permitted under section 128B of the Truth in 
Lending Act. 
‘‘(5) 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 by modifying the contractual terms 
of the loan. Priority loss mitigation activities include 
modification of the loan terms that provide for the 
following: 
‘‘(A) ALTERATION OF TERMS.—Reduction 
of the interest rate of the loan, forgiveness of 
loan principal or interest, conversion from an 
adjustable rate mortgage to a fixed rate mort-
gage, and reamortization of the loan in connec-
tion with an extension of the final maturity 
date of the loan such that the total term of the 
loan does not exceed 40 years. 
‘‘(B) SHORT
REFINANCING.—Short refi-
nancing of the loan consisting of acceptance of 
payment from or on behalf of the borrower or 
mortgagor of an amount that is less than the 
full amount alleged to be due and owing under 
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the loan, including principal, interest, and fees, 
in full satisfaction of the obligation under the 
loan and as part of a refinance transaction 
under which the property that is subject to the 
lien securing the loan is intended to remain the 
principal residence of the borrower or mort-
gagor. 
In the case of priority loss mitigation activities, the 
mortgagee or servicer shall waive any late payment 
charge, penalty interest, or any other fees or 
charges, including legal fees, or any combination 
thereof, that would otherwise apply to the loan. 
‘‘(6) 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, 
other activities that avoid foreclosure and preserve 
the borrower’s or mortgagor’s ownership interest in 
the property that is subject to the lien securing the 
loan, but do not change the contractual terms of the 
loan. Secondary loss mitigation activities include the 
following activities: 
‘‘(A) Waiver of any late payment charge, 
penalty interest, or any other fees or charges, 
including legal fees, or any combination thereof. 
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‘‘(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 the loan, includ-
ing arrearage, and a new schedule of repayment 
amounts. 
‘‘(7) LAST-RESORT
LOSS
MITIGATION
ACTIVI-
TIES.—For purposes of this section, the term ‘last- 
resort 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. Last-resort loss mitigation activities include 
the following activities: 
‘‘(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 
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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. 
‘‘(8) LIMITATIONS ON LOSS MITIGATION.— 
‘‘(A) ANNUAL
CERTIFICATIONS
OF
IN-
COME.—A borrower or mortgagor under a cov-
ered federally related mortgage loan who has 
received loss mitigation activities provided 
under this section shall annually provide a cer-
tification of the income of such borrower or 
mortgagor to the servicer or mortgagee of the 
loan. The servicer or mortgagee under the loan 
may increase the monthly payment due under 
the loan from the borrower or mortgagee if 
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such certification reveals that the income of 
such borrower or mortgagee has increased, ex-
cept such increase in payment due may not ex-
ceed an amount that is commensurate with 
such increase in income. 
‘‘(B) NO OBLIGATION TO MODIFY FRAUDU-
LENT
LOANS.—Subsections (a) and (b) shall 
not apply with respect to a covered federally re-
lated mortgage loan if the borrower or mort-
gagor under the loan committed fraud by pro-
viding false or misleading information in con-
nection with the loss mitigation activities for 
the loan. This subparagraph may not be con-
strued to exempt subsections (a) and (b) from 
applying to any loan because of any fraud com-
mitted by the originator of the loan during the 
application and approval process for the loan. 
‘‘(d) AFFORDABLE PAYMENTS.— 
‘‘(1) CONSIDERATION
IN
REASONABILITY
OF 
LOSS MITIGATION ACTIVITIES.—The affordability of 
any scheduled payments due from the borrower or 
mortgagor under a covered federally related mort-
gage loan pursuant to loss mitigation activities for 
the loan and whether the activities are in the best 
financial interests of the borrower or mortgagor 
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shall be taken into consideration in determining 
whether a mortgagee has engaged, for purposes of 
subsection (a)(1), in reasonable loss mitigation ac-
tivities that provide for long-term affordability of the 
loan. 
‘‘(2) AFFORDABILITY.— 
‘‘(A) IN
GENERAL.—Payments under a 
loan shall be considered to be affordable for a 
borrower or mortgagor for purposes of this sub-
section if such payments do not cause the total 
monthly debts of the borrower or mortgagor, in-
cluding amounts due under the loan, to ex-
ceed— 
‘‘(i) a percentage established by the 
Director, by regulation, of the monthly 
gross income of the borrower or mort-
gagor; or 
‘‘(ii) such other maximum percentage 
of such income as the Director may estab-
lish, by regulation, which regulations shall 
take into consideration the amount of in-
come of the borrower or mortgagor avail-
able to pay regular expenses after payment 
of all installment and revolving debt. 
