II 118th CONGRESS 2d Session S. 3784 IN THE SENATE OF THE UNITED STATES February 8 (legislative day, February 7), 2024 Mr. Reed (for himself, Mr. Brown , Ms. Smith , Mr. Wyden , and Mr. Merkley ) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To provide requirements for the bulk auction or group sale of certain non-performing loans, and for other purposes.

1. Short title This Act may be cited as the Preserving Homes and Communities Act of 2024 . 2. Sale of FHA non-performing single family mortgage loans (a) In general Title II of the National Housing Act ( 12 U.S.C. 1707 et seq. ) is amended by adding at the end the following: 259. Sale of non-performing single family mortgage loans (a) Single family sales The Secretary may conduct sales of 1 or more single family non-performing residential mortgage loans insured under this title only if the following requirements are met: (1) The Secretary determines that no other reasonable measures other than a sale are available to restore the Fund to, or keep the Fund above, the minimum capital requirements under section 205(f)(4). (2) The Secretary establishes a system that provides priority to Federal, State, local, or Tribal governments or nonprofit organizations that have the capacity and experience required for buying, servicing, and resolving single family mortgage loans in a manner that promotes affordable housing, fair housing, affordable homeownership, housing counseling, or neighborhood stabilization. (3) Applicable loss mitigation required under section 230 is exhausted before any loan is placed into the loan sale. (4) Clear, written notice is sent by certified and first-class mail by the servicer to the borrower of the loan, all owners of record, and any applicable estate of the borrower with a copy sent to the Secretary, not less than 90 days before the inclusion of the loan in any single family sale— (A) stating that the loan will be included in a single family sale of non-performing loans; and (B) describing the sale process, including— (i) the loss mitigation or other protections available to the borrower and other owners of record both before and after the sale; (ii) the status of any loss mitigation actions offered by the mortgagee with respect to the loan, including decisions on all loss mitigation reviews, descriptions of any loss mitigation options offered or denied, and supporting documentation for the most recent evaluation; and (iii) the obligations of the servicer of the loan before and after the sale, including loss mitigation requirements. (5) Purchasers take loans subject to the following requirements: (A) The provision of loss mitigation options to all eligible borrowers that offer terms and protections at least as favorable as those available under loss mitigation guidelines of the Federal Housing Administration, including the absence of fees for loss mitigation and loan modifications that reduce payments to an affordable level. (B) The provision of a deferral program that offers terms and protections at least as favorable as those provided by a partial claim available under loss mitigation guidelines of the Federal Housing Administration, including the absence of fees, to borrowers who can afford their pre-hardship mortgage payment. (C) Written, public disclosure of post-sale loss mitigation options. (D) Failure by the purchaser to follow the established loss mitigation guidelines shall serve as a defense to a judicial foreclosure and a basis to enjoin or otherwise stay a non-judicial foreclosure. (E) Data reporting as provided under subsection (d)(1). (F) Maintenance of vacant and abandoned property, including the payment of local property taxes, until such time as title is transferred to a nonprofit organization or the property is sold to a bona fide third-party purchaser. (G) Where a property becomes vacant, the purchaser shall not release the lien until the property is sold or donated. (H) Use of contract for deed, lease to own, or a land installment contract to sell or otherwise transfer any property that is secured by a purchased loan shall be prohibited unless the tenant or purchaser is a nonprofit organization. (I) For all non-performing loans where a home retention loss mitigation option is not possible and the purchaser acquires the property through foreclosure sale, 75 percent of those properties shall be— (i) sold at the current fair market value to an owner occupant; (ii) sold or donated to a non-profit or local government entity that will commit to 1 of the outcomes described in clause (i) or (iii); (iii) for not less than the 10-year period beginning on the date on which any entity initially leases the property, and with respect to any new lease beginning within such 10-year period, leased to a tenant with income that is not more than 100 percent of the area median income at the time the tenant initially leases the property, with monthly rents that are not more than 30 percent of the monthly household income, provided that the property owner accepts as rental payment any legal source of income, including— (I) a housing voucher under section 8 of the United States Housing Act of 1937 ( 42 U.S.C. 