110 HR 5579 RH: Emergency Mortgage Loan Modification Act of 2008 U.S. House of Representatives 2008-03-11 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

IB Union Calendar No. 382 110th CONGRESS 2d Session H. R. 5579 [Report No. 110–615] 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.

1.

Short title

This Act may be cited as the Emergency Mortgage Loan Modification Act of 2008.

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.

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