I 

109TH CONGRESS 

2D SESSION H. R. 4991 

To require the Secretary of the Treasury to carry out a program to temporarily make payments under residential mortgage loans for properties 

significantly damaged by Hurricane Katrina. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 16, 2006 

Mr. JEFFERSON (for himself, Mr. TAYLOR of Mississippi, Mr. MELANCON, Mr. 

DAVIS of Alabama, Mr. BISHOP of Georgia, Mr. MCDERMOTT, Mr. FORD, 

Mr. WATT, Mr. OWENS, Ms. KILPATRICK of Michigan, and Mr. TOWNS) 

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

A BILL 

To require the Secretary of the Treasury to carry out a 

program to temporarily make payments under residential 

mortgage loans for properties significantly damaged by 

Hurricane Katrina. 

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 ‘‘Homeowners Preserva5 tion of Equity Act of 2006’’. 


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1 SEC. 2. HURRICANE KATRINA MORTGAGE PROTECTION 

2 PROGRAM. 

3 (a) IN GENERAL.—The Secretary of the Treasury, in 

4 consultation with the Federal banking agencies, the Na5 tional Credit Union Administration, and the appropriate 

6 State bank supervisors of each State contained in whole 

7 or in part in the GO Zone, shall establish a program to 

8 provide emergency mortgage assistance through the provi9 sion of direct mortgage payments on behalf of eligible indi10 viduals. 

11 (b) DEFINITIONS.—For purposes of this section, the 

12 following definitions shall apply: 

13 (1) CONSUMER MORTGAGE.—The term ‘‘con14 sumer mortgage’’ means any consumer credit trans15 action (which term shall have the same meaning 

16 given such term for purposes of the Truth in Lend17 ing Act) in which a security interest, including any 

18 such interest arising by operation of law, is retained 

19 or acquired in any property that is used as the prin20 cipal dwelling (under the meaning given such term 

21 for purposes of section 121 of the Internal Revenue 

22 Code of 1986) of the person to whom credit is ex23 tended. 

24 (2) CONSUMER MORTGAGE PAYMENT.—The 

25 term ‘‘consumer mortgage payment’’ means the 

26 scheduled payment on a consumer mortgage for 


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1 principal, interest, and any scheduled deposit in an 

2 escrow account for the purpose of ensuring payment 

3 of taxes, insurance, or other charges with respect to 

4 the property securing such consumer mortgage. 

5 (3) ELIGIBLE CONSUMER MORTGAGE.—The 

6 term ‘‘eligible consumer mortgage’’ means a con7 sumer mortgage that meet the following require8 ments: 

9 (A) TIMING.—The mortgage was entered 

10 into before August 29, 2005. 

11 (B) GOOD STANDING.—As of August 28, 

12 2005, the mortgage was not in foreclosure. 

13 (C) PROPERTY REQUIREMENTS.—The 

14 property in which a security interest was re15 tained or acquired under the mortgage— 

16 (i) was designed principally as a one17 to four-family residence; 

18 (ii) was located in the GO Zone; 

19 (iii) was, as of August 28, 2005, the 

20 primary residence of the mortgagor; and 

21 (iv)(I) was significantly damaged by 

22 Hurricane Katrina or by flooding resulting 

23 from Hurricane Katrina; or 

24 (II) is uninhabitable as a result of 

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1 cane Katrina, including uninhabitability re2 sulting from lack of electricity, water, or 

3 other services due to such damage or flood4 ing. 

5 (D) SERVICER AGREEMENTS.—The 

6 servicer for the mortgage has made such assur7 ances as the Secretary shall require to ensure 

8 that the servicer will comply with the require9 ments of subsection (h). 

10 (4) ELIGIBLE INDIVIDUAL.—The term ‘‘eligible 

11 individual’’ means an individual— 

12 (A) who is a citizen, national, or qualified 

13 alien as defined in section 431(b) of the Per14 sonal Responsibility and Work Opportunity 

15 Reconciliation Act of 1996 (8 U.S.C. 1641(b)); 

16 (B) who was a mortgagor on an eligible 

17 consumer mortgage; 

18 (C) whose ability to continue meeting the 

19 consumer mortgage payment obligations under 

20 the eligible consumer mortgage was severely im21 paired as a result of hurricane-related disrup22 tion in the GO Zone, as determined in accord23 ance with a standard established by the 

24 Secetary that compares the debt of the indi25 vidual to the income of the individual; and 


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1 (D) who has agreed to the terms for repay2 ment of assistance under subsection (i). 

3 (5) FEDERAL BANKING AGENCY AND STATE

4 BANK SUPERVISOR.—The terms ‘‘Federal banking 

5 agency’’ and ‘‘State bank supervisor’’ have the 

6 meanings given such terms in section 3 of the Fed7 eral Deposit Insurance Act. 

