II 

112TH CONGRESS 

1ST SESSION S. 824 

To provide for enhanced mortgage-backed and asset-backed security investor 

protections, to prevent foreclosure fraud, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

APRIL 14, 2011 

Mr. BROWN of Ohio introduced the following bill; which was read twice and 

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

A BILL 

To provide for enhanced mortgage-backed and asset-backed 

security investor protections, to prevent foreclosure 

fraud, 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 ‘‘Foreclosure Fraud and 

5 Homeowner Abuse Prevention Act of 2011’’. 

6 SEC. 2. DEFINITIONS. 

7 For purposes of this Act, the following definitions 

8 shall apply: 

9 (1) COMMISSION.—The term ‘‘Commission’’ 

10 means the Securities and Exchange Commission. 

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1 (2) MORTGAGE.—The term ‘‘mortgage’’ means 

2 a federally related mortgage loan, as defined in sec3 tion 3 of the Real Estate Settlement Procedures Act 

4 of 1974 (12 U.S.C. 2602). 

5 (3) MORTGAGE-BACKED SECURITY.—The term 

6 ‘‘mortgage-backed security’’ means an asset-backed 

7 security, as defined in section 3(a) of the Securities 

8 Exchange Act of 1934 (15 U.S.C. 78c(a)), that is 

9 collateralized by— 

10 (A) a mortgage; or 

11 (B) a collateralized mortgage obligation of 

12 mortgage-backed securities. 

13 (4) SECURITIZED RESIDENTIAL MORTGAGE

14 LOAN.—The term ‘‘securitized residential mortgage 

15 loan’’ means any residential mortgage loan that 

16 serves as collateral for a fixed-income or other secu17 rity that allows the holder of such security to receive 

18 payments dependent on the cash flow from such res19 idential mortgage loan. 

20 (5) SERVICER.—The term ‘‘servicer’’— 

21 (A) means any person responsible for the 

22 management or collection of a pool of assets or 

23 making allocations or distributions to holders of 

24 asset-backed securities; and 

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1 (B) does not include any State or local 

2 housing agency. 

3 SEC. 3. TRUST INDENTURE ACT PROTECTIONS. 

4 (a) DEFINITIONS.—Section 303 of the Trust Inden5 ture Act of 1939 (15 U.S.C. 77ccc) is amended— 

6 (1) in paragraph (7), by adding at the end the 

7 following: ‘‘Such term shall include mortgage-backed 

8 securities.’’; 

9 (2) in paragraph (10), by adding at the end the 

10 following: ‘‘Such term shall include servicers of 

11 mortgage-backed securities.’’; and 

12 (3) by adding at the end the following: 

13 ‘‘(19) The term ‘mortgage-backed security’ 

14 means an asset-backed security, as defined in section 

15 3(a) of the Securities Exchange Act of 1934, that is 

16 collateralized by— 

17 ‘‘(A) a mortgage; or 

18 ‘‘(B) a collateralized mortgage obligation 

19 of mortgage-backed securities. 

20 ‘‘(20) The term ‘servicer’— 

21 ‘‘(A) means any person responsible for the 

22 management or collection of a pool of assets or 

23 making allocations or distributions to holders of 

24 asset-backed securities; and 

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1 ‘‘(B) does not include any State or local 

2 housing agency.’’. 

3 (b) CLARIFICATION OF EXEMPTIONS.—Section 304 

4 of the Trust Indenture Act of 1939 (15 U.S.C. 77ddd) 

5 is amended— 

6 (1) in paragraph (2), by inserting ‘‘other than 

7 residential mortgage-back securities’’ after ‘‘securi8 ties’’; 

9 (2) in paragraph (4), by inserting ‘‘other than 

10 a residential mortgage-back security’’ after ‘‘secu11 rity’’; and 

12 (3) in paragraph (7), by inserting ‘‘other than 

13 a registered mortgage-back security’’ after ‘‘secu14 rity’’. 

15 (c) FIDUCIARY DUTY.—Section 315 of the Trust In16 denture Act of 1939 (15 U.S.C. 77ooo) is amended by 

17 adding at the end the following: 

18 ‘‘(f) Each servicer of a mortgage-backed security 

19 shall have a fiduciary duty to protect the economic inter20 ests of the investors as a whole in an asset-backed secu21 rity, which duty may not be waived by the investor.’’. 

22 (d) REMOVAL OF TRUSTEE.—Section 310 of the 

23 Trust Indenture Act of 1939 (15 U.S.C. 77jjj) is amended 

24 by adding at the end the following: 

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1 ‘‘(3) An indenture trustee that is a servicer of 

2 mortgage-backed securities may be removed if not 

3 fewer than 50 percent of the investors petition a 

4 court of competent jurisdiction for the removal of 

5 such trustee.’’. 

6 (e) AMENDMENT OF POOLING AND SERVICING

7 AGREEMENT.—Section 316 of the Trust Indenture Act of 

8 1939 (15 U.S.C. 77ppp) is amended by adding at the end 

9 the following: 

10 ‘‘(d) Notwithstanding any other provision of this title, 

11 a pooling and servicing agreement with respect to any 

12 mortgage-backed security may be amended without the 

13 consent of a majority of the holders of such security, if 

14 not fewer than 25 percent thereof petition a court of com15 petent jurisdiction for such action. For purposes of this 

16 subsection a ‘pooling and servicing agreement’ is any con17 tract or a substantially similar document establishing the 

18 transaction rights and duties of the parties to any mort19 gage-backed securitization transaction.’’. 

