II

106TH CONGRESS

1ST SESSION S. 1553

To establish a program to assist homeowners experiencing unavoidable, temporary difficulty making payments on mortgages insured under the National Housing Act.

IN THE SENATE OF THE UNITED STATES

AUGUST 5, 1999

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

to the Committee on Banking, Housing, and Urban Affairs

A BILL

To establish a program to assist homeowners experiencing

unavoidable, temporary difficulty making payments on

mortgages insured under the National Housing Act.

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 ‘‘Homeowners’ Emer5 gency Mortgage Assistance Act’’.

6 SEC. 2. MORTGAGE EMERGENCY ASSISTANCE PROGRAM.

7 (a) IN GENERAL.—The Secretary shall establish a

8 program to make payments on a mortgage insured under
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1 the National Housing Act for a 1- to 4-family residence

2 when—

3 (1) the mortgagee has given the mortgagor no4 tice in accordance with section 3(b) that it intends

5 to foreclose the mortgage;

6 (2) at least 2 full monthly installments due on

7 the mortgage are unpaid after the application of any

8 partial payments that may have been accepted but

9 not yet applied to the mortgage account;

10 (3) the mortgagor is suffering financial hard11 ship due to circumstances beyond the control of the

12 mortgagor which render the mortgagor unable to

13 correct the delinquency on the mortgage and unable

14 to make full mortgage payments before the expira15 tion of the 60-day period beginning on the date that

16 notice was sent to the mortgagor in accordance with

17 section 3(b);

18 (4) there is a reasonable prospect that the

19 mortgagor will be able to resume full mortgage pay20 ments not later than 36 months after the beginning

21 of the period for which assistance payments are pro22 vided and to pay the mortgage in full by its maturity

23 date or by a later date agreed upon by the mort24 gagee;
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1 (5) the property mortgaged is the mortgagor’s

2 principal place of residence;

3 (6) the mortgagor does not own other property

4 which is subject to a mortgage insured or held by

5 the Secretary;

6 (7) the mortgagor has applied to the Secretary

7 for assistance in accordance with section 4; and

8 (8) the mortgagor has not been more than 60

9 days in arrears on a residential mortgage within the

10 2-year period preceding the delinquency for which

11 assistance is requested, unless the mortgagor can

12 demonstrate that the prior delinquency was the re13 sult of financial hardship due to circumstances be14 yond the control of the mortgagor.

15 (b) EFFECT OF FINDING OF INELIGIBILITY.—If,

16 after reviewing an application for assistance submitted in

17 accordance with section 4, the Secretary determines that

18 the mortgagor has not met the conditions of eligibility de19 scribed in subsection (a), the mortgagor shall be prohib20 ited from reapplying for assistance under this Act until

21 the expiration of the 6-month period beginning on the date

22 of such determination unless there is a material change

23 in the financial circumstances of the mortgagor.

24 (c) DETERMINATION RELATING TO FINANCIAL

25 HARDSHIP.—In determining whether a financial hardship
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1 (which may be caused by a reduction in income or an in2 crease in expenses, or both) is due to circumstances be3 yond the control of a mortgagor, the Secretary may con4 sider information regarding the mortgagor’s employment

5 record, credit history, and current income. Such cir6 cumstances shall include, but not be limited to—

7 (1) loss of a job by a member of the household;

8 (2) salary, wage or earnings reduction of a

9 member of the household;

10 (3) injury, disability or illness of a member of

11 the household;

12 (4) divorce or separation in the household; or

13 (5) death of a member of the household.

14 (d) HOUSING COUNSELING AGENCIES.—The Sec15 retary shall designate and approve nonprofit housing

16 counseling agencies in each State to be available to assist

17 the Secretary in implementing the program established

18 pursuant to subsection (a) of this section and to section

19 4(b)(1)(A). Nonprofit housing agencies designated and ap20 proved under this subsection shall provide assistance to

21 an eligible mortgagor during the entire period that such

22 mortgagor receives assistance under this Act.