8 (6) GO ZONE.—The term ‘‘GO Zone’’ has the 

9 meaning given such term in section 1400M of the 

10 Internal Revenue Code of 1986) 

11 (7) SECRETARY.—The term ‘‘Secretary’’ means 

12 the Secretary of the Treasury. 

13 (8) SERVICER.—The term ‘‘servicer’’, with re14 spect to a consumer mortgage, has the meaning 

15 given such term in section 6(i) of the Real Estate 

16 Settlement Procedures Act of 1974 (12 U.S.C. 

17 2605(i)). 

18 (9) HABITABLE; UNINHABITABLE.— 

19 (A) IN GENERAL.—The terms ‘‘habitable’’ 

20 and ‘‘uninhabitable’’ mean, with respect to a 

21 residence, that the residence has been deter22 mined to be fit or not to be fit, respectively, for 

23 human habitation. 

24 (B) DETERMINATION.—The Secretary 

25 shall, by regulations pursuant to subsection (l), 


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1 establish procedures and standards for deter2 minations of habitability and uninhabitability 

3 for purposes of the program under this section. 

4 Such standards shall take into consideration de5 terminations and declarations of habitability 

6 and unihabitability by Federal and State and 

7 local governments or agencies, including the 

8 Federal Emergency Management Agency and 

9 State and local disaster relief agencies, and by 

10 insurers, access or lack thereof to necessary in11 frastructure or services, including electricity, 

12 potable water, and waste water service, and 

13 such other factors as the Secretary considers 

14 appropriate. 

15 (c) MORTGAGE PAYMENT RELIEF PROGRAM.—The 

16 Secretary shall design and implement the program under 

17 this section in a manner that provides that assistance to 

18 be paid by the Secretary with respect to an eligible con19 sumer mortgage and on behalf of an eligible individual is 

20 paid directly to the servicer for such mortgage. 

21 (d) PERIOD OF ASSISTANCE.—Payments under the 

22 program under this section with respect to an eligible con23 sumer mortgage may be made only for consumer mortgage 

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1 ginning on August 28, 2005, and ending on the earlier 

2 of— 

3 (1) March 1, 2007, or 

4 (2) the expiration of the 60-day period begin5 ning upon the the date that the eligible individual 

6 first reoccupies the property subject to the mort7 gage. 

8 (e) LIMITATIONS ON PAYMENTS.— 

9 (1) IN GENERAL.—Subject to subsection (f), in 

10 no case may the value of the assistance provided 

11 under the program under this section with respect to 

12 any eligible consumer mortgage exceed the aggregate 

13 amount of the consumer mortgage payments due 

14 under the mortgage during the period for which as15 sistance is provided for such mortgage under the 

16 program. 

17 (2) NO DOUBLE PAYMENTS.—The Secretary 

18 shall take appropriate actions to ensure that, in the 

19 case of any consumer mortgage payment paid by an 

20 eligible individual on an eligible consumer mortgage 

21 for any period for which payment has already been 

22 made under the program under this section, the 

23 servicer of the consumer mortgage shall return such 

24 payment within a reasonable period of time or shall 

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1 tion of the principal obligation under the mortgage 

2 and promptly notify the eligible individual of such 

3 credit. 

4 (3) TERMS OF PAYMENT.—For purposes of this 

5 section, the amount of any consumer mortgage pay6 ment shall be equal to the amount of such payment 

7 due under the terms of such consumer mortgage as 

8 in effect on August 28, 2005. 

9 (4) PROHIBITION OF FEES AND CHARGES.— 

10 Payments under the program under this section may 

11 not be made to the servicer of a consumer mortgage 

12 that provides for any penalites, fees, charges, addi13 tional interest, or servicing costs of any kind attrib14 utable to— 

15 (A) participation in the program under 

16 this section; 

17 (B) any prepayment of consumer mort18 gage, including prepayment involving applica19 tion of insurance proceeds to the mortgage; or 

20 (C) late payment of any consumer mort21 gage payment due under the consumer mort22 gage during the period beginning on August 28, 

23 2005, and ending on the commencement of pay24 ments under this section for the mortgage. 


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1 (5) REVERSAL OF ADVERSE ACTIONS ALREADY

2 TAKEN.—Payments under the program under this 

3 section may not be made to the servicer of a con4 sumer mortgage if, during the period beginning on 

5 August 29, 2005, and ending upon the enrollment of 

6 the consumer mortgage in the program, the servicer 

7 has furnished to any consumer reporting agency (as 

8 such term is defined in section 603 of the Fair Cred9 it Reporting Act) any information that relates to 

10 such consumer mortgage or the mortgagor under 

11 such mortgage and is adverse to the interests of the 

12 mortgagor and has failed to withdraw or remove 

13 such information from the consumer reporting agen14 cy. 

