[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5579 Reported in House (RH)]






                                                 Union Calendar No. 382
110th CONGRESS
  2d Session
                                H. R. 5579

                          [Report No. 110-615]

 To remove an impediment to troubled debt restructuring on the part of 
     holders of residential mortgage loans, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 11, 2008

  Mr. Castle (for himself and Mr. Kanjorski) introduced the following 
    bill; which was referred to the Committee on Financial Services

                              May 1, 2008

                    Additional sponsor: Mr. Sherman

                              May 1, 2008

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]
 [For text of introduced bill, see copy of bill as introduced on March 
                               11, 2008]

_______________________________________________________________________

                                 A BILL


 
 To remove an impediment to troubled debt restructuring on the part of 
     holders of residential mortgage loans, and for other purposes.

    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 ``Emergency Mortgage Loan Modification 
Act of 2008''.

SEC. 2. SAFE HARBOR FOR QUALIFIED LOAN MODIFICATIONS OR WORKOUT PLANS 
              FOR CERTAIN RESIDENTIAL MORTGAGE LOANS.

    (a) Standard for Loan Modifications or Workout Plans.--Absent 
contractual provisions to the contrary--
            (1) the duty to maximize, or to not adversely affect, the 
        recovery of total proceeds from pooled residential mortgage 
        loans is owed by a servicer of such pooled loans to the 
        securitization vehicle for the benefit of all investors and 
        holders of beneficial interests in the pooled loans, in the 
        aggregate, and not to any individual party or group of parties; 
        and
            (2) a servicer of pooled residential mortgage loans shall 
        be deemed to be acting on behalf of the securitization vehicle 
        in the best interest of all investors and holders of beneficial 
        interests in the pooled loans, in the aggregate, if for a loan 
        that is in payment default under the loan agreement or for 
        which payment default is imminent or reasonably foreseeable, 
        the loan servicer makes reasonable and documented efforts to 
        implement a modification or workout plan or, if such efforts 
        are unsuccessful or such plan would be infeasible, engages in 
        other loss mitigation, including accepting a short payment or 
        partial discharge of principal, or agreeing to a short sale of 
        the property, to the extent that the servicer reasonably 
        believes the particular modification or workout plan or other 
        mitigation actions will maximize the net present value to be 
        realized on the loan, including over that which would be 
        realized through foreclosure.
    (b) Safe Harbor.--Absent contractual provisions to the contrary, a 
servicer of a residential mortgage loan that acts in a manner 
consistent with the duty set forth in subsection (a), shall not be 
liable for entering into a qualified loan modification or workout plan, 
to--
            (1) any person, based on that person's ownership of a 
        residential mortgage loan or any interest in a pool of 
        residential mortgage loans or in securities that distribute 
        payments out of the principal, interest and other payments in 
        loans on the pool;
            (2) any person who is obligated pursuant to a derivatives 
        instrument to make payments determined in reference to any loan 
        or any interest referred to in paragraph (1); or
            (3) any person that insures any loan or any interest 
        referred to in paragraph (1) under any law or regulation of the 
        United States or any law or regulation of any State or 
        political subdivision of any State.
    (c) Rule of Construction.--No provision of this section shall be 
construed as limiting the ability of a servicer to enter into loan 
modifications or workout plans other than qualified loan modification 
or workout plans.
    (d) Definitions.--For purposes of this section, the following 
definitions shall apply:
            (1) Qualified loan modification or workout plan.--The term 
        ``qualified loan modification or workout plan'' means a 
        modification or plan that--
                    (A) is scheduled to remain in place until the 
                borrower sells or refinances the property, or for at 
                least 5 years from the date of adoption of the plan, 
                whichever is sooner;
                    (B) does not provide for a repayment schedule that 
                results in negative amortization at any time; and
                    (C) does not require the borrower to pay additional 
                points and fees.
            (2) Negative amortization.--For purposes of paragraph (1), 
        the term ``negative amortization'' does not include the 
        capitalization of delinquent interest and arrearages.
            (3) Residential mortgage loan defined.--The term 
        ``residential mortgage loan'' means a loan that is secured by a 
        lien on an owner-occupied residential dwelling.
            (4) Securitization vehicle.--The term ``securitization 
        vehicle'' means a trust, corporation, partnership, limited 
        liability entity, special purpose entity, or other structure 
        that--
                    (A) is the issuer, or is created by the issuer, of 
                mortgage pass-through certificates, participation 
                certificates, mortgage-backed securities, or other 
                similar securities backed by a pool of assets that 
                includes residential mortgage loans; and
                    (B) holds such loans.
    (e) Effective Period.--This section shall apply only with respect 
to qualified loan modification or workout plans initiated prior to 
January 1, 2011.
                                                 Union Calendar No. 382

110th CONGRESS

  2d Session

                               H. R. 5579

                          [Report No. 110-615]

_______________________________________________________________________

                                 A BILL

 To remove an impediment to troubled debt restructuring on the part of 
     holders of residential mortgage loans, and for other purposes.

_______________________________________________________________________

                              May 1, 2008

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed