[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7126 Introduced in House (IH)]







110th CONGRESS
  2d Session
                                H. R. 7126

  To provide stability to the housing market in the United States by 
providing diligent notice and options to homeowners facing the risk of 
foreclosure, providing alternatives to the homeowner and mortgagee that 
  can assist in the retention of the home while meeting the financial 
   obligations to ensure that the mortgagee will be made whole, and 
providing protections to renters of properties subject to mortgages in 
                  foreclosure, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 26, 2008

Ms. Richardson introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
  To provide stability to the housing market in the United States by 
providing diligent notice and options to homeowners facing the risk of 
foreclosure, providing alternatives to the homeowner and mortgagee that 
  can assist in the retention of the home while meeting the financial 
   obligations to ensure that the mortgagee will be made whole, and 
providing protections to renters of properties subject to mortgages in 
                  foreclosure, 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 ``Housing Options Made Effective Act'' 
or the ``HOME Act''.

SEC. 2. REQUIREMENT TO FILE NOTICE OF DEFAULT BEFORE FORECLOSURE.

    Notwithstanding any provision of State law, no judicial or 
nonjudicial foreclosure may be initiated with respect to any covered 
residential mortgage (as such term is defined in section 14) unless--
            (1) the mortgagee has filed for record, in the appropriate 
        public office for filing or recordation of interests in or 
        against real property for the State or jurisdiction in which 
        the property subject to the mortgage is located, a notice of 
        default that includes--
                    (A) a statement identifying the covered residential 
                mortgage, the name or names of the mortgagor and 
                mortgagee, and the book and page, or instrument number, 
                if applicable, where the mortgage is recorded or a 
                description of the property subject to the mortgage;
                    (B) a statement that a breach of the obligation 
                under the mortgage has occurred;
                    (C) a statement setting forth the nature of each 
                breach actually known to the mortgagee and of the 
                mortgagee's election to sell or cause to be sold the 
                property to satisfy that obligation and any other 
                obligation secured by the mortgage that is in default; 
                and
                    (D) a declaration from the mortgagee that--
                            (i) the mortgagee has complied with section 
                        4 (relating to direct contact with the borrower 
                        to provide foreclosure avoidance options);
                            (ii) the mortgagee has used due diligence, 
                        in accordance with the requirements of section 
                        5, to contact the borrower; or
                            (iii) the borrower has surrendered the 
                        property to the mortgagee; and
            (2) the 90-day period beginning upon the filing of the 
        notice of default has expired.

SEC. 3. REQUIREMENTS FOR FILING NOTICE OF DEFAULT.

    Notwithstanding any provision of State law, a mortgagee may not 
file notice of default, as required under section 2(1), with respect to 
any covered residential mortgage unless--
            (1) the mortgagee has complied with the requirements of 
        section 4 (relating to direct contact with the borrower to 
        provide foreclosure avoidance options) and the 30-day period 
        beginning upon compliance with all requirements of section 4 
        has expired;
            (2) the mortgagee has used due diligence, in accordance 
        with the requirements of section 5, to contact the borrower and 
        the 30-day period beginning upon compliance by the mortgagee 
        with all requirements of such section has expired; or
            (3) the borrower has surrendered the property to the 
        mortgagee.

SEC. 4. DIRECT CONTACT WITH BORROWER TO PROVIDE FORECLOSURE AVOIDANCE 
              OPTIONS.