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‘‘(B) 
UNDERWATER
LOANS.—Notwith-
standing subparagraph (A), payments under a 
loan having a loan-to-value ratio that exceeds 
100 percent shall not be considered to be af-
fordable for a borrower or mortgagor for pur-
poses of this subsection unless the amount of 
the remaining principal balance on such loan 
that exceeds 100 percent is reduced. 
‘‘(3) INCOME USED IN DETERMINING AFFORD-
ABILITY.— 
‘‘(A) DOCUMENTATION.—A mortgagee or 
servicer shall request documentation of the in-
come of a borrower or mortgagor before com-
mencing loss mitigation activities. 
‘‘(B) VERIFICATION.—The borrower’s or 
mortgagor’s income shall be verified by— 
‘‘(i) the Federal wage and tax state-
ment (Form W–2 of the Internal Revenue 
Service) of the borrower or mortgagor; or 
‘‘(ii) tax returns, payroll receipts, fi-
nancial institution records, or other third- 
party documents that provide reasonably 
reliable evidence of the income or assets of 
the borrower or mortgagor. 
‘‘(4) STANDARD NET PRESENT VALUE TEST.— 
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‘‘(A) TEST.—Upon the request of a bor-
rower or mortgagor under a covered federally 
related mortgage loan who is qualified for loss 
mitigation activities under this section, the 
mortgagee or servicer under the loan shall per-
form a standard test to compare the expected 
net present value of modifying the loan to the 
net present value of foreclosing on such loan. 
‘‘(B) EFFECT.—If application of the 
standard test referred to in subparagraph (A) 
to a covered federally related mortgage loan 
shows that the net present value, to the mort-
gagee or in the aggregate, of modifying the loan 
exceeds the net present value of foreclosing on 
the loan, all persons that hold an interest in the 
mortgage agreement shall agree to modify such 
loan in a manner as the Bureau has prescribed. 
‘‘(C) COMPONENTS.—The Director shall, 
by regulation, establish the components of the 
standard test for purposes of subparagraph (A), 
which shall not— 
‘‘(i) prohibit the modification of nega-
tively amortizing loans; 
‘‘(ii) prohibit the modification of loans 
with negative equity; or 
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‘‘(iii) prohibit the modification of 
loans to minority and low-income bor-
rowers or mortgagors. 
‘‘(5) DEBT-TO-INCOME RATIO.—In determining 
the debt-to-income ratio or residual income of a 
mortgagor or borrower under a covered federally re-
lated mortgage loan for purposes of this subsection, 
the amount of monthly payment under the loan shall 
include principal, interest, taxes, insurance, flood in-
surance, any homeowner’s association and condo-
minium fees, and any second or subordinate liens. 
‘‘(6) 
MONTHLY
INCOME.—In 
determining 
monthly income of a mortgagor or borrower for pur-
poses of this subsection, all wages, salary, overtime, 
fees, commissions, tips, Social Security benefits, pen-
sions, and all other income shall be considered. 
‘‘(7) 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 
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notice required under subsection (c)(2), whichever is 
earlier. 
‘‘(e) EXPLANATION OF DENIAL.—A mortgagee or 
servicer under a covered federally related mortgage loan 
shall provide, to each borrower or mortgagor who has re-
quested loss mitigation activities under this section and 
been denied the provision of such activities by the mort-
gagee or servicer, an explanation of why such activities 
were denied and the eligibility standards used by such 
mortgagee or servicer in assessing the provision of loss 
mitigation activities. 
‘‘(f) PRESUMPTION
OF
COMPLIANCE.—An offer, 
made by a mortgagee or servicer under a covered federally 
related mortgage loan to a borrower or mortgagor, of a 
priority loss mitigation alternative that is in compliance 
with the requirements under subsection (d) (relating to 
affordable payments) and any regulations carrying out 
such subsection shall be presumed to constitute compli-
ance with the requirement to perform reasonable loss miti-
gation under subsection (a) with respect to the loan. 
‘‘(g) SUBORDINATE LIENS.— 
‘‘(1) INFORMATION SHARING.—Each mortgagee 
with respect to a subordinate lien shall provide to 
any mortgagee holding a senior lien under a covered 
federally related mortgage loan information needed 
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by such senior mortgagees to engage in reasonable 
loss mitigation as required by this section with re-
spect. 
