[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4991 Introduced in House (IH)]







109th CONGRESS
  2d Session
                                H. R. 4991

  To require the Secretary of the Treasury to carry out a program to 
    temporarily make payments under residential mortgage loans for 
         properties significantly damaged by Hurricane Katrina.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 16, 2006

 Mr. Jefferson (for himself, Mr. Taylor of Mississippi, Mr. Melancon, 
 Mr. Davis of Alabama, Mr. Bishop of Georgia, Mr. McDermott, Mr. Ford, 
    Mr. Watt, Mr. Owens, Ms. Kilpatrick of Michigan, and Mr. Towns) 
 introduced the following bill; which was referred to the Committee on 
                           Financial Services

_______________________________________________________________________

                                 A BILL


 
  To require the Secretary of the Treasury to carry out a program to 
    temporarily make payments under residential mortgage loans for 
         properties significantly damaged by Hurricane Katrina.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Homeowners Preservation of Equity 
Act of 2006''.

SEC. 2. HURRICANE KATRINA MORTGAGE PROTECTION PROGRAM.

    (a) In General.--The Secretary of the Treasury, in consultation 
with the Federal banking agencies, the National Credit Union 
Administration, and the appropriate State bank supervisors of each 
State contained in whole or in part in the GO Zone, shall establish a 
program to provide emergency mortgage assistance through the provision 
of direct mortgage payments on behalf of eligible individuals.
    (b) Definitions.--For purposes of this section, the following 
definitions shall apply:
            (1) Consumer mortgage.--The term ``consumer mortgage'' 
        means any consumer credit transaction (which term shall have 
        the same meaning given such term for purposes of the Truth in 
        Lending Act) in which a security interest, including any such 
        interest arising by operation of law, is retained or acquired 
        in any property that is used as the principal dwelling (under 
        the meaning given such term for purposes of section 121 of the 
        Internal Revenue Code of 1986) of the person to whom credit is 
        extended.
            (2) Consumer mortgage payment.--The term ``consumer 
        mortgage payment'' means the scheduled payment on a consumer 
        mortgage for principal, interest, and any scheduled deposit in 
        an escrow account for the purpose of ensuring payment of taxes, 
        insurance, or other charges with respect to the property 
        securing such consumer mortgage.
            (3) Eligible consumer mortgage.--The term ``eligible 
        consumer mortgage'' means a consumer mortgage that meet the 
        following requirements:
                    (A) Timing.--The mortgage was entered into before 
                August 29, 2005.
                    (B) Good standing.--As of August 28, 2005, the 
                mortgage was not in foreclosure.
                    (C) Property requirements.--The property in which a 
                security interest was retained or acquired under the 
                mortgage--
                            (i) was designed principally as a one- to 
                        four-family residence;
                            (ii) was located in the GO Zone;
                            (iii) was, as of August 28, 2005, the 
                        primary residence of the mortgagor; and
                            (iv)(I) was significantly damaged by 
                        Hurricane Katrina or by flooding resulting from 
                        Hurricane Katrina; or
                            (II) is uninhabitable as a result of damage 
                        or flooding resulting from Hurricane Katrina, 
                        including uninhabitability resulting from lack 
                        of electricity, water, or other services due to 
                        such damage or flooding.
                    (D) Servicer agreements.--The servicer for the 
                mortgage has made such assurances as the Secretary 
                shall require to ensure that the servicer will comply 
                with the requirements of subsection (h).
            (4) Eligible individual.--The term ``eligible individual'' 
        means an individual--
                    (A) who is a citizen, national, or qualified alien 
                as defined in section 431(b) of the Personal 
                Responsibility and Work Opportunity Reconciliation Act 
                of 1996 (8 U.S.C. 1641(b));
                    (B) who was a mortgagor on an eligible consumer 
                mortgage;
                    (C) whose ability to continue meeting the consumer 
                mortgage payment obligations under the eligible 
                consumer mortgage was severely impaired as a result of 
                hurricane-related disruption in the GO Zone, as 
                determined in accordance with a standard established by 
                the Secetary that compares the debt of the individual 
                to the income of the individual; and
                    (D) who has agreed to the terms for repayment of 
                assistance under subsection (i).
            (5) Federal banking agency and state bank supervisor.--The 
        terms ``Federal banking agency'' and ``State bank supervisor'' 
        have the meanings given such terms in section 3 of the Federal 
