I 

111TH CONGRESS 

1ST SESSION H. R. 3451 

To amend the Real Estate Settlement Procedures Act of 1974 to require 

mortgagees for mortgages in default to engage in reasonable loss mitigation activities, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 31, 2009 

Ms. WATERS introduced the following bill; which was referred to the 

Committee on Financial Services 

A BILL 

To amend the Real Estate Settlement Procedures Act of 

1974 to require mortgagees for mortgages in default 

to engage in reasonable loss mitigation activities, 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 ‘‘Foreclosure Prevention 

5 and Sound Mortgage Servicing Act of 2009’’. 


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1 SEC. 2. DUTY TO ENGAGE IN LOSS MITIGATION. 

2 (a) DUTY.—The Real Estate Settlement Procedures 

3 Act of 1974 is amended by inserting after section 6 (12 

4 U.S.C. 2605) the following new section: 

5 ‘‘SEC. 6A. DUTY TO ENGAGE IN LOSS MITIGATION. 

6 ‘‘(a) DUTY FOR COVERED FEDERALLY RELATED

7 MORTGAGE LOANS.—Upon default of any federally re8 lated mortgage loan that is secured by a lien on the prin9 cipal residence of the borrower or mortgagor, the mort10 gagee shall engage in reasonable loss mitigation activities 

11 that provide for— 

12 ‘‘(1) the long-term affordability of the loan; and 

13 ‘‘(2) the maximum retention of home equity. 

14 ‘‘(b) NO FORECLOSURE WITHOUT LOSS MITIGA15 TION.—No foreclosure of any covered federally related 

16 mortgage loan shall be initiated if the mortgagee or 

17 servicer has at any time failed to comply with the require18 ments of this section with respect to such loan. 

19 ‘‘(c) LOSS MITIGATION ACTIVITIES.— 

20 ‘‘(1) IN GENERAL.—For purposes of this sec21 tion, loss mitigation activities shall include— 

22 ‘‘(A) priority loss mitigation activities 

23 under paragraph (6); 

24 ‘‘(B) secondary loss mitigation activities 

25 under paragraph (7); 


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1 ‘‘(C) last-resort loss mitigation activities 

2 under paragraph (8); and 

3 ‘‘(D) any loss mitigation activities con4 sistent with the Making Home Affordable pro5 gram of the Secretary of the Treasury, as an6 nounced on March 4, 2009, including any sub7 sequent updates. 

8 ‘‘(2) EXCEPTIONS FOR SERVICERS PARTICI9 PATING IN THE MAKING HOME AFFORDABLE PRO10 GRAM.—Any mortgagee or servicer that meets its 

11 obligation under this Act through subparagraph (D) 

12 of paragraph (1) shall not be subject to the require13 ments of paragraphs (3), (4), (6), and (7). 

14 ‘‘(3) ORDER OF PURSUIT.—In complying with 

15 subsection (a), the mortgagee or servicer shall pur16 sue loss mitigation activities in the following order: 

17 first priority loss mitigation activities, then sec18 ondary loss mitigation activities, and then last-resort 

19 loss mitigation activities. If any loss mitigation activ20 ity is taken, the mortgagee or servicer shall provide 

21 written notice of such activity to the borrower or 

22 mortgagor by mail not later than 7 business days 

23 after such action is taken. 

24 ‘‘(4) CONSIDERATION OF CIRCUMSTANCES IN

25 PROVISION OF LOSS MITIGATION ACTIVITIES.—In deVerDate Nov 24 2008 23:32 Aug 03, 2009 Jkt 079200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3451.IH H3451

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1 termining the type of loss mitigation activity to pro2 vide with respect to a covered federally related mort3 gage loan, the mortgagee or servicer may consider 

4 the financial and personal circumstances of the bor5 rower or mortgagor. The mortgagee or servicer may 

6 provide— 

7 ‘‘(A) priority loss mitigation activities with 

8 respect to borrowers or mortgagors who have 

9 experienced a permanent or long-term change 

10 in their financial condition that prevents them 

11 from making payments due under the loan, in12 cluding illness, injury, death of a wage earner, 

13 interest rate reset, or significant decline in the 

14 value of the property that is subject to the lien 

15 securing the loan; 

16 ‘‘(B) secondary loss mitigation activities 

17 with respect to borrowers or mortgagors who 

18 have experienced a short-term change in their 

19 financial condition having a duration of less 

20 than 3 months that prevents them from making 

21 payments due under the loan; and 

22 ‘‘(C) last resort loss mitigation activities 

23 with respect to borrowers or mortgagors who, 

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1 gage, will be unable to make payments due 

2 under the loan. 

3 ‘‘(5) PROHIBITIONS.—A mortgagee or servicer 

4 with respect to a covered federally related mortgage 

5 loan— 

6 ‘‘(A) may not limit the number of loss 

7 mitigation activities provided with respect to a 

8 borrower or mortgagor; 

9 ‘‘(B) shall comply with the requirements of 

10 under this section with respect to the loan with11 out regard to whether there has been a previous 

12 default under the loan; and 

13 ‘‘(C) may not require a minimum loan-to14 value ratio for the provision of any loss mitiga15 tion activity or use such a ratio to determine 

16 the type of loss mitigation activity provided 

17 with respect to a borrower or mortgagor. 

