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[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 824 Introduced in Senate (IS)]

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.

    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 ``Foreclosure Fraud and Homeowner 
Abuse Prevention Act of 2011''.

SEC. 2. DEFINITIONS.

    For purposes of this Act, the following definitions shall apply:
            (1) Commission.--The term ``Commission'' means the 
        Securities and Exchange Commission.
            (2) Mortgage.--The term ``mortgage'' means a federally 
        related mortgage loan, as defined in section 3 of the Real 
        Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602).
            (3) Mortgage-backed security.--The term ``mortgage-backed 
        security'' means an asset-backed security, as defined in 
        section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
        78c(a)), that is collateralized by--
                    (A) a mortgage; or
                    (B) a collateralized mortgage obligation of 
                mortgage-backed securities.
            (4) Securitized residential mortgage loan.--The term 
        ``securitized residential mortgage loan'' means any residential 
        mortgage loan that serves as collateral for a fixed-income or 
        other security that allows the holder of such security to 
        receive payments dependent on the cash flow from such 
        residential mortgage loan.
            (5) Servicer.--The term ``servicer''--
                    (A) means any person responsible for the management 
                or collection of a pool of assets or making allocations 
                or distributions to holders of asset-backed securities; 
                and
                    (B) does not include any State or local housing 
                agency.

SEC. 3. TRUST INDENTURE ACT PROTECTIONS.

    (a) Definitions.--Section 303 of the Trust Indenture Act of 1939 
(15 U.S.C. 77ccc) is amended--
            (1) in paragraph (7), by adding at the end the following: 
        ``Such term shall include mortgage-backed securities.'';
            (2) in paragraph (10), by adding at the end the following: 
        ``Such term shall include servicers of mortgage-backed 
        securities.''; and
            (3) by adding at the end the following:
            ``(19) The term `mortgage-backed security' means an asset-
        backed security, as defined in section 3(a) of the Securities 
        Exchange Act of 1934, that is collateralized by--
                    ``(A) a mortgage; or
                    ``(B) a collateralized mortgage obligation of 
                mortgage-backed securities.
            ``(20) The term `servicer'--
                    ``(A) means any person responsible for the 
                management or collection of a pool of assets or making 
                allocations or distributions to holders of asset-backed 
                securities; and
                    ``(B) does not include any State or local housing 
                agency.''.
    (b) Clarification of Exemptions.--Section 304 of the Trust 
Indenture Act of 1939 (15 U.S.C. 77ddd) is amended--
            (1) in paragraph (2), by inserting ``other than residential 
        mortgage-back securities'' after ``securities'';
            (2) in paragraph (4), by inserting ``other than a 
        residential mortgage-back security'' after ``security''; and
            (3) in paragraph (7), by inserting ``other than a 
        registered mortgage-back security'' after ``security''.
    (c) Fiduciary Duty.--Section 315 of the Trust Indenture Act of 1939 
(15 U.S.C. 77ooo) is amended by adding at the end the following:
    ``(f) Each servicer of a mortgage-backed security shall have a 
fiduciary duty to protect the economic interests of the investors as a 
whole in an asset-backed security, which duty may not be waived by the 
investor.''.
    (d) Removal of Trustee.--Section 310 of the Trust Indenture Act of 
1939 (15 U.S.C. 77jjj) is amended by adding at the end the following:
            ``(3) An indenture trustee that is a servicer of mortgage-
        backed securities may be removed if not fewer than 50 percent 
        of the investors petition a court of competent jurisdiction for 
        the removal of such trustee.''.
    (e) Amendment of Pooling and Servicing Agreement.--Section 316 of 
the Trust Indenture Act of 1939 (15 U.S.C. 77ppp) is amended by adding 
at the end the following:
    ``(d) Notwithstanding any other provision of this title, a pooling 
and servicing agreement with respect to any mortgage-backed security 
may be amended without the consent of a majority of the holders of such 
security, if not fewer than 25 percent thereof petition a court of 
competent jurisdiction for such action. For purposes of this subsection 
a `pooling and servicing agreement' is any contract or a substantially 
similar document establishing the transaction rights and duties of the 
parties to any mortgage-backed securitization transaction.''.
    (f) Penalty.--Section 325 of the Trust Indenture Act of 1939 (15 
U.S.C. 77yyy) is amended by striking ``$10,000'' and inserting 
``$40,000''.
    (g) Duties and Responsibilities of Servicers.--Section 315(a) of 
the Trust Indenture Act of 1939 (15 U.S.C. 77ooo(a)) is amended--
            (1) by striking ``The indenture'' and inserting ``(1) The 
        indenture'';
            (2) by redesignating existing paragraphs (1) and (2) as 
        subparagraphs (A) and (B), respectively, and moving the margins 
        2 ems to the right; and
            (3) by adding at the end the following:
    ``(2) Paragraph (1) shall not apply with respect to an indenture 
that is a mortgage-backed security. An indenture trustee of such a 
security shall have a duty to verify the correctness of any such 
statements.''.