23 SEC. 3. LEGAL ACTION.

24 (a) CONDITIONS UNDER WHICH LEGAL ACTION IS

25 PROHIBITED.—Except as otherwise provided in the Act,
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1 a mortgagee of a mortgage which is insured under the Na2 tional Housing Act for a 1- to 4-family residence may not

3 accelerate the maturity of or commence any legal action

4 regarding such a mortgage (including, but not limited to,

5 mortgage foreclosure to recover under such obligation) or

6 take possession of any security of the mortgagor for such

7 mortgage obligation unless the mortgagee has sent to the

8 mortgagor notice pursuant to subsection (b). In addition,

9 the mortgagee may not take such action—

10 (1) before the expiration of the 30-day period

11 beginning on the date that notice of the intent to

12 take such action was sent to the mortgagor in ac13 cordance with subsection (b);

14 (2) before the expiration of the 30-day period

15 beginning on the date of the initial meeting between

16 the mortgagor and an approved counseling agency

17 held in accordance with section 4(a);

18 (3) if an application for such assistance under

19 this Act has been submitted to the Secretary on be20 half of the mortgagor and such application—

21 (A) is pending; or

22 (B) has been approved but payments have

23 not yet been made toward the mortgage; or

24 (4) if payment toward the mortgage is being

25 made under this Act.
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1 (b) REQUIREMENTS OF NOTICE.—The Secretary

2 shall issue regulations that include, but are not limited

3 to, a uniform notice under this section. Such notice shall

4 be in plain language and shall—

5 (1) inform the mortgagor in large bold type

6 that he or she may be eligible for temporary assist7 ance in making mortgage payments;

8 (2) include an explanation of the mortgage as9 sistance program under this Act;

10 (3) inform the mortgagor that to apply for

11 mortgage assistance, he or she shall attend a meet12 ing in accordance with section 4(a) within 30 days

13 of the date of the notice;

14 (4) include the legal action intended and the

15 basis therefore;

16 (5) include a list of approved counseling agen17 cies located in the State in which the mortgagor re18 sides;

19 (6) be sent via first class mail to the last known

20 address of the mortgagor; and

21 (7) be subject to such other requirements as

22 prescribed by the Secretary.

23 SEC. 4. APPLICATION FOR ASSISTANCE.

24 (a) MEETING.—
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1 (1) IN GENERAL.—To apply for assistance

2 under this Act, not later than 30 days after receiv3 ing notice in accordance with section 3(b), a mort4 gagor shall attend a face-to-face meeting with the

5 mortgagee or an approved counseling agency to at6 tempt to prevent legal action for which the notice

7 was sent by restructuring the mortgage payment

8 schedule. A meeting under this paragraph may be

9 conducted over the telephone under circumstances

10 prescribed by the Secretary.

11 (2) NOTICE.—If the mortgagor meets with the

12 approved counseling agency within the period speci13 fied in paragraph (1), the approved counseling agen14 cy shall send notice of the meeting which includes,

15 but is not limited to, the date of the meeting, to the

16 mortgagee not later than 5 business days after the

17 meeting.

18 (b) PREPARATION; SUBMISSION.—

19 (1) IN GENERAL.—If the mortgagor is not able

20 to resolve the default and prevent foreclosure before

21 the expiration of the 30-day period beginning on the

22 date of the meeting, the mortgagor may file an ap23 plication for mortgage assistance under this Act. At

24 the request of the mortgagor, an approved coun25 seling agency shall—
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1 (A) assist the mortgagor in preparing an

2 application for assistance under this Act; and

3 (B) not later than 30 days after the mort4 gagor initially requests assistance in the prepa5 ration of the application, submit the completed

6 application to the Secretary.

7 (2) FEES.—The Secretary may pay approved

8 counseling agencies a fee, in an amount determined

9 by the Secretary, for rendering assistance pursuant

10 to this Act.

11 (c) NOTICE TO MORTGAGEE.—If the approved coun12 seling agency submits an application for assistance to the

13 Secretary on behalf of a mortgagor, the approved coun14 seling agency shall, not later than 5 business days after

15 submitting the application, inform the mortgagee of the

16 date that the application was submitted.

17 (d) FORM; CONTENTS.—An application for assistance

18 under this Act shall be submitted on a form prescribed

19 by the Secretary and shall include a financial statement

20 disclosing all assets and liabilities of the mortgagor,

21 whether singly or jointly held, and all household income

22 regardless of source.

23 (e) EFFECT OF MISREPRESENTATION.—A mortgagor

24 who intentionally misrepresents any financial information

25 in connection with the filing of an application for assist-
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1 ance under this Act may be denied assistance and required

2 to immediately repay an amount of assistance received,

3 and the mortgagee may, at any time thereafter, take any

4 legal action to enforce the mortgage without any further

5 restrictions or requirements under this Act.