18 ‘‘(6) PRIORITY LOSS MITIGATION ACTIVITIES.— 

19 For purposes of this section, the term ‘priority loss 

20 mitigation activities’ includes, with respect to a cov21 ered federally related mortgage loan, activities that 

22 preserve the borrower’s or mortgagor’s ownership in23 terest in the property that is subject to the lien se24 curing the loan by modifying the contractual terms 

25 of the loan. Priority loss mitigation activities include 


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1 modification of the loan terms that provide for the 

2 following: 

3 ‘‘(A) ALTERATION OF TERMS.—Reduction 

4 of the interest rate of the loan, forgiveness of 

5 loan principal or interest, conversion from an 

6 adjustable rate mortgage to a fixed rate mort7 gage, and reamortization of the loan in connec8 tion with an extension of the final maturity 

9 date of the loan. 

10 ‘‘(B) SHORT REFINANCING.—Short refi11 nancing of the loan consisting of acceptance of 

12 payment from or on behalf of the borrower or 

13 mortgagor of an amount that is less than the 

14 full amount alleged to be due and owing under 

15 the loan, including principal, interest, and fees, 

16 in full satisfaction of the obligation under the 

17 loan and as part of a refinance transaction 

18 under which the property that is subject to the 

19 lien securing the loan is intended to remain the 

20 principal residence of the borrower or mort21 gagor. 

22 ‘‘(7) SECONDARY LOSS MITIGATION ACTIVI23 TIES.—For purposes of this section, the term ‘sec24 ondary loss mitigation activities’ includes, with re25 spect to a covered federally related mortgage loan, 


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1 other activities that avoid foreclosure and preserve 

2 the borrower’s or mortgagor’s ownership interest in 

3 the property that is subject to the lien securing the 

4 loan, but do not change the contractual terms of the 

5 loan. Secondary loss mitigation activities include the 

6 following activities: 

7 ‘‘(A) Waiver of any late payment charge, 

8 penalty interest, or any other fees or charges, 

9 including legal fees, or any combination thereof. 

10 ‘‘(B) Establishment of a repayment plan 

11 under which the borrower or mortgagor re12 sumes regularly scheduled payments and pays 

13 additional amounts at scheduled intervals to 

14 cure the delinquency. 

15 ‘‘(C) Forbearance under the loan that pro16 vides for a temporary reduction in, or cessation 

17 of, monthly payments followed by a reamortiza18 tion of the amounts due under the loan, includ19 ing arrearage, and a new schedule of repayment 

20 amounts. 

21 ‘‘(8) LAST-RESORT LOSS MITIGATION ACTIVI22 TIES.—For purposes of this section, the term ‘last 

23 resort loss mitigation activities’ includes, with re24 spect to a covered federally related mortgage loan, 

25 activities that avoid foreclosure but do not preserve 


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1 the borrower’s or mortgagor’s ownership interest in 

2 the property that is subject to the lien securing the 

3 loan. Last-resort loss mitigation activities include 

4 the following activities: 

5 ‘‘(A) Short sale of the principal residence 

6 that is subject to the lien securing the loan, 

7 consisting of acceptance of payment from or on 

8 behalf of the borrower or mortgagor of an 

9 amount less than the amount alleged to be due 

10 and owing under the loan, including principal, 

11 interest, and fees, in full satisfaction of the obli12 gation under such loan and as part of a sale 

13 transaction in which the property is not in14 tended to remain the principal residence of the 

15 borrower or mortgagor. 

16 ‘‘(B) Assumption of the borrower’s obliga17 tions under the loan by a third party. 

18 ‘‘(C) Cancellation or postponement of a 

19 foreclosure sale to allow the borrower or mort20 gagor additional time to sell the property. 

21 ‘‘(D) Acquisition of the property by the 

22 mortgagee or servicer by deed in lieu of fore23 closure. 

24 ‘‘(9) PROTECTION OF CONTRACT RIGHTS.—Not25 withstanding subsections (a) and (b), nothing in this 


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1 section shall require a servicer for a covered feder2 ally related mortgage loan to breach a contract with 

3 the mortgagee (or its predecessors in interest, suc4 cessors, or assigns) entered into before the enact5 ment of the Foreclosure Prevention and Sound 

6 Mortgage Servicing Act of 2009. 

7 ‘‘(d) AFFORDABLE PAYMENTS.— 

8 ‘‘(1) IN GENERAL.—The affordability of any 

9 scheduled payments due from the borrower or mort10 gagor pursuant to loss mitigation activities and 

11 whether the activities are in the best financial inter12 ests of the borrower or mortgagor shall be taken 

13 into consideration in determining whether a mort14 gagee has engaged, for purposes of subsection 

15 (a)(1), in reasonable loss mitigation activities that 

16 provide for long-term affordability of the loan. Pay17 ments under a loan shall be considered to be afford18 able for a borrower or mortgagor for purposes of 

19 this subsection if such payments result in a debt-to20 income ratio or residual income of the borrower or 

21 mortgagor in an amount less than or equal to 31 

22 percent of the monthly gross income of the borrower 

23 or mortgagor or such other lower percentage as a 

24 mortgagee or servicer may determine. Payments 

25 under a loan shall not be considered to be affordable 


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1 for a borrower or mortgagor for purposes of this 

2 subsection unless such the amount of such payments 

3 is 10 percent less than the amount of payments due 

4 under the loan before loss mitigation activities with 

5 respect to the loan. 

