I

105TH CONGRESS

2D SESSION H. R. 4745

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

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 8, 1998

Mr. GUTIERREZ introduced the following bill; which was referred to the

Committee on Banking and Financial Services

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 The 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 mortgagor’s

12 control which render the mortgagor unable to cor13 rect the delinquency on the mortgage and unable to

14 make full mortgage payments before the expiration

15 of the 60-day period beginning on the date that no16 tice 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 mortga24 gee;
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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) WAIVER OF CERTAIN CONDITIONS.—The condi16 tions set forth in paragraphs (4) and (5) of subsection

17 (a) may be waived by the Secretary in any case where re18 quiring the conditions to be met would adversely affect

19 achievement of the purposes of the National Housing Act.

20 (c) EFFECT OF FINDING OF INELIGIBILITY.—If,

21 after reviewing an application for assistance submitted in

22 accordance with section 4, the Secretary determines that

23 the mortgagor has not met the conditions of eligibility de24 scribed in subsection (a), the mortgagor shall be prohib25 ited from reapplying for assistance under this Act until
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1 the expiration of the 6-month period beginning on the date

2 of such determination unless there is a material change

3 in the financial circumstances of the mortgagor.

4 (d) DETERMINATION RELATING TO FINANCIAL

5 HARDSHIP.—In determining whether a financial hardship

6 is due to circumstances beyond a mortgagor’s control, the

7 Secretary may consider information regarding the mortga8 gor’s employment record, credit history, and current in9 come.

10 (e) HOUSING COUNSELING AGENCIES.—The Sec11 retary shall designate and approve nonprofit housing

12 counseling agencies in each State to be available to assist

13 the Secretary in implementing the program established

14 pursuant to subsection (a).

15 SEC. 3. LEGAL ACTION.

16 (a) CONDITIONS UNDER WHICH LEGAL ACTION IS

17 PROHIBITED.—Except as otherwise provided in the Act,

18 a mortgagee of a mortgage which is insured under the Na19 tional Housing Act for a 1- to 4-family residence may not

20 accelerate the maturity of or commence any legal action

21 regarding such a mortgage (including mortgage fore22 closure to recover under such obligation) or take posses23 sion of any security of the mortgagor for such mortgage

24 obligation—
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1 (1) before the expiration of the 30-day period

2 beginning on the date that notice of the intent to

3 take such action was sent to the mortgagor in ac4 cordance with subsection (b);

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

6 beginning on the date of the initial meeting between

7 the mortgagor and an approved counseling agency

8 held in accordance with section 4(a);

9 (3) if an application for such assistance under

10 this Act has been submitted to the Secretary on be11 half of the mortgagor and such application—

12 (A) is pending; or

13 (B) has been approved by payments have

14 not yet been made toward the mortgage; or

15 (4) if payment toward the mortgage is being

16 made under this Act.

17 (b) REQUIREMENTS OF NOTICE.—Notice under this

18 section shall—

19 (1) give a brief description of the legal action

20 intended and the basis therefore;

21 (2) be sent via first class mail;

22 (3) include a list of approved counseling agen23 cies located in the State in which the mortgagor re24 sides; and
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1 (4) be subject to such other requirements as

2 prescribed by the Secretary.

3 SEC. 4. APPLICATION FOR ASSISTANCE.

4 (a) MEETING.—

5 (1) IN GENERAL.—To apply for assistance

6 under this Act, not later than 30 days after receiv7 ing notice in accordance with section 3(b), a mortga8 gor shall attend a meeting with the mortgagee or an

9 approved counseling agency to attempt to prevent

10 legal action for which the notice was sent by restruc11 turing the scheduled mortgage payment. A meeting

12 under this paragraph may be conducted over the

13 telephone.

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

15 approved counseling agency within the period speci16 fied in paragraph (1), the approved counseling agen17 cy shall send notice of the meeting, including the

18 date of the meeting, to the mortgagee not later than

19 5 business days after the meeting.

