I 

110TH CONGRESS 

2D SESSION H. R. 5579 

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 

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, 

3 SECTION 1. SHORT TITLE. 

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

5 Loan Modification Act of 2008’’. 


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1 SEC. 2. SAFE HARBOR FOR QUALIFIED LOAN MODIFICA2 TIONS OR WORKOUT PLANS FOR CERTAIN 

3 RESIDENTIAL MORTGAGE LOANS. 

4 (a) STANDARD FOR LOAN MODIFICATIONS OR WORK5 OUT PLANS.—Absent specific contractual provisions to the 

6 contrary— 

7 (1) the duty to maximize, or to not adversely 

8 affect, the recovery of total proceeds from pooled 

9 residential mortgage loans is owed by a servicer of 

10 such pooled loans to the securitization vehicle for the 

11 benefit of all investors and holders of beneficial in12 terests in the pooled loans, in the aggregate, and not 

13 to any individual party or group of parties; and 

14 (2) a servicer of pooled residential mortgage 

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

16 securitization vehicle in the best interest of all inves17 tors and holders of beneficial interests in the pooled 

18 loans, in the aggregate, if for a loan that is in pay19 ment default under the loan agreement or for which 

20 payment default is imminent or reasonably foresee21 able, the loan servicer makes reasonable and docu22 mented efforts to implement a modification or work23 out plan or, if such efforts are unsuccessful or such 

24 plan would be infeasible, engages in other loss miti25 gation, including accepting a short payment or par26 tial discharge of principal, or agreeing to a short 


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1 sale of the property, to the extent that the servicer 

2 reasonably believes the modification or workout plan 

3 or other mitigation actions will maximize the net 

4 present value to be realized on the loan over that 

5 which would be realized through foreclosure. 

6 (b) SAFE HARBOR.—Absent specific contractual pro7 visions to the contrary, a servicer of a residential mortgage 

8 loan that acts in a manner consistent with the duty set 

9 forth in subsection (a), shall not be liable for entering into 

10 a qualified loan modification or workout plan, to— 

11 (1) any person, based on that person’s owner12 ship of a residential mortgage loan or any interest 

13 in a pool of residential mortgage loans or in securi14 ties that distribute payments out of the principal, in15 terest and other payments in loans on the pool; 

16 (2) any person who is obligated to make pay17 ments determined in reference to any loan or any in18 terest referred to in paragraph (1); or 

19 (3) any person that insures any loan or any in20 terest referred to in paragraph (1) under any law or 

21 regulation of the United States or any law or regula22 tion of any State or political subdivision of any 

23 State. 

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

25 section shall be construed as limiting the ability of a 


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1 servicer to enter into loan modifications or workout plans 

2 other than qualified loan modification or workout plans. 

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

4 following definitions shall apply: 

5 (1) QUALIFIED LOAN MODIFICATION OR WORK6 OUT PLAN.—The term ‘‘qualified loan modification 

7 or workout plan’’ means a modification or plan 

8 that— 

9 (A) is scheduled to remain in place until 

10 the borrower sells or refinances the property, or 

11 for at least 5 years from the date of adoption 

12 of the plan, whichever is sooner; 

13 (B) does not provide for a repayment 

14 schedule that results in negative amortization 

15 at any time; and 

16 (C) does not require the borrower to pay 

17 additional points and fees. 

18 (2) RESIDENTIAL MORTGAGE LOAN DEFINED.— 

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

20 that is secured by a lien on an owner-occupied resi21 dential dwelling. 

22 (3) SECURITIZATION VEHICLE.—The term 

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

24 partnership, limited liability entity, special purpose 

25 entity, or other structure that— 


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

2 issuer, of mortgage pass-through certificates, 

3 participation certificates, mortgage-backed secu4 rities, or other similar securities backed by a 

5 pool of assets that includes residential mortgage 

6 loans; and 

7 (B) holds such loans. 

8 (e) EFFECTIVE PERIOD.—This section shall apply 

9 only with respect to qualified loan modification or workout 

10 plans initiated prior to January 1, 2011. 

Æ 


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