II 

110TH CONGRESS 

2D SESSION S. 3738 

To amend the Truth in Lending Act to permit deferrals on certain home 

mortgage foreclosures for a limited period to allow homeowners to take 

remedial action, to require home mortgage servicers to provide advance 

notice of any upcoming reset of the mortgage interest rate, and for 

other purposes. 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 11 (legislative day, DECEMBER 10), 2008 

Mr. MENENDEZ introduced the following bill; which was read twice and 

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

A BILL 

To amend the Truth in Lending Act to permit deferrals 

on certain home mortgage foreclosures for a limited period to allow homeowners to take remedial action, to 

require home mortgage servicers to provide advance notice of any upcoming reset of the mortgage interest rate, 

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 ‘‘Home Retention and 

5 Economic Stabilization Act of 2008’’. 


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1 SEC. 2. FORECLOSURE DEFERMENT. 

2 (a) IN GENERAL.—Chapter 2 of the Truth in Lend3 ing Act (15 U.S.C. 1631 et seq.) is amended by inserting 

4 after section 128 the following new section: 

5 ‘‘§ 128A. Foreclosure deferment and reset notification 

6 for certain mortgages 

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

8 following definitions shall apply: 

9 ‘‘(1) DEFERMENT PAYMENT AMOUNT.—The 

10 term ‘deferment payment amount’ means the 

11 amount of the monthly payment that is due on an 

12 eligible deferred-foreclosure mortgage during the 

13 deferment period. 

14 ‘‘(2) DEFERMENT PERIOD.—The term 

15 ‘deferment period’ means the period that— 

16 ‘‘(A) begins when the eligible deferred-fore17 closure consumer sends notice of the exercise of 

18 the deferral right under subsection (b)(1) with 

19 respect to an eligible deferred-foreclosure mort20 gage to the creditor or servicer; and 

21 ‘‘(B) ends on the earliest of the following 

22 applicable dates: 

23 ‘‘(i) The date that is 270 days after 

24 the beginning of the period. 

25 ‘‘(ii) The end of the 30-day period be26 ginning on any due date for any deferment 


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1 payment (on such mortgage, in accordance 

2 with this section) which remains unpaid as 

3 of the end of such 30-day period. 

4 ‘‘(iii) The date on which the creditor 

5 or servicer enters into a qualified loan 

6 modification with the consumer. 

7 ‘‘(iv) The date on which the deferment 

8 is terminated by judicial order. 

9 ‘‘(3) DEFERMENT PERIOD TRIGGER.—The term 

10 ‘deferment period trigger’ means the date on which 

11 the consumer becomes eligible for a deferment under 

12 subsection (b)(1) with respect to an eligible deferred13 foreclosure mortgage and occurs— 

14 ‘‘(A) in the case of a subprime mortgage, 

15 on the earlier of the date of any adjustment or 

16 reset of the interest rate on such mortgage or 

17 the date by which the consumer is 60 days de18 linquent on mortgage payments; and 

19 ‘‘(B) in the case of a negative amortization 

20 mortgage, the date of the first increase in the 

21 minimum monthly payment due under such 

22 mortgage after the origination of such mort23 gage. 

24 ‘‘(4) ELIGIBLE DEFERRED-FORECLOSURE

25 MORTGAGE.—The term ‘eligible deferred-foreclosure 


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1 mortgage’ means a subprime mortgage or a negative 

2 amortization mortgage, that was entered into before 

3 January 1, 2008, and has reached the deferment pe4 riod trigger. 

5 ‘‘(5) ELIGIBLE DEFERRED-FORECLOSURE CON6 SUMER.—The term ‘eligible deferred-foreclosure con7 sumer’ means a consumer who— 

8 ‘‘(A) is a mortgagor on an eligible de9 ferred-foreclosure mortgage; 

10 ‘‘(B) has resided at the property secured 

11 by such mortgage since the mortgage trans12 action was entered into and intends to reside at 

13 such property at least until the end of the 

14 deferment period; 

15 ‘‘(C) has a current monthly income that, 

16 when multiplied by 12, is less than 200 percent 

17 of the area median annual income for the rel18 evant family size in the State in which the resi19 dence is located; and 

20 ‘‘(D) during the deferment period, re21 sponds to reasonable inquiries from a creditor 

22 or servicer with respect to an eligible deferred23 foreclosure mortgage. 