20 (f) PENALTY.—Section 325 of the Trust Indenture 

21 Act of 1939 (15 U.S.C. 77yyy) is amended by striking 

22 ‘‘$10,000’’ and inserting ‘‘$40,000’’. 

23 (g) DUTIES AND RESPONSIBILITIES OF

24 SERVICERS.—Section 315(a) of the Trust Indenture Act 

25 of 1939 (15 U.S.C. 77ooo(a)) is amended— 

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1 (1) by striking ‘‘The indenture’’ and inserting 

2 ‘‘(1) The indenture’’; 

3 (2) by redesignating existing paragraphs (1) 

4 and (2) as subparagraphs (A) and (B), respectively, 

5 and moving the margins 2 ems to the right; and 

6 (3) by adding at the end the following: 

7 ‘‘(2) Paragraph (1) shall not apply with respect to 

8 an indenture that is a mortgage-backed security. An in9 denture trustee of such a security shall have a duty to 

10 verify the correctness of any such statements.’’. 

11 SEC. 4. MORTGAGE RELATED SECURITY SERVICER AD12 VANCES. 

13 The Securities Exchange Act of 1934 (15 U.S.C. 78a 

14 et seq.) is amended by inserting after section 15G the fol15 lowing new section: 

16 ‘‘SEC. 15H. MORTGAGE RELATED SECURITIES SERVICER 

17 ADVANCES. 

18 ‘‘(a) COMMISSION RULEMAKING REQUIRED.— 

19 Promptly after the date of enactment of this section, the 

20 Commission shall, after consultation with the appropriate 

21 Federal banking agencies (as defined in section 3 of the 

22 Federal Deposit Insurance Act (12 U.S.C. 1813)) and the 

23 Bureau of Consumer Financial Protection where appro24 priate, issue regulations— 

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1 ‘‘(1) to require each servicer of a mortgage re2 lated security to notify investors therein of any ad3 vances to the securitization vehicle; 

4 ‘‘(2) to prohibit the primary servicer of a mort5 gage related security from advancing delinquent pay6 ments of principal and interest by mortgagors for 

7 more than 3 payment periods, unless financing or 

8 reimbursement facilities to fund or reimburse the 

9 primary servicers are available; 

10 ‘‘(3) to prohibit the commingling of home11 owners’ monthly mortgage payments with the assets 

12 of the servicer of a mortgage related security, other 

13 than as necessary to clear payments received, but 

14 not to exceed 2 business days; 

15 ‘‘(4) to provide for recoupment, from any cur16 rent or former senior executive or director of a 

17 servicer of a mortgage related security who has been 

18 convicted of any violation of the securities laws, any 

19 compensation received during the 3-year period pre20 ceding the date of the violation that the Commission 

21 determines was connected to such violation, includ22 ing any unjust enrichment related to such violation, 

23 except that, in the case of fraud, no time limit shall 

24 apply; 

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1 ‘‘(5) to allow for the controlling holder of a 

2 mortgage related security to appoint and remove the 

3 servicers of such security, where the servicer has not 

4 been in substantial compliance with its duties under 

5 applicable law and all relevant agreements, as deter6 mined by the Commission; 

7 ‘‘(6) to require each pooling and servicing 

8 agreement related to a mortgage related security to 

9 specify separate and independent servicers for de10 fault (in this section referred to as the ‘mandatory 

11 special servicer’) and transactions processing; and 

12 ‘‘(7) to require existing or future loans com13 prising the mortgage related security be transferred 

14 to the mandatory special servicer, if such loans are 

15 more than 60 days delinquent or where the holder 

16 and servicer find that there is a significant risk of 

17 default, based on all the facts and circumstances, in 

18 which case, such mandatory special servicer shall be 

19 compensated through an untranched, prorated inter20 est in the assets of the mortgage related security, 

21 beginning at 1 percent. 

22 For purposes of this subsection a ‘pooling and servicing 

23 agreement’ is any contract establishing the transaction 

24 rights and duties of the parties to any mortgage-backed 

25 securitization transaction. 

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1 ‘‘(b) COMPENSATION.—The rules of the Commission 

2 under this section shall include a definition of the term 

3 ‘compensation’ to mean any financial remuneration, in4 cluding salary, bonuses, incentives, benefits, severance, de5 ferred compensation, or golden parachute benefits, and 

6 any profits realized from the sale of the securities of the 

7 company.’’. 

8 SEC. 5. LIMITATION ON MORTGAGES HELD BY LOAN 

9 SERVICERS. 

10 (a) LIMITATION.—The Truth in Lending Act (15 

11 U.S.C. 1631 et seq.) is amended by inserting before sec12 tion 130 (15 U.S.C. 1640) the following new section: 

13 ‘‘SEC. 129I. LIMITATIONS ON MORTGAGES HELD BY LOAN 

14 SERVICERS. 

15 ‘‘(a) LIMITATION.—Neither the servicer of a 

16 securitized residential mortgage loan, nor any affiliate of 

17 such servicer, may own, or hold any interest in, any other 

18 residential mortgage loan that is secured by a mortgage, 

19 deed of trust, or other equivalent consensual security in20 terest on the same dwelling or residential real property 

21 that is subject to the mortgage, deed of trust, or other 

22 security interest that secures the securitized residential 

23 mortgage loan serviced by the servicer. 

