IB 

Union Calendar No. 382 

110TH CONGRESS 

2D SESSION H. R. 5579 

[Report No. 110–615] 

To remove an impediment to troubled debt restructuring on the part of 

holders of residential mortgage loans, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 11, 2008 

Mr. CASTLE (for himself and Mr. KANJORSKI) introduced the following bill; 

which was referred to the Committee on Financial Services 

MAY 1, 2008 

Additional sponsor: Mr. SHERMAN

MAY 1, 2008 

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on March 11, 2008] 

A BILL 

To remove an impediment to troubled debt restructuring 

on the part of holders of residential mortgage loans, 

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, 


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Emergency Mortgage 

3 Loan Modification Act of 2008’’. 

4 SEC. 2. SAFE HARBOR FOR QUALIFIED LOAN MODIFICA5 TIONS OR WORKOUT PLANS FOR CERTAIN 

6 RESIDENTIAL MORTGAGE LOANS. 

7 (a) STANDARD FOR LOAN MODIFICATIONS OR WORK8 OUT PLANS.—Absent contractual provisions to the con9 trary— 

10 (1) the duty to maximize, or to not adversely af11 fect, the recovery of total proceeds from pooled resi12 dential mortgage loans is owed by a servicer of such 

13 pooled loans to the securitization vehicle for the ben14 efit of all investors and holders of beneficial interests 

15 in the pooled loans, in the aggregate, and not to any 

16 individual party or group of parties; and 

17 (2) a servicer of pooled residential mortgage 

18 loans shall be deemed to be acting on behalf of the 

19 securitization vehicle in the best interest of all inves20 tors and holders of beneficial interests in the pooled 

21 loans, in the aggregate, if for a loan that is in pay22 ment default under the loan agreement or for which 

23 payment default is imminent or reasonably foresee24 able, the loan servicer makes reasonable and docu25 mented efforts to implement a modification or work26 out plan or, if such efforts are unsuccessful or such 


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1 plan would be infeasible, engages in other loss mitiga2 tion, including accepting a short payment or partial 

3 discharge of principal, or agreeing to a short sale of 

4 the property, to the extent that the servicer reasonably 

5 believes the particular modification or workout plan 

6 or other mitigation actions will maximize the net 

7 present value to be realized on the loan, including 

8 over that which would be realized through foreclosure. 

9 (b) SAFE HARBOR.—Absent contractual provisions to 

10 the contrary, a servicer of a residential mortgage loan that 

11 acts in a manner consistent with the duty set forth in sub12 section (a), shall not be liable for entering into a qualified 

13 loan modification or workout plan, to— 

14 (1) any person, based on that person’s ownership 

15 of a residential mortgage loan or any interest in a 

16 pool of residential mortgage loans or in securities that 

17 distribute payments out of the principal, interest and 

18 other payments in loans on the pool; 

19 (2) any person who is obligated pursuant to a 

20 derivatives instrument to make payments determined 

21 in reference to any loan or any interest referred to in 

22 paragraph (1); or 

23 (3) any person that insures any loan or any in24 terest referred to in paragraph (1) under any law or 

25 regulation of the United States or any law or regulaVerDate Aug 31 2005 22:25 May 01, 2008 Jkt 069200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6203 E:\BILLS\H5579.RH H5579

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1 tion of any State or political subdivision of any 

2 State. 

3 (c) RULE OF CONSTRUCTION.—No provision of this 

4 section shall be construed as limiting the ability of a 

5 servicer to enter into loan modifications or workout plans 

6 other than qualified loan modification or workout plans. 

7 (d) DEFINITIONS.—For purposes of this section, the 

8 following definitions shall apply: 

9 (1) QUALIFIED LOAN MODIFICATION OR WORK10 OUT PLAN.—The term ‘‘qualified loan modification or 

11 workout plan’’ means a modification or plan that— 

12 (A) is scheduled to remain in place until 

13 the borrower sells or refinances the property, or 

14 for at least 5 years from the date of adoption of 

15 the plan, whichever is sooner; 

16 (B) does not provide for a repayment sched17 ule that results in negative amortization at any 

18 time; and 

19 (C) does not require the borrower to pay ad20 ditional points and fees. 

21 (2) NEGATIVE AMORTIZATION.—For purposes of 

22 paragraph (1), the term ‘‘negative amortization’’ does 

23 not include the capitalization of delinquent interest 

24 and arrearages. 


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1 (3) RESIDENTIAL MORTGAGE LOAN DEFINED.— 

2 The term ‘‘residential mortgage loan’’ means a loan 

3 that is secured by a lien on an owner-occupied resi4 dential dwelling. 

5 (4) SECURITIZATION VEHICLE.—The term 

6 ‘‘securitization vehicle’’ means a trust, corporation, 

7 partnership, limited liability entity, special purpose 

8 entity, or other structure that— 

9 (A) is the issuer, or is created by the issuer, 

10 of mortgage pass-through certificates, participa11 tion certificates, mortgage-backed securities, or 

12 other similar securities backed by a pool of assets 

13 that includes residential mortgage loans; and 

14 (B) holds such loans. 

15 (e) EFFECTIVE PERIOD.—This section shall apply only 

16 with respect to qualified loan modification or workout plans 

17 initiated prior to January 1, 2011. 


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Union Calendar No. 382 

110TH CONGRESS 

2D SESSION H. R. 5579 

[Report No. 110

–615] 

A BILL 

To remove an impediment to troubled debt restrucgage loans, and for other purposes. turing on the part of holders of residential mortMAY 1, 2008 

Reported with an amendment, committed to the Comand ordered to be printed mittee of the Whole House on the State of the Union, 


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