SEC. 4. MORTGAGE RELATED SECURITY SERVICER ADVANCES.

    The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is 
amended by inserting after section 15G the following new section:

``SEC. 15H. MORTGAGE RELATED SECURITIES SERVICER ADVANCES.

    ``(a) Commission Rulemaking Required.--Promptly after the date of 
enactment of this section, the Commission shall, after consultation 
with the appropriate Federal banking agencies (as defined in section 3 
of the Federal Deposit Insurance Act (12 U.S.C. 1813)) and the Bureau 
of Consumer Financial Protection where appropriate, issue regulations--
            ``(1) to require each servicer of a mortgage related 
        security to notify investors therein of any advances to the 
        securitization vehicle;
            ``(2) to prohibit the primary servicer of a mortgage 
        related security from advancing delinquent payments of 
        principal and interest by mortgagors for more than 3 payment 
        periods, unless financing or reimbursement facilities to fund 
        or reimburse the primary servicers are available;
            ``(3) to prohibit the commingling of homeowners' monthly 
        mortgage payments with the assets of the servicer of a mortgage 
        related security, other than as necessary to clear payments 
        received, but not to exceed 2 business days;
            ``(4) to provide for recoupment, from any current or former 
        senior executive or director of a servicer of a mortgage 
        related security who has been convicted of any violation of the 
        securities laws, any compensation received during the 3-year 
        period preceding the date of the violation that the Commission 
        determines was connected to such violation, including any 
        unjust enrichment related to such violation, except that, in 
        the case of fraud, no time limit shall apply;
            ``(5) to allow for the controlling holder of a mortgage 
        related security to appoint and remove the servicers of such 
        security, where the servicer has not been in substantial 
        compliance with its duties under applicable law and all 
        relevant agreements, as determined by the Commission;
            ``(6) to require each pooling and servicing agreement 
        related to a mortgage related security to specify separate and 
        independent servicers for default (in this section referred to 
        as the `mandatory special servicer') and transactions 
        processing; and
            ``(7) to require existing or future loans comprising the 
        mortgage related security be transferred to the mandatory 
        special servicer, if such loans are more than 60 days 
        delinquent or where the holder and servicer find that there is 
        a significant risk of default, based on all the facts and 
        circumstances, in which case, such mandatory special servicer 
        shall be compensated through an untranched, prorated interest 
        in the assets of the mortgage related security, beginning at 1 
        percent.
For purposes of this subsection a `pooling and servicing agreement' is 
any contract establishing the transaction rights and duties of the 
parties to any mortgage-backed securitization transaction.
    ``(b) Compensation.--The rules of the Commission under this section 
shall include a definition of the term `compensation' to mean any 
financial remuneration, including salary, bonuses, incentives, 
benefits, severance, deferred compensation, or golden parachute 
benefits, and any profits realized from the sale of the securities of 
the company.''.

SEC. 5. LIMITATION ON MORTGAGES HELD BY LOAN SERVICERS.

    (a) Limitation.--The Truth in Lending Act (15 U.S.C. 1631 et seq.) 
is amended by inserting before section 130 (15 U.S.C. 1640) the 
following new section:

``SEC. 129I. LIMITATIONS ON MORTGAGES HELD BY LOAN SERVICERS.