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

25 following definitions shall apply: 

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1 ‘‘(1) AFFILIATE.—The term ‘affiliate’ means, 

2 with respect to a servicer, any person or entity that 

3 controls, is controlled by, or is under common con4 trol with such servicer, as the Board shall prescribe 

5 by regulation. 

6 ‘‘(2) RESIDENTIAL MORTGAGE LOAN.—The 

7 term ‘residential mortgage loan’ means any con8 sumer credit transaction that is secured by a mort9 gage, deed of trust, or other equivalent consensual 

10 security interest on a dwelling or on residential real 

11 property that includes a dwelling, other than a con12 sumer credit transaction under an open end credit 

13 plan or an extension of credit relating to a plan de14 scribed in section 101(53D) of title 11, United 

15 States Code. 

16 ‘‘(3) SECURITIZED RESIDENTIAL MORTGAGE

17 LOAN.—The term ‘securitized residential mortgage 

18 loan’ means any residential mortgage loan that 

19 serves as collateral for a fixed-income or other secu20 rity that allows the holder of such security to receive 

21 payments dependent on the cash flow from such res22 idential mortgage loan. 

23 ‘‘(4) SERVICER.—The term ‘servicer’— 

24 ‘‘(A) has the meaning provided in section 

25 129A, except that such term includes a person 

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1 who receives any payments from a mortgagor, 

2 including any amounts for escrow accounts, and 

3 makes payments to the owner of the loan or 

4 other third parties, including payments made 

5 after default, pursuant to the terms of the rel6 evant contracts; and 

7 ‘‘(B) excludes State and local housing 

8 agencies. 

9 ‘‘(c) INTERESTS.—For purposes of subsection (a), 

10 ownership of, or holding an interest in a securitized resi11 dential mortgage loan includes ownership of, or holding 

12 an interest in— 

13 ‘‘(1) a pool of securitized residential mortgage 

14 loans that contains such securitized residential mort15 gage loan; or 

16 ‘‘(2) any security based on or backed by a pool 

17 of securitized residential mortgage loans that con18 tains such securitized residential mortgage loan.’’. 

19 (b) CLERICAL AMENDMENT.—The table of sections 

20 for chapter 2 of the Truth in Lending Act is amended 

21 by inserting before the item relating to section 130 the 

22 following new item: 

‘‘Sec. 129I. Limitations on mortgages held by loan servicers.’’. 

23 (c) APPLICABILITY.—The amendment made by sub24 section (a) shall apply— 

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1 (1) with respect to the servicer (or affiliate of 

2 the servicer) of a residential mortgage loan that is 

3 originated after the date of enactment of this Act, 

4 on such date of enactment; and 

5 (2) with respect to the servicer (or affiliate of 

6 the servicer) of a residential mortgage loan that is 

7 originated on or before the date of enactment of this 

8 Act, upon the expiration of the 12-month period be9 ginning on such date of enactment. 

10 (d) ENFORCEMENT PROVISIONS.—Section 130 of the 

11 Truth in Lending Act (15 U.S.C. 1640) is amended by 

12 adding at the end the following: 

13 ‘‘(m) SERVICERS.—This section shall apply to 

14 servicers (as that term is defined in section 129I) in the 

15 same manner, and to the same extent as it applies to 

16 creditors.’’. 

17 SEC. 6. REAL ESTATE SETTLEMENT PROCEDURES ACT OF 

18 1974 IMPROVEMENTS. 

19 (a) RESPA FEES AND RESTRICTIONS.—Section 8 of 

20 the Real Estate Settlement Procedures Act of 1974 (12 

21 U.S.C. 2607) is amended by adding at the end the fol22 lowing new subsections 

23 ‘‘(e) FEES TO BE REASONABLY RELATED TO

24 COSTS.—All fees charged for the rendering of a real estate 

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1 ing a federally related mortgage loan or incurred in con2 nection with servicing such loan shall be reasonably re3 lated to the cost of providing the service. 

4 ‘‘(f) RESTRICTION ON USE OF SUBSIDIARIES AND

5 INSOURCING.— 

6 ‘‘(1) IN GENERAL.—No servicer of a residential 

7 mortgage loan shall render a real estate settlement 

8 service in connection with a transaction involving a 

9 federally related mortgage loan through a subsidiary 

10 of such person or through insourcing. 

11 ‘‘(2) INSOURCING DEFINED.—For purposes of 

12 this subsection, the term ‘insourcing’ means pro13 viding for services to be conducted by the servicer’s 

14 affiliated entities.’’. 