        Deposit Insurance Act.
            (6) GO zone.--The term ``GO Zone'' has the meaning given 
        such term in section 1400M of the Internal Revenue Code of 
        1986)
            (7) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
            (8) Servicer.--The term ``servicer'', with respect to a 
        consumer mortgage, has the meaning given such term in section 
        6(i) of the Real Estate Settlement Procedures Act of 1974 (12 
        U.S.C. 2605(i)).
            (9) Habitable; uninhabitable.--
                    (A) In general.--The terms ``habitable'' and 
                ``uninhabitable'' mean, with respect to a residence, 
                that the residence has been determined to be fit or not 
                to be fit, respectively, for human habitation.
                    (B) Determination.--The Secretary shall, by 
                regulations pursuant to subsection (l), establish 
                procedures and standards for determinations of 
                habitability and uninhabitability for purposes of the 
                program under this section. Such standards shall take 
                into consideration determinations and declarations of 
                habitability and unihabitability by Federal and State 
                and local governments or agencies, including the 
                Federal Emergency Management Agency and State and local 
                disaster relief agencies, and by insurers, access or 
                lack thereof to necessary infrastructure or services, 
                including electricity, potable water, and waste water 
                service, and such other factors as the Secretary 
                considers appropriate.
    (c) Mortgage Payment Relief Program.--The Secretary shall design 
and implement the program under this section in a manner that provides 
that assistance to be paid by the Secretary with respect to an eligible 
consumer mortgage and on behalf of an eligible individual is paid 
directly to the servicer for such mortgage.
    (d) Period of Assistance.--Payments under the program under this 
section with respect to an eligible consumer mortgage may be made only 
for consumer mortgage payments due under such mortgage during the 
period beginning on August 28, 2005, and ending on the earlier of--
            (1) March 1, 2007, or
            (2) the expiration of the 60-day period beginning upon the 
        the date that the eligible individual first reoccupies the 
        property subject to the mortgage.
    (e) Limitations on Payments.--
            (1) In general.--Subject to subsection (f), in no case may 
        the value of the assistance provided under the program under 
        this section with respect to any eligible consumer mortgage 
        exceed the aggregate amount of the consumer mortgage payments 
        due under the mortgage during the period for which assistance 
        is provided for such mortgage under the program.
            (2) No double payments.--The Secretary shall take 
        appropriate actions to ensure that, in the case of any consumer 
        mortgage payment paid by an eligible individual on an eligible 
        consumer mortgage for any period for which payment has already 
        been made under the program under this section, the servicer of 
        the consumer mortgage shall return such payment within a 
        reasonable period of time or shall immediately credit such 
        payment toward amortization of the principal obligation under 
        the mortgage and promptly notify the eligible individual of 
        such credit.
            (3) Terms of payment.--For purposes of this section, the 
        amount of any consumer mortgage payment shall be equal to the 
        amount of such payment due under the terms of such consumer 
        mortgage as in effect on August 28, 2005.
            (4) Prohibition of fees and charges.--Payments under the 
        program under this section may not be made to the servicer of a 
        consumer mortgage that provides for any penalites, fees, 
        charges, additional interest, or servicing costs of any kind 
        attributable to--
                    (A) participation in the program under this 
                section;
                    (B) any prepayment of consumer mortgage, including 
                prepayment involving application of insurance proceeds 
                to the mortgage; or
                    (C) late payment of any consumer mortgage payment 
                due under the consumer mortgage during the period 
                beginning on August 28, 2005, and ending on the 
                commencement of payments under this section for the 
                mortgage.
            (5) Reversal of adverse actions already taken.--Payments 
        under the program under this section may not be made to the 
        servicer of a consumer mortgage if, during the period beginning 
        on August 29, 2005, and ending upon the enrollment of the 
        consumer mortgage in the program, the servicer has furnished to 
        any consumer reporting agency (as such term is defined in 
        section 603 of the Fair Credit Reporting Act) any information 
        that relates to such consumer mortgage or the mortgagor under 
        such mortgage and is adverse to the interests of the mortgagor 
        and has failed to withdraw or remove such information from the 
        consumer reporting agency.
    (f) Enrollment in Program.--
            (1) Expedited process.--The Secretary shall establish an 
