II 

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. 

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 Congress finds the following: 

8 (1) High national, regional, or local foreclosure 

9 rates destabilize the economy, housing market, and 

10 neighborhoods of the United States. 


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1 (2) Shared equity mortgage modifications can 

2 provide alternatives to foreclosures that benefit both 

3 underwater homeowners and mortgage investors. 

4 SEC. 3. SHARED EQUITY MORTGAGE MODIFICATION PILOT 

5 PROGRAMS. 

6 (a) DEFINITIONS.—In this section— 

7 (1) the term ‘‘covered mortgage’’ means a 

8 mortgage— 

9 (A) that is— 

10 (i) purchased by, guaranteed by, or 

11 otherwise sold to the Federal National 

12 Mortgage Association, the Government Na13 tional Mortgage Association, or the Fed14 eral Home Loan Mortgage Corporation; or 

15 (ii) insured under title II of the Na16 tional Housing Act (12 U.S.C. 1707 et 

17 seq.); 

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

19 the primary or secondary residence of a home20 owner; 

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

22 than the appraised value of the real property 

23 securing the mortgage on or about the date on 

24 which the homeowner is approved to participate 

25 in the pilot program under subsection (b); 


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1 (D) with respect to which the home2 owner— 

3 (i) is not fewer than 90 days delin4 quent; or 

5 (ii) is at risk of imminent default; 

6 (E) of a homeowner who has a documented 

7 financial hardship that prevents or will prevent 

8 the homeowner from making mortgage pay9 ments; and 

10 (F) that may, at the discretion of the Di11 rector of the Federal Housing Finance Agency 

12 with respect to mortgage-backed securities or 

13 participation certificates issued by an enterprise 

14 or of the Secretary of Housing and Urban De15 velopment with respect to mortgage-backed se16 curities issued by the Government National 

17 Mortgage Association, respectively, be made 

18 part of any security instrument that may com19 bine or separate the mortgage note and equity 

20 position in the real property securing the mort21 gage; 

22 (2) the term ‘‘enterprise’’ has the meaning 

23 given that term in section 1303 of the Federal 

24 Housing Enterprises Financial Safety and Sound25 ness Act of 1992 (12 U.S.C. 4502); 


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1 (3) the term ‘‘equity value of the real property’’ 

2 means, with respect to a covered mortgage, the dif3 ference between the value of the real property secur4 ing the covered mortgage upon the time of sale (or 

5 refinance) and the initial principal obligation amount 

6 owed on the covered mortgage, less any transaction 

7 costs associated with the sale or refinancing, pro8 vided that if the equity value is negative at time of 

9 sale (or refinance), no payment is due to the inves10 tor; 

11 (4) the term ‘‘homeowner’’ means the mort12 gagor under a covered mortgage; 

13 (5) the term ‘‘investor’’ means— 

14 (A) the mortgagee under a covered mort15 gage; or 

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

17 collateralizes an asset-backed security, as de18 fined in section 3(a) of the Securities Exchange 

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

20 the asset-backed security; 

21 (6) the term ‘‘pilot program’’ means a pilot pro22 gram established under subsection (b); and 

23 (7) the term ‘‘shared equity mortgage modifica24 tion’’ means a modification of a covered mortgage in 

25 accordance with subsection (c). 


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1 (b) PILOT PROGRAMS ESTABLISHED.—Not later 

2 than 1 year after the date of enactment of this Act, the 

3 Director of the Federal Housing Finance Agency and the 

4 Federal Housing Commissioner shall each establish a pilot 

5 program to encourage the use of shared equity mortgage 

6 modifications that are designed to return greater net 

7 present value to investors than other loss-mitigation activi8 ties, including foreclosure. 

9 (c) SHARED EQUITY MORTGAGE MODIFICATION.— 

10 For purposes of a pilot program, a shared equity mortgage 

11 modification shall— 

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

13 mortgage to 100 percent or less within 3 years, by 

14 reducing the difference between the initial original 

15 principal obligation amount owed on the covered 

16 mortgage and the reduced principal obligation 

17 amount determined by the targeted loan-to-value 

ratio set forth in this paragraph by 1 18 ⁄3 at the end 

19 of each year for 3 years; 

20 (2) reduce the interest rate for a covered mort21 gage, if a reduction of principal under paragraph (1) 

22 would not result in a reduced monthly payment that 

23 is affordable to the homeowner; 

24 (3) reduce the amount of any periodic payment 

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


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1 amount payable by the homeowner is equal to the 

2 amount that would be payable by the homeowner if, 

3 on the date on which the shared equity mortgage 

4 modification takes effect— 

5 (A) all reductions of the amount of prin6 cipal under paragraph (1) had been made; and 

7 (B) any reduction in the interest rate 

8 under paragraph (2) for which the covered 

9 mortgage is eligible had been made; 

10 (4) require the homeowner to pay to the inves11 tor upon refinancing or selling the real property se12 curing a covered mortgage, a percentage (not to ex13 ceed 50 percent) of the equity value of such real 

14 property, provided that— 

15 (A) the dollar amount due to the investor 

16 upon such sale or refinance shall not exceed an 

17 amount that is equal to twice the largest dollar 

18 amount of the principal reduction that the 

19 homeowner achieved as a result of the principal 

20 reduction under paragraph (1); 

21 (B) the cap established under subpara22 graph (A) shall, on February 1 of the year fol23 lowing the year of enactment of this Act, and 

24 each February 1 thereafter, be adjusted for in25 flation, by multiplying the prior year’s cap 