1437f ) and any form of Federal, State, or local housing assistance provided to a person or family or provided to a housing owner on behalf of a person or family, including— (aa) rental vouchers; (bb) rental assistance; (cc) rental subsidies from nongovernmental organizations; and (dd) homeownership subsidies; (II) income received as a monthly benefit under title II of the Social Security Act ( 42 U.S.C. 401 et seq. ), as a supplemental security income benefit under title XVI of the Social Security Act ( 42 U.S.C. 1381 et seq. ), or as a benefit under the Railroad Retirement Act of 1974 ( 45 U.S.C. 231 et seq. ), including any such benefit to which the individual is entitled for which payment is made to a representative payee; (III) income received by court order, including spousal support and child support; (IV) any payment from a trust, guardian, conservator, cosigner, or relative; and (V) any other lawful source of income or funds, including savings accounts and investments; or (iv) for any property that is not habitable, demolished or donated to a land bank with a cash donation to cover demolition costs. (b) Direct loan sales The Secretary may permit direct loan sales of single family non-performing residential loans insured under this title only if— (1) the loans are sold to municipalities, land banks, or nonprofit organizations that work in affordable housing, housing counseling, or neighborhood stabilization; (2) the purchaser complies with the requirements under paragraph (5) of subsection (a); and (3) the pricing reasonably reflects the costs of complying with the requirements under paragraphs (3) through (5) of subsection (a). (c) Forbearance The Secretary may not sell— (1) a single family non-performing residential loan insured under this Title while the loan is in a forbearance plan. (2) a single family non-performing residential loan insured under this title that is not more than 90 days from the end of a forbearance plan. (d) Data and reporting (1) Purchaser reporting During the 4-year period following any single family sale of non-performing residential single family mortgage loans under subsection (a) or (b), the Secretary shall require each purchaser of such a loan, including any subsequent purchaser of the loan, to provide to the Secretary quarterly loan-level data regarding the treatment and outcome of the loan, including— (A) loan characteristics, including loan type, remaining loan term, loan to value ratio, number of months in arrears, loss mitigation status, and foreclosure status at time of sale; (B) loss mitigation data, including whether loss mitigation was provided by the purchaser, debt-to-income ratio and percent payment reduction for any modified loans, foreclosures begun or completed, and performance of modified loans; (C) demographic data for the borrower and any co-borrower, including race, national origin, sex, ZIP Code, and census tract, and, if available, disability status and veteran status; and (D) other purchaser actions, including charge offs and resales of loans and dates for such actions. (2) Semiannual reports to Congress The Secretary shall submit to Congress, and make publicly available at no cost to the public in a format that is readily accessible on the website of the Department of Housing and Urban Development, semi-annual reports to Congress on— (A) loans sold in a single family sale under subsection (a), disaggregated by pool, including— (i) the number of loans and types of loans; (ii) mean and median delinquency and loan to value ratios at the time of the sale; (iii) the number and percentage of owner-occupied properties; (iv) the number and percentage of loans modified prior to the sale; (v) the number and percentage of loans in foreclosure proceedings at the time of the sale; and (vi) demographic and geographic data, including property locations by census tract or larger geographic location if necessary to protect personally identifiable information; (B) the performance of loans after a single family sale under subsection (a), disaggregated by loan pool, including the initial purchaser, current owner, current servicer, data summarizing any alternatives to foreclosure offered and enacted, and data summarizing the data collected under paragraph (1); (C) the results of a fair lending analysis conducted based on the data in paragraph (1) to identify any discriminatory impacts or outcomes associated with the sales; and (D) claims paid through the Claims Without Conveyance of Title program under section 204(a)(1)(C), including the number of third party sales by ZIP Code, whether purchasers are owner-occupants, nonprofit organizations, government entities, or investors, and the source of funds or financing used by purchasers. (e) Penalties for noncompliance The Secretary may— (1) forcibly retain loans or properties, without providing compensation, from purchasers that do not meet the requirements under subsection (a)(5); and (2) enact additional penalties for purchasers described in paragraph (1) that the Secretary determines have repeatedly not complied with the requirements under subsection (a)(5), including monetary penalties and prohibition from participating in single family sales under this section. (f) Regulations The Secretary shall issue regulations related to single family sales in accordance with the requirements in this section. 