6 ‘‘(2) INCOME USED IN DETERMINING AFFORD7 ABILITY.— 

8 ‘‘(A) DOCUMENTATION.—A mortgagee or 

9 servicer may request documentation of the in10 come of a borrower or mortgagor before com11 mencing loss mitigation activities. 

12 ‘‘(B) VERIFICATION.—The mortgagor’s or 

13 borrower’s income shall be verified by— 

14 ‘‘(i) requiring the mortgagor or bor15 rower to provide a signed form for the re16 quest for a transcript of the mortgagor’s 

17 or borrower’s Federal tax return (Form 

18 4506–T of the Internal Revenue Service); 

19 ‘‘(ii) obtaining the most recent Fed20 eral tax return on file for each borrower 

21 who signed the note for the covered feder22 ally related mortgage loan; 

23 ‘‘(iii) by requiring the mortgagor or 

24 borrower to provide the two most recent 


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1 payroll receipts for each wage earner who 

2 signed such note; and 

3 ‘‘(iv) in the case of mortgagors or bor4 rowers who are self-employed or who have 

5 non-wage income, by obtaining other third6 party documents that provide reasonably 

7 reliable evidence of income. 

8 ‘‘(C) ABSENCE OF SUFFICIENT LIQUID AS9 SETS.—Loss mitigation activities with respect 

10 to a covered federally related mortgage loan 

11 shall not be provided unless the mortgagor or 

12 borrower has represented and warranted that 

13 the mortgagor or borrower does not have suffi14 cient liquid assets to make the monthly pay15 ments due under the loan. 

16 ‘‘(3) DEBT-TO-INCOME RATIO.—In determining 

17 the debt-to-income ratio or residual income of a 

18 mortgagor or borrower under a covered federally re19 lated mortgage loan for purposes of this subsection, 

20 the amount of monthly payment under the loan shall 

21 include principal, interest, taxes, insurance, flood in22 surance, any homeowner’s association and condo23 minium fees, and any second or subordinate liens. 

24 ‘‘(4) MONTHLY INCOME.—In determining 

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1 poses of this subsection, all wages, salary, overtime, 

2 fees, commissions, tips, Social Security benefits, pen3 sions, and all other income shall be considered. 

4 ‘‘(5) WRITTEN NOTIFICATION OF AFFORD5 ABILITY CALCULATION.—The mortgagee or servicer 

6 shall notify the borrower or mortgagor in writing of 

7 the results of the determination of affordability 

8 under this subsection and the income on which the 

9 determination was based. Such written notice shall 

10 be provided by mail not later than 7 business days 

11 after such action is taken or as part of the written 

12 notice required under subsection (c)(3), whichever is 

13 earlier. 

14 ‘‘(e) NOTIFICATION OF INTEREST RATE IN15 CREASE.—In the case of any covered federally related 

16 mortgage loan that is an adjustable rate mortgage, not 

17 less than 60 days before any increase in the periodic pay18 ment due for principal or interest or in the interest rate 

19 charged under the loan, but not more than 120 days be20 fore such increase, the mortgagee or servicer shall, in addi21 tion to any notices required by the contract and other law, 

22 inform the borrower in writing by mail and by telephone 

23 of the date that such payment or interest rate increase 

24 will occur and of the amount of the projected monthly pay25 ment under the loan after such increase, based on the preVerDate Nov 24 2008 23:32 Aug 03, 2009 Jkt 079200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H3451.IH H3451

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1 vailing interest rate of the index used for such increase 

2 with the 30-day period ending upon such notice. The writ3 ten notice shall provide the information required under 

4 this subsection in a clear and conspicuous format. 

5 ‘‘(f) SUBORDINATE LIENS.—Each mortgagee with re6 spect to a subordinate lien shall provide to mortgagees 

7 having senior liens information needed by such senior 

8 mortgagees to engage in reasonable loss mitigation as re9 quired by this section. Any modification of the loan under10 taken as part of loss mitigation activity shall not impair 

11 the priority status of liens under the modified loan, to the 

12 extent that there are no additional funds advanced to the 

13 borrower in connection with such modification. 

14 ‘‘(g) DIRECT ACCESS TO AUTHORIZED LOSS MITIGA15 TION PERSONNEL.— 

16 ‘‘(1) PROVISION OF CONTACT INFORMATION.— 

17 The mortgagee or servicer of a covered federally re18 lated mortgage loan shall provide, on each regular 

19 account statement for the loan, a toll-free or collect20 call telephone number that provides the borrower 

21 with direct access to a person with the information 

22 and authority to answer questions and fully resolve 

23 issues related to loss mitigation activities for the 

24 loan. 