    ``(a) Limitation.--Neither the servicer of a securitized 
residential mortgage loan, nor any affiliate of such servicer, may own, 
or hold any interest in, any other residential mortgage loan that is 
secured by a mortgage, deed of trust, or other equivalent consensual 
security interest on the same dwelling or residential real property 
that is subject to the mortgage, deed of trust, or other security 
interest that secures the securitized residential mortgage loan 
serviced by the servicer.
    ``(b) Definitions.--For purposes of this section, the following 
definitions shall apply:
            ``(1) Affiliate.--The term `affiliate' means, with respect 
        to a servicer, any person or entity that controls, is 
        controlled by, or is under common control with such servicer, 
        as the Board shall prescribe by regulation.
            ``(2) Residential mortgage loan.--The term `residential 
        mortgage loan' means any consumer credit transaction that is 
        secured by a mortgage, deed of trust, or other equivalent 
        consensual security interest on a dwelling or on residential 
        real property that includes a dwelling, other than a consumer 
        credit transaction under an open end credit plan or an 
        extension of credit relating to a plan described in section 
        101(53D) of title 11, United States Code.
            ``(3) Securitized residential mortgage loan.--The term 
        `securitized residential mortgage loan' means any residential 
        mortgage loan that serves as collateral for a fixed-income or 
        other security that allows the holder of such security to 
        receive payments dependent on the cash flow from such 
        residential mortgage loan.
            ``(4) Servicer.--The term `servicer'--
                    ``(A) has the meaning provided in section 129A, 
                except that such term includes a person who receives 
                any payments from a mortgagor, including any amounts 
                for escrow accounts, and makes payments to the owner of 
                the loan or other third parties, including payments 
                made after default, pursuant to the terms of the 
                relevant contracts; and
                    ``(B) excludes State and local housing agencies.
    ``(c) Interests.--For purposes of subsection (a), ownership of, or 
holding an interest in a securitized residential mortgage loan includes 
ownership of, or holding an interest in--
            ``(1) a pool of securitized residential mortgage loans that 
        contains such securitized residential mortgage loan; or
            ``(2) any security based on or backed by a pool of 
        securitized residential mortgage loans that contains such 
        securitized residential mortgage loan.''.
    (b) Clerical Amendment.--The table of sections for chapter 2 of the 
Truth in Lending Act is amended by inserting before the item relating 
to section 130 the following new item:

``Sec. 129I. Limitations on mortgages held by loan servicers.''.
    (c) Applicability.--The amendment made by subsection (a) shall 
apply--
            (1) with respect to the servicer (or affiliate of the 
        servicer) of a residential mortgage loan that is originated 
        after the date of enactment of this Act, on such date of 
        enactment; and
            (2) with respect to the servicer (or affiliate of the 
        servicer) of a residential mortgage loan that is originated on 
        or before the date of enactment of this Act, upon the 
        expiration of the 12-month period beginning on such date of 
        enactment.
    (d) Enforcement Provisions.--Section 130 of the Truth in Lending 
Act (15 U.S.C. 1640) is amended by adding at the end the following:
    ``(m) Servicers.--This section shall apply to servicers (as that 
term is defined in section 129I) in the same manner, and to the same 
extent as it applies to creditors.''.

SEC. 6. REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 IMPROVEMENTS.