6 (f) AVAILABILITY.—An application for assistance

7 under this Act may be obtained from an approved coun8 seling agency.

9 (g) DETERMINATION ON APPLICATION.—

10 (1) TIME PERIOD.—The Secretary shall deter11 mine eligibility of a mortgagor for assistance under

12 this Act not later than 60 days after receipt of the

13 application of the mortgagor.

14 (2) NOTIFICATION.—Not later than 5 business

15 days after mailing the determination on an applica16 tion for assistance, the Secretary shall notify the

17 mortgagor and the mortgagee as to whether the ap18 plication has been approved or disapproved.

19 SEC. 5. ASSISTANCE PAYMENTS BY SECRETARY.

20 (a) AMOUNT TO BRING MORTGAGE CURRENT.—If

21 the Secretary determines that a mortgagor is eligible for

22 assistance under this Act, the Secretary shall pay to the

23 mortgagee from the Mutual Mortgage Insurance Fund the

24 full amount due to the mortgagee pursuant to the terms

25 of the mortgage without regard to any acceleration under
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1 the mortgage, or the full amount of any alternative mort2 gage payments agreed to by the mortgagee and mortgagor

3 on the date that the application is approved by the Sec4 retary. This amount shall include the amount of principal,

5 interest, taxes, assessments, ground rents, hazard insur6 ance, any mortgage insurance or credit insurance pre7 miums, and reasonable attorneys’ fees incurred by such

8 mortgagee in relation to the arrearage.

9 (b) MONTHLY ASSISTANCE PAYMENTS.—

10 (1) IN GENERAL.—The Secretary shall make

11 monthly mortgage assistance payments to the mort12 gagee on behalf of the mortgagor pursuant to this

13 Act.

14 (2) OBLIGATION OF THE MORTGAGOR.—A

15 mortgagor on whose behalf the Secretary is making

16 the mortgage assistance payments shall pay monthly

17 payments to the Secretary. Such payments shall be

18 in an amount which will cause the mortgagor’s total

19 housing expense not to exceed 35 percent of the

20 mortgagor’s net effective income. This shall be the

21 maximum amount the mortgagor can be required to

22 pay during the 36 months a mortgagor is eligible for

23 mortgage assistance. The mortgagor shall make such

24 payments at least 7 days before each mortgage pay25 ment is due under the mortgage.
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1 (3) OBLIGATION OF THE SECRETARY.—Upon

2 receipt of this payment from the mortgagor, the Sec3 retary or the Secretary’s duly authorized agent shall

4 send the total mortgage payment directly to the

5 mortgagee.

6 (c) REVIEW UPON DELINQUENCY.—If the mortgagor

7 fails to pay to the Secretary any amounts due directly

8 from the mortgagor under this section not later than 15

9 days after such due date, the Secretary or its designated

10 agent shall review the mortgagor’s financial circumstances

11 to determine whether a delinquency in payments due from

12 the mortgagor under this section or section 6 is the result

13 of a change in the mortgagor’s financial circumstances

14 since the payment amount was last determined. If the de15 linquency is not the result of a change in the mortgagor’s

16 financial circumstances, the Secretary shall terminate fu17 ture mortgage assistance payments and the mortgagee

18 may, at any time thereafter, take any legal action to en19 force its mortgage without any further restriction or re20 quirement. If the delinquency is the result of such a

21 change, the Secretary shall modify the mortgagor’s re22 quired payments to the Secretary as the Secretary shall

23 determine.

24 (d) PERIOD FOR ASSISTANCE.—Payments under this

25 Act shall be provided for a period not to exceed 36 months,
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1 either consecutively or nonconsecutively. The Secretary

2 shall establish procedures for periodic review of the mort3 gagor’s financial circumstances for the purpose of deter4 mining the necessity for continuation, termination, or ad5 justment of the amount of the payments.

6 SEC. 6. REPAYMENT OF ASSISTANCE.

7 (a) ASSISTANCE LOAN.—The amount by which the

8 assistance payments made by the Secretary to the mort9 gagee exceeds the amount of payments made by the mort10 gagor to the Secretary shall be a loan by the Secretary

11 to the mortgagor. The loan shall be evidenced by such doc12 uments as the Secretary shall determine necessary to pro13 tect the interests of the United States.