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1 ‘‘(2) PROHIBITION ON OUTSOURCING.—In car2 rying out subsection (a) with respect to a covered 

3 federally related mortgage loan, any contact by or on 

4 behalf of a mortgagee or servicer with the home5 owner and any processing of any loss mitigation ac6 tivities shall be conducted only by agents of the 

7 mortgagee or servicer who are physically located in 

8 the United States. 

9 ‘‘(h) THIRD-PARTY LOAN MODIFICATIONS.—The 

10 servicer or mortgagee of a covered federally related mort11 gage loan shall not accept or provide loss mitigation activi12 ties with respect to such loan at the request of any entity 

13 or individual that is not party to the loan unless— 

14 ‘‘(1) the entity or individual is authorized by 

15 the borrower or mortgagee to act on behalf of the 

16 borrower or mortgagor; and 

17 ‘‘(2)(A) is a representative of a housing coun18 seling agency approved by the Secretary of Housing 

19 and Urban Development; or 

20 ‘‘(B) provides documentation to the servicer or 

21 mortgagee that the entity or individual— 

22 ‘‘(i) has not charged any fee to the bor23 rower or mortgagor for such request; or 

24 ‘‘(ii)(I) has charged a nominal fee for such 

25 request; 


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1 ‘‘(II) has entered into a written contract, 

2 in plain English or the primary language of the 

3 borrower or mortgagor, with the borrower or 

4 mortgagor, that includes provisions for cancella5 tion without penalty; and 

6 ‘‘(III) will refund any such fees to the bor7 rower or mortgagor in the event the request for 

8 loss mitigation is denied. 

9 ‘‘(i) DUTY TO REFER TO HUD-CERTIFIED HOUSING

10 COUNSELING AGENCY.— 

11 ‘‘(1) REFERRAL BY SERVICER OR MORT12 GAGEE.—In the case of any payment due under a 

13 covered federally related mortgage loan that is more 

14 than 60 days late, the servicer or mortgagee shall 

15 forward to a housing counseling agency approved by 

16 the Secretary the contact information of the bor17 rower. 

18 ‘‘(2) EXPRESSION OF BORROWER PREF19 ERENCE.—The borrower may communicate to the 

20 servicer or mortgagee a preference for a particular 

21 housing counseling agency approved by the Sec22 retary— 

23 ‘‘(A) in writing at the time of closing on 

24 the loan; or 


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1 ‘‘(B) in writing at any time during the 

2 term of the loan, including by conveyance of 

3 signed authorization form from the approved 

4 housing counseling agency of the borrower’s 

5 choice, which shall be transmitted by such agen6 cy to the mortgagee or servicer. 

7 ‘‘(3) REFERRAL RELATIONSHIP.—A mortgagee 

8 or servicer may establish a referral relationship with 

9 a housing counseling agency approved by the Sec10 retary, but such relationship may not be exclusive 

11 and the mortgagee or servicer may not refuse to re12 spond to qualified written requests and other com13 munications from another housing counseling agency 

14 approved by the Secretary or any other agent that 

15 is authorized by the borrower. 

16 ‘‘(j) PROHIBITION ON WAIVER OF RIGHTS.—A mort17 gagee for a covered federally related mortgage loan may 

18 not— 

19 ‘‘(1) when engaging in loss mitigation activities 

20 pursuant to subsection (a), require a borrower to 

21 limit or waive the rights of such borrower to bring 

22 any claims, defenses, demands, proceedings, actions, 

23 or causes of action against the mortgagee or servicer 

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1 gation activities, including any activities under sub2 section (c); or 

3 ‘‘(2) require the borrower to agree to arbitra4 tion as a condition of receiving loan modification ac5 tivities. 

6 Any waiver or arbitration provision in a written agreement 

7 prohibited under this subsection shall be void and unen8 forceable. 

9 ‘‘(k) REPORTING ON LOSS MITIGATION ACTIVI10 TIES.— 

11 ‘‘(1) IN GENERAL.—Each mortgagee or servicer 

12 of a covered federally related mortgage loan shall re13 port monthly and comprehensively to the Comp14 troller of the Currency and to the Director of the 

15 Office of Thrift Supervision on the extent and scope 

16 of the loss mitigation activities of the mortgagee. 

17 Each such report shall include data on loss mitiga18 tion activities disaggregated according to the cat19 egories specified in each of the subparagraphs of 

20 paragraphs (6), (7), and (8) of subsection (c), any 

21 loss mitigation activities not covered by such cat22 egories, the number of loans receiving loss mitiga23 tion that have become performing loans, the number 

24 of loans receiving loss mitigation that have pro25 ceeded to foreclosure, the total number of foreVerDate Nov 24 2008 23:32 Aug 03, 2009 Jkt 079200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\H3451.IH H3451

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1 closures initiated during the reporting period, and 

2 such other information as the Comptroller or Direc3 tor determines to be relevant. 

4 ‘‘(2) COMPILATION OF AGGREGATE DATA.— 

5 ‘‘(A) COMMENCEMENT.—Beginning with 

6 data for calendar year 2009, the Comptroller of 

7 the Currency and the Director of the Office of 

8 Thrift Supervision shall, in consultation, with 

9 the Chairman of the Federal Reserve compile 

10 for each year, for each primary metropolitan 

11 statistical area, metropolitan statistical area, 

12 and consolidated metropolitan statistical area 

13 that is not comprised of designated primary 

14 metropolitan statistical areas, aggregate data 

15 by census tract for each mortgagee or servicer 

16 that is required to disclose data under this sub17 section. 

