I 
112TH CONGRESS 
2D SESSION 
H. R. 5940 
To establish pilot programs to encourage the use of shared appreciation 
mortgage modifications, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 8, 2012 
Mr. PETERS (for himself, Mr. CAMPBELL, and Mr. ELLISON) introduced the 
following bill; which was referred to the Committee on Financial Services 
A BILL 
To establish pilot programs to encourage the use of shared 
appreciation mortgage modifications, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Preserving American 
Homeownership Act of 2012’’. 
SEC. 2. FINDINGS. 
The Congress finds the following: 
(1) The stability of the economy, housing mar-
ket, and neighborhoods of the United States depends 
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upon reducing the number of foreclosures in the 
United States. 
(2) Homeowners struggling to make payments 
on homes with mortgages that are deeply under-
water are some of the most at risk of foreclosure. 
(3) A properly carried out principal modifica-
tion program will preserve the assets of the govern-
ment-sponsored mortgage enterprises assets and re-
duce taxpayer losses, consistent with the mission of 
the Federal Housing Finance Agency as the enter-
prises’ conservator, and will help foster a more resil-
ient national housing market. 
SEC. 3. SHARED APPRECIATION MORTGAGE MODIFICATION 
PILOT PROGRAMS. 
(a) DEFINITIONS.—In this section— 
(1) the term ‘‘capital improvement’’ means a 
home improvement described in table 4 of Publica-
tion 530 of the Internal Revenue Service, or any 
successor thereto; 
(2) the term ‘‘covered mortgage’’ means a 
mortgage— 
(A) that is— 
(i) sold to the Federal National Mort-
gage Association, the Government National 
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Mortgage Association, or the Federal 
Home Loan Mortgage Corporation; or 
(ii) insured under title II of the Na-
tional Housing Act (12 U.S.C. 1707 et 
seq.); 
(B) that is secured by real property that is 
the primary residence of a homeowner; 
(C) that has an outstanding principal bal-
ance of an amount that is greater than the ap-
praised value of the real property securing the 
mortgage, on or about the date on which the 
homeowner is approved to participate in the 
pilot program under subsection (b); 
(D) with respect to which the homeowner 
is, both as of the date of the enactment of this 
Act and as of the date of the modification 
under a pilot program under subsection (b)— 
(i) not fewer than 60 days delinquent; 
or 
(ii) at risk of imminent default; and 
(E) of a homeowner who has a documented 
financial hardship that prevents or will prevent 
the homeowner from making mortgage pay-
ments; 
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(3) the term ‘‘Director’’ means the Director of 
the Federal Housing Finance Agency; 
(4) the term ‘‘enterprise’’ has the same mean-
ing as in section 1303 of the Federal Housing En-
terprises Financial Safety and Soundness Act of 
1992 (12 U.S.C. 4502); 
(5) the term ‘‘homeowner’’ means the mort-
gagor under a covered mortgage; 
(6) the term ‘‘investor’’ means— 
(A) the mortgagee under a covered mort-
gage; or 
(B) in the case of a covered mortgage that 
collateralizes an asset-backed security, as de-
fined in section 3(a) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78c(a)), the trustee for 
the asset-backed security; 
(7) the term ‘‘pilot program’’ means a pilot pro-
gram established under subsection (b); and 
(8) the term ‘‘shared appreciation mortgage 
modification’’ means a modification of a covered 
mortgage in accordance with subsection (c). 
(b) PILOT PROGRAMS ESTABLISHED.—The Director 
of the Federal Housing Finance Agency and the Federal 
Housing Commissioner, in consultation with the Secretary 
of the Treasury, shall each establish a pilot program to 
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encourage, through assistance provided under the Home 
Affordable Modification Program under the Making Home 
Affordable initiative of the Secretary of the Treasury, the 
use of shared appreciation mortgage modifications that 
are designed to return greater cash flow to investors than 
other loss-mitigation activities, including foreclosure, and 
result in positive net present value for the investor. 
(c) SHARED APPRECIATION MORTGAGE MODIFICA-
TION.—For purposes of the pilot program, a shared appre-
ciation mortgage modification shall— 
(1) reduce the loan-to-value ratio of a covered 
mortgage— 
(A) to 115 percent immediately upon such 
modification, by immediately reducing the 
amount of principal under the covered mortgage 
accordingly; and 
(B) to 95 percent within 3 years, by reduc-
ing the amount of principal under the covered 
mortgage by 1⁄3 at the end of each year for 3 
years; 
(2) reduce the interest rate for a covered mort-
gage, if a reduction of principal under paragraph (1) 
would not result in a reduced monthly payment that 
is affordable to the homeowner; 
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(3) reduce the amount of any periodic payment 
required to be made by the homeowner, so that the 
amount payable by the homeowner is equal to the 
amount that would be payable by the homeowner if, 
on the date on which the shared appreciation mort-
gage modification takes effect— 
(A) all reductions of the amount of prin-
cipal under paragraph (1) had been made; and 
(B) any reduction in the interest rate 
under paragraph (2) for which the covered 
mortgage is eligible had been made; 
(4) require the homeowner to pay to the inves-
tor after refinancing or selling the real property se-
curing a covered mortgage a percentage of the 
amount of any increase (not to exceed 50 percent of 
such increase) in the value of the real property dur-
ing the period beginning on the date on which the 
homeowner was approved to participate in the pilot 
program and ending on the date of the refinancing 
or sale that is equal to the percentage by which the 
investor reduced the amount of principal under the 
covered mortgage under paragraph (1); and 
(5) result in a positive net present value for the 
investor after taking into account the principal re-
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