percent or less within 3 years, by reducing the difference 
        between the initial original principal obligation amount owed 
        on the covered mortgage and the reduced principal obligation 
        amount determined by the targeted loan-to-value ratio set forth 
        in this paragraph by \1/3\ at the end of each year for 3 years;
            (2) reduce the interest rate for a covered mortgage, if a 
        reduction of principal under paragraph (1) would not result in 
        a reduced monthly payment that is affordable to the homeowner;
            (3) reduce the amount of any periodic payment required to 
        be made by the homeowner, so that the amount payable by the 
        homeowner is equal to the amount that would be payable by the 
        homeowner if, on the date on which the shared equity mortgage 
        modification takes effect--
                    (A) all reductions of the amount of principal under 
                paragraph (1) had been made; and
                    (B) any reduction in the interest rate under 
                paragraph (2) for which the covered mortgage is 
                eligible had been made;
            (4) require the homeowner to pay to the investor upon 
        refinancing or selling the real property securing a covered 
        mortgage, a percentage (not to exceed 50 percent) of the equity 
        value of such real property, provided that--
                    (A) the dollar amount due to the investor upon such 
                sale or refinance shall not exceed an amount that is 
                equal to twice the largest dollar amount of the 
                principal reduction that the homeowner achieved as a 
                result of the principal reduction under paragraph (1);
                    (B) the cap established under subparagraph (A) 
                shall, on February 1 of the year following the year of 
                enactment of this Act, and each February 1 thereafter, 
                be adjusted for inflation, by multiplying the prior 
                year's cap amount by the ratio of the annual average of 
                the Consumer Price Index for All Urban Consumers (CPI-
                U), or a BLS-designated successor to CPI-U, for the 
                prior calendar year to its annual average for the 
                calendar year 2 years prior; and
                    (C) the investor is permitted to structure the 
                equity-sharing interest that the investor is entitled 
                to receive under this paragraph to be transferrable, 
                including by structuring such interest for future sale 
                to other investors;
            (5) be designed to deliver maximal net present value to the 
        investor, taking into account--
                    (A) the principal reduction under paragraph (1);
                    (B) any interest rate reductions under paragraph 
                (2);
                    (C) expected reductions in foreclosure and in any 
                other costs that may reduce net present value; and
                    (D) the value of the equity sharing interest 
                determined under paragraph (4);
            (6) be based on factors including the percentage value of 
        any principal reduction under paragraph (1), the amount of any 
        such principal reduction, and any other factors as determined 
        appropriate by the Director of the Federal Housing Finance 
        Agency or the Federal Housing Commissioner, respectively; and
            (7) require disclosure to the homeowner, before entering 
        into the shared equity mortgage modification, of--
                    (A) the estimated net present value of the equity 
                sharing interest to be determined under paragraph (4); 
                and
                    (B) any other information as determined appropriate 
                by the Director of the Federal Housing Finance Agency 
                or the Federal Housing Commissioner, respectively.
    (d) Determination of Value of Home.--
            (1) In general.--For purposes of this section, the value of 
        real property securing a covered mortgage shall be determined 
        by a licensed appraiser who is independent of and does not 
        otherwise do business with the homeowner, servicer, investor, 
        or an affiliate of the homeowner, servicer, or investor.
            (2) Time for determination.--The value of real property 
        securing a covered mortgage shall be determined on a date that 
        is as close as practicable to the date on which a homeowner 
        begins to participate in a pilot program.
            (3) Cost.--
                    (A) Responsibility for cost.--
                            (i) Initial cost.--The investor shall pay 
                        the cost of an appraisal under paragraph (1).
                            (ii) Deduction from homeowner share.--At 
                        the option of the investor, up to one-half of 
                        the cost of an appraisal under paragraph (1) 
                        may be added to the amount paid by the 
                        homeowner to the investor under subsection 
                        (c)(4).
                    (B) Reasonableness of cost.--The cost of an 
                appraisal under paragraph (1) shall be reasonable, as 
                determined by the Director of the Federal Housing 
                Finance Agency or the Federal Housing Commissioner, 
                respectively, and consistent with any rule, 
                interpretive guideline, or general statement of policy 
                issued pursuant to section 129E of the Truth in Lending 
                Act (15 U.S.C. 1639e).
            (4) Second appraisal.--At the time of refinancing or sale 
        of real property securing a covered mortgage, the investor may 
        request a second appraisal of the value of the real property, 
        at the expense of the investor, by a licensed appraiser 
        selected by the Director of the Federal Housing Finance Agency 
        or the Federal Housing Commissioner, respectively, who is 
        independent of and does not otherwise do business with the 
        homeowner, servicer, investor, or an affiliate of the 
        homeowner, servicer, or investor, if the investor believes that 
        the sale price or claimed value at the time of the refinancing 
        is not an accurate reflection of the fair market value of the 
        real property.
    (e) Eligibility for Reduction of Principal.--Each pilot program 
shall provide that a homeowner is not eligible for a reduction in the 
amount of principal under a covered mortgage under a shared equity 
mortgage modification if, after the homeowner begins participating in 
the pilot program, the homeowner--
            (1) is delinquent on more than 3 payments under the shared 
        equity mortgage modification during any of the 3 successive 1-
        year periods beginning on the date on which the shared equity 
        mortgage modification is made; and
            (2) fails to be current with all payments described in 
        paragraph (1) before the end of each 1-year period described in 
        paragraph (1).
    (f) Participation by Servicers.--The Director of the Federal 
Housing Finance Agency shall require each enterprise to require that 
any servicer of a covered mortgage in which the enterprise is an 
investor participate in the pilot program of the Federal Housing 
Finance Agency by offering shared equity mortgage modifications to a 
random and statistically significant sampling of homeowners with 
covered mortgages.
    (g) Studies and Reports.--The Director of the Federal Housing 
Finance Agency and the Federal Housing Commissioner shall--
            (1) conduct annual studies of the pilot program of the 
        Federal Housing Finance Agency and the Federal Housing 
        Administration, respectively;
            (2) submit a report to Congress containing the results of 
        each study at the end of each of the 3 successive 1-year 
        periods beginning on the date on which the pilot program is 
        established; and
            (3) make publicly available to the maximum extent possible, 
        consistent with the protection of any personal information, and 
        in a timely manner any data generated by the pilot program.
                                 <all>
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