18 ‘‘(B) SCOPE.—Each such report shall in19 clude loan-level disclosures of outstanding loans 

20 with information related to— 

21 ‘‘(i) the location of the security prop22 erty; 

23 ‘‘(ii) the loan amount; 

24 ‘‘(iii) the value of such security prop25 erty; 


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1 ‘‘(iv) the age of borrower or mort2 gagee; 

3 ‘‘(v) the date on which such loan was 

4 originated; 

5 ‘‘(vi) the type of entity owning such 

6 loan; 

7 ‘‘(vii) the performance status of such 

8 loan; 

9 ‘‘(viii) the monetary losses incurred by 

10 the investor in such loan in connection 

11 with the termination of such loan; 

12 ‘‘(ix) the loss mitigation activities pro13 vided in reference to such loan according 

14 to the categories specified in each of the 

15 subparagraphs of paragraphs (6), (7), and 

16 (8) of subsection (c); 

17 ‘‘(x) the loss mitigation activities pro18 vided in reference to such loan that are not 

19 covered by such categories; 

20 ‘‘(xi) the magnitude of such modifica21 tion or loss mitigation activities; 

22 ‘‘(xii) the dates of consideration, ap23 proval, or rejection of such loss mitigation 

24 activities; 


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1 ‘‘(xiii) the reasons for such rejection; 

2 and 

3 ‘‘(xiv) any other relevant information. 

4 Such reports shall also include information 

5 identical to that required upon loan origination 

6 by the Home Mortgage Disclosure Act of 1975. 

7 ‘‘(C) DATA TABLES.—The Comptroller and 

8 the Director shall also produce tables indicating 

9 for each primary metropolitan statistical area, 

10 metropolitan statistical area, and consolidated 

11 metropolitan statistical area that is not com12 prised of designated primary metropolitan sta13 tistical areas, aggregate loss mitigation patterns 

14 for various categories of census tracts grouped 

15 according to location, age of housing stock, in16 come level, and racial and ethnic characteris17 tics. 

18 ‘‘(D) AVAILABILITY TO PUBLIC.—The data 

19 and tables required pursuant to this paragraph 

20 shall be made available to the public not later 

21 than 6 months after such data is reported pur22 suant to subparagraph (A). 

23 ‘‘(l) DEFINITIONS.—For purposes of this section, the 

24 following definitions shall apply: 


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1 ‘‘(1) ADJUSTABLE RATE MORTGAGE.—The term 

2 ‘adjustable rate mortgage’ means, with respect to a 

3 federally related mortgage loan, that the loan terms 

4 provide for the rate of interest charged under the 

5 loan to reset or adjust at least once during the term 

6 of the loan. 

7 ‘‘(2) COVERED FEDERALLY RELATED MORT8 GAGE LOAN.—The term ‘covered federally related 

9 mortgage loan’ means a federally related mortgage 

10 loan described in subsection (a). 

11 ‘‘(3) MORTGAGEE.—The term ‘mortgagee’ 

12 means, with respect to a federally related mortgage 

13 loan, the original lender under the loan and any af14 filiates, agents, subsidiaries, successors, or assignees 

15 of such lender, and any subsequent purchaser, trust16 ee, or transferee of the loan or credit instrument 

17 issued by such lender. 

18 ‘‘(4) SERVICER.—The term ‘servicer’ has the 

19 meaning given such term in section 6(i). 

20 ‘‘(m) REPORT TO CONGRESS.—Not later than the ex21 piration of the 12-month period beginning upon the date 

22 of the enactment of the Foreclosure Prevention and Sound 

23 Mortgage Servicing Act of 2009, and of each consecutive 

24 12-month period thereafter, the Comptroller of the Cur25 rency and the Director of the Office of Thrift Supervision 


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1 shall provide a report to the Congress on the extent of 

2 compliance by mortgagees and servicers with the require3 ments of this section and paragraphs (4) through (7) of 

4 section 6(e).’’. 

5 (b) DUTY OF LOAN SERVICER TO RESPOND TO BOR6 ROWER INQUIRIES.—Section 6(e)(1)A) of the Real Estate 

7 Settlement Procedures Act of 1974 (12 U.S.C. 

8 2605(e)(1)(A)) is amended by striking ‘‘borrower)’’ and 

9 inserting ‘‘(borrower, including a housing counseling agen10 cy approved by the Secretary)’’. 

11 (c) COMPREHENSIVE DISCLOSURE AND FAIR PROC12 ESSING OF QUALIFIED WRITTEN REQUESTS.—Section 

13 6(e) of the Real Estate Settlement Procedures Act of 1974 

14 (12 U.S.C. 2605(e)) is amended by adding at the end the 

15 following new paragraphs: 

16 ‘‘(4) PROVISION OF INFORMATION REGARDING

17 MORTGAGE.—The servicer of a covered federally re18 lated mortgage loan (as such term is defined in sec19 tion 6A(l)) shall have available at all times the fol20 lowing information, which shall be provided to the 

21 borrower or borrower’s agent in response to a quali22 fied written request by the borrower submitted in ac23 cordance with the deadlines set forth in paragraph 

24 (1)(A): 


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1 ‘‘(A) Whether the account relating to such 

2 loan is current, or if not, the date the account 

3 went into default. 