24 ‘‘(6) NEGATIVE AMORTIZATION MORTGAGE.— 

25 The term ‘negative amortization mortgage’ means a 


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1 consumer credit transaction secured by the con2 sumer’s principal residence with the potential for 

3 negative amortization of the outstanding principal 

4 balance and under which the minimum monthly pay5 ment of principal and interest required increases 

6 after the date of origination. 

7 ‘‘(7) QUALIFIED LOAN MODIFICATION.— 

8 ‘‘(A) IN GENERAL.—The term ‘qualified 

9 loan modification’ means a permanent, sustain10 able loan modification. 

11 ‘‘(B) FDIC REGULATIONS.—Not later 

12 than 60 days after the date of enactment of the 

13 Home Retention and Economic Stabilization 

14 Act of 2008, the Chair of the Federal Deposit 

15 Insurance Corporation shall promulgate rules 

16 establishing under what circumstances a loan 

17 modification will qualify as permanent and sus18 tainable. 

19 ‘‘(8) SUBPRIME MORTGAGE.—The term 

20 ‘subprime mortgage’ means— 

21 ‘‘(A) any residential mortgage loan that 

22 constitutes a first lien on the dwelling or real 

23 property securing the loan and either— 

24 ‘‘(i) has an annual percentage rate 

25 that equals or exceeds the yield on securiVerDate Aug 31 2005 05:05 Dec 12, 2008 Jkt 079200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S3738.IS S3738

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1 ties issued by the Secretary of the Treas2 ury under chapter 31 of title 31, United 

3 States Code, that bear comparable periods 

4 of maturity by more than 3 percentage 

5 points; or 

6 ‘‘(ii) has an annual percentage rate 

7 that equals or exceeds the most recent con8 ventional mortgage rate, or such other an9 nual percentage rate as may be established 

10 by the Board by regulation, by more than 

11 175 basis points; and 

12 ‘‘(B) any residential mortgage loan that is 

13 not the first lien on the dwelling or real prop14 erty securing the loan and either— 

15 ‘‘(i) has an annual percentage rate 

16 that equals or exceeds the yield on securi17 ties issued by the Secretary of the Treas18 ury under chapter 31 of title 31, United 

19 States Code, that bear comparable periods 

20 of maturity by more than 5 percentage 

21 points; or 

22 ‘‘(ii) has an annual percentage rate 

23 that equals or exceeds the most recent con24 ventional mortgage rate, or such other an25 nual percentage rate as may be established 


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1 by the Board by regulation, by more than 

2 375 basis points. 

3 ‘‘(b) RIGHT TO DEFERMENT OF INSTITUTION OF OR

4 ACTION ON FORECLOSURE.— 

5 ‘‘(1) RIGHT ESTABLISHED.—Any eligible de6 ferred-foreclosure consumer shall have the right to 

7 defer any initiation of a foreclosure, whether judicial 

8 or nonjudicial, or any action in connection with a 

9 foreclosure already instituted, including any fore10 closure sale, with respect to any eligible deferred11 foreclosure mortgage by any creditor, servicer, or 

12 holder of such mortgage, or any other person acting 

13 on behalf of any such creditor, servicer, or holder, 

14 until the end of the deferment period. 

15 ‘‘(2) ENFORCEMENT OF RIGHT.—An eligible de16 ferred-foreclosure consumer may defend against a 

17 foreclosure or bring an action in any court of com18 petent or general jurisdiction to compel compliance 

19 with the right of the consumer under paragraph (1) 

20 to defer any initiation of a foreclosure or any action 

21 in connection with a foreclosure already instituted, 

22 including any foreclosure sale, with respect to any 

23 eligible deferred-foreclosure mortgage. 

24 ‘‘(c) NOTICE TO CONSUMER BEFORE ANY FORE25 CLOSURE ACTION.— 


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1 ‘‘(1) NOTICE OF RIGHT REQUIRED.—Before ini2 tiating any foreclosure with respect to any eligible 

3 deferred-foreclosure mortgage, the creditor or 

4 servicer shall notify, by personal service, any eligible 

5 deferred-foreclosure consumer with respect to such 

6 mortgage of such consumer’s right under subsection 

7 (b) to defer the initiation of foreclosure. 