15 (f) ENROLLMENT IN PROGRAM.— 

16 (1) EXPEDITED PROCESS.—The Secretary shall 

17 establish an expedited process, in accordance with 

18 this subsection, for the enrollment of eligible individ19 uals in the program under this section. 

20 (2) NOTIFICATION.—To be eligible to receive 

21 payments under the program under this section, the 

22 servicer of a consumer mortgage shall notify the 

23 Secretary— 

24 (A) of the nonpayment of a scheduled con25 sumer mortgage payment from an individual in 


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1 GO Zone, not earlier than 31 days following 

2 such nonpayment; or 

3 (B) of a communication to the servicer by 

4 an individual reasonably indicating eligibility for 

5 assistance under the program, after such com6 munication. 

7 (3) ENROLLMENT.—The Secretary, upon re8 ceipt of a notice under paragraph (2) regarding a 

9 consumer mortgage, shall enroll the eligible indi10 vidual involved in the program under this section, 

11 subject to the servicer of the mortgage submitting 

12 such confirmation to the Secretary as the Secretary 

13 shall require that the servicer has verified, in accord14 ance with such procedures as the Secretary shall es15 tablish, that mortgagor under such consumer mort16 gage is an eligible individual and that the consumer 

17 mortgage is an eligible consumer mortgage. 

18 (4) DUTY OF SERVICER.—The servicer of a con19 sumer mortgage shall make a reasonable effort to 

20 notify an eligible individual— 

21 (A) of the enrollment of such individual in 

22 the program under paragraph (3); 

23 (B) that, if it is later determined that the 

24 individual is not an eligible individual or the 

25 consumer mortgage is not an eligible consumer 


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1 mortgage (as determined by the audit process 

2 under subsection (g) or otherwise), such 

3 servicer may be required at a later date to 

4 repay the program for the total amount of con5 sumer mortgage payments made by the Sec6 retary on behalf of such individual, but that 

7 there shall be no liability on the part of the in8 dividual to repay the program for such 

9 amounts; and 

10 (C) that such individual may elect to de11 cline enrollment, or cancel enrollment, in the 

12 program by notifying the servicer involved. 

13 (g) RETROSPECTIVE AUDIT.— 

14 (1) IN GENERAL.—The Secretary shall provide 

15 for the performance of an appropriate audit of the 

16 program under this section by a date that is not 

17 later than 180 days after the date of the enactment 

18 of this Act. 

19 (2) REPAYMENT OF IMPROPERLY PROVIDED

20 FUNDS.— 

21 (A) ACTION BY SECRETARY.—If the Sec22 retary determines, pursuant to the audit under 

23 paragraph (1) or otherwise, that an individual 

24 that was enrolled in the program under this 

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1 section (b) or the consumer mortgage was not 

2 an eligible consumer mortgage, the Secretary 

3 shall seek repayment from the servicer of the 

4 consumer mortgage of the amounts paid under 

5 the program on behalf of such individual. Such 

6 individual shall not be liable to the Secretary 

7 for the repayment of such amounts paid under 

8 the program on behalf of the individual. 

9 (B) TERMS OF REPAYMENT.—Any repay10 ment pursuant to subparagraph (A) shall be 

11 made with no interest or late penalty to accrue 

12 prior to the commencement of a repayment pe13 riod which shall begin not earlier than the date 

14 that is 3 months after the date on which a de15 termination and notice of noneligibility is pro16 vided. 

17 (h) PROHIBITED ACTIONS.—During the period that 

18 payments are made under the program under this section 

19 for an eligible consumer loan, a servicer who accepts pay20 ments under the program under this section with respect 

21 to any eligible consumer mortgage, and any person who 

22 makes or holds such eligible consumer mortgage (if other 

23 than the servicer), may not— 

24 (1) accelerate the maturity of or commence any 

25 legal action regarding such mortgage (including 


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1 mortgage foreclosure to recover under such obliga2 tion) or take possession of any security of the mort3 gagor for such eligible consumer mortgage obliga4 tion; 

5 (2) increase the annual percentage rate of inter6 est with respect to such eligible consumer mortgage, 

7 except in the case of any mortgage the terms of 

8 which provide for changes in the rate of interest that 

9 are not made in connection with delinquency, de10 fault, or other credit-related events; 

11 (3) refuse to accept, prevent, or otherwise limit 

12 the prepayment (in whole or in part) of any out13 standing principal amount due under the mortgage, 

14 including prepayment involving application of any 

15 insurance proceeds; or 

16 (4) impose any other fees or charges with re17 spect to such consumer mortgage, including any fees 

18 or charges for any prepayment described in para19 graph (3). 