4 ‘‘(B) The current balance due on the loan, 

5 including the amount of principal due, an 

6 itemization of all fees due, an explanation of the 

7 escrow balance, and whether there are any es8 crow deficiencies or shortages. 

9 ‘‘(C) A full payment history that shows, in 

10 a clear and easily understandable manner, all of 

11 the activity on the loan since the origination of 

12 the loan, including the escrow account, and the 

13 application of payments made under the loan. 

14 ‘‘(D) The initial terms of the loan. 

15 ‘‘(E) A copy of the original note and secu16 rity instrument. 

17 ‘‘(F) Identification of the owner of the 

18 mortgage note and any investors in the note. 

19 ‘‘(G) Any documents that limit, explain, or 

20 modify the loss mitigation activities offered by 

21 the servicer. 

22 ‘‘(H) Any other information requested by 

23 the borrower that is reasonably related to loss 

24 mitigation activities. 


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1 ‘‘(5) PROHIBITION OF ‘WRONG DOOR’ ACTIONS

2 FOR QUALIFIED WRITTEN REQUESTS.—All written 

3 communications from the mortgagee or servicer of a 

4 federally related mortgage loan to the borrower shall 

5 include the address for receipt and handling of 

6 qualified written requests. Any qualified written re7 quest received by the mortgagee or servicer shall be 

8 valid notwithstanding receipt at any address other 

9 than that designated by the mortgagee or servicer 

10 for receipt and handling of such requests. 

11 ‘‘(6) PROHIBITION OF FEE FOR RESPONSE TO

12 QUALIFIED WRITTEN REQUESTS.—A mortgagee or 

13 servicer for a federally related mortgage loan may 

14 not impose any fee for, or on account of, the prepa15 ration and submission by such mortgagee or servicer 

16 of any response or statement required by this sub17 section. 

18 ‘‘(7) PROHIBITION OF FORECLOSURE PENDING

19 DISCLOSURE.—In the case of a covered federally re20 lated mortgage loan (as such term is defined in sec21 tion 6A(l)), no foreclosure proceeding may be initi22 ated or continued against the borrower or the prin23 cipal residence of the borrower during any period in 

24 which a qualified written request under this sub25 section is pending and the mortgagee or servicer has 


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1 not complied with the requirements of this sub2 section regarding the request.’’. 

3 (d) DAMAGES AND COSTS.—Section 6(f) of the Real 

4 Estate Settlement Procedures Act of 1974 (12 U.S.C. 

5 2605(f)) is amended— 

6 (1) in the matter preceding paragraph (1), by 

7 inserting ‘‘or of section 6A’’ after ‘‘this section’’; 

8 (2) in paragraphs (1)(B) and (2)(B)— 

9 (A) by striking ‘‘a pattern or practice’’ 

10 each place such term appears; and 

11 (B) by striking ‘‘$1,000’’ each place such 

12 term appears and inserting ‘‘$2,000 for each 

13 violation’’; and 

14 (3) in paragraph (2)(B)(i), by striking 

15 ‘‘$500,000’’ and inserting ‘‘$1,000,000’’. 

16 (e) CONFORMING AMENDMENT.—Section 17 of the 

17 Real Estate Settlement Procedures Act of 1974 (12 

18 U.S.C. 2615) is amended by striking ‘‘Nothing’’ and in19 serting ‘‘Except as provided in sections 6(e)(7) and 6A, 

20 nothing’’. 

21 SEC. 3. DUTIES OF LENDERS AND LOAN SERVICERS. 

22 The Truth in Lending Act is amended by inserting 

23 after section 129A (15 U.S.C. 1639a) the following new 

24 section: 


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1 ‘‘SEC. 129B. DUTIES OF LENDERS AND LOAN SERVICERS. 

2 ‘‘(a) STANDARD OF CARE.— 

3 ‘‘(1) AGENCY RELATIONSHIP.—In the case of 

4 any home loan serviced by a loan servicer on behalf 

5 of a lender, the loan servicer shall be deemed an 

6 agent of that lender, and shall be subject to all re7 quirements of agents otherwise applicable under 

8 Federal or State law. 

9 ‘‘(2) FAIR DEALING.—Each lender and loan 

10 servicer shall, in addition to the duties imposed by 

11 otherwise applicable provisions of Federal or State 

12 law, with respect to each home mortgage loan, in13 cluding any home mortgage loan in default or in 

14 which the homeowner has filed for bankruptcy— 

15 ‘‘(A) act with reasonable skill, care, dili16 gence, and in accordance with the highest 

17 standards; and 

18 ‘‘(B) act in good faith and with fair deal19 ing in any transaction, practice, or course of 

20 business associated with the home mortgage 

21 loan. 