    (a) RESPA Fees and Restrictions.--Section 8 of the Real Estate 
Settlement Procedures Act of 1974 (12 U.S.C. 2607) is amended by adding 
at the end the following new subsections
    ``(e) Fees To Be Reasonably Related to Costs.--All fees charged for 
the rendering of a real estate settlement service in connection with a 
transaction involving a federally related mortgage loan or incurred in 
connection with servicing such loan shall be reasonably related to the 
cost of providing the service.
    ``(f) Restriction on Use of Subsidiaries and Insourcing.--
            ``(1) In general.--No servicer of a residential mortgage 
        loan shall render a real estate settlement service in 
        connection with a transaction involving a federally related 
        mortgage loan through a subsidiary of such person or through 
        insourcing.
            ``(2) Insourcing defined.--For purposes of this subsection, 
        the term `insourcing' means providing for services to be 
        conducted by the servicer's affiliated entities.''.
    (b) Force-Placed Insurance.--Section 6 of the Real Estate 
Settlement Procedures Act of 1974 (12 U.S.C. 2605) is amended--
            (1) in subsection (l), by adding at the end the following 
        new paragraph:
            ``(5) Requirement to continue insurance.--If a borrower's 
        insurance policy has not been paid, the servicer shall make 
        payments on the current policy or seek reinstatement of such 
        policy where necessary and then make such payments, unless the 
        policy has been terminated for reasons other than nonpayment. 
        Where escrow funds are not available, the servicer shall 
        advance such funds. If the current policy cannot be continued 
        and force-placed insurance is provided, the costs and the 
        coverage should be substantially equivalent to that provided in 
        a standard homeowner's insurance policy.'';
            (2) by adding at the end the following new subsection:
    ``(n) Disclosures Related to Insurance Coverage Information.--
            ``(1) Notice.--Each servicer of a federally related 
        mortgage loan shall notify the borrower of such loan that the 
        borrower is required to disclose to the servicer the borrower's 
        property insurance coverage information.
            ``(2) Disclosure.--Each borrower who receives a notice 
        described under paragraph (1) shall disclose such information 
        to the servicer.''.
    (c) Loss Mitigation.--Section 6 of the Real Estate Settlement 
Procedures Act of 1974 (12 U.S.C. 2605), as amended by subsection (b), 
is further amended by adding at the end the following new subsection:
    ``(o) Loss Mitigation.--
            ``(1) Single electronic record and single point of 
        contact.--Each servicer of a federally related mortgage loan, 
        or agents of such servicer, shall, with respect to the 
        borrower, establish--
                    ``(A) a single electronic record for each account, 
                the contents of which shall be accessible throughout 
                the servicer, or agents of such servicer, including to 
                all loss mitigation staff, all foreclosure staff, and 
                all bankruptcy staff; and
                    ``(B) a single point of contact for the borrower 
                for all loss mitigation activities.
            ``(2) General loss mitigation requirements.--Each servicer 
        of a federally related mortgage loan, or agents of such 
        servicer, shall--
                    ``(A) maintain adequate staffing and systems for 
                tracking borrower documents and information that are 
                relevant to foreclosure, loss mitigation, bankruptcy, 
                and other servicing operations;
                    ``(B) maintain adequate staffing and caseload 
                limits for employees responsible for handling 
                foreclosure, loss mitigation, bankruptcy, and related 
                communication with borrowers and housing counselors;
                    ``(C) set reasonable minimum experience, education, 
                and training requirements for loan modification staff; 
                and
                    ``(D) document electronically each action on a 
                foreclosure, loan modification, bankruptcy, or other 
                servicing file, including all communication with the 
                borrower and other parties.
            ``(3) Team leaders.--Each servicer of a federally related 
        mortgage loan shall establish a single individual to coordinate 
        the servicer's departments handling the activities described 
        under subparagraphs (A), (B), and (C) under paragraph (2).
            ``(4) Limit on employee activities.--With respect to 
        employees of a servicer of a federally related mortgage loan 
        who handle delinquent loans or mandatory special servicers, the 
        Bureau shall issue regulations setting a reasonable limit on 
        the number of cases that may be handled by each such employee.
            ``(5) Mandatory special servicer defined.--For purposes of 
        this subsection, the term `mandatory special servicer' has the 
        meaning given such term in section 15H(a)(6) of the Securities 
        Exchange Act of 1934.
            ``(6) Additional requirements related to transfer of 
        loans.--
                    ``(A) To successor servicers.--For any ordinary 
                transfer of servicing to a successor servicer of a 
                federally related mortgage loan or subservicer, the 
                transferring servicer shall--
                            ``(i) inform the successor servicer 
                        (including a subservicer) whether a loan 
                        modification is pending;
                            ``(ii) ensure that the successor servicer 
                        shall accept and continue processing prior loan 
                        modification requests; and
                            ``(iii) ensure that successor servicer 
                        shall honor trial and permanent loan 
                        modification agreements entered into by the 
                        transferring servicer.
                    ``(B) To mandatory special servicers.--A servicer 
                of a federally related mortgage loan shall refer any 
                loan that is 60 or more days delinquent to an 
                independent mandatory special servicer or subservicer 
                who shall agree to the loss mitigation requirements of 
                this subsection.''.
    (d) Application of Payments.--Section 6(k)(1) of the Real Estate 
Settlement Procedures Act of 1974 (12 U.S.C. 2605(k)) is amended--
            (1) in subparagraph (D), by striking ``or'' at the end;
            (2) in subparagraph (E), by striking the period and 
        inserting ``; or''; and
            (3) by adding at the end the following new subparagraph:
                    ``(F) apply payments, including partial payments, 
                made by a borrower to any fees before first applying 
                such payments to any outstanding scheduled principal or 
                interest payments.''.
    (e) Monthly Servicing Statements.--Section 6 of the Real Estate 
Settlement Procedures Act of 1974 (12 U.S.C. 2605), as amended by 
subsection (c), is further amended by adding at the end the following 
new subsection:
    ``(p) Monthly Servicing Statements.--The Bureau shall issue 
regulations requiring each servicer of a federally related mortgage 
loan to provide borrowers with a monthly servicing statement that 
clearly describes--
            ``(1) the payment amounts due under the loan agreement;
            ``(2) the date and time when such payments must be 
        received;
            ``(3) the location where such payments must be received; 
        and
            ``(4) a list of each payment received by the servicer, 
        along with how such payment was allocated to the amounts owed 
        by the borrower.''.
    (f) Unfair and Deceptive Acts or Practices Violations.--Section 19 
of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2617) 
is amended by adding at the end the following new subsection:
    ``(e) Authority of the Bureau With Respect to UDAP Violations.--The 
Bureau's authority with respect to unfair and deceptive acts or 
practices by servicers of federally related mortgage loans shall be the 
same as its authority with respect to unfair and deceptive acts or 
practices under the Consumer Financial Protection Act of 2010. 
Notwithstanding such authority, the following shall apply:
            ``(1) Service.--The Bureau shall provide the servicer in 
        violation with notification of such violation via personal 
        service and such notification shall include a notice of the 
        servicer's rights and any bond requirements the servicer may be 
        subject to by reason of such violation.
            ``(2) Damages.--Notwithstanding amounts specified under the 
        Federal Trade Commission Act, a servicer convicted of unfair 
        and deceptive acts or practices with respect to a federally 
        related mortgage loan shall be--
                    ``(A) fined, regardless of whether there was a 
                pattern or practice of such violations, statutory 
                damages of not more than $10,000 for each such 
                violation (such amount to be adjusted annually 
                beginning 1 year after the date of enactment of the 
                Foreclosure Fraud and Homeowner Abuse Prevention Act of 
                2011 by the percentage corresponding to the annual 
                percentage increase in the Consumer Price Index for all 
                urban consumers);
                    ``(B) required to pay all actual damages, including 
                emotional distress, regardless of whether there was 
                detrimental reliance on the part of the borrower; and
                    ``(C) liable for attorneys fees.
            ``(3) Bar to foreclosure.--In any judicial or non-judicial 
        foreclosure proceeding, it shall be a bar to foreclosure that 
        the servicer of the federally related mortgage loan on the 
        property to be foreclosed violated any provision of this 
        section.
            ``(4) Statute of limitations.--The statute of limitations 
        for a servicer's violation of unfair and deceptive acts or 
        practices laws with respect to a federally related mortgage 
        loan shall be 3 years from the date on which violation 
        occurs.''.

SEC. 7. TRANSFER NOTIFICATION UNDER TILA.

    (a) In General.--Section 131(g) of the Truth in Lending Act (15 
U.S.C. 1641(g)) is amended--
            (1) in paragraph (1), by inserting ``, including any 
        servicer with respect to a securitized residential mortgage 
        loan,'' before ``shall notify''; and
            (2) by striking paragraph (2) and inserting the following:
            ``(2) Definitions.--For purposes of this subsection--
                    ``(A) the term `mortgage loan' means any consumer 
                credit transaction that is secured by the principal 
                dwelling of a consumer; and
                    ``(B) the terms `servicer' and `securitized 
                residential mortgage loan' have the same meanings as in 
                section 129I(b).''.
    (b) Safe Harbor for Mistaken Payments; Fees.--Section 131 of the 
Truth in Lending Act (15 U.S.C. 1641) is amended--
            (1) by redesignating subsection (g) as subsection (i); and
            (2) by inserting after subsection (f) the following:
    ``(g) Treatment of Mistaken Loan Payments After Transfer.--During 
the 60-day period beginning on the effective date of transfer of the 
servicing of any securitized residential mortgage loan, a late fee may 
not be imposed on the consumer with respect to any payment on such 
loan, and no such payment may be treated as late for any other purpose, 
if the payment is received by the transferor servicer (rather than the 
transferee servicer who should properly receive payment) before the due 
date applicable to such payment.
    ``(h) Fee Waivers Upon Transfer.--
            ``(1) In general.--A creditor, including a servicer, may 
        not impose or collect--
                    ``(A) any fee that is not listed as having been 
                incurred in--
                            ``(i) the notice to the consumer of the 
                        transfer of a securitized residential mortgage 
                        loan from the previous creditor or servicer; or
                            ``(ii) the notice to the consumer from the 
                        new creditor or servicer; or
                    ``(B) any fee that is not specified on the monthly 
                statement to the consumer as having been incurred.
            ``(2) Definitions.--For purposes of this subsection, the 
        terms `servicer' and `securitized residential mortgage loan' 
        have the same meanings as in section 129I(b).''.

SEC. 8. LOAN MODIFICATIONS; DUAL TRACK PROCEEDINGS PROHIBITED.

    (a) In General.--Section 129A of the Truth in Lending Act (as such 
section is redesignated by section 1402(a)(1) of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act) is amended--
            (1) by redesignating subsections (f) and (g) as subsections 
        (h) and (i), respectively;
            (2) in subsection (i), as so redesignated--
                    (A) by redesignating paragraphs (1) through (3) as 
                paragraphs (2) through (4), respectively; and
                    (B) by inserting before paragraph (2), as so 
                redesignated, the following:
            ``(1) the term `affordable loan modification' means an 
        agreement to reduce the amount of scheduled regular payments 
        under a mortgage note, including any reduction of the principal 
        amount of the mortgage note, that is reflected in a permanent 
        change to the terms of the mortgage note under such terms as 
        the Bureau of Consumer Financial Protection shall define.''; 
        and
            (3) by inserting after subsection (e) the following:
    ``(f) Limitation on Foreclosure Proceedings.--
            ``(1) Initiation of foreclosure.--A servicer may not 
        initiate or continue a nonjudicial foreclosure or a judicial 
        foreclosure against a mortgagor that is otherwise authorized 
        under State law, unless the servicer--
                    ``(A) has determined whether the mortgagor is 
                eligible for an affordable loan modification; and
                    ``(B) has made such a modification, if the 
                mortgagor is eligible for a modification.
            ``(2) Foreclosure proceedings permitted.--Notwithstanding 
        paragraph (1), a servicer may initiate or continue a judicial 
        or nonjudicial foreclosure under State law against a mortgagor, 
        if--
                    ``(A) the servicer--
                            ``(i) determines that the mortgagor is not 
                        eligible for a modification;
                            ``(ii) notifies the mortgagor of the 
                        determination under clause (i); and
                            ``(iii) provides the mortgagor--
                                    ``(I) a copy of any net present 
                                value calculation made by the servicer 
                                in relation to an affordable loan 
                                modification, including any information 
                                providing a basis for such net present 
                                value calculation;
                                    ``(II) a copy of any note, deed of 
                                trust, or other document necessary to 
                                establish the right of the mortgagee to 
                                foreclose on the mortgage, including 
                                proof of assignment of the mortgage to 
                                the mortgagee and the right of the 
                                mortgagee to enforce the relevant note 
                                under the law of the State in which the 
                                real property securing the mortgage is 
                                located;
                                    ``(III) a copy of any language in 
                                the pooling or servicing agreement with 
                                respect to the mortgage that the 
                                servicer believes prevents a 
                                modification of the mortgage note;
                                    ``(IV) a copy of all correspondence 
                                between the servicer and the mortgagees 
                                and investors in which the servicer 
                                attempts to obtain permission to make a 
                                modification;
                                    ``(V) a complete and unaltered copy 
                                of the pooling or servicing agreement 
                                in electronic format; and
                                    ``(VI) the alternatives to 
                                foreclosure available to the mortgagor, 
                                including deed in lieu of foreclosures 
                                and short sales; or
                    ``(B) a mortgagor--
                            ``(i) declines an affordable modification 
                        in writing; or
                            ``(ii) does not respond to the servicer's 
                        outreach activities (as defined by the 
                        Secretary of Housing and Urban Development) to 
                        obtain underlying information to complete an 
                        application or obtain consent to an affordable 
                        modification.
        For purposes of subparagraph (A), a `pooling and servicing 
        agreement' is any contract establishing the transaction rights 
        and duties of the parties to any mortgage-backed securitization 
        transaction.
            ``(3) Bar to foreclosure.--Failure to comply with the 
        requirements of this subsection shall be a bar to the 
        foreclosure of a mortgage, deed of trust, or substantially 
        similar instrument.
            ``(4) Eligibility.--A mortgagor shall be eligible to 
        participate in an affordable loan modification program if--
                    ``(A) such person is a mortgagor under a federally 
                related loan secured by the principal residence of the 
                mortgagor, or is eligible to assume such a federally 
                related mortgage loan, who is unable to make payments 
                on a federally related mortgage loan under such 
                criteria as the Director of the Bureau of Consumer 
                Financial Protection shall define, in consultation with 
                the Secretary of Housing and Urban Development and the 
                Secretary of the Treasury; and
                    ``(B) they are not an individual who has abandoned 
                the principal residence securing the federally related 
                mortgage loan.
            ``(5) Certification of determination of eligibility 
        required for sale.--
                    ``(A) Sale of property prohibited.--If the servicer 
                of a mortgage does not file a certification with the 
                appropriate land records office in the jurisdiction 
                where the property securing the mortgage is located, 
                stating that the servicer has determined the 
                eligibility of the mortgagor for an affordable loan 