    (a) In General.--A mortgagee for a covered residential mortgage 
complies with the requirements of this section only if the mortgagee 
has taken all of the following actions:
            (1) Direct contact.--The mortgagee has made direct contact 
        with the borrower via service, in person, or by telephone and 
        notified the borrower--
                    (A) that the borrower has a right to request a 
                meeting with the mortgagee for the purpose of assessing 
                the borrower's financial situation and providing 
                options for the borrower to avoid foreclosure, which 
                may be held contemporaneously with or subsequent to 
                such contact at the option of the borrower; and
                    (B) of the toll-free telephone number made 
                available by the Department of Housing and Urban 
                Development to locate a housing counseling agency 
                certified by the Department.
            (2) Assessment of financial condition and options to avoid 
        foreclosure.--
                    (A) In general.--If requested by the borrower, the 
                mortgagee has conducted a meeting with the borrower, 
                not later than 14 days after the request was made, 
                during which the mortgagee has provided the borrower 
                with an assessment of the borrower's financial 
                situation and options for the borrower to avoid 
                foreclosure.
                    (B) Telephone meetings.--A meeting required under 
                this paragraph may be conducted by telephone.
                    (C) Timing.--A mortgagee may comply with the 
                requirements for a meeting under this paragraph by 
                fulfilling such requirements upon making contact with 
                the borrower in accordance with paragraph (1) or by 
                holding a subsequent meeting.
                    (D) Borrower's use of designee.--
                            (i) Authority.--A borrower may designate a 
                        housing counseling agency certified by the 
                        Department of Housing and Urban Development, 
                        attorney, or other advisor to discuss options 
                        for the borrower to avoid foreclosure with the 
                        mortgagee.
                            (ii) Procedure.--To designate a housing 
                        counseling agency certified by the Department 
                        of Housing and Urban Development for purposes 
                        of this subparagraph, a borrower shall send a 
                        notarized letter to the mortgagee stating that 
                        the borrower has designated such a counselor to 
                        discuss options to foreclosure.
                            (iii) Borrower responsibility for final 
                        decision.--Notwithstanding the designation of 
                        any housing counseling agency by a borrower 
                        pursuant to this subparagraph, the mortgagee 
                        may not accept a final determination regarding 
                        acceptance or denial of any loan modification 
                        or workout plan offered to the borrower except 
                        directly from the borrower.
            (3) Loan modifications and workout plans.--Any loan 
        modification or workout plan offered by the mortgagee to the 
        borrower under a covered residential mortgage pursuant to 
        contact or meetings required under this section shall be an 
        offer that--
                    (A) fulfills payment of the principal obligation of 
                the mortgage; and
                    (B) minimizes the loss of the mortgagee.
    (b) Participation of Loss Mitigation Personnel.--Any loss 
mitigation personnel of a mortgagee may participate by telephone during 
any contact required by this section.

SEC. 5. DUE DILIGENCE IN ATTEMPTING TO CONTACT BORROWER.

