‘‘(b) ELIGIBLE MORTGAGES.—To be eligible for in-
surance under this section, a mortgage shall comply with 
all of the following requirements: 
‘‘(1) OWNER-OCCUPIED SOLE RESIDENCE.—The 
residence securing the mortgage insured under this 
section shall be occupied by the mortgagor as the 
principal residence of the mortgagor and the mort-
gagor shall provide a certification to the originator 
of the insured mortgage that such residence securing 
the mortgage is the only residence in which the 
mortgagor has any present ownership interest. 
‘‘(2) PRINCIPAL
OBLIGATION
AMOUNT.—The 
principal obligation amount of the mortgage to be 
insured under this section shall be equal to 97.5 per-
cent of the current appraised value of the residence 
securing the mortgage. 
‘‘(3) REQUIRED WAIVER OF PREPAYMENT PEN-
ALTIES AND FEES.—All penalties for prepayment or 
refinancing of the existing senior mortgage, and all 
fees and penalties related to default or delinquency 
on the existing senior mortgage, shall be waived or 
forgiven. 
‘‘(4) 
EXTINGUISHMENT
OF
SUBORDINATE 
LIENS.— 
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‘‘(A) REQUIRED AGREEMENT.—All holders 
of existing mortgages on the property to which 
the eligible mortgage relates shall agree to ac-
cept the proceeds of the insured loan, and any 
payment pursuant to subparagraph (B), as pay-
ment in full of all indebtedness under the exist-
ing mortgage, and all encumbrances related to 
such existing mortgage shall be removed. The 
Secretary may take such actions, in accordance 
with the standards established pursuant to sub-
paragraph (B), as may be necessary and appro-
priate to facilitate coordination and agreement 
between the holders of the existing senior mort-
gage and any existing subordinate mortgages, 
taking into consideration the subordinate lien 
status of such subordinate mortgages. 
‘‘(B) PAYMENT.—The Secretary shall pro-
vide for the payment to the holder of any exist-
ing subordinate mortgage of an amount equal 
to 5 cents for each dollar of the outstanding 
principal balance of, and accrued interest on, 
the outstanding mortgage. 
‘‘(5) INTEREST
RATE
AND
TERM
OF
MORT-
GAGE.—The mortgage to be insured under this sec-
tion shall— 
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‘‘(A) bear interest at a single rate that is 
fixed for the entire term of the mortgage; and 
‘‘(B) have a maturity of 30 years from the 
date of the beginning of amortization of such 
mortgage. 
‘‘(6) UNDERWRITING STANDARDS.—The mort-
gage insured under this section shall comply with 
the underwriting standards applicable under the 
FHA Secure Program (established by mortgagee let-
ter 2007–11, issued September 5, 2007), as such 
Program is in effect as of February 1, 2009. 
‘‘(7) PRIORITY OF LIEN FOR NON-VESTED LOAN 
PRINCIPAL.—The mortgage to be insured under this 
section shall provide that the Secretary’s lien pursu-
ant to subsection (d)(4) on the residence that is sub-
ject to the mortgage shall have superior priority to 
the lien under the insured mortgage. 
‘‘(8) REQUIREMENTS
FOR
EXISTING
SENIOR 
MORTGAGE BEING REFINANCED.— 
‘‘(A) ORIGINATION
DATE.—The existing 
senior mortgage shall have been originated dur-
ing the period beginning on January 1, 2003, 
and ending upon December 31, 2007. 
‘‘(B) PRINCIPAL OBLIGATION.—The exist-
ing senior mortgage shall have had an original 
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principal obligation in an amount that did not 
exceed the maximum dollar amount limitation 
in effect on February 1, 2009, under section 
203(b)(2) of the National Housing Act (12 
U.S.C. 1709(b)(2)) for a residence of the appli-
cable size for the area in which the residence is 
located. 
‘‘(C) DEBT-TO-INCOME RATIO UPON ORIGI-
NATION.—As of the time of the origination of 
the existing senior mortgage, the mortgagor 
shall have had a ratio of mortgage debt to in-
come, taking into consideration all existing 
mortgages of that mortgagor at such time, ex-
ceeding 30 percent. 
‘‘(D) LOAN-TO-VALUE RATIO.—The exist-
ing senior mortgage shall, upon origination, 
have involved a principal obligation (including 
such initial service charges, appraisal, inspec-
tion, and other fees as the Secretary shall ap-
prove) in an amount not exceeding 90 percent 
of the appraised value of the property at such 
time. 
‘‘(c) PAYMENT TO SERVICER OF EXISTING MORT-
GAGE.—For each mortgage insured under this section, the 
Secretary shall make a payment in the amount of $1,000 
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to the servicer of the existing senior mortgage refinanced 
by such insured mortgage. 