260. Claims without conveyance of title first look program (a) Claims without conveyance of title first look program With respect to a third party sale of properties foreclosed upon and put up for sale in accordance with section 204(a)(1)(C), the Secretary shall maintain an exclusive right for eligible buyers to purchase these properties at a price at or below the fair market value of the property (with appropriate adjustments) for a specified period of time at the start of post-foreclosure sale efforts. (b) Eligible buyers The right to purchase a property under subsection (a) shall be offered to— (1) homebuyers who will occupy the property as a principal residence; (2) nonprofit organizations that— (A) commit in advance to rehabilitate the property and dispose of the property for an allowable use and within a time period to be designated by the Secretary by regulation; (B) are pre-approved for participation by the Secretary or a designee thereof to ensure that the organization— (i) maintains active tax-exempt status under section 501(c)(3) of the Internal Revenue Code; (ii) has a primary mission related to— (I) affordable housing; or (II) community revitalization through housing-related activities; and (iii) has demonstrated not less than 2 years of direct experience with real estate project development as an organizational entity; and (3) Federal, State, local, or Tribal government agencies or instrumentalities that meet the requirements of subparagraph (A) and clauses (ii) and (iii) of subparagraph (B) of paragraph (2). (c) Allowable uses An allowable use described in this subsection shall include— (1) renovation and sale, or, if the property already meets the minimum property standards set by the Assistant Secretary for Housing and Federal Housing Commissioner, sale without renovation, to an owner-occupant with an income that is not more than 120 percent of the area median income; (2) renovation and creation of affordable homeownership or, if the property already meets the minimum property standards set by the Assistant Secretary for Housing and Federal Housing Commissioner, creation of affordable homeownership without renovation, by a community land trust or shared equity homeownership program; (3) renovation and rental to tenants with an income that is not more than 100 percent of the area median income at the time the tenant initially leases the property, with monthly rents that are not more than 30 percent of the monthly household income, for not less than the 10-year period beginning on the date on which any entity initially leases the property, and with respect to any new lease beginning within such 10-year period, provided that the property owner accepts as rental payment any legal source of income, including— (A) a housing voucher under section 8 of the United States Housing Act of 1937 ( 42 U.S.C. 1437f ) and any form of Federal, State, or local housing assistance provided to a person or family or provided to a housing owner on behalf of a person or family, including— (i) rental vouchers; (ii) rental assistance; (iii) rental subsidies from nongovernmental organizations; and (iv) homeownership subsidies; (B) income received as a monthly benefit under title II of the Social Security Act ( 42 U.S.C. 401 et seq. ), as a supplemental security income benefit under title XVI of the Social Security Act ( 42 U.S.C. 1381 et seq. ), or as a benefit under the Railroad Retirement Act of 1974 ( 45 U.S.C. 231 et seq. ), including any such benefit to which the individual is entitled for which payment is made to a representative payee; (C) income received by court order, including spousal support and child support; (D) any payment from a trust, guardian, conservator, cosigner, or relative; and (E) any other lawful source of income or funds, including savings accounts and investments; and (4) demolition, but only if the property is vacant or uninhabitable and if the demolition is part of a strategy that incorporates rehabilitation, new construction, or designation of the land for use as a public amenity. (d) Reporting requirements (1) In general Each purchaser of a property under this section, other than an owner-occupant, shall, on an annual basis until the purchaser completes the allowable use of the property under subsection (c), report to the Secretary— (A) the start date and completion date of any rehabilitation; (B) the scope of work for and the total cost of any rehabilitation; (C) the end-use of the property, including sale to owner-occupant, use in a land trust or other shared equity program, or affordable rental; (D) the demographics of the end-user of the property, whether an owner-occupant or a tenant, including race, national origin, sex, ZIP Code, and census tract, and, if available, disability status and veteran status; and (E) the approximate income of the end-user of the property expressed as a percentage of the area median income. (2) Availability The Secretary