    (a) In General.--The mortgagee for a covered residential mortgage 
shall be considered for purposes of section 2(a)(2) to have used due 
diligence in accordance with this section to contact the borrower under 
the mortgage only if the mortgagee complies with the following 
requirements:
            (1) First attempt.--The mortgagee shall send to the 
        borrower at the address of the property subject to the mortgage 
        and all other addresses of the borrower known to the mortgagee, 
        by first-class mail, a letter that--
                    (A) states that the borrower is delinquent on 
                payments due under the mortgage;
                    (B) instructs the borrower to contact the mortgagee 
                to discuss options to avoid foreclosure;
                    (C) includes an address and telephone number at 
                which to contact the mortgagee; and
                    (D) includes the toll-free telephone number made 
                available by the Department of Housing and Urban 
                Development to locate a housing counseling agency 
                certified by the Department.
            (2) Follow-up contact.--After the letter required under 
        paragraph (1) has been sent, the mortgagee shall attempt to 
        contact the borrower by telephone at least three times at 
        different hours and on different days by calling any and all 
        telephone numbers for the borrower that the mortgagee has on 
        file and, if contact is made, shall provide the information 
        specified in subparagraphs (A) through (D) of paragraph (1).
            (3) Contact by certified mail.--If the borrower does not 
        contact the mortgagee within 10 days after the telephone call 
        requirements of paragraph (2) have been satisfied/ the 
        mortgagee complies with paragraph (2) but is unable to provide 
        the borrower by telephone with the information specified in 
        subparagraphs (A) through (D) of paragraph (1), the mortgagee 
        shall send to the borrower at the address of the property 
        subject to the mortgage and all other addresses of the borrower 
        known to the mortgagee, by certified mail, with return receipt 
        requested, a letter that contains the information specified in 
        subparagraphs (A) through (D) of paragraph (1).
            (4) Process server.--If the borrower does not contact the 
        mortgagee within 14 days after the certified letter is sent 
        pursuant to paragraph (3), or the certified letter is returned 
        to the mortgagee marked ``return to sender,'' the mortgagee 
        shall utilize the services of a private process server to 
        deliver the contents of the certified letter to the borrower.
            (5) Web posting.--If the mortgagee maintains or has a 
        location on the World Wide Web, the mortgagee shall post a 
        prominent link on the homepage of such website to the following 
        information:
                    (A) A list of financial documents that borrowers in 
                default should collect and be prepared to present to 
                the mortgagee when discussing options for avoiding 
                foreclosure.
                    (B) A toll-free telephone number by which borrowers 
                who wish to discuss options for avoiding foreclosure 
                may discuss such options with the mortgagee.
                    (C) The toll-free telephone number made available 
                by the Department of Housing and Urban Development to 
                locate a housing counseling agency certified by the 
                Department.
            (6) Direct contact.--If, before the expiration of the 30-
        day period beginning upon compliance by the mortgagee with all 
        requirements of this section, the borrower requests a meeting 
        with the mortgagee for the purpose of assessing the borrower's 
        financial situation and providing options for the borrower to 
        avoid foreclosure--
                    (A) the mortgagee shall conduct such a meeting with 
                the borrower in accordance with the requirements of 
                paragraphs (2) and (3) of section 4(a); and
                    (B) for purposes of section 3(1), the mortgagee 
                shall be considered to have complied with section 4 
                upon completion of the requirements under subparagraph 
                (A) of this paragraph.
    (b) Authority To Charge Fees.--The mortgagee under a covered 
residential mortgage entered into after the date of the enactment of 
this Act may assess a fee to the borrower in an amount such the 
aggregate of such fees for all covered mortgages entered into by such 
mortgagee does not exceed the amount reasonably estimated to be 
necessary to cover the costs of actions taken pursuant to paragraphs 
(1) through (5) of subsection (a) with respect to all covered 
residential mortgages of such mortgagee.

SEC. 6. DUTIES REGARDING LOAN MODIFICATIONS AND WORKOUT PLANS.

    (a) Duties of Loan Servicers.--Any duty any servicer of covered 
residential mortgages may have to maximize net present value under 
their pooling and servicing agreements relating to such mortgages is 
owed to all parties in a loan pool, not to any particular parties, and 
a servicer of such mortgages acts in the best interests of all parties 
if the servicer agrees to or implements a loan modification or workout 
plan for such any such a mortgage for which both of the following 
apply:
            (1) The mortgage is in payment default, or payment default 
        is reasonably foreseeable.
            (2) Anticipated recovery under the loan modification or 
        workout plan relating to the mortgage exceeds the anticipated 
        recovery through foreclosure on a net present value basis.
    (b) Offering of Workouts.--The mortgagee for a covered residential 
mortgage described in subsection (a) shall offer the borrower a loan 
modification or workout plan in accordance with section 4.

SEC. 7. ACCURATE CREDIT REPORTING.

    (a) Reporting of Subsequent Mortgage Payments.--In the case of any 
covered residential mortgage for which any loan modification or workout 
plan has been negotiated between the borrower and the mortgagee and 
agreed to or implemented, any payments due under the mortgage after 
such agreement or implementation made on time and pursuant to the loan 
modification or workout plan shall be reported to the appropriate 
consumer reporting agency described in section 603(p) of the Fair 
Credit Reporting Act and included in the consumer file for such 
borrower at such agency and in any consumer report (as defined in 
section 603 of the Fair Credit Reporting Act) prepared from such file.
    (b) Rule of Construction.--This section may not be construed to 
authorize the omission, from any consumer file or consumer report for 
any borrower under a covered residential mortgage, of any delinquent 
payments due under the mortgage before or after agreement to or 
implementation of any loan modification or workout plan for the 
mortgage.