22 ‘‘(3) TRAINING AND COMPETENCY.—Each lend23 er and loan servicer shall institute training, proce24 dures, and standards to ensure that borrowers are 

25 treated fairly and competently. 

26 ‘‘(b) RULES FOR ASSESSMENT OF FEE.— 


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1 ‘‘(1) IN GENERAL.—No home mortgage loan 

2 contract may require, nor may any lender or loan 

3 servicer assess or receive, any fees or charges other 

4 than interest, late fees as specifically authorized in 

5 this section, or fees assessed for nonsufficient funds, 

6 and charges allowed pursuant to subsection 

7 (h)(1)(B), until the home mortgage loan is the sub8 ject of a foreclosure proceeding and the debt on such 

9 loan has been accelerated. 

10 ‘‘(2) FEE LIMITATIONS.—Any permissible fee or 

11 charge described under paragraph (1) shall be— 

12 ‘‘(A) reasonable; 

13 ‘‘(B) for services actually rendered; and 

14 ‘‘(C) specifically authorized by the terms of 

15 the home mortgage loan contract and State law. 

16 ‘‘(3) ASSESSMENT AND DISCLOSURE.— 

17 ‘‘(A) IN GENERAL.—Any permissible fee or 

18 charge described under paragraph (1) shall 

19 be— 

20 ‘‘(i) assessed not later than 30 days 

21 after the date on which the fee was ac22 crued; and 

23 ‘‘(ii) explained clearly and conspicu24 ously in the next monthly accounting stateVerDate Nov 24 2008 23:32 Aug 03, 2009 Jkt 079200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6201 E:\BILLS\H3451.IH H3451

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1 ment provided to the borrower designated 

2 in the home mortgage loan contract. 

3 ‘‘(B) FAILURE TO COMPLY.—Failure by a 

4 lender or loan servicer to comply with the re5 quirements set forth under subparagraph (A) 

6 shall result in the waiver of the fee. 

7 ‘‘(4) REQUIRED STATEMENTS.—Each month a 

8 lender or loan servicer shall provide to each borrower 

9 designated in a home mortgage loan contract en10 tered into by such lender or loan servicer a periodic 

11 statement that clearly and in plain English ex12 plains— 

13 ‘‘(A) the application of the prior month’s 

14 payment by the borrower, including the alloca15 tion of the payment to interest, principal, es16 crow, and fees; 

17 ‘‘(B) the status of the escrow account held 

18 on behalf of the borrower, including the pay19 ments into and from the escrow account; and 

20 ‘‘(C) the assessment of fees accruing in the 

21 previous month, including the reason that such 

22 fee accrued and the date such fee accrued. 

23 ‘‘(c) MAXIMUM ALLOWABLE LATE FEES CHARGED

24 AFTER LOAN CLOSING.— 


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1 ‘‘(1) IN GENERAL.—No lender or loan servicer 

2 may impose a charge or fee for late payment of any 

3 amount due on a home mortgage loan— 

4 ‘‘(A) unless the home mortgage loan con5 tract specifically authorizes the charge or fee; 

6 ‘‘(B) in an amount in excess of 5 percent 

7 of the amount of the payment past due; 

8 ‘‘(C) before the end of the 15-day period 

9 after the date the payment is due, or in the 

10 case of a home mortgage loan on which interest 

11 on each installment is paid in advance, before 

12 the end of the 30-day period after the date the 

13 payment is due; or 

14 ‘‘(D) more than once with respect to a sin15 gle late payment. 

16 ‘‘(2) RULE OF CONSTRUCTION.—For purposes 

17 of this subsection, payments on any amount due on 

18 a home mortgage loan shall be applied first to cur19 rent installments, then to delinquent payments, and 

20 then to delinquency charges. 

21 ‘‘(3) COORDINATION WITH SUBSEQUENT LATE

22 FEES.—If a home loan mortgage payment is other23 wise a full payment for the applicable period and is 

24 paid on its due date or within an applicable grace 

25 period, and the only delinquency or insufficiency of 


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1 payment is attributable to a late fee or delinquency 

2 charge assessed on an earlier payment, no late fee 

3 or delinquency charge may be imposed on such pay4 ment. 

5 ‘‘(d) PAYOFF STATEMENTS.— 

6 ‘‘(1) PROHIBITION ON FEES.— 

7 ‘‘(A) IN GENERAL.—No lender or loan 

8 servicer (or any third party acting on behalf of 

9 such lender or loan servicer) may charge a fee 

10 for transmitting to any borrower the amount 

11 due to pay off the outstanding balance on the 

12 home mortgage loan of such borrower. 

13 ‘‘(B) EXCEPTION.—After a lender or loan 

14 servicer (or any third party acting on behalf of 

15 such lender or loan servicer) has provided the 

16 information described in subparagraph (A) 

17 without charge on 4 occasions during a cal18 endar year, the lender or loan servicer (or any 

19 third party acting on behalf of such lender or 

20 loan servicer) may thereafter charge a reason21 able fee for providing such information during 

22 the remainder of the calendar year. 

23 ‘‘(2) TIMING.—The information described in 

24 subparagraph (A) shall be provided to the borrower 

25 within a reasonable period of time but in any event 


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1 not more than 5 business days after the receipt of 

2 the request by the lender or loan servicer. 