                modification--
                            ``(i) the mortgagee may not sell the 
                        property securing the mortgage; and
                            ``(ii) no person that purchases the 
                        property securing the mortgage may initiate an 
                        action to recover possession of the property.
                    ``(B) Violations.--A sale of property in violation 
                of this paragraph shall be void.
                    ``(C) Contents.--The Director of the Bureau of 
                Consumer Financial Protection shall, by rule, determine 
                the contents of the certification required under this 
                subsection.
    ``(g) Earned Principal Forgiveness.--
            ``(1) In general.--If, after reducing mortgage note 
        principal under earned principal forgiveness provided in 
        paragraph (2), a target affordable regular mortgage payment has 
        not been achieved, the servicer of the mortgage shall comply 
        with the affordable loan modification plan modification 
        waterfall steps of interest rate reduction, term extension, and 
        principal forbearance, as necessary to achieve a target 
        affordable regular mortgage payment.
            ``(2) Earned principal forgiveness.--
                    ``(A) Principal reduction.--The Bureau shall 
                determine standards by which a mortgagor who has 
                received an affordable loan modification shall remain 
                in good standing in order to participate in a reduction 
                in mortgage note principal under this subsection.
                    ``(B) Principal reduction required.--Except as 
                provided under subparagraph (C), a servicer shall offer 
                a mortgager an affordable loan modification having the 
                maximum amount of principal reduction that results in a 
                positive net present value calculation.
                    ``(C) Exceptions.--
                            ``(i) Greater principal reduction.--A 
                        servicer may offer a greater principal 
                        reduction, if such a reduction is consistent 
                        with the terms of any contract with respect to 
                        the mortgage.
                            ``(ii) Loan-to-value ratio.--A servicer is 
                        not required to offer an affordable loan 
                        modification having a principal reduction that 
                        would result in a loan-to-value ratio of less 
                        than 100 percent.
                    ``(D) Rules of construction.--
                            ``(i) Maximum amount of principal 
                        reduction.--A principal reduction amount may be 
                        considered the maximum amount if it is within 
                        $1,000 of the actual maximum amount.
                            ``(ii) Positive net present value 
                        calculation.--A net present value calculation 
                        shall be deemed to be `positive' if the net 
                        present value result for an affordable loan 
                        modification scenario is greater than the net 
                        present value result if no affordable loan 
                        modification is made. Net present value shall 
                        be calculated as the benefit of all investors 
                        in a securitization rather than the benefit of 
                        any particular class of investors.
                    ``(E) Principal forgiveness.--
                            ``(i) Treatment of principal reduction 
                        amount.--Any amount of principal reduction 
                        under subparagraph (B) shall be treated as non-
                        interest-bearing principal forbearance until 
                        the dates described under clause (ii). The 
                        principal reduction described in this 
                        subparagraph shall be deemed to be separate 
                        from and exclusive of any other forbearance 
                        that may be offered in conjunction with a 
                        modification under an affordable loan 
                        modification program.
                            ``(ii) Reduction of principal.--The 
                        servicer of a mortgage modified under an 
                        affordable loan modification plan shall reduce 
                        the unpaid balance of the principal of the 
                        mortgage by an amount equal to \1/3\ of the 
                        total amount of the principal reduction under 
                        subparagraph (B) on each of the following 
                        dates:
                                    ``(I) The date that is 1 year after 
                                the date on which the affordable loan 
                                modification begins.
                                    ``(II) The date that is 2 years 
                                after the date on which the affordable 
                                loan medication begins.
                                    ``(III) The date that is 3 years 
                                after the date on which the affordable 
                                loan modification begins.
                            ``(iii) Limitation.--The Bureau may not 
                        require a servicer to reduce mortgage note 
                        principal to an amount that is less than the 
                        market value of the property securing the 
                        mortgage at the time of the reduction in 
                        principal.
            ``(3) Calculation of target affordable regular mortgage 
        payment.--For purposes of this subsection, the target 
        affordable regular mortgage payment shall be calculated under 
        such terms as the Bureau shall define. Such terms shall--
                    ``(A) be based on a fully amortizing principal and 
                interest payment over the remainder of the term of the 
                mortgage, as modified by a reduction in principal; and
                    ``(B) use the mortgage note interest rate in effect 
                at the time of a reduction in principal.
            ``(4) Treatment of subordinate liens.--The Bureau shall 
        prescribe rules establishing procedures governing the treatment 
        of any whole loan owned by the creditor (or any of its 
        affiliates) and secured by a subordinate lien on a property 
        owned by a mortgagor participating in an affordable loan 
        modification program.''.