8 ‘‘(2) CONTENTS OF NOTICE.—The Board shall 

9 prescribe, by regulations under sections 105 and 

10 122, the content and format, including the size of 

11 the font, of the notices under paragraph (1) in a 

12 manner that maximizes the likelihood that the con13 sumer will obtain and understand all the information 

14 necessary to exercise the right to defer any action to 

15 institute foreclosure, including— 

16 ‘‘(A) the manner and format for obtaining 

17 such deferral, including a sample notice form, 

18 an identification form, and a certification form 

19 for the consumer to use in complying with sub20 section (d)(1); 

21 ‘‘(B) contact information for the creditor 

22 or servicer, as the case may be and any third 

23 party involved in foreclosure proceedings, in24 cluding State or local officials; and 


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1 ‘‘(C) contact information for obtaining any 

2 counseling concerning the exercise of such de3 ferral from a counselor approved by the appro4 priate State housing finance agency or the Sec5 retary of Housing and Urban Development. 

6 ‘‘(3) TIMING.—No foreclosure action or pro7 ceeding with respect to any eligible deferred-fore8 closure mortgage shall be valid unless the creditor or 

9 servicer has provided the notice required under this 

10 subsection to the consumer at least 30 days before 

11 instituting any such action or proceeding and at 

12 least once during each subsequent 30-day period 

13 until the foreclosure becomes final. 

14 ‘‘(d) INSTITUTION OF DEFERMENT.— 

15 ‘‘(1) PROCEDURE REQUIRED.—Any eligible de16 ferred-foreclosure consumer who chooses to exercise 

17 a deferment right under subsection (b) shall pro18 vide— 

19 ‘‘(A) notice of the exercise of such to the 

20 servicer or other person described in the notice 

21 to the consumer under subsection (e) by any 

22 reasonable means including by mail, service 

23 whether directly or to any agent, including at 

24 the address of any registered agent; 


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1 ‘‘(B) a clear identification of the eligible 

2 deferred-foreclosure consumer and the address 

3 of the property securing the mortgage; and 

4 ‘‘(C) a certification that at least 1 con5 sumer borrower with respect to such mortgage 

6 resides at the property secured by such mort7 gage and intends to reside at such property at 

8 least until the end of the deferment period. 

9 ‘‘(2) SUFFICIENCY OF NOTICE.— 

10 ‘‘(A) IN GENERAL.—Notice and delivery of 

11 an affidavit under paragraph (1) may be made 

12 by any reasonable means including by mail, 

13 service whether directly or to any agent, includ14 ing at the address of any registered agent with 

15 the secretary of state for the State in which the 

16 property is located, or any attorney rep17 resenting the consumer, or by such means as 

18 the terms of the mortgage or regulations pre19 scribed by the Board may provide. 

20 ‘‘(B) OTHER PARTIES.—If any court, any 

21 sheriff or other official designated under State 

22 law, or any other person authorized under State 

23 law and the contracts of the parties to maintain 

24 any foreclosure proceeding or conduct any fore25 closure sale receives, directly or indirectly, a 


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1 copy of any notice provided under this sub2 section by an eligible deferred-foreclosure con3 sumer with respect to any eligible deferred-fore4 closure mortgage, no foreclosure action may be 

5 taken by the court, sheriff, official, or other 

6 person with respect to such mortgage during 

7 the applicable deferred-foreclosure period. 

8 ‘‘(3) ACKNOWLEDGMENT.— 

9 ‘‘(A) IN GENERAL.—Any creditor, servicer, 

10 or holder of an eligible deferred-foreclosure 

11 mortgage, or any other person acting on behalf 

12 of any such creditor, servicer, or holder, who re13 ceives a notice from a consumer under para14 graph (2) shall acknowledge to the consumer 

15 the receipt of the notice of the exercise of the 

16 deferment right under subsection (b) before the 

17 end of the 10-business day period beginning on 

18 the date of such receipt. 

19 ‘‘(B) CONTENTS OF NOTICE.—The ac20 knowledgment provided to any eligible deferred21 foreclosure consumer under subparagraph (A) 

22 shall include the date on which the next pay23 ment is due on the eligible deferred-foreclosure 

24 mortgage, the deferment payment amount, the 

25 date on which each subsequent payment is due, 


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1 and the address or the delivery method for each 

2 such payment that is acceptable to the recipi3 ent. 