3 ‘‘(e) CIVIL LIABILITY.— 

4 ‘‘(1) IN GENERAL.—Any lender or loan servicer 

5 who fails to comply with any requirement of this sec6 tion with respect to a borrower designated in a home 

7 mortgage loan contract, is liable to such borrower in 

8 an amount equal to the sum of— 

9 ‘‘(A) any actual damages sustained by 

10 such borrower as a result of the failure; 

11 ‘‘(B) an amount not less than $5,000; or 

12 ‘‘(C) in the case of any successful action to 

13 enforce the foregoing liability the costs of the 

14 action, together with a reasonable attorney’s fee 

15 as determined by the court. 

16 ‘‘(2) JURISDICTION.—Any action by a borrower 

17 for a failure to comply with the requirements of this 

18 section may be brought in any United States district 

19 court, or in any other court of competent jurisdic20 tion, not later than 3 years from the date of the oc21 currence of such violation. This subsection does not 

22 bar a person from asserting a violation of this sec23 tion in an action by a lender or loan servicer to col24 lect the debt owed on a home mortgage loan, or fore25 close upon the home securing a home mortgage loan, 


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1 or to stop a foreclosure upon that home, which was 

2 brought more than 3 years after the date of the oc3 currence of the violation as a matter of defense by 

4 recoupment or set-off in such action. An action 

5 under this section does not create an independent 

6 basis for removal of an action to a United States 

7 district court. 

8 ‘‘(3) STATE ATTORNEY GENERAL ENFORCE9 MENT.—An action to enforce a violation of this sec10 tion may also be brought by the appropriate State 

11 attorney general in any appropriate United States 

12 district court, or any other court of competent juris13 diction, not later than 3 years after the date on 

14 which the violation occurs. An action under this sec15 tion does not create an independent basis for re16 moval of an action to a United States district court. 

17 ‘‘(f) DEFINITIONS.—In this section, the following 

18 definitions shall apply: 

19 ‘‘(1) LENDER.—The term ‘lender’ has the same 

20 meaning as in section 3500.2 of title 24, Code of 

21 Federal Regulations, as in effect on the date of en22 actment of this section. 

23 ‘‘(2) LOAN SERVICER.—The term ‘loan servicer’ 

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1 tion 6(i)(2) of the Real Estate Settlement Proce2 dures Act of 1974 (12 U.S.C. 2605(i)(2)).’’. 

3 SEC. 4. NOTICE OF TRANSFER OF LOAN SERVICING. 

4 Paragraph (3) of section 6(b) of the Real Estate Set5 tlement Procedures Act of 1974 (12 U.S.C. 2605(b)(3)) 

6 is amended by adding at the end the following new sub7 paragraph: 

8 ‘‘(H) A statement explaining— 

9 ‘‘(i) whether the account of the bor10 rower is current, or if the account is not 

11 current, an explanation of the reason and 

12 date the account went into default; 

13 ‘‘(ii) the current balance due on the 

14 loan, including the principal due, an expla15 nation of the escrow balance, and whether 

16 there are any escrow deficiencies or short17 ages; and 

18 ‘‘(iii) a full payment history of the 

19 borrower which shows in a clear and easily 

20 understandable manner, all of the activity 

21 on the home mortgage loan since the origi22 nation of the loan or the prior transfer of 

23 servicing, including the escrow account, 

24 and the application of payments.’’. 


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1 SEC. 5. SERVICER COMPENSATION. 

2 Not later than the expiration of the 6-month period 

3 beginning on the date of the enactment of this Act, the 

4 Secretary of Housing and Urban Development and the 

5 Federal banking regulatory agencies shall, by regulation, 

6 establish and implement procedures and standards de7 signed to ensure that the means and manner of compensa8 tion of servicers of federally related mortgage loans is con9 sistent with the purposes of this Act and the amendments 

10 made by this Act, and to the extent possible, does not pro11 vide incentives for foreclosure of such mortgages or dis12 incentives to engaging in reasonable loss mitigation activi13 ties for such mortgages. 

14 SEC. 6. UNENFORCEABILITY OF POOLING AND SERVICING 

15 AGREEMENTS PROHIBITING MODIFICATION. 

16 Any provision of any investment contract entered into 

17 after the date of the enactment of this Act between a 

18 servicer of pooled residential mortgages and an investor 

19 that is inconsistent with this Act or the amendments made 

20 by this Act shall be considered to be contrary to public 

21 policy and void and enforceable. 

22 SEC. 7. PILOT PROGRAM FOR COMMUNITY BANKS. 

23 The Secretary of the Treasury and the Secretary of 

24 Housing and Urban Development shall jointly carry out 

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1 poration, and the Federal Home Loan Banks to enter into 

2 contracts for insured community development financial in3 stitutions (as such term is defined in section 103 of the 

4 Community Development Banking and Financial Institu5 tions Act of 1994 (12 U.S.C. 4702)), including minority6 owned such institutions, to provide mortgage servicing 

7 with respect to mortgages owned or securitized by such 

8 Government-sponsored enterprises. 

Æ 


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