shall, on an annual basis, make the information collected under paragraph (1) publicly available at no cost to the public in a readily accessible format on the website of the Department of Housing and Urban Development. (e) Use of third party vendors The Secretary may contract with a third-party vendor to assist in carrying out the provisions of this section, including to— (1) pre-approve nonprofit organizations for participation in the Claims Without Conveyance of Title First Look program; (2) monitor compliance with allowable uses and time periods designated by the Secretary by regulation; and (3) facilitate reporting to the Secretary. (f) Access The Secretary shall ensure that any eligible buyer seeking to purchase a property under this section can easily access and inspect the property prior to making a commitment to purchase the property. . (b) Regulations Not later than 18 months after the date of enactment of this Act, the Secretary of Housing and Urban Development shall promulgate regulations to carry out the amendments made by this section. 3. Sale of Fannie Mae and Freddie Mac non-performing loans The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4501 et seq. ) is amended by inserting after section 1328 ( 12 U.S.C. 4548 ) the following: 1329. Sale of non-performing loans (a) Bulk auction or group sales An enterprise may not conduct bulk auctions or other group sales of single family non-performing residential loans unless the following requirements are met: (1) The enterprise establishes a system that provides priority to Federal, State, local, or Tribal governments or nonprofit organizations that have the capacity and experience required for buying, servicing, and resolving single family mortgage loans in a manner that promotes affordable housing, fair housing, affordable homeownership, provision of housing counseling, or neighborhood stabilization (2) Applicable loss mitigation is exhausted before a loan may be placed into the bulk auction or group sale. (3) Clear, written notice is sent by the enterprise or servicer through certified and first-class mail to the borrower and all owners of record, with a copy sent to the enterprise if sent by the servicer, not less than 90 days before the inclusion of the loan in any proposed sale— (A) stating that the loan will be included in a bulk auction or group sale of non-performing loans; and (B) describing the bulk auction or group sale process, including— (i) the loss mitigation or other protections available to the borrower and other owners of record both before and after the auction or sale; (ii) the status of any loss mitigation actions offered by the mortgagee with respect to the loan, including decisions on all loss mitigation reviews, descriptions of any loss mitigation options offered or denied, and supporting documentation for the most recent evaluation; and (iii) the obligations of the servicer of the loan before and after the auction or sale, including loss mitigation requirements. (4) The enterprise requires in the terms of the bulk auction or group sale that purchasers take loans subject to the following requirements: (A) The purchaser is required to provide loss mitigation options to all eligible borrowers that offer terms and protections at least as favorable as those available under loss mitigation guidelines of the enterprise, including the absence of fees for loss mitigation and loan modifications that reduce payments to an affordable level. (B) The purchaser is required to offer a deferral program that offers terms and protections at least as favorable as those available under loss mitigation guidelines of the enterprise, including the absence of fees, to borrowers who can afford their pre-hardship mortgage payment. (C) The purchaser is required to provide written, public disclosure of post-sale loss mitigation options that the purchaser makes available to eligible borrowers. (D) Failure by the purchaser to follow the established loss mitigation guidelines shall serve as a defense to a judicial foreclosure and a basis to enjoin or otherwise stay a non-judicial foreclosure. (E) Data reporting as provided under subsection (c)(1). (F) If a property becomes vacant, the purchaser shall not release the lien until the property is sold or donated. (G) Use of contract for deed, lease to own, or a land installment contract to sell or otherwise transfer any property that is secured by a purchased loan shall be prohibited unless the tenant or purchaser is a nonprofit organization. (H) For all non-performing loans where a home-retention loss mitigation option is not possible and the purchaser acquires the property through foreclosure sale, 75 percent of those properties shall be— (i) sold at the current fair market value to an owner-occupant; (ii) sold or donated to a nonprofit or local government entity that will commit to 1 of the outcomes described in clause (i) or (iii); (iii) for not less than the 10-year period beginning on the date on which any entity initially leases the property, and with respect to any new lease beginning within such 10-year period, leased to a tenant with an income that is not more than 100 