4 ‘‘(4) MONTHLY PAYMENT NOTICES.—Each peri5 odic statement of account submitted by the creditor 

6 or servicer with respect to any eligible deferred-fore7 closure mortgage during the period while any 

8 deferment right under subsection (b) is in effect 

9 shall include— 

10 ‘‘(A) the due date and the amount of the 

11 next payment due on such mortgage; 

12 ‘‘(B) the address or the delivery method 

13 for such payment; 

14 ‘‘(C) the date on which the deferral of the 

15 foreclosure will terminate; and 

16 ‘‘(D) a notice that failure to make such 

17 payment in a timely manner will jeopardize the 

18 continuation of the deferral of the foreclosure. 

19 ‘‘(e) DEFERMENT PAYMENT.— 

20 ‘‘(1) IN GENERAL.—During the deferment pe21 riod with respect to any eligible deferred-foreclosure 

22 mortgage for which any deferment right has been 

23 exercised under subsection (b), monthly payments 

24 shall continue to be made by the consumer with re25 spect to such mortgage. 


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1 ‘‘(2) AMOUNT OF PAYMENT.—The deferment 

2 payment amount for purposes of monthly payments 

3 under paragraph (1) with respect to any eligible de4 ferred-foreclosure mortgage shall be— 

5 ‘‘(A) in the case of any subprime mort6 gage, the lesser of— 

7 ‘‘(i) the minimum monthly payment of 

8 principal and interest on the date the loan 

9 was originated; or 

10 ‘‘(ii) a monthly payment based on the 

11 outstanding loan principal plus a rate of 

12 interest calculated at a fixed annual per13 centage rate, in an amount equal to the 

14 most recent conventional mortgage rate 

15 plus a 100 basis point premium for risk, 

16 amortized over a period of 30 years minus 

17 the period of time since the origination of 

18 the loan; and 

19 ‘‘(B) in the case of any negative amortiza20 tion mortgage, the amount of the first min21 imum monthly payment due under the mort22 gage after the origination of such mortgage. 

23 ‘‘(3) AMORTIZATION OF DIFFERENCE.—The 

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1 foreclosure mortgage and the deferment payment 

2 amount shall be amortized over the life of the mort3 gage beginning after the deferred-foreclosure period 

4 in accordance with regulations which the Board shall 

5 prescribe. 

6 ‘‘(4) CHARGES PROHIBITED.—No creditor or 

7 servicer may impose any late fee or other fee or 

8 charge during the deferment period with respect to 

9 any eligible deferred-foreclosure mortgage for which 

10 any deferment right has been exercised under sub11 section (b) or in connection with the exercise of such 

12 deferment right. 

13 ‘‘(f) NOTICE OF RESET AND ALTERNATIVES.—Dur14 ing the 1-month period that ends 120 days before the date 

15 on which, in the case of a subprime mortgage, the interest 

16 rate in effect during the introductory period of the mort17 gage adjusts or resets to a variable interest rate, or in 

18 the case of a negative amortization mortgage, the min19 imum monthly payment of principal and interest required 

20 first increases from the amount of the first such minimum 

21 monthly payment due under the mortgage after the origi22 nation of such mortgage, the creditor or servicer of such 

23 loan shall provide a written notice, separate and distinct 

24 from all other correspondence to the consumer, that in25 cludes the following: 


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1 ‘‘(1) Any index or formula used— 

2 ‘‘(A) in the case of any subprime mort3 gage, in determining the annual percentage rate 

4 applicable as of the effective date of such reset 

5 or adjustment; and 

6 ‘‘(B) in the case of any negative amortiza7 tion mortgage, in making increases in the min8 imum monthly payments due, and a source of 

9 information about the index or formula. 

10 ‘‘(2) A good faith estimate, based on accepted 

11 industry standards and disclosed in a clear and con12 spicuous manner, of the creditor or servicer of the 

13 amount of the monthly payment that will apply after 

14 the date of the adjustment or reset, or increase, as 

15 applicable, and the assumptions on which this esti16 mate is based. 

