I 
110TH CONGRESS 
2D SESSION 
H. R. 5679 
To amend the Real Estate Settlement Procedures Act of 1974 to require 
mortgagees for mortgages in default to engage in reasonable loss mitiga-
tion activities. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 2, 2008 
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. 
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 ‘‘Foreclosure Prevention 
and Sound Mortgage Servicing Act of 2008’’. 
SEC. 2. DUTY TO ENGAGE IN LOSS MITIGATION. 
(a) DUTY.—The Real Estate Settlement Procedures 
Act of 1974 is amended by inserting after section 6 (12 
U.S.C. 2605) the following new section: 
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‘‘SEC. 6A. DUTY TO ENGAGE IN LOSS MITIGATION. 
‘‘(a) DUTY
FOR COVERED FEDERALLY RELATED 
MORTGAGE LOANS.—Upon default of any federally re-
lated mortgage loan that is secured by a lien on the prin-
cipal residence of the borrower or mortgagor, the mort-
gagee shall engage in reasonable loss mitigation activities 
that provide for— 
‘‘(1) the long-term affordability of the loan; and 
‘‘(2) the maximum retention of home equity. 
‘‘(b) NO FORECLOSURE WITHOUT LOSS MITIGA-
TION.—No foreclosure of any covered federally related 
mortgage loan shall be initiated if the mortgagee or 
servicer has at any time failed to comply with the require-
ments of this section with respect to such loan. 
‘‘(c) LOSS MITIGATION ACTIVITIES.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, loss mitigation activities shall include both pri-
ority loss mitigation activities and secondary loss 
mitigation activities. In complying with subsection 
(a), the mortgagee or servicer shall pursue priority 
loss mitigation activities before considering sec-
ondary loss mitigation activities. If any loss mitiga-
tion activity is taken, including any priority or sec-
ondary loss mitigation activities, the mortgagee or 
servicer shall provide written notice of such activity 
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to the borrower or mortgagor by mail not later than 
7 business days after such action is taken. 
‘‘(2) PRIORITY LOSS MITIGATION ACTIVITIES.— 
For purposes of this section, the term ‘priority loss 
mitigation activities’ includes, with respect to a cov-
ered federally related mortgage loan, activities that 
preserve the borrower’s or mortgagor’s ownership in-
terest in the property that is subject to the lien se-
curing the loan. Priority loss mitigation activities in-
clude the following activities: 
‘‘(A) Waiver of any late payment charge, 
penalty interest, or any other fees or charges, 
or any combination thereof. 
‘‘(B) Establishment of a repayment plan 
under which the borrower or mortgagor re-
sumes regularly scheduled payments and pays 
additional amounts at scheduled intervals to 
cure the delinquency. 
‘‘(C) Forbearance under the loan that pro-
vides for a temporary reduction in, or cessation 
of, monthly payments followed by a reamortiza-
tion of the amounts due under loan, including 
arrearage, and a new schedule of repayment 
amounts. 
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‘‘(D) Waiver, modification, or variation of 
any material term of the loan, including short- 
term, long-term, or life-of-loan modifications 
that change the interest rate, forgive the pay-
ment of principal or interest, or extend the final 
maturity date of the loan. 
‘‘(E) Short refinancing of the loan con-
sisting of acceptance of payment from or on be-
half of the borrower or mortgagor of an amount 
less than the amount alleged to be due and 
owing under the loan, including principal, inter-
est, and fees, in full satisfaction of the obliga-
tion under such loan and as part of a refinance 
transaction in which the property is intended to 
remain the principal residence of the borrower 
or mortgagor. 
‘‘(3) SECONDARY
LOSS
MITIGATION
ACTIVI-
TIES.—For purposes of this section, the term ‘sec-
ondary loss mitigation activities’ includes, with re-
spect to a covered federally related mortgage loan, 
activities that avoid foreclosure but do not preserve 
the borrower’s or mortgagor’s ownership interest in 
the property that is subject to the lien securing the 
loan. Secondary loss mitigation activities include the 
following activities: 
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‘‘(A) Short sale of the principal residence 
that is subject to the lien securing the loan, 
consisting of acceptance of payment from or on 
behalf of the borrower or mortgagor of an 
amount less than the amount alleged to be due 
and owing under the loan, including principal, 
interest, and fees, in full satisfaction of the obli-
gation under such loan and as part of a sale 
transaction in which the property is not in-
tended to remain the principal residence of the 
borrower or mortgagor. 
‘‘(B) Assumption of the borrower’s obliga-
tions under the loan by a third-party. 
‘‘(C) Cancellation or postponement of a 
foreclosure sale to allow the borrower or mort-
gagor additional time to sell the property. 
‘‘(D) Acquisition of the property by the 
mortgagee or servicer by deed in lieu of fore-
closure. 
‘‘(d) AFFORDABLE PAYMENTS.— 
‘‘(1) IN
GENERAL.—The affordability of any 
scheduled payments due from the borrower or mort-
gagor pursuant to loss mitigation activities shall be 
taken into consideration in determining whether a 
mortgagee has engaged, for purposes of subsection 
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(a)(1), in reasonable loss mitigation activities that 
provide for long-term affordability of the loan. Pay-
ments under a loan shall be considered to be afford-
able for a borrower or mortgagor for purposes of 
this subsection if such payments result in a debt-to- 
income ratio or residual income of the borrower or 
mortgagor in an amount permitted under section 
36.4337 of title 38, Code of Federal Regulations. 
‘‘(2) INCOME USED IN DETERMINING AFFORD-
ABILITY.—In making a determination of afford-
ability for purposes of this subsection, a mortgagee 
or servicer shall use the income information fur-
nished by the borrower at the time of loan origina-
tion, except that the borrower or mortgagor may 
elect to provide the mortgagee or servicer with cur-
rent information and, if so provided, such current 
income information shall be used for purposes of de-
termining affordability. The mortgagee or servicer 
shall advise the borrower or mortgagor of any right 
under this paragraph to provide current income in-
formation. If current income information is used, all 
sources of income shall be verified by tax returns, 
payroll receipts, bank records, or other third-party 
verification; the best and most appropriate docu-
mentation shall be used. 
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‘‘(3) DEBT PAYMENTS USED IN DETERMINING 
AFFORDABILITY.—In the case of default of any cov-
ered federally related mortgage loan for which the 
security property is subject to multiple liens— 
‘‘(A) each mortgagee or servicer with re-
spect to a senior lien shall reasonably take into 
account the obligations of the borrower or mort-
gagor under subordinate liens; and 
‘‘(B) the mortgagee or servicer shall take 
into account any other secured or unsecured ob-
ligations of the borrower or mortgagor. 
‘‘(4) WRITTEN
NOTIFICATION
OF
AFFORD-
ABILITY CALCULATION.—The mortgagee or servicer 
shall notify the borrower or mortgagor in writing of 
the results of the determination of affordability 
under this subsection and the income on which the 
determination was based. Such written notice shall 
be provided by mail not later than 7 business days 
after such action is taken or as part of the written 
notice required under subsection (c)(1), whichever is 
earlier. 
‘‘(e) REASONABLE FEE.—A mortgagee engaged in 
loss mitigation pursuant to this section may charge a rea-
sonable fee for loss mitigation activities in addition to ac-
tual administrative costs and other expenses. The Sec-
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