15 (b) FORCE-PLACED INSURANCE.—Section 6 of the 

16 Real Estate Settlement Procedures Act of 1974 (12 

17 U.S.C. 2605) is amended— 

18 (1) in subsection (l), by adding at the end the 

19 following new paragraph: 

20 ‘‘(5) REQUIREMENT TO CONTINUE INSUR21 ANCE.—If a borrower’s insurance policy has not 

22 been paid, the servicer shall make payments on the 

23 current policy or seek reinstatement of such policy 

24 where necessary and then make such payments, un25 less the policy has been terminated for reasons other 

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1 than nonpayment. Where escrow funds are not avail2 able, the servicer shall advance such funds. If the 

3 current policy cannot be continued and force-placed 

4 insurance is provided, the costs and the coverage 

5 should be substantially equivalent to that provided in 

6 a standard homeowner’s insurance policy.’’; 

7 (2) by adding at the end the following new sub8 section: 

9 ‘‘(n) DISCLOSURES RELATED TO INSURANCE COV10 ERAGE INFORMATION.— 

11 ‘‘(1) NOTICE.—Each servicer of a federally re12 lated mortgage loan shall notify the borrower of 

13 such loan that the borrower is required to disclose 

14 to the servicer the borrower’s property insurance 

15 coverage information. 

16 ‘‘(2) DISCLOSURE.—Each borrower who re17 ceives a notice described under paragraph (1) shall 

18 disclose such information to the servicer.’’. 

19 (c) LOSS MITIGATION.—Section 6 of the Real Estate 

20 Settlement Procedures Act of 1974 (12 U.S.C. 2605), as 

21 amended by subsection (b), is further amended by adding 

22 at the end the following new subsection: 

23 ‘‘(o) LOSS MITIGATION.— 

24 ‘‘(1) SINGLE ELECTRONIC RECORD AND SINGLE

25 POINT OF CONTACT.—Each servicer of a federally 

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1 related mortgage loan, or agents of such servicer, 

2 shall, with respect to the borrower, establish— 

3 ‘‘(A) a single electronic record for each ac4 count, the contents of which shall be accessible 

5 throughout the servicer, or agents of such 

6 servicer, including to all loss mitigation staff, 

7 all foreclosure staff, and all bankruptcy staff; 

8 and 

9 ‘‘(B) a single point of contact for the bor10 rower for all loss mitigation activities. 

11 ‘‘(2) GENERAL LOSS MITIGATION REQUIRE12 MENTS.—Each servicer of a federally related mort13 gage loan, or agents of such servicer, shall— 

14 ‘‘(A) maintain adequate staffing and sys15 tems for tracking borrower documents and in16 formation that are relevant to foreclosure, loss 

17 mitigation, bankruptcy, and other servicing op18 erations; 

19 ‘‘(B) maintain adequate staffing and case20 load limits for employees responsible for han21 dling foreclosure, loss mitigation, bankruptcy, 

22 and related communication with borrowers and 

23 housing counselors; 

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1 ‘‘(C) set reasonable minimum experience, 

2 education, and training requirements for loan 

3 modification staff; and 

4 ‘‘(D) document electronically each action 

5 on a foreclosure, loan modification, bankruptcy, 

6 or other servicing file, including all communica7 tion with the borrower and other parties. 

8 ‘‘(3) TEAM LEADERS.—Each servicer of a fed9 erally related mortgage loan shall establish a single 

10 individual to coordinate the servicer’s departments 

11 handling the activities described under subpara12 graphs (A), (B), and (C) under paragraph (2). 

13 ‘‘(4) LIMIT ON EMPLOYEE ACTIVITIES.—With 

14 respect to employees of a servicer of a federally re15 lated mortgage loan who handle delinquent loans or 

16 mandatory special servicers, the Bureau shall issue 

17 regulations setting a reasonable limit on the number 

18 of cases that may be handled by each such employee. 

19 ‘‘(5) MANDATORY SPECIAL SERVICER DE20 FINED.—For purposes of this subsection, the term 

21 ‘mandatory special servicer’ has the meaning given 

22 such term in section 15H(a)(6) of the Securities Ex23 change Act of 1934. 

24 ‘‘(6) ADDITIONAL REQUIREMENTS RELATED TO

25 TRANSFER OF LOANS.— 

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1 ‘‘(A) TO SUCCESSOR SERVICERS.—For any 

2 ordinary transfer of servicing to a successor 

3 servicer of a federally related mortgage loan or 

4 subservicer, the transferring servicer shall— 

5 ‘‘(i) inform the successor servicer (in6 cluding a subservicer) whether a loan 

7 modification is pending; 

8 ‘‘(ii) ensure that the successor servicer 

9 shall accept and continue processing prior 

10 loan modification requests; and 

11 ‘‘(iii) ensure that successor servicer 

12 shall honor trial and permanent loan modi13 fication agreements entered into by the 

14 transferring servicer. 

15 ‘‘(B) TO MANDATORY SPECIAL

16 SERVICERS.—A servicer of a federally related 

17 mortgage loan shall refer any loan that is 60 or 

18 more days delinquent to an independent manda19 tory special servicer or subservicer who shall 

20 agree to the loss mitigation requirements of this 

21 subsection.’’. 

22 (d) APPLICATION OF PAYMENTS.—Section 6(k)(1) of 

23 the Real Estate Settlement Procedures Act of 1974 (12 

24 U.S.C. 2605(k)) is amended— 

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1 (1) in subparagraph (D), by striking ‘‘or’’ at 

2 the end; 

3 (2) in subparagraph (E), by striking the period 

4 and inserting ‘‘; or’’; and 

5 (3) by adding at the end the following new sub6 paragraph: 

7 ‘‘(F) apply payments, including partial 

8 payments, made by a borrower to any fees be9 fore first applying such payments to any out10 standing scheduled principal or interest pay11 ments.’’. 

12 (e) MONTHLY SERVICING STATEMENTS.—Section 6 

13 of the Real Estate Settlement Procedures Act of 1974 (12 

14 U.S.C. 2605), as amended by subsection (c), is further 

15 amended by adding at the end the following new sub16 section: 

17 ‘‘(p) MONTHLY SERVICING STATEMENTS.—The Bu18 reau shall issue regulations requiring each servicer of a 

19 federally related mortgage loan to provide borrowers with 

20 a monthly servicing statement that clearly describes— 

21 ‘‘(1) the payment amounts due under the loan 

22 agreement; 

23 ‘‘(2) the date and time when such payments 

24 must be received; 

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1 ‘‘(3) the location where such payments must be 

2 received; and 

3 ‘‘(4) a list of each payment received by the 

4 servicer, along with how such payment was allocated 

5 to the amounts owed by the borrower.’’. 

6 (f) UNFAIR AND DECEPTIVE ACTS OR PRACTICES

7 VIOLATIONS.—Section 19 of the Real Estate Settlement 

8 Procedures Act of 1974 (12 U.S.C. 2617) is amended by 

9 adding at the end the following new subsection: 

10 ‘‘(e) AUTHORITY OF THE BUREAU WITH RESPECT

11 TO UDAP VIOLATIONS.—The Bureau’s authority with re12 spect to unfair and deceptive acts or practices by servicers 

13 of federally related mortgage loans shall be the same as 

14 its authority with respect to unfair and deceptive acts or 

15 practices under the Consumer Financial Protection Act of 

16 2010. Notwithstanding such authority, the following shall 

17 apply: 

18 ‘‘(1) SERVICE.—The Bureau shall provide the 

19 servicer in violation with notification of such viola20 tion via personal service and such notification shall 

21 include a notice of the servicer’s rights and any bond 

22 requirements the servicer may be subject to by rea23 son of such violation. 

24 ‘‘(2) DAMAGES.—Notwithstanding amounts 

25 specified under the Federal Trade Commission Act, 

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1 a servicer convicted of unfair and deceptive acts or 

2 practices with respect to a federally related mort3 gage loan shall be— 

4 ‘‘(A) fined, regardless of whether there was 

5 a pattern or practice of such violations, statu6 tory damages of not more than $10,000 for 

7 each such violation (such amount to be adjusted 

8 annually beginning 1 year after the date of en9 actment of the Foreclosure Fraud and Home10 owner Abuse Prevention Act of 2011 by the 

11 percentage corresponding to the annual percent12 age increase in the Consumer Price Index for 

13 all urban consumers); 

14 ‘‘(B) required to pay all actual damages, 

15 including emotional distress, regardless of 

16 whether there was detrimental reliance on the 

17 part of the borrower; and 

18 ‘‘(C) liable for attorneys fees. 

19 ‘‘(3) BAR TO FORECLOSURE.—In any judicial 

20 or non-judicial foreclosure proceeding, it shall be a 

21 bar to foreclosure that the servicer of the federally 

22 related mortgage loan on the property to be fore23 closed violated any provision of this section. 

24 ‘‘(4) STATUTE OF LIMITATIONS.—The statute 

25 of limitations for a servicer’s violation of unfair and 

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1 deceptive acts or practices laws with respect to a 

2 federally related mortgage loan shall be 3 years from 

3 the date on which violation occurs.’’. 

4 SEC. 7. TRANSFER NOTIFICATION UNDER TILA. 

5 (a) IN GENERAL.—Section 131(g) of the Truth in 

6 Lending Act (15 U.S.C. 1641(g)) is amended— 

7 (1) in paragraph (1), by inserting ‘‘, including 

8 any servicer with respect to a securitized residential 

9 mortgage loan,’’ before ‘‘shall notify’’; and 

10 (2) by striking paragraph (2) and inserting the 

11 following: 

12 ‘‘(2) DEFINITIONS.—For purposes of this sub13 section— 

14 ‘‘(A) the term ‘mortgage loan’ means any 

15 consumer credit transaction that is secured by 

16 the principal dwelling of a consumer; and 

17 ‘‘(B) the terms ‘servicer’ and ‘securitized 

18 residential mortgage loan’ have the same mean19 ings as in section 129I(b).’’. 

20 (b) SAFE HARBOR FOR MISTAKEN PAYMENTS; 

21 FEES.—Section 131 of the Truth in Lending Act (15 

22 U.S.C. 1641) is amended— 

23 (1) by redesignating subsection (g) as sub24 section (i); and 

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1 (2) by inserting after subsection (f) the fol2 lowing: 

3 ‘‘(g) TREATMENT OF MISTAKEN LOAN PAYMENTS

4 AFTER TRANSFER.—During the 60-day period beginning 

5 on the effective date of transfer of the servicing of any 

6 securitized residential mortgage loan, a late fee may not 

7 be imposed on the consumer with respect to any payment 

8 on such loan, and no such payment may be treated as late 

9 for any other purpose, if the payment is received by the 

10 transferor servicer (rather than the transferee servicer 

11 who should properly receive payment) before the due date 

12 applicable to such payment. 