‘‘(d) NONAMORTIZING NO-INTEREST LOAN.— 
‘‘(1) IN
GENERAL.—In connection with each 
mortgage insured under this section, the Secretary 
shall make a loan under this subsection to the mort-
gagor, the proceeds of which shall be paid by the 
Secretary directly to the holder of the existing senior 
mortgage being refinanced by the mortgage insured 
under this section. Such loan shall be in an amount 
equal to the difference between— 
‘‘(A) the amount of the outstanding prin-
cipal obligation under the existing senior mort-
gage refinanced by such insured mortgage as of 
the time of the origination of such insured 
mortgage; and 
‘‘(B) the amount of the original principal 
obligation of the insured mortgage. 
‘‘(2) TERMS.—A loan under this section— 
‘‘(A) shall not bear interest; and 
‘‘(B) shall not require the borrower to 
make payments of principal, except as provided 
in paragraph (3). 
‘‘(3) REPAYMENT.—A loan under this section 
shall require repayment of principal only if the bor-
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rower defaults with respect to the borrower’s obliga-
tions under the insured mortgage in connection with 
which such loan is made during the 5-year period 
that begins on the date that such mortgage is in-
sured, as follows: 
‘‘(A) YEAR 1.—If any such default occurs 
during the period that begins on the date that 
such mortgage is insured and ends 1 year after 
such date of insurance, the Secretary shall be 
entitled to repayment of 100 percent of the 
principal amount of the loan. 
‘‘(B) YEAR 2.—If any such default occurs 
during the period that begins 1 year after such 
date of insurance and ends 2 years after such 
date of insurance, the Secretary shall be enti-
tled to 80 percent of such principal amount. 
‘‘(C) YEAR 3.—If any such default occurs 
during the period that begins 2 years after such 
date of insurance and ends 3 years after such 
date of insurance, the Secretary shall be enti-
tled to 60 percent of such principal amount. 
‘‘(D) YEAR 4.—If any such default occurs 
during the period that begins 3 years after such 
date of insurance and ends 4 years after such 
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date of insurance, the Secretary shall be enti-
tled to 40 percent of such principal amount. 
‘‘(E) YEAR 5.—If any such default occurs 
during the period that begins 4 years after such 
date of insurance and ends 5 years after such 
date of insurance, the Secretary shall be enti-
tled to 20 percent of such principal amount. 
‘‘(F) AFTER YEAR 5.—If any such default 
occurs after the expiration of the 5-year period 
that begins on such date of insurance, the Sec-
retary shall not be entitled to repayment of any 
portion of such principal amount. 
‘‘(4) LIEN.—Repayment of the portion of the 
principal amount of a loan made under this sub-
section that is required under paragraph (3) shall be 
secured by a lien on the residence that is subject to 
the mortgage insured under this section in connec-
tion with which such loan was made, that is held by 
the Secretary, and which shall have priority over all 
other liens on such residence. 
‘‘(e) PREMIUMS.—Notwithstanding any other provi-
sion of this Act: 
‘‘(1) IN GENERAL.—For each eligible mortgage 
insured under this section, the Secretary shall estab-
lish and collect an annual premium in an amount 
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equal to not less than 0.55 percent of the amount 
of the remaining insured principal balance of the 
mortgage and not more than 0.75 percent of such 
remaining insured principal balance, as determined 
according to a schedule established by the Secretary 
that assigns such annual premiums based upon the 
credit risk of the mortgage. 
‘‘(2) REDUCTION
OR
TERMINATION
DURING 
MORTGAGE TERM.—Notwithstanding paragraph (1), 
the Secretary may provide that the annual premiums 
charged for eligible mortgages insured under this 
section are reduced over the term of the mortgage 
or that the collection of such premiums is discon-
tinued at some time during the term of the mort-
gage, in a manner that is consistent with policies for 
such reduction or discontinuation of annual pre-
miums charged for mortgages in accordance with 
section 203(c). 
‘‘(f) SUNSET.—The Secretary may not enter into any 
new commitment to insure any refinanced eligible mort-
gage, or newly insure any refinanced eligible mortgage, 
pursuant to this section after the expiration of the 3-year 
period beginning upon the date of the enactment of this 
Act. 
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‘‘(g) DEFINITIONS.—For purposes of this section, the 
following definitions shall apply: 
‘‘(1) ELIGIBLE MORTGAGE.—The term ‘eligible 
mortgage’ means a mortgage that meets the require-
ment under subsection (b) for insurance under this 
section. 
‘‘(2) EXISTING MORTGAGE.—The term ‘existing 
mortgage’ means, with respect to a mortgage in-
sured or to be insured under this section, a mort-
gage on the same residence that is to be subject to 
such mortgage insured under this section that is to 
be extinguished pursuant to such insured mortgage. 