14 (b) REPAYMENT OF ASSISTANCE LOAN.—Before

15 making assistance payments under this Act on behalf of

16 a mortgagor, the Secretary shall enter into an agreement

17 with the mortgagor for repayment of all mortgage assist18 ance made by the Secretary under section 5, plus interest

19 as provided in subsection (c). The agreement shall provide

20 for monthly payments by the mortgagor to the Secretary

21 which shall begin once the Secretary has determined that

22 continuation of mortgage assistance payments to the

23 mortgagee is unnecessary, and shall be in an amount de24 termined as follows:
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1 (1) HOUSING EXPENSE LESS THAN 35 PER2 CENT.—If the mortgagor’s total housing expense is

3 less than 35 percent of the mortgagor’s net effective

4 income, the mortgagor shall pay to the Secretary the

5 difference between 35 percent of the mortgagor’s net

6 effective income and the mortgagor’s total housing

7 expense unless otherwise determined by the Sec8 retary after examining the mortgagor’s financial cir9 cumstances and ability to contribute to repayment of

10 the mortgage assistance.

11 (2) HOUSING EXPENSE GREATER THAN 35 PER12 CENT.—If the mortgagor’s total housing expense is

13 more than 35 percent of the mortgagor’s net effec14 tive income, repayment of the mortgage assistance

15 shall be deferred until the mortgagor’s total housing

16 expense is less than 35 percent of the mortgagor’s

17 net effective income.

18 (3) WHEN MORTGAGE PAID IN FULL.—Notwith19 standing paragraphs (1) and (2), if repayment of

20 mortgage assistance is not made by the date that

21 the mortgage is paid in full, the mortgagor shall

22 make mortgage assistance repayments in an amount

23 not less than the previous regular mortgage payment

24 until the mortgage assistance is repaid.
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1 (c) INTEREST.—Interest shall accrue on all mortgage

2 assistance made under this Act at the rate determined

3 monthly by the Secretary of the Treasury to be equal to

4 the then current average yield on outstanding 30-year

5 bonds issued by the Secretary of the Treasury under sec6 tion 3102 of title 31, United States Code, and shall accrue

7 only during the period in which the mortgagor is required

8 to make repayment under this section.

9 (d) LIEN TO SECURE REPAYMENT OF ASSIST10 ANCE.—Repayment of amounts owed to the Secretary

11 from a mortgagor shall be secured by a mortgage lien on

12 the property and by such other obligation as the Secretary

13 may require. The lien or other security interest of the Sec14 retary shall not be deemed to take priority over any other

15 secured lien or secured interest in effect against the mort16 gagor’s property on the date assistance payments begin.

17 The Secretary may allow subordination of the mortgage

18 assistance lien only if such subordination is necessary to

19 permit the mortgagor to obtain a home improvement loan

20 for repairs necessary to preserve the property.

21 (e) TIME FOR REPAYMENT.—Payments under this

22 section shall be made by the mortgagor to the Secretary

23 not later than 14 days after each mortgage payment is

24 due under the mortgage (or in the case of repayment after
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1 the mortgage has been paid in full, not later than the date

2 the mortgage payments were due under the mortgage).

3 SEC. 7. DEFINITIONS.

4 For the purposes of this Act, the following definitions

5 apply:

6 (1) APPROVED COUNSELING AGENCY.—The

7 term ‘‘approved counseling agency’’ means a non8 profit housing counseling agency approved by the

9 Secretary pursuant to section 2(e).

10 (2) GROSS HOUSEHOLD INCOME.—The term

11 ‘‘gross household income’’ means the total income of

12 a mortgagor, the mortgagor’s spouse, children resid13 ing in the same residence as the mortgagor, and any

14 other person living in such residence that is declared

15 by the mortgagor as a dependent for Federal income

16 tax purposes.

17 (3) HOUSEHOLD.—The term ‘‘household’’

18 means a mortgagor, the mortgagor’s spouse, chil19 dren residing in the same residence as the mort20 gagor, and any other person living in such residence

21 that is declared by the mortgagor as a dependent for

22 Federal income tax purposes.

23 (4) HOUSING EXPENSE.—The term ‘‘housing

24 expense’’ means the sum of the mortgagor’s monthly

25 maintenance, utility, and hazard insurance expense,
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1 taxes, and required mortgage payments, including

2 escrows.

3 (5) NET EFFECTIVE INCOME.—The term ‘‘net

4 effective income’’ means the gross household income

5 of the mortgagor, less city, State, and Federal in6 come and social security taxes.

7 (6) SECRETARY.—The term ‘‘Secretary’’ means

8 the Secretary of Housing and Urban Development.

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