20 (b) PREPARATION; SUBMISSION.—

21 (1) IN GENERAL.—If it is determined at the

22 meeting that the mortgagor is not likely to be able

23 to pay the mortgage delinquency or otherwise resolve

24 the default and prevent foreclosure before the expi25 ration of the 60-day period beginning on the date of
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1 the meeting, the mortgagor may file an application

2 for mortgage assistance under this Act. At the re3 quest of the mortgagor, an approved counseling

4 agency shall—

5 (A) assist the mortgagor in preparing an

6 application for assistance under this Act; and

7 (B) not later than 30 days after the mort8 gagor initially requests assistance in the prepa9 ration of the application, submit the completed

10 application to the Secretary.

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

12 counseling agencies a fee, in an amount determined

13 by the Secretary, for rendering assistance pursuant

14 to this Act.

15 (c) NOTICE TO MORTGAGEE.—If the approved coun16 seling agency submits an application for assistance to the

17 Secretary on behalf of a mortgagor, the approved counsel18 ing agency shall, not later than 5 business days after sub19 mitting the application, inform the mortgagee of the date

20 that the application was submitted.

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

22 under this Act shall be submitted on a form prescribed

23 by the Secretary and shall include a financial statement

24 disclosing all assets and liabilities of the mortgagor,
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1 whether singly or jointly held, and all household income

2 regardless of source.

3 (e) EFFECT OF MISREPRESENTATION.—A mortgagor

4 who intentionally misrepresents any financial information

5 in conjunction with the filing of an application for assist6 ance under this Act may be denied assistance and required

7 to immediately repay any amount of assistance received,

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

9 legal action to enforce the mortgage without any further

10 restrictions or requirements under this Act.

11 (f) AVAILABILITY.—An application for assistance

12 under this Act may be obtained from an approved counsel13 ing agency.

14 (g) DETERMINATION ON APPLICATION.—

15 (1) TIME PERIOD.—The Secretary shall deter16 mine eligibility of a mortgagor for assistance under

17 this Act not later than 90 days after receipt of the

18 application of the mortgagor.

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

20 days after making the determination on an applica21 tion for assistance, the Secretary will notify the

22 mortgagor and the mortgagee as to whether the ap23 plication has been approved or disapproved.
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1 SEC. 5. PAYMENTS.

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

3 the Secretary determines that a mortgagor is eligible for

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

5 mortgagee from the Mutual Mortgage Insurance Fund the

6 full amount due to the mortgagee pursuant to the terms

7 of the mortgage without regard to any acceleration under

8 the mortgage, or the full amount of any alternative mort9 gage payments agreed to by the mortgagee and mortgagor

10 on the date that the application is approved by the Sec11 retary. This amount shall include the amount of principal,

12 interest, taxes, assessments, ground rents, hazard insur13 ance, any mortgage insurance or credit insurance pre14 miums, and reasonable attorneys’ fees incurred by such

15 mortgagee in relation to the arrearage.

16 (b) MONTHLY ASSISTANCE.—After the Secretary has

17 paid to the mortgagee the amount pursuant to subsection

18 (a), the Secretary may provide monthly mortgage assist19 ance payments to the mortgagee on behalf of the mortga20 gor.

21 (c) PERIOD FOR ASSISTANCE.—Payments under this

22 Act shall be provided for a period not to exceed 36 months,

23 either consecutively or nonconsecutively. The Secretary

24 shall establish procedures for periodic review of the mort25 gagor’s financial circumstances for the purpose of deter-
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1 mining the necessity for continuation, termination, or ad2 justment of the amount of the payments.

3 SEC. 6. REPAYMENT OF ASSISTANCE.

4 (a) MONTHLY PAYMENTS.—Before making assist5 ance payments under this Act on behalf of a mortgagor,

6 the Secretary shall enter into an agreement with the mort7 gagor for repayment of all mortgage assistance made by

8 the Secretary plus interest as provided in subsection (b).

9 The agreement shall provide for monthly payments by the

10 mortgagor in an amount determined as follows:

11 (1) If the mortgagor’s total housing expense is

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

13 income, the mortgagor shall pay to the Secretary the

14 difference between 35 percent of the mortgagor’s net

15 effective income and the mortgagor’s total housing

16 expense unless otherwise determined by the Sec17 retary after examining the mortgagor’s financial cir18 cumstances and ability to contribute to repayment of

19 the mortgage assistance.