20 (i) REPAYMENT OF ASSISTANCE AMOUNTS.—Assist21 ance under the program under this section may not be 

22 provided with respect to a consumer mortgage unless the 

23 eligible individual who is the mortgagor under such mort24 gage enters into an agreement with the Secretary that the 

25 aggregate amount of all such assistance provided for such 


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1 mortgage will be repaid to the Secretary, together with 

2 interest on such amounts, as follows: 

3 (1) INTEREST.—The interest on amounts of as4 sistance provided under the program shall accrue at 

5 a rate, as determined by the Secretary, that is equal 

6 to 50 percent of the average rate payable by the 

7 Treasury on its obligations having a 5-year term to 

8 maturity and outstanding as of September 1, 2005, 

9 until full repayment is made. 

10 (2) SILENT SECOND MORTGAGE.—Amounts of 

11 assistance and interest shall be secured by a lien on 

12 the property in the aggregate amount of such assist13 ance and interest, that is held by the Secretary and 

14 shall be subordinate to all other mortgages on the 

15 property and to any Federal tax lien, but shall be 

16 superior to any other lien. The lien shall be extin17 guished upon sale or transfer of the property by the 

18 mortgagor and the payment to the Secretary from 

19 the proceeds of such sale or transfer of the aggre20 gate amount of such assistance and interest. The 

21 Secretary may not require the mortgagor to repay 

22 any amount of assistance or interest until the prop23 erty is sold or otherwise transferred. 

24 (3) PREPAYMENT.—Notwithstanding the third 

25 sentence of paragraph (2), the mortgagor may make 


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1 payments, in whole or in part, of amounts of assist2 ance and interest owed to the Secretary pursuant to 

3 this subsection at any time after payments under 

4 this section on behalf of the mortgagor have con5 cluded and no penalty, fee, or charge may be im6 posed for any payments made before sale or transfer 

7 of the property by the mortgagor. 

8 (4) SECONDARY MARKET.—The Secretary may 

9 sell and otherwise deal in liens established under this 

10 section, and may issue and guarantee securities 

11 backed by liens established under this section, as the 

12 Secretary considers appropriate. 

13 (j) PENALTIES.— 

14 (1) IN GENERAL.—In the case of each con15 sumer mortgage that is submitted under subsection 

16 (f) to the Secretary by a servicer and confirmed by 

17 the servicer as eligible for participation in the pro18 gram under this section that is not an eligible con19 sumer mortgage or for which the mortgagor is not 

20 an eligible individual, the Secretary may assess to 

21 the servicer, for each such mortgage so submitted— 

22 (A) a civil penalty in an amount not ex23 ceeding the amount of any mortgage payments 

24 received as a consequence of submission of such 

25 ineligible mortgage or individual; and 


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1 (B) interest, at a rate determined by the 

2 Secretary, for the period that any amounts im3 properly paid under the program on behalf of 

4 such mortgage were held by the servicer. 

5 (2) INTENTIONAL VIOLATIONS.—If the Sec6 retary determines that any submission of a mortgage 

7 to which paragraph (1) applies was made with inten8 tional or reckless disregard of the requirements 

9 under subsection (f)(3) regarding verification proce10 dures or with actual knowledge that the consumer 

11 mortgage or the mortgagor under the consumer 

12 mortgage was not eligible for assistance under the 

13 program under this section, the Secretary may as14 sess to the servicer, for each such mortgage so sub15 mitted— 

16 (A) a civil penalty in an amount not ex17 ceeding three times the amount of any mort18 gage payments received as a consequence of 

19 submission of such ineligible mortgage or indi20 vidual; and 

21 (B) interest, at a rate determined by the 

22 Secretary, for the period that any amounts im23 properly paid under the program on behalf of 

24 such mortgage were held by the servicer. 


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1 (3) EFFECT ON OTHER LAW.—The penalties 

2 under this subsection shall be in addition to any 

3 other remedies and penalties provided by other pro4 visions of Federal and State law, including any civil 

5 and criminal penalties for fraud and false state6 ments. 

7 (k) EXCLUSION OF MORTGAGE RELIEF PAYMENTS

8 FROM INCOME OF MORTGAGOR.—Any amounts paid 

9 under the program under this section with respect to an 

10 eligible consumer mortgage shall not be included as gross 

11 income of the eligible individual who is the mortgagor 

12 under such mortgage for purposes of the Internal Revenue 

13 Code of 1986 or for any other program for benefits, pay14 ments, or assistance for an individual, household, or fam15 ily eligiblity unit provided by any Federal or State agency 

16 or by appropriated funds of the United States or any 

17 State, for which eligibility is determined on the basis of 

18 income or assets or any other test of means. 

19 (l) EXPEDITED RULEMAKING.—The Secretary shall 

20 utilize expedited rulemaking procedures to carry out this 

21 section. 

22 (m) AUTHORIZATION OF APPROPRIATIONS.—There 

23 are authorized to be appropriated such sums as may be 


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1 necessary for fiscal years 2006 and 2007 to carry out this 

2 section. 

Æ 


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