        expedited process, in accordance with this subsection, for the 
        enrollment of eligible individuals in the program under this 
        section.
            (2) Notification.--To be eligible to receive payments under 
        the program under this section, the servicer of a consumer 
        mortgage shall notify the Secretary--
                    (A) of the nonpayment of a scheduled consumer 
                mortgage payment from an individual in GO Zone, not 
                earlier than 31 days following such nonpayment; or
                    (B) of a communication to the servicer by an 
                individual reasonably indicating eligibility for 
                assistance under the program, after such communication.
            (3) Enrollment.--The Secretary, upon receipt of a notice 
        under paragraph (2) regarding a consumer mortgage, shall enroll 
        the eligible individual involved in the program under this 
        section, subject to the servicer of the mortgage submitting 
        such confirmation to the Secretary as the Secretary shall 
        require that the servicer has verified, in accordance with such 
        procedures as the Secretary shall establish, that mortgagor 
        under such consumer mortgage is an eligible individual and that 
        the consumer mortgage is an eligible consumer mortgage.
            (4) Duty of servicer.--The servicer of a consumer mortgage 
        shall make a reasonable effort to notify an eligible 
        individual--
                    (A) of the enrollment of such individual in the 
                program under paragraph (3);
                    (B) that, if it is later determined that the 
                individual is not an eligible individual or the 
                consumer mortgage is not an eligible consumer mortgage 
                (as determined by the audit process under subsection 
                (g) or otherwise), such servicer may be required at a 
                later date to repay the program for the total amount of 
                consumer mortgage payments made by the Secretary on 
                behalf of such individual, but that there shall be no 
                liability on the part of the individual to repay the 
                program for such amounts; and
                    (C) that such individual may elect to decline 
                enrollment, or cancel enrollment, in the program by 
                notifying the servicer involved.
    (g) Retrospective Audit.--
            (1) In general.--The Secretary shall provide for the 
        performance of an appropriate audit of the program under this 
        section by a date that is not later than 180 days after the 
        date of the enactment of this Act.
            (2) Repayment of improperly provided funds.--
                    (A) Action by secretary.--If the Secretary 
                determines, pursuant to the audit under paragraph (1) 
                or otherwise, that an individual that was enrolled in 
                the program under this section was not an eligible 
                individual under subsection (b) or the consumer 
                mortgage was not an eligible consumer mortgage, the 
                Secretary shall seek repayment from the servicer of the 
                consumer mortgage of the amounts paid under the program 
                on behalf of such individual. Such individual shall not 
                be liable to the Secretary for the repayment of such 
                amounts paid under the program on behalf of the 
                individual.
                    (B) Terms of repayment.--Any repayment pursuant to 
                subparagraph (A) shall be made with no interest or late 
                penalty to accrue prior to the commencement of a 
                repayment period which shall begin not earlier than the 
                date that is 3 months after the date on which a 
                determination and notice of noneligibility is provided.
    (h) Prohibited Actions.--During the period that payments are made 
under the program under this section for an eligible consumer loan, a 
servicer who accepts payments under the program under this section with 
respect to any eligible consumer mortgage, and any person who makes or 
holds such eligible consumer mortgage (if other than the servicer), may 
not--
            (1) accelerate the maturity of or commence any legal action 
        regarding such mortgage (including mortgage foreclosure to 
        recover under such obligation) or take possession of any 
        security of the mortgagor for such eligible consumer mortgage 
        obligation;
            (2) increase the annual percentage rate of interest with 
        respect to such eligible consumer mortgage, except in the case 
        of any mortgage the terms of which provide for changes in the 
        rate of interest that are not made in connection with 
        delinquency, default, or other credit-related events;
            (3) refuse to accept, prevent, or otherwise limit the 
        prepayment (in whole or in part) of any outstanding principal 
        amount due under the mortgage, including prepayment involving 
        application of any insurance proceeds; or
            (4) impose any other fees or charges with respect to such 
        consumer mortgage, including any fees or charges for any 
        prepayment described in paragraph (3).
    (i) Repayment of Assistance Amounts.--Assistance under the program 