13 ‘‘(h) FEE WAIVERS UPON TRANSFER.— 

14 ‘‘(1) IN GENERAL.—A creditor, including a 

15 servicer, may not impose or collect— 

16 ‘‘(A) any fee that is not listed as having 

17 been incurred in— 

18 ‘‘(i) the notice to the consumer of the 

19 transfer of a securitized residential mort20 gage loan from the previous creditor or 

21 servicer; or 

22 ‘‘(ii) the notice to the consumer from 

23 the new creditor or servicer; or 

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1 ‘‘(B) any fee that is not specified on the 

2 monthly statement to the consumer as having 

3 been incurred. 

4 ‘‘(2) DEFINITIONS.—For purposes of this sub5 section, the terms ‘servicer’ and ‘securitized residen6 tial mortgage loan’ have the same meanings as in 

7 section 129I(b).’’. 

8 SEC. 8. LOAN MODIFICATIONS; DUAL TRACK PROCEEDINGS 

9 PROHIBITED. 

10 (a) IN GENERAL.—Section 129A of the Truth in 

11 Lending Act (as such section is redesignated by section 

12 1402(a)(1) of the Dodd-Frank Wall Street Reform and 

13 Consumer Protection Act) is amended— 

14 (1) by redesignating subsections (f) and (g) as 

15 subsections (h) and (i), respectively; 

16 (2) in subsection (i), as so redesignated— 

17 (A) by redesignating paragraphs (1) 

18 through (3) as paragraphs (2) through (4), re19 spectively; and 

20 (B) by inserting before paragraph (2), as 

21 so redesignated, the following: 

22 ‘‘(1) the term ‘affordable loan modification’ 

23 means an agreement to reduce the amount of sched24 uled regular payments under a mortgage note, in25 cluding any reduction of the principal amount of the 

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1 mortgage note, that is reflected in a permanent 

2 change to the terms of the mortgage note under 

3 such terms as the Bureau of Consumer Financial 

4 Protection shall define.’’; and 

5 (3) by inserting after subsection (e) the fol6 lowing: 

7 ‘‘(f) LIMITATION ON FORECLOSURE PRO8 CEEDINGS.— 

9 ‘‘(1) INITIATION OF FORECLOSURE.—A servicer 

10 may not initiate or continue a nonjudicial foreclosure 

11 or a judicial foreclosure against a mortgagor that is 

12 otherwise authorized under State law, unless the 

13 servicer— 

14 ‘‘(A) has determined whether the mort15 gagor is eligible for an affordable loan modifica16 tion; and 

17 ‘‘(B) has made such a modification, if the 

18 mortgagor is eligible for a modification. 

19 ‘‘(2) FORECLOSURE PROCEEDINGS PER20 MITTED.—Notwithstanding paragraph (1), a servicer 

21 may initiate or continue a judicial or nonjudicial 

22 foreclosure under State law against a mortgagor, 

23 if— 

24 ‘‘(A) the servicer— 

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1 ‘‘(i) determines that the mortgagor is 

2 not eligible for a modification; 

3 ‘‘(ii) notifies the mortgagor of the de4 termination under clause (i); and 

5 ‘‘(iii) provides the mortgagor— 

6 ‘‘(I) a copy of any net present 

7 value calculation made by the servicer 

8 in relation to an affordable loan modi9 fication, including any information 

10 providing a basis for such net present 

11 value calculation; 

12 ‘‘(II) a copy of any note, deed of 

13 trust, or other document necessary to 

14 establish the right of the mortgagee to 

15 foreclose on the mortgage, including 

16 proof of assignment of the mortgage 

17 to the mortgagee and the right of the 

18 mortgagee to enforce the relevant note 

19 under the law of the State in which 

20 the real property securing the mort21 gage is located; 

22 ‘‘(III) a copy of any language in 

23 the pooling or servicing agreement 

24 with respect to the mortgage that the 

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1 servicer believes prevents a modifica2 tion of the mortgage note; 

3 ‘‘(IV) a copy of all correspond4 ence between the servicer and the 

5 mortgagees and investors in which the 

6 servicer attempts to obtain permission 

7 to make a modification; 

8 ‘‘(V) a complete and unaltered 

9 copy of the pooling or servicing agree10 ment in electronic format; and 

11 ‘‘(VI) the alternatives to fore12 closure available to the mortgagor, in13 cluding deed in lieu of foreclosures 

14 and short sales; or 

15 ‘‘(B) a mortgagor— 

16 ‘‘(i) declines an affordable modifica17 tion in writing; or 

18 ‘‘(ii) does not respond to the servicer’s 

19 outreach activities (as defined by the Sec20 retary of Housing and Urban Develop21 ment) to obtain underlying information to 

22 complete an application or obtain consent 

23 to an affordable modification. 

24 For purposes of subparagraph (A), a ‘pooling and 

25 servicing agreement’ is any contract establishing the 

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1 transaction rights and duties of the parties to any 

2 mortgage-backed securitization transaction. 