percent of the area median income at the time the tenant initially leases the property, with monthly rents that are not more than 30 percent of the monthly household income, provided that the property owner accepts as rental payment any legal source of income, including— (I) a housing voucher under section 8 of the United States Housing Act of 1937 ( 42 U.S.C. 1437f ) and any form of Federal, State, or local housing assistance provided to a person or family or provided to a housing owner on behalf of a person or family, including— (aa) rental vouchers; (bb) rental assistance; (cc) rental subsidies from nongovernmental organizations; and (dd) homeownership subsidies; (II) income received as a monthly benefit under title II of the Social Security Act ( 42 U.S.C. 401 et seq. ), as a supplemental security income benefit under title XVI of the Social Security Act ( 42 U.S.C. 1381 et seq. ), or as a benefit under the Railroad Retirement Act of 1974 ( 45 U.S.C. 231 et seq. ), including any such benefit to which the individual is entitled for which payment is made to a representative payee; (III) income received by court order, including spousal support and child support; (IV) any payment from a trust, guardian, conservator, cosigner, or relative; and (V) any other lawful source of income or funds, including savings accounts and investments; or (iv) for any property that is not habitable, demolished or donated to a land bank with a cash donation to cover demolition costs. (5) The enterprise maintains vacant and abandoned property until such time as title is transferred to a nonprofit organization or the property is sold to a bona fide third-party purchaser. (b) Forbearance An enterprise may not sell— (1) a single family non-performing residential loan while the loan is in a forbearance plan; (2) a single family non-performing residential loan that is not more than 90 days removed from the end of a forbearance plan. (c) Data and reporting (1) Purchaser reporting During the 4-year period following any auction or sale of single family non-performing residential loans under subsection (a), the Director shall require the enterprise to collect from each purchaser of such loans, including any subsequent purchaser of a loan, quarterly loan-level data regarding the treatment and outcome of the loan, including— (A) loan characteristics, including loan type, remaining loan term, loan to value ratio, number of months in arrears, loss mitigation status, and foreclosure status at time of sale; (B) loss mitigation data, including whether loss mitigation was provided by the purchaser, debt-to-income ratio and percent payment reduction for any modified loans, foreclosures begun or completed, and performance of modified loans; (C) demographic data for each borrower and any co-borrower, including race, national origin, sex, ZIP Code, and census tract, and, if available, disability status and veteran status; and (D) other purchaser actions, including charge offs and resales of loans and dates for such actions. (2) Semiannual reports to Congress The Director shall submit to Congress, and make publicly available at no cost to the public in a readily accessible format on the website of the Agency, semi-annual reports on— (A) loans sold in an auction or sale under subsection (a) by each enterprise, disaggregated by pool, including— (i) the number of loans and types of loans; (ii) mean and median delinquency and loan to value ratios at the time of the sale; (iii) the number and percentage of owner-occupied properties; (iv) the number and percentage of loans modified prior to auction or sale; (v) the number and percentage of loans in foreclosure proceedings at the time of auction or sale; and (vi) demographic and geographic data, including property locations by census tract or larger geographic location if necessary to protect personally identifiable information; (B) the performance of loans after an auction or sale under subsection (a), disaggregated by loan pool, including the initial purchaser, current owner, current servicer, data summarizing any alternatives to foreclosure offered and enacted, and data summarizing the data collected under subparagraph (A); and (C) the results of a fair lending analysis conducted based on the data in subparagraphs (A) and (B) to identify any discriminatory impacts or outcomes associated with the auctions or sales. (d) Penalties for noncompliance The enterprises may— (1) forcibly retain loans or properties, without providing compensation, from purchasers that do not meet the requirements under subsection (a)(4); and (2) enact additional penalties for purchasers described in paragraph (1) that the Director determines have repeatedly not complied with the requirements under subsection (a)(5), including monetary penalties and prohibition from participating in sales under this section. (e) Regulations The Director shall issue regulations defining the terms of permissible auctions or sales in accordance with the requirements in this section. 