gage on, a one- to four-family dwelling, including a 
condominium or a share in a cooperative ownership 
housing association, that is occupied by the mort-
gagor as the principal residence of the mortgagor; 
(2) is owned or guaranteed by the Federal Na-
tional Mortgage Association or the Federal Home 
Loan Mortgage Corporation; 
(3) was originated on or before the date of the 
enactment of this Act; 
(4) has a principal balance that exceeds the 
value of the dwelling subject to the mortgage by 
more than 20 percent; and 
(5) has been determined to be net present value 
positive for the enterprise that owns or guarantees 
such mortgage, pursuant to the application of the 
net present value model identified in subsection 
(m)(3) that results in the expected net present value 
of reducing principal on the mortgage exceeding the 
net present value of foreclosing on such mortgage. 
(c) PRINCIPAL REDUCTION ON QUALIFIED MORT-
GAGES.—To reduce principal on a qualified mortgage 
under a program of an enterprise under this section, the 
enterprise shall— 
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(1) reduce the principal for the qualified mort-
gage to an amount that results in a loan-to-value 
ratio for the mortgage of not more than 90 percent; 
(2) require that if the dwelling subject to the 
qualified mortgage that has had its principal re-
duced under the program is sold by any process 
other than a foreclosure sale or short sale, to the ex-
tent that such property appreciates in value, the 
mortgagor shall provide not less than one-third of 
the amount of such appreciation to the enterprise; 
and 
(3) recover from the mortgagor under the quali-
fied mortgage that has had its principal reduced 
under the program, if such mortgage subsequently 
enters foreclosure, an amount equal to the difference 
between the sales price at foreclosure sale of the 
dwelling subject to such mortgage and the amount 
of the outstanding principal balance on mortgage 
immediately before such principal reduction. 
(d) STREAMLINED PROCESS.—To the maximum ex-
tent possible, each enterprise shall— 
(1) limit the amount of paperwork required 
from a mortgagor to receive a principal reduction 
under the program established under this section by 
the enterprise; and 
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(2) endeavor to complete the principal reduction 
for a qualified mortgage pursuant to the mortga-
gor’s request not later than 30 days after receiving 
such request from the mortgagor. 
(e) PROHIBITION ON BORROWER FEES.—Neither the 
servicer conducting the principal reduction on behalf of 
the enterprise nor the enterprise may charge the mort-
gagor any fee, including any fee for any appraisal notwith-
standing that such appraisal is required to determine the 
value of the dwelling subject to the qualified mortgage, 
for the reduction of principal of the qualified mortgage 
under the program under this section of the enterprise. 
All fees and penalties related to any default or delinquency 
on such qualified mortgage shall be waived or forgiven. 
(f) FEE TO SERVICER.—For each qualified mortgage 
of an enterprise for which the servicer of the qualified 
mortgage provides a principal reduction pursuant to the 
program under this section of the enterprise, the enter-
prise shall pay to the servicer a fee not exceeding $1,000. 
(g) TAX TREATMENT.—The reduction of principal 
taken on a qualified mortgage under a program under this 
section shall not result in any tax liability for the mort-
gagor under such mortgage. 
(h) MAINTENANCE OF LIEN STATUS.—Any reduction 
of principal taken with respect to a first mortgage under 
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a program under this section shall not impair the priority 
status of liens on the dwelling subject to the mortgage, 
to the extent that there are no additional funds advanced 
to the mortgagor in connection with such principal reduc-
tion. 
(i) MAINTENANCE OF LOAN STATUS.—Any reduction 
of principal taken with respect to a qualified mortgage 
under a program under this section shall not result in the 
treatment of the modified loan as a new loan. 
(j) SECOND LIENS.—The Director shall encourage 
the modification of second liens on dwellings that are sub-
ject to mortgages for which principal reductions are taken 
under the programs under this section by implementing 
remedial actions on servicers that service mortgages 
owned or guaranteed by the enterprises and own second 
liens that are not modified following a request by the Di-
rector upon a reduction of principal of the mortgage 
owned by the enterprise. Upon termination of any serv-
icing contracts with such servicers, the Director shall take 
remedial actions with respect to such servicers, which may 
include— 
(1) cancelling servicing rights of mortgages 
owned by the enterprises; 
(2) reducing compensation to any such servicer; 
or 
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(3) taking such other actions, consistent with 
applicable law, as the Director determines is appro-
priate. 
(k) RESTRICTIONS ON COMPENSATION.—The Direc-
tor may not approve bonus compensation that exceeds the 
base compensation for any executive or senior executive 
of an enterprise, unless the aggregate number of qualified 
mortgages for which principal reductions have been taken 
pursuant to the program under this section of such enter-
prise exceeds 1,000,000. 
(l) RULE
OF CONSTRUCTION.—Any reduction of 
principal of a qualified mortgage of an enterprise under 
a program under this section shall be considered con-
sistent with the mission of any conservator of the enter-
prises 
as 
such 
mission 
is 
described 
in 
section 
1367(b)(2)(D) of the Federal Housing Enterprises Finan-
cial Safety and Soundness Act of 1992 (12 U.S.C. 
4617(b)(2)(D)). 
(m) DEFINITIONS.—For purposes of this section, the 
following definitions shall apply: 
(1) DIRECTOR.—The term ‘‘Director’’ means 
the Director of the Federal Housing Finance Agen-
cy. 
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(2) 
ENTERPRISE.—The 
term 
‘‘enterprise’’ 
means the Federal National Mortgage Association 
and the Federal Home Loan Mortgage Corporation. 
(3) NET
PRESENT
VALUE.—The term ‘‘net 
present value’’ means the net present value as deter-
mined under the model specified in Supplemental 
Directive 09–01 for the Home Affordable Modifica-
tion Program of the Department of the Treasury 
and any updates thereto. 
(n) REGULATIONS.—The Director shall issue any 
regulations or guidance necessary to carry out the pro-
grams required under this section not later than the expi-
ration of the 6-month period that begins on the date of 
the enactment of this Act. 
(o) TERMINATION.—The requirement under sub-
section (a)(2) for an enterprise to forgive principal on a 
qualified mortgage shall not apply with respect to any re-
quest for principal reduction made after the expiration of 
the 12-month period that begins on the earlier of— 
(1) the date that any regulations or guidance 
issued pursuant to subsection (n) take effect; or 
(2) the expiration of the 6-month period identi-
fied in subsection (n). 
Æ 
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