3 ‘‘(3) BAR TO FORECLOSURE.—Failure to com4 ply with the requirements of this subsection shall be 

5 a bar to the foreclosure of a mortgage, deed of trust, 

6 or substantially similar instrument. 

7 ‘‘(4) ELIGIBILITY.—A mortgagor shall be eligi8 ble to participate in an affordable loan modification 

9 program if— 

10 ‘‘(A) such person is a mortgagor under a 

11 federally related loan secured by the principal 

12 residence of the mortgagor, or is eligible to as13 sume such a federally related mortgage loan, 

14 who is unable to make payments on a federally 

15 related mortgage loan under such criteria as 

16 the Director of the Bureau of Consumer Finan17 cial Protection shall define, in consultation with 

18 the Secretary of Housing and Urban Develop19 ment and the Secretary of the Treasury; and 

20 ‘‘(B) they are not an individual who has 

21 abandoned the principal residence securing the 

22 federally related mortgage loan. 

23 ‘‘(5) CERTIFICATION OF DETERMINATION OF

24 ELIGIBILITY REQUIRED FOR SALE.— 

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1 ‘‘(A) SALE OF PROPERTY PROHIBITED.—If 

2 the servicer of a mortgage does not file a cer3 tification with the appropriate land records of4 fice in the jurisdiction where the property se5 curing the mortgage is located, stating that the 

6 servicer has determined the eligibility of the 

7 mortgagor for an affordable loan modification— 

8 ‘‘(i) the mortgagee may not sell the 

9 property securing the mortgage; and 

10 ‘‘(ii) no person that purchases the 

11 property securing the mortgage may ini12 tiate an action to recover possession of the 

13 property. 

14 ‘‘(B) VIOLATIONS.—A sale of property in 

15 violation of this paragraph shall be void. 

16 ‘‘(C) CONTENTS.—The Director of the Bu17 reau of Consumer Financial Protection shall, by 

18 rule, determine the contents of the certification 

19 required under this subsection. 

20 ‘‘(g) EARNED PRINCIPAL FORGIVENESS.— 

21 ‘‘(1) IN GENERAL.—If, after reducing mortgage 

22 note principal under earned principal forgiveness 

23 provided in paragraph (2), a target affordable reg24 ular mortgage payment has not been achieved, the 

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1 fordable loan modification plan modification water2 fall steps of interest rate reduction, term extension, 

3 and principal forbearance, as necessary to achieve a 

4 target affordable regular mortgage payment. 

5 ‘‘(2) EARNED PRINCIPAL FORGIVENESS.— 

6 ‘‘(A) PRINCIPAL REDUCTION.—The Bu7 reau shall determine standards by which a 

8 mortgagor who has received an affordable loan 

9 modification shall remain in good standing in 

10 order to participate in a reduction in mortgage 

11 note principal under this subsection. 

12 ‘‘(B) PRINCIPAL REDUCTION REQUIRED.— 

13 Except as provided under subparagraph (C), a 

14 servicer shall offer a mortgager an affordable 

15 loan modification having the maximum amount 

16 of principal reduction that results in a positive 

17 net present value calculation. 

18 ‘‘(C) EXCEPTIONS.— 

19 ‘‘(i) GREATER PRINCIPAL REDUC20 TION.—A servicer may offer a greater 

21 principal reduction, if such a reduction is 

22 consistent with the terms of any contract 

23 with respect to the mortgage. 

24 ‘‘(ii) LOAN-TO-VALUE RATIO.—A 

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1 able loan modification having a principal 

2 reduction that would result in a loan-to3 value ratio of less than 100 percent. 

4 ‘‘(D) RULES OF CONSTRUCTION.— 

5 ‘‘(i) MAXIMUM AMOUNT OF PRINCIPAL

6 REDUCTION.—A principal reduction 

7 amount may be considered the maximum 

8 amount if it is within $1,000 of the actual 

9 maximum amount. 

10 ‘‘(ii) POSITIVE NET PRESENT VALUE

11 CALCULATION.—A net present value cal12 culation shall be deemed to be ‘positive’ if 

13 the net present value result for an afford14 able loan modification scenario is greater 

15 than the net present value result if no af16 fordable loan modification is made. Net 

17 present value shall be calculated as the 

18 benefit of all investors in a securitization 

19 rather than the benefit of any particular 

20 class of investors. 

21 ‘‘(E) PRINCIPAL FORGIVENESS.— 

22 ‘‘(i) TREATMENT OF PRINCIPAL RE23 DUCTION AMOUNT.—Any amount of prin24 cipal reduction under subparagraph (B) 

25 shall be treated as non-interest-bearing 

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1 principal forbearance until the dates de2 scribed under clause (ii). The principal re3 duction described in this subparagraph 

4 shall be deemed to be separate from and 

5 exclusive of any other forbearance that 

6 may be offered in conjunction with a modi7 fication under an affordable loan modifica8 tion program. 

9 ‘‘(ii) REDUCTION OF PRINCIPAL.—The 

10 servicer of a mortgage modified under an 

11 affordable loan modification plan shall re12 duce the unpaid balance of the principal of 

the mortgage by an amount equal to 1 13 ⁄3 of 

14 the total amount of the principal reduction 

15 under subparagraph (B) on each of the fol16 lowing dates: 

17 ‘‘(I) The date that is 1 year after 

18 the date on which the affordable loan 

19 modification begins. 