‘‘(2) MAINTENANCE
OF
LIEN
STATUS.—Any 
priority loss mitigation activity under subsection 
(c)(5) undertaken with respect to a senior lien as 
part of loss mitigation activity shall not impair the 
priority status of liens under the modified loan, to 
the extent that there are no additional funds ad-
vanced to the borrower in connection with such pri-
ority loss mitigation activity. 
‘‘(3) AUTOMATIC
MODIFICATION
UPON
MODI-
FICATION OF SENIOR LIEN.—Upon the provision of 
loss mitigation activities in accordance with this Act 
by the holder of a senior lien, a mortgagee with re-
spect to a subordinate lien shall modify such lien in 
proportion to the modification of the senior lien. 
‘‘(4) UNDERWATER
SUBORDINATE
LIENS.—If 
the combined loan-to-value ratio under the covered 
federally related mortgage loan secured by the senior 
lien and any loans secured by subordinate liens ex-
ceeds 100 percent, the mortgagee of each such sub-
ordinate lien shall perform one or more of the fol-
lowing actions: 
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‘‘(A) Reduce the principal amount on such 
lien to an amount that results in a total loan- 
to-value ratio of not more than 100 percent 
when combined with the primary lien. 
‘‘(B) Release the residential real property 
that is subject to such subordinate lien from the 
subordinate lien. 
‘‘(h) DIRECT ACCESS TO AUTHORIZED LOSS MITIGA-
TION PERSONNEL.— 
‘‘(1) PROVISION OF CONTACT INFORMATION.— 
The mortgagee or servicer of a covered federally re-
lated mortgage loan shall provide, on each regular 
account statement for the loan, a toll-free or collect- 
call telephone number that provides the borrower 
with direct access to a person with the information 
and authority to answer questions and fully resolve 
issues related to loss mitigation activities for the 
loan. 
‘‘(2) REQUIREMENT OF SINGLE POINT OF CON-
TACT.— 
‘‘(A) REQUIREMENT.—For any borrower 
or mortgagor that contacts a mortgagee or 
servicer through the telephone number provided 
pursuant to paragraph (1) or through any other 
means, the mortgagee or servicer shall assign to 
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such borrower or mortgagor a single point of 
contact that will personally and primarily assist 
such borrower or mortgagor with the resolution 
or implementation of loss mitigation activities 
requested by such borrower or mortgagor. 
‘‘(B) DEFINITION.—For purposes of this 
paragraph the term ‘single point of contact’ 
means an individual employed by a servicer 
with specialized training in loss mitigation and 
customer service who serves as the primary 
point of contact for any negotiations, questions, 
or other informational needs a for borrower or 
mortgagor who has requested loss mitigation. 
‘‘(3) PROHIBITION ON OUTSOURCING.—In car-
rying out subsection (a) with respect to a covered 
federally related mortgage loan, any contact by or on 
behalf of a mortgagee or servicer with the home-
owner and any processing of any loss mitigation ac-
tivities shall be conducted only by agents of the 
mortgagee or servicer who are physically located in 
the United States. 
‘‘(i) THIRD-PARTY
LOAN
MODIFICATIONS.—The 
mortgagee or servicer of a covered federally related mort-
gage loan shall not accept or provide loss mitigation activi-
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ties with respect to such loan at the request of any entity 
or individual that is not party to the loan unless— 
‘‘(1) the entity or individual is authorized by 
the borrower or mortgagee to act on behalf of the 
borrower or mortgagor; and 
‘‘(2)(A) is a representative of a housing coun-
seling agency approved by the Secretary of Housing 
and Urban Development; or 
‘‘(B) provides documentation to the servicer or 
mortgagee that the entity or individual— 
‘‘(i) has not charged any fee to the bor-
rower or mortgagor for such request; or 
‘‘(ii)(I) has charged a nominal fee for such 
request; 
‘‘(II) has entered into a written contract, 
in plain English or the primary language of the 
borrower or mortgagor, with the borrower or 
mortgagor, that includes provisions for cancella-
tion without penalty; and 
‘‘(III) will refund any such fees to the bor-
rower or mortgagor in the event the request for 
loss mitigation is denied. 