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1 amount by the ratio of the annual average of 

2 the Consumer Price Index for All Urban Con3 sumers (CPI–U), or a BLS-designated suc4 cessor to CPI–U, for the prior calendar year to 

5 its annual average for the calendar year 2 years 

6 prior; and 

7 (C) the investor is permitted to structure 

8 the equity-sharing interest that the investor is 

9 entitled to receive under this paragraph to be 

10 transferrable, including by structuring such in11 terest for future sale to other investors; 

12 (5) be designed to deliver maximal net present 

13 value to the investor, taking into account— 

14 (A) the principal reduction under para15 graph (1); 

16 (B) any interest rate reductions under 

17 paragraph (2); 

18 (C) expected reductions in foreclosure and 

19 in any other costs that may reduce net present 

20 value; and 

21 (D) the value of the equity sharing interest 

22 determined under paragraph (4); 

23 (6) be based on factors including the percentage 

24 value of any principal reduction under paragraph 

25 (1), the amount of any such principal reduction, and 


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1 any other factors as determined appropriate by the 

2 Director of the Federal Housing Finance Agency or 

3 the Federal Housing Commissioner, respectively; 

4 and 

5 (7) require disclosure to the homeowner, before 

6 entering into the shared equity mortgage modifica7 tion, of— 

8 (A) the estimated net present value of the 

9 equity sharing interest to be determined under 

10 paragraph (4); and 

11 (B) any other information as determined 

12 appropriate by the Director of the Federal 

13 Housing Finance Agency or the Federal Hous14 ing Commissioner, respectively. 

15 (d) DETERMINATION OF VALUE OF HOME.— 

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

17 the value of real property securing a covered mort18 gage shall be determined by a licensed appraiser who 

19 is independent of and does not otherwise do business 

20 with the homeowner, servicer, investor, or an affil21 iate of the homeowner, servicer, or investor. 

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

23 real property securing a covered mortgage shall be 

24 determined on a date that is as close as practicable 


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1 to the date on which a homeowner begins to partici2 pate in a pilot program. 

3 (3) COST.— 

4 (A) RESPONSIBILITY FOR COST.— 

5 (i) INITIAL COST.—The investor shall 

6 pay the cost of an appraisal under para7 graph (1). 

8 (ii) DEDUCTION FROM HOMEOWNER

9 SHARE.—At the option of the investor, up 

10 to one-half of the cost of an appraisal 

11 under paragraph (1) may be added to the 

12 amount paid by the homeowner to the in13 vestor under subsection (c)(4). 

14 (B) REASONABLENESS OF COST.—The 

15 cost of an appraisal under paragraph (1) shall 

16 be reasonable, as determined by the Director of 

17 the Federal Housing Finance Agency or the 

18 Federal Housing Commissioner, respectively, 

19 and consistent with any rule, interpretive guide20 line, or general statement of policy issued pur21 suant to section 129E of the Truth in Lending 

22 Act (15 U.S.C. 1639e). 

23 (4) SECOND APPRAISAL.—At the time of refi24 nancing or sale of real property securing a covered 

25 mortgage, the investor may request a second apVerDate Sep 11 2014 02:38 Jun 19, 2015 Jkt 049200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1582.IS S1582

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1 praisal of the value of the real property, at the ex2 pense of the investor, by a licensed appraiser se3 lected by the Director of the Federal Housing Fi4 nance Agency or the Federal Housing Commis5 sioner, respectively, who is independent of and does 

6 not otherwise do business with the homeowner, 

7 servicer, investor, or an affiliate of the homeowner, 

8 servicer, or investor, if the investor believes that the 

9 sale price or claimed value at the time of the refi10 nancing is not an accurate reflection of the fair mar11 ket value of the real property. 

12 (e) ELIGIBILITY FOR REDUCTION OF PRINCIPAL.— 

13 Each pilot program shall provide that a homeowner is not 

14 eligible for a reduction in the amount of principal under 

15 a covered mortgage under a shared equity mortgage modi16 fication if, after the homeowner begins participating in the 

17 pilot program, the homeowner— 

18 (1) is delinquent on more than 3 payments 

19 under the shared equity mortgage modification dur20 ing any of the 3 successive 1-year periods beginning 

21 on the date on which the shared equity mortgage 

22 modification is made; and 

23 (2) fails to be current with all payments de24 scribed in paragraph (1) before the end of each 1- 

25 year period described in paragraph (1). 


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1 (f) PARTICIPATION BY SERVICERS.—The Director of 

2 the Federal Housing Finance Agency shall require each 

3 enterprise to require that any servicer of a covered mort4 gage in which the enterprise is an investor participate in 

5 the pilot program of the Federal Housing Finance Agency 

6 by offering shared equity mortgage modifications to a ran7 dom and statistically significant sampling of homeowners 

8 with covered mortgages. 

9 (g) STUDIES AND REPORTS.—The Director of the 

10 Federal Housing Finance Agency and the Federal Hous11 ing Commissioner shall— 

12 (1) conduct annual studies of the pilot program 

13 of the Federal Housing Finance Agency and the 

14 Federal Housing Administration, respectively; 

15 (2) submit a report to Congress containing the 

16 results of each study at the end of each of the 3 suc17 cessive 1-year periods beginning on the date on 

18 which the pilot program is established; and 

19 (3) make publicly available to the maximum ex20 tent possible, consistent with the protection of any 

21 personal information, and in a timely manner any 

22 data generated by the pilot program. 

Æ 


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