‘‘(3) EXISTING SENIOR MORTGAGE.—The term 
‘existing senior mortgage’ means, with respect to a 
mortgage insured or to be insured under this sec-
tion, the existing mortgage that has superior pri-
ority. 
‘‘(4) EXISTING SUBORDINATE MORTGAGE.—The 
term ‘existing subordinate mortgage’ means, with re-
spect to a mortgage insured or to be insured under 
this section, an existing mortgage that has subordi-
nate priority to the existing senior mortgage. 
‘‘(h) AUTHORIZATION OF APPROPRIATIONS.—There 
is authorized to be appropriated for fiscal years 2009 
through 2012— 
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‘‘(1) $2,000,000,000 for payments under sub-
section (c) to servicers of eligible mortgages refi-
nanced by such insured mortgages; 
‘‘(2) $1,500,000,000 for payments under (b)(4) 
for the extinguishment of subordinate liens on the 
properties subject to eligible mortgages refinanced 
by such insured mortgages; and 
‘‘(3) $90,000,000,000 for the costs (as such 
term is defined in section 502 of the Federal Credit 
Reform Act of 1974 (2 U.S.C. 661a)) of loans under 
subsection (d) to mortgagors under such insured 
mortgages.’’. 
SEC. 3. SERVICER SAFE HARBOR. 
(a) SAFE HARBOR.— 
(1) LOAN
MODIFICATIONS
AND
WORKOUT 
PLANS.—Notwithstanding any other provision of 
law, and notwithstanding any investment contract 
between a servicer and a securitization vehicle or in-
vestor, a servicer that acts consistent with the duty 
set forth in section 129A(a) of Truth in Lending Act 
(15 U.S.C. 1639a) shall not be liable for entering 
into a loan modification or workout plan with re-
spect to any such mortgage that meets all of the cri-
teria set forth in paragraph (2)(B) to— 
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(A) any person, based on that person’s 
ownership of a residential mortgage loan or any 
interest in a pool of residential mortgage loans 
or in securities that distribute payments out of 
the principal, interest and other payments in 
loans on the pool; 
(B) any person who is obligated pursuant 
to a derivatives instrument to make payments 
determined in reference to any loan or any in-
terest referred to in subparagraph (A); or 
(C) any person that insures any loan or 
any interest referred to in subparagraph (A) 
under any law or regulation of the United 
States or any law or regulation of any State or 
political subdivision of any State. 
(2) ABILITY TO MODIFY MORTGAGES.— 
(A) ABILITY.—Notwithstanding any other 
provision of law, and notwithstanding any in-
vestment contract between a servicer and a 
securitization vehicle or investor, a servicer— 
(i) shall not be limited in the ability 
to modify mortgages, the number of mort-
gages that can be modified, the frequency 
of loan modifications, or the range of per-
missible modifications; and 
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(ii) shall not be obligated to repur-
chase loans from or otherwise make pay-
ments to the securitization vehicle on ac-
count of a modification, workout, or other 
loss mitigation plan for a residential mort-
gage or a class of residential mortgages 
that constitute a part or all of the mort-
gages in the securitization vehicle, 
if any mortgage so modified meets all of the cri-
teria set forth in subparagraph (B). 
(B) CRITERIA.—The criteria under this 
subparagraph with respect to a mortgage are as 
follows: 
(i) Default on the payment of such 
mortgage has occurred or is reasonably 
foreseeable. 
(ii) The property securing such mort-
gage is occupied by the mortgagor of such 
mortgage. 
(iii) The servicer reasonably and in 
good faith believes that the anticipated re-
covery on the principal outstanding obliga-
tion of the mortgage under the particular 
modification or workout plan or other loss 
mitigation action will exceed, on a net 
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present value basis, the anticipated recov-
ery on the principal outstanding obligation 
of the mortgage to be realized through 
foreclosure. 
(3) 
APPLICABILITY.—This 
subsection 
shall 
apply only with respect to modifications, workouts, 
and other loss mitigation plans initiated before Jan-
uary 1, 2012. 
(b) REPORTING.—Each servicer that engages in loan 
modifications or workout plans subject to the safe harbor 
in subsection (a) shall report to the Secretary on a regular 
basis regarding the extent, scope and results of the 
servicer’s modification activities. The Secretary shall pre-
scribe regulations specifying the form, content, and timing 
of such reports. 
(c) DEFINITION OF SECURITIZATION VEHICLES.— 
For purposes of this section, the term ‘‘securitization vehi-
cle’’ means a trust, corporation, partnership, limited liabil-
ity entity, special purpose entity, or other structure that— 
(1) is the issuer, or is created by the issuer, of 
mortgage pass-through certificates, participation cer-
tificates, mortgage-backed securities, or other similar 
securities backed by a pool of assets that includes 
residential mortgage loans; and 
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(2) holds such mortgages. 
Æ 
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