‘‘(j) DUTY TO REFER TO HUD-CERTIFIED HOUSING 
COUNSELING AGENCY.— 
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‘‘(1) REFERRAL
BY
SERVICER
OR
MORT-
GAGEE.—In the case of any payment due under a 
covered federally related mortgage loan that is more 
than 60 days late, the servicer or mortgagee shall 
forward to a housing counseling agency approved by 
the Secretary of Housing and Urban Development 
the contact information of the borrower. 
‘‘(2) 
EXPRESSION
OF
BORROWER
PREF-
ERENCE.—The borrower may communicate to the 
servicer or mortgagee a preference for a particular 
housing counseling agency approved by the Sec-
retary of Housing and Urban Development— 
‘‘(A) in writing at the time of closing on 
the loan; or 
‘‘(B) in writing at any time during the 
term of the loan, including by conveyance of 
signed authorization form from the approved 
housing counseling agency of the borrower’s 
choice, which shall be transmitted by such agen-
cy to the mortgagee or servicer. 
‘‘(3) REFERRAL RELATIONSHIP.—A mortgagee 
or servicer may establish a referral relationship with 
a housing counseling agency approved by the Sec-
retary of Housing and Urban Development, but such 
relationship may not be exclusive and the mortgagee 
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or servicer may not refuse to respond to qualified 
written requests and other communications from an-
other housing counseling agency approved by the 
Secretary of Housing and Urban Development or 
any other agent that is authorized by the borrower. 
‘‘(k) PROHIBITION ON WAIVER OF RIGHTS.—A mort-
gagee for a covered federally related mortgage loan may 
not— 
‘‘(1) when engaging in loss mitigation activities 
pursuant to subsection (a), require a borrower to 
limit or waive the rights of such borrower to bring 
any claims, defenses, demands, proceedings, actions, 
or causes of action against the mortgagee or servicer 
as a condition of accepting an offer of any loss miti-
gation activities, including any activities under sub-
section (c); or 
‘‘(2) require the borrower to agree to arbitra-
tion as a condition of receiving loan modification ac-
tivities. 
Any waiver or arbitration provision in a written agreement 
prohibited under this subsection shall be void and unen-
forceable. 
‘‘(l) SHORT SALE
AND DEED-IN-LIEU
OF FORE-
CLOSURE PROTECTIONS.— 
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‘‘(1) RIGHT TO SELL.—If a borrower or mort-
gagor under a covered federally related mortgage 
loan presents documentation to the mortgagee or 
servicer of such loan an objective circumstance 
under paragraph (2) that supports a request of the 
borrower or mortgagor for the immediate sale of the 
property subject to the loan, the mortgagee or 
servicer shall not prevent or otherwise interfere with 
the borrower or mortgagor from selling the property 
subject to such loan for an amount that is less than 
the amount owed to such mortgagee or servicer. 
‘‘(2) OBJECTIVE CIRCUMSTANCE.—Only the fol-
lowing objective circumstances may be considered by 
the mortgagee or servicer, for purposes of paragraph 
(1), in determining whether an immediate sale of the 
property subject to the loan is required: 
‘‘(A) A member of the household of the 
borrower or mortgagor has obtained a new job. 
‘‘(B) A member of the household of the 
borrower or mortgagor is attending a new 
school. 
‘‘(C) The health and well-being of a mem-
ber of the household of the borrower or mort-
gagor. 
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‘‘(3) PROHIBITION ON DEMAND PAYMENTS.—In 
any case in which an immediate sale of a property 
is determined under paragraph (1) to be required, 
the mortgagee or servicer for the covered federally 
related mortgage loan, or any agent thereof, shall 
not demand an additional payment from the bor-
rower or mortgagor, or any agent thereof, or a po-
tential purchaser of the property as a condition of 
allowing the sale of the property to occur. 
‘‘(4) RIGHT TO RECAPTURE.—This Act may not 
be construed to prevent, in the case of any imme-
diate sale pursuant to paragraph (1), a mortgagee 
or servicer from recovering after such sale from the 
mortgagee or borrower, to the extent provided under 
State law, the difference between the amount owed 
under the covered federally related mortgage loan 
and the sale price of the property. 
‘‘(m) REPORTING
ON LOSS MITIGATION ACTIVI-
TIES.— 
‘‘(1) IN GENERAL.—Each mortgagee or servicer 
of a covered federally related mortgage loan shall re-
port monthly and comprehensively to the Comp-
troller of the Currency, the Director, and the Board 
of Governors of the Federal Reserve System on the 
extent and scope of the loss mitigation activities of 
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