1330. Sale of re-performing loans (a) Bulk auction or group sales An enterprise may not conduct bulk auctions or other group sales of single family re-performing residential loans unless the following requirements are met: (1) The enterprise establishes a system that provides priority to Federal, State, local, or Tribal governments or nonprofit organizations that have the capacity and experience required for buying, servicing, and resolving single family mortgage loans in a manner that promotes affordable housing, fair housing, affordable homeownership, provision of housing counseling, or neighborhood stabilization. (2) Clear, written notice is sent by the enterprise or servicer through certified and first-class mail to the borrower and all owners of record, with a copy sent to the enterprise if sent by the servicer, not less than 90 days before the inclusion of the loan in any proposed sale— (A) stating that the loan will be included in a bulk auction or group sale of re-performing loans; and (B) describing the bulk auction or group sale process, including— (i) the loss mitigation or other protections available to the borrower and other owners of record both before and after the auction or sale; and (ii) the obligations of the servicer of the loan before and after the auction or sale, including loss mitigation requirements. (3) The enterprise requires in the terms of the bulk auction or group sale that purchasers take loans subject to the following requirements: (A) The purchaser is required to offer targeted payment relief options to borrowers that become more than 60 days delinquent on their mortgage after their loan is sold that includes deferral of principal and term extension options that reduce payments to an affordable level. (B) The purchaser is required to offer a deferral program to borrowers that become more than 60 days delinquent on their mortgage after their loan is sold that offers terms and protections at least as favorable as those available under loss mitigation guidelines of the enterprise, including the absence of fees, to borrowers who can afford their pre-hardship mortgage payment. (C) Failure by the purchaser to follow the established loss mitigation guidelines shall serve as a defense to a judicial foreclosure and a basis to enjoin or otherwise stay a non-judicial foreclosure. (D) Data reporting as provided under subsection (b)(1). (E) If a property becomes vacant, the purchaser shall not release the lien until the property is sold or donated. (F) Use of contract for deed, lease to own, or a land installment contract to sell or otherwise transfer any property that is secured by a purchased loan shall be prohibited unless the tenant or purchaser is a nonprofit organization. (b) Data and reporting (1) Purchaser reporting During the 4-year period following any auction or sale of single family re-performing residential mortgage loans under subsection (a), the Director shall require the enterprise to collect from each purchaser of such loans, including any subsequent purchaser of a loan, quarterly loan-level data regarding the treatment and outcome of the loan, including— (A) loan characteristics, including loan type, remaining loan term, loan to value ratio, number of months in arrears, and loan status; (B) loss mitigation data, including whether loss mitigation was provided by the purchaser, debt-to-income ratio and percent payment reduction for any modified loans, and performance of modified loans; (C) demographic data for each borrower and any co-borrower, including race, national origin, sex, ZIP Code, and census tract, and, if available, disability status and veteran status; and (D) other purchaser actions, including charge offs and resales of loans and dates for such actions. (2) Semiannual reports to congress The Director shall submit to Congress, and make publicly available at no cost to the public in a readily accessible format on the website of the Agency, semi-annual reports on— (A) loans sold in an auction or sale under subsection (a) by each enterprise, disaggregated by pool, including— (i) the number of loans and types of loans; (ii) mean and median delinquency and loan to value ratios at the time of the sale; (iii) the number and percentage of loans modified prior to auction or sale; and (iv) demographic and geographic data, including property locations by census tract or larger geographic location if necessary to protect personally identifiable information. (B) the performance of loans after an auction or sale under subsection (a), disaggregated by loan pool, including the initial purchaser, current owner, current servicer, data summarizing any alternatives to foreclosure offered and enacted, and data summarizing the data collected under subparagraph (A); and (C) the results of a fair lending analysis conducted based on the data in subparagraphs (A) and (B) to identify any discriminatory impacts or outcomes associated with the auctions or sales. (c) Penalties for noncompliance The enterprises may forcibly retain loans or properties, without providing compensation, from purchasers that do not meet the requirements under subsection (a)(3). (d) Regulations The Director shall issue regulations defining the terms of permissible auctions or sales in accordance with the requirements in this section. .