20 (2) If the mortgagor’s total housing expense is

21 more than 35 percent of the mortgagor’s net effec22 tive income, repayment of the mortgage assistance

23 shall be deferred until the mortgagor’s total housing

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

25 net effective income.
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1 (3) Notwithstanding paragraphs (1) and (2), if

2 repayment of mortgage assistance is not made by

3 the date that the mortgage is paid in full, the mort4 gagor shall make mortgage assistance repayments in

5 an amount not less than the previous regular mort6 gage payment until the mortgage assistance is re7 paid.

8 (b) INTEREST.—Interest shall accrue on all mortgage

9 assistance made under this Act at the rate determined

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

11 the then current average yield on outstanding 30-year

12 bonds issued by the Secretary of the Treasury under sec13 tion 3102 of title 31, United States Code, and shall accrue

14 only during the period in which the mortgagor is required

15 to make repayment under this section.

16 (c) ASSISTANCE LOANS.—The amount by which the

17 mortgagor assistance payments made by the Secretary to

18 the mortgagee exceeds the amount of payments made by

19 the mortgagor to the Secretary shall be a loan by the Sec20 retary to the mortgagor. The loan shall be evidenced by

21 such documents as the Secretary shall determine nec22 essary to protect the interests of the United States.

23 (d) LIEN TO SECURE REPAYMENT OF ASSIST24 ANCE.—Repayment of amounts owed to the Secretary

25 from a mortgagor shall be secured by a mortgage lien on
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1 the property and by such other obligation as the Secretary

2 may require. The lien or other security interest of the Sec3 retary shall not be deemed to take priority over any other

4 secured lien or secured interest in effect against the mort5 gagor’s property on the date assistance payments begin.

6 The Secretary may allow subordination of the mortgage

7 assistance lien if such subordination is necessary to permit

8 the mortgagor to obtain a home improvement loan for re9 pairs necessary to preserve the property.

10 (e) TIME FOR PAYMENT.—The mortgagor shall make

11 the above payment to the Secretary at least 7 days before

12 each mortgage payment is due under the mortgage.

13 (f) REVIEW UPON DELINQUENCY.—If the mortgagor

14 fails to pay to the Secretary any amounts due directly

15 from him or her under this section not later than 15 days

16 after the due date, the Secretary shall review the mortga17 gor’s financial circumstances to determine whether the de18 linquency is the result of a change in the mortgagor’s fi19 nancial circumstance since the payment amount last was

20 determined. If the delinquency is not the result of a

21 change in the mortgagor’s financial circumstances, the

22 Secretary shall terminate the mortgage assistance pay23 ments and the mortgagee may, at any time thereafter,

24 take any legal action to enforce its mortgage without any

25 further restriction or requirement. If the delinquency is
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1 the result of such a change, the Secretary shall modify

2 the mortgagor’s required payments to the Secretary as the

3 Secretary shall determine.

4 SEC. 7. DEFINITIONS.

5 For the purposes of this Act, the following definitions

6 apply:

7 (1) APPROVED COUNSELING AGENCY.—The

8 term ‘‘approved counseling agency’’ means a non9 profit housing counseling agency approved by the

10 Secretary pursuant to section 2(e).

11 (2) GROSS HOUSEHOLD INCOME.—The term

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

13 a mortgagor, the mortgagor’s spouse, children resid14 ing in the same household as the mortgagor, and

15 any other resident of the household declared by the

16 mortgagor as a dependent for Federal tax purposes.

17 (3) HOUSING EXPENSE.—The term ‘‘housing

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

19 maintenance, utility, and hazard insurance expense,

20 taxes, and required mortgage payments, including

21 escrows.

22 (4) NET EFFECTIVE INCOME.—The term ‘‘net

23 effective income’’ means the gross household income

24 of the mortgagor, less city, State, and Federal in25 come and social security taxes.
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1 (5) SECRETARY.—The term ‘‘Secretary’’ means

2 the Secretary of Housing and Urban Development.

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