under this section may not be provided with respect to a consumer 
mortgage unless the eligible individual who is the mortgagor under such 
mortgage enters into an agreement with the Secretary that the aggregate 
amount of all such assistance provided for such mortgage will be repaid 
to the Secretary, together with interest on such amounts, as follows:
            (1) Interest.--The interest on amounts of assistance 
        provided under the program shall accrue at a rate, as 
        determined by the Secretary, that is equal to 50 percent of the 
        average rate payable by the Treasury on its obligations having 
        a 5-year term to maturity and outstanding as of September 1, 
        2005, until full repayment is made.
            (2) Silent second mortgage.--Amounts of assistance and 
        interest shall be secured by a lien on the property in the 
        aggregate amount of such assistance and interest, that is held 
        by the Secretary and shall be subordinate to all other 
        mortgages on the property and to any Federal tax lien, but 
        shall be superior to any other lien. The lien shall be 
        extinguished upon sale or transfer of the property by the 
        mortgagor and the payment to the Secretary from the proceeds of 
        such sale or transfer of the aggregate amount of such 
        assistance and interest. The Secretary may not require the 
        mortgagor to repay any amount of assistance or interest until 
        the property is sold or otherwise transferred.
            (3) Prepayment.--Notwithstanding the third sentence of 
        paragraph (2), the mortgagor may make payments, in whole or in 
        part, of amounts of assistance and interest owed to the 
        Secretary pursuant to this subsection at any time after 
        payments under this section on behalf of the mortgagor have 
        concluded and no penalty, fee, or charge may be imposed for any 
        payments made before sale or transfer of the property by the 
        mortgagor.
            (4) Secondary market.--The Secretary may sell and otherwise 
        deal in liens established under this section, and may issue and 
        guarantee securities backed by liens established under this 
        section, as the Secretary considers appropriate.
    (j) Penalties.--
            (1) In general.--In the case of each consumer mortgage that 
        is submitted under subsection (f) to the Secretary by a 
        servicer and confirmed by the servicer as eligible for 
        participation in the program under this section that is not an 
        eligible consumer mortgage or for which the mortgagor is not an 
        eligible individual, the Secretary may assess to the servicer, 
        for each such mortgage so submitted--
                    (A) a civil penalty in an amount not exceeding the 
                amount of any mortgage payments received as a 
                consequence of submission of such ineligible mortgage 
                or individual; and
                    (B) interest, at a rate determined by the 
                Secretary, for the period that any amounts improperly 
                paid under the program on behalf of such mortgage were 
                held by the servicer.
            (2) Intentional violations.--If the Secretary determines 
        that any submission of a mortgage to which paragraph (1) 
        applies was made with intentional or reckless disregard of the 
        requirements under subsection (f)(3) regarding verification 
        procedures or with actual knowledge that the consumer mortgage 
        or the mortgagor under the consumer mortgage was not eligible 
        for assistance under the program under this section, the 
        Secretary may assess to the servicer, for each such mortgage so 
        submitted--
                    (A) a civil penalty in an amount not exceeding 
                three times the amount of any mortgage payments 
                received as a consequence of submission of such 
                ineligible mortgage or individual; and
                    (B) interest, at a rate determined by the 
                Secretary, for the period that any amounts improperly 
                paid under the program on behalf of such mortgage were 
                held by the servicer.
            (3) Effect on other law.--The penalties under this 
        subsection shall be in addition to any other remedies and 
        penalties provided by other provisions of Federal and State 
        law, including any civil and criminal penalties for fraud and 
        false statements.
    (k) Exclusion of Mortgage Relief Payments From Income of 
Mortgagor.--Any amounts paid under the program under this section with 
respect to an eligible consumer mortgage shall not be included as gross 
income of the eligible individual who is the mortgagor under such 
mortgage for purposes of the Internal Revenue Code of 1986 or for any 
other program for benefits, payments, or assistance for an individual, 
household, or family eligiblity unit provided by any Federal or State 
agency or by appropriated funds of the United States or any State, for 
which eligibility is determined on the basis of income or assets or any 
other test of means.
    (l) Expedited Rulemaking.--The Secretary shall utilize expedited 
rulemaking procedures to carry out this section.
    (m) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary for fiscal years 2006 and 
2007 to carry out this section.
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