SEC. 9. FAIR DEBT COLLECTION PRACTICES ACT AMENDMENTS.

    (a) Applicability to Servicers.--Section 803 of the Fair Debt 
Collection Practices Act (15 U.S.C. 1692a) is amended--
            (1) in paragraph (6), by inserting before ``The term does 
        not'' the following: ``The term includes any servicer of a 
        securitized residential mortgage loan who uses any 
        instrumentality of interstate commerce or the mails in the 
        collection of any debts in relation to any such securitized 
        residential mortgage loan.''; and
            (2) by adding at the end the following:
            ``(9) Securitized residential mortgage loan.--The term 
        `securitized residential mortgage loan' means any residential 
        mortgage loan that serves as collateral for a fixed-income or 
        other security that allows the holder of such security to 
        receive payments dependent on the cash flow from such 
        residential mortgage loan.
            ``(10) Servicer.--The term `servicer'--
                    ``(A) means any person responsible for the 
                management or collection of a pool of securitized 
                residential mortgage loans or making allocations or 
                distributions to holders of asset-backed securities; 
                and
                    ``(B) does not include any State or local housing 
                agency.''.
    (b) Civil Liability.--Section 813 of the Fair Debt Collection 
Practices Act (15 U.S.C. 1692k) is amended by adding at the end the 
following:
    ``(f) Any debt collector that violates any provision of this title 
with respect to a debt secured by the residence of the consumer shall 
be liable to such consumer in the amount of $10,000 per violation.
    ``(g) After the end of the 1-year period beginning on the date of 
the enactment of this subsection, amounts of penalties specified under 
this section shall be annually adjusted to reflect inflation.''.
    (c) Rulemaking.--The Bureau of Consumer Financial Protection shall, 
not later than 270 days after the date of enactment of this Act, issue 
rules to carry out the amendments made by this section.

SEC. 10. REGULATION OF SERVICER AFFILIATES BY BANKING AGENCIES.

    (a) Capital Reserve Standards.--Each of the appropriate Federal 
banking agencies (as defined in section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. 1813)) shall promulgate regulations to 
establish independent capital reserve standards for any servicer of a 
federally related mortgage that is affiliated with a financial 
institution that is subject to regulation by that agency.
    (b) Treatment of Delinquent Loans.--
            (1) In general.--The Securities and Exchange Commission 
        shall issue regulations to provide that, for purposes of 
        generally accepted accounting principles, any federally related 
        mortgage loan that is 120 days or more delinquent and that has 
        not been the subject of a modification or a debt restructuring, 
        as provided in section 129A of the Truth in Lending Act shall 
        be marked to market.
            (2) Insured depository institution treatment.--An 
        appropriate Federal banking agency (as defined under section 3 
        of the Federal Deposit Insurance Act (12 U.S.C. 1813)) may not 
        find the regulations issues pursuant to paragraph (1) to be 
        inconsistent with the objectives described under section 
        37(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 
        1831n(a)(1)).
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