20 ‘‘(II) The date that is 2 years 

21 after the date on which the affordable 

22 loan medication begins. 

23 ‘‘(III) The date that is 3 years 

24 after the date on which the affordable 

25 loan modification begins. 

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1 ‘‘(iii) LIMITATION.—The Bureau may 

2 not require a servicer to reduce mortgage 

3 note principal to an amount that is less 

4 than the market value of the property se5 curing the mortgage at the time of the re6 duction in principal. 

7 ‘‘(3) CALCULATION OF TARGET AFFORDABLE

8 REGULAR MORTGAGE PAYMENT.—For purposes of 

9 this subsection, the target affordable regular mort10 gage payment shall be calculated under such terms 

11 as the Bureau shall define. Such terms shall— 

12 ‘‘(A) be based on a fully amortizing prin13 cipal and interest payment over the remainder 

14 of the term of the mortgage, as modified by a 

15 reduction in principal; and 

16 ‘‘(B) use the mortgage note interest rate in 

17 effect at the time of a reduction in principal. 

18 ‘‘(4) TREATMENT OF SUBORDINATE LIENS.— 

19 The Bureau shall prescribe rules establishing proce20 dures governing the treatment of any whole loan 

21 owned by the creditor (or any of its affiliates) and 

22 secured by a subordinate lien on a property owned 

23 by a mortgagor participating in an affordable loan 

24 modification program.’’. 

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1 SEC. 9. FAIR DEBT COLLECTION PRACTICES ACT AMEND2 MENTS. 

3 (a) APPLICABILITY TO SERVICERS.—Section 803 of 

4 the Fair Debt Collection Practices Act (15 U.S.C. 1692a) 

5 is amended— 

6 (1) in paragraph (6), by inserting before ‘‘The 

7 term does not’’ the following: ‘‘The term includes 

8 any servicer of a securitized residential mortgage 

9 loan who uses any instrumentality of interstate com10 merce or the mails in the collection of any debts in 

11 relation to any such securitized residential mortgage 

12 loan.’’; and 

13 (2) by adding at the end the following: 

14 ‘‘(9) SECURITIZED RESIDENTIAL MORTGAGE

15 LOAN.—The term ‘securitized residential mortgage 

16 loan’ means any residential mortgage loan that 

17 serves as collateral for a fixed-income or other secu18 rity that allows the holder of such security to receive 

19 payments dependent on the cash flow from such res20 idential mortgage loan. 

21 ‘‘(10) SERVICER.—The term ‘servicer’— 

22 ‘‘(A) means any person responsible for the 

23 management or collection of a pool of 

24 securitized residential mortgage loans or mak25 ing allocations or distributions to holders of 

26 asset-backed securities; and 

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1 ‘‘(B) does not include any State or local 

2 housing agency.’’. 

3 (b) CIVIL LIABILITY.—Section 813 of the Fair Debt 

4 Collection Practices Act (15 U.S.C. 1692k) is amended 

5 by adding at the end the following: 

6 ‘‘(f) Any debt collector that violates any provision of 

7 this title with respect to a debt secured by the residence 

8 of the consumer shall be liable to such consumer in the 

9 amount of $10,000 per violation. 

10 ‘‘(g) After the end of the 1-year period beginning on 

11 the date of the enactment of this subsection, amounts of 

12 penalties specified under this section shall be annually ad13 justed to reflect inflation.’’. 

14 (c) RULEMAKING.—The Bureau of Consumer Finan15 cial Protection shall, not later than 270 days after the 

16 date of enactment of this Act, issue rules to carry out the 

17 amendments made by this section. 

18 SEC. 10. REGULATION OF SERVICER AFFILIATES BY BANK19 ING AGENCIES. 

20 (a) CAPITAL RESERVE STANDARDS.—Each of the ap21 propriate Federal banking agencies (as defined in section 

22 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)) 

23 shall promulgate regulations to establish independent cap24 ital reserve standards for any servicer of a federally remstockstill on DSKH9S0YB1PROD with BILLS

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1 lated mortgage that is affiliated with a financial institu2 tion that is subject to regulation by that agency. 

3 (b) TREATMENT OF DELINQUENT LOANS.— 

4 (1) IN GENERAL.—The Securities and Ex5 change Commission shall issue regulations to provide 

6 that, for purposes of generally accepted accounting 

7 principles, any federally related mortgage loan that 

8 is 120 days or more delinquent and that has not 

9 been the subject of a modification or a debt restruc10 turing, as provided in section 129A of the Truth in 

11 Lending Act shall be marked to market. 

12 (2) INSURED DEPOSITORY INSTITUTION TREAT13 MENT.—An appropriate Federal banking agency (as 

14 defined under section 3 of the Federal Deposit In15 surance Act (12 U.S.C. 1813)) may not find the reg16 ulations issues pursuant to paragraph (1) to be in17 consistent with the objectives described under sec18 tion 37(a)(1) of the Federal Deposit Insurance Act 

19 (12 U.S.C. 1831n(a)(1)). 

Æ 

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