17 ‘‘(3) A list of alternatives consumers may pur18 sue before the date of adjustment or reset, or in19 crease, as applicable, and descriptions of the actions 

20 consumers must take to pursue these alternatives, 

21 including— 

22 ‘‘(A) refinancing; 

23 ‘‘(B) renegotiation of loan terms; 

24 ‘‘(C) payment forbearances; 

25 ‘‘(D) pre-foreclosure sales; and 


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1 ‘‘(E) any payment assistance available 

2 from the State in which the property is located. 

3 ‘‘(4) The names, addresses, telephone numbers, 

4 and Internet addresses of counseling agencies or 

5 programs reasonably available to the consumer that 

6 have been certified or approved and made publicly 

7 available by the Secretary of Housing and Urban 

8 Development or a State housing finance authority 

9 (as defined in section 1301 of the Financial Institu10 tions Reform, Recovery, and Enforcement Act of 

11 1989). 

12 ‘‘(5) The address, telephone number, and Inter13 net address for the State housing finance authority 

14 (as so defined) for the State in which the consumer 

15 resides. 

16 ‘‘(g) MOST RECENT CONVENTIONAL MORTGAGE

17 RATE.—For purposes of subsection (f)(1)(A)(ii), the term 

18 ‘most recent conventional mortgage rate’ means the con19 tract interest rate on commitments for fixed-rate first 

20 mortgages most recently published in the Federal Reserve 

21 Statistical Release on selected interest rates (daily or 

22 weekly), and commonly referred to as the H.15 release (or 

23 any successor publication), in the week preceding a date 

24 of determination for purposes of applying this subsection. 


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1 ‘‘(h) DUTY OF CONSUMER TO MAINTAIN PROP2 ERTY.— 

3 ‘‘(1) IN GENERAL.—Any eligible deferred-fore4 closure consumer for whom a deferment of fore5 closure is in effect under this section with respect to 

6 any eligible deferred-foreclosure mortgage may not, 

7 with respect to any property securing such mort8 gage, destroy, damage, or impair such property, 

9 allow the property to deteriorate, or commit waste 

10 on the property. 

11 ‘‘(2) ENFORCEMENT.—Any consumer may be 

12 liable to any creditor or servicer for any violation of 

13 paragraph (1) under section 130(a)(1) and for such 

14 purposes section 130(a) shall be applied by sub15 stituting ‘consumer’ for ‘creditor’ each place such 

16 term appears. 

17 ‘‘(i) DECLARATION OF RIGHTS.—In addition to the 

18 right of any party to a mortgage to seek a declaratory 

19 judgment under section 2201 of title 28, United States 

20 Code, any such party may apply prior to the end of the 

21 deferment period to any State court of competent or gen22 eral jurisdiction for an order establishing the rights, du23 ties, and conditions imposed on or applicable to any party 

24 to the mortgage, including the terms and conditions of a 

25 deferment. 


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1 ‘‘(j) COORDINATION WITH STATE LAW.— 

2 ‘‘(1) IN GENERAL.—No provision of this section 

3 shall be construed as annulling, altering, or affecting 

4 the laws of any State relating to deferment of fore5 closures, except to the extent that those laws are in6 consistent with the provisions of this section, and 

7 then only to the extent of the inconsistency. 

8 ‘‘(2) RULE OF CONSTRUCTION.—A State law is 

9 not inconsistent with this section if the protection 

10 such law affords any consumer is greater than the 

11 protection afforded by this subsection.’’. 

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

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

14 by inserting after the item relating to section 128 the fol15 lowing new item: 

‘‘128A. Foreclosure deferment and reset notification for certain mortgages.’’. 

16 SEC. 3. AUTHORIZATION OF APPROPRIATIONS FOR HOUS17 ING COUNSELING. 

18 There is authorized to be appropriated for fiscal year 

19 2008, $200,000,000 for the Neighborhood Reinvestment 

20 Corporation, for carrying out foreclosure mitigation activi21 ties under the terms and conditions contained in the sec22 ond paragraph under the heading ‘‘Neighborhood Rein23 vestment Corporation—Payment to the Neighborhood Re24 investment Corporation’’ in title III of division K of Public 

25 Law 110–161 (121 Stat. 2441), which may include use 


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1 for costs of providing additional counselors, translators, 

2 and other staffers and costs of providing additional com3 puters and improving databases and overall operations to 

4 better assist mortgagor families. 

Æ 


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