SEC. 8. LOAN MODIFICATION OR WORKOUT PLAN.

    (a) Inclusion of Provision.--Any covered residential mortgage 
agreement that is entered into after the date of the enactment of this 
Act shall contain a provision that--
            (1) grants the borrower under the mortgage and the 
        mortgagee the right to negotiate a loan modification or workout 
        plan if--
                    (A) the mortgage is in payment default or payment 
                default is reasonably foreseeable; or
                    (B) in the case of a mortgagee, the anticipated 
                recovery under a loan workout plan exceeds the 
                anticipated recovery through foreclosure on a net 
                present value basis; and
            (2) requires that any such loan modification or workout 
        plan offered or agreed to comply with the requirements under 
        section 4(a)(3).
    (b) Deposit of Payment.--If the borrower under a covered 
residential mortgage agrees to a loan modification or workout plan for 
the mortgage, pursuant to a provision included in a mortgage agreement 
pursuant to subsection (a) of this section or pursuant to or pursuant 
to section 4(a), any payments due under the mortgage made pursuant to 
the loan modification or workout plan shall be deposited directly into 
the account of the mortgagee.
    (c) Rule of Construction.--This section may not be construed to 
require the mortgagee for any covered residential mortgage to reduce 
the principal amount due under the mortgage, or to prevent the 
mortgagee from taking action to minimize the mortgagee's financial 
loss.

SEC. 9. APPLICATION OF PARTIAL PAYMENTS.

    (a) Separate Account.--The mortgagee for a covered residential 
mortgage may not refuse, and shall credit to the account of the 
borrower under such mortgage, any partial payments of amounts due under 
the mortgage.
    (b) Effect on Foreclosure.--Acceptance of partial payments by the 
mortgagee for a covered residential mortgage shall not affect 
determination of default under the mortgage.

SEC. 10. RIGHTS OF RENTERS IN FORECLOSURE.

    (a) In General.--In the case of any foreclosure of any covered 
residential mortgage for a property:
            (1) Right to occupy property.--Any successor in interest in 
        such property pursuant to the foreclosure shall assume such 
        interest subject to the rights of any tenant of the property 
        under the authority of a lease entered into before the 
        initiation of such foreclosure to occupy the property until the 
        end of the remaining term of the lease or the eviction pursuant 
        only to a notice of eviction served on such tenant after the 
        expiration of the 6-month period beginning upon foreclosure of 
        the mortgage, whichever occurs first.
            (2) Notice to tenant of sale.--Upon posting a notice of 
        sale pursuant to foreclosure, the mortgagee shall immediately 
        inform any tenant of the property under the authority of a 
        lease entered into before the initiation of such foreclosure 
        that the property may be sold in connection with such 
        foreclosure, and the mortgagee shall inform any such tenant of 
        the date, time, and location of such sale if that information 
        is known upon the posting of notice of sale.
            (3) Requirement to use due diligence to contact tenant.--
        The mortgagee shall use due diligence, in accordance with the 
        requirements of subsection (b), to contact each tenant of the 
        property under the authority of a lease entered into before the 
        initiation of such foreclosure.
    (b) Due Diligence To Contact Tenant.--The mortgagee for a covered 
residential mortgage shall be considered for purposes of subsection 
(a)(3) to have used due diligence in accordance with this subsection to 
contact the tenant of the property subject to a covered residential 
mortgage that is being foreclosed only if the mortgagee sends to the 
tenant at the address of the property subject to the mortgage, by 
certified mail, with return receipt requested, a letter that contains 
the following information:
            (1) A statement that the property may be sold at a 
        foreclosure sale.
            (2) A statement that such tenant may be evicted pursuant 
        only to a notice of eviction served on such tenant after the 
        expiration of the 6-month period beginning upon foreclosure of 
        the mortgage.
            (3) A statement that the tenant should contact the borrow 
        under the mortgage or the landlord regarding the foreclosure 
        and continued residence in the property.
            (4) An address and telephone number at which to contact the 
        borrower or landlord.
    (c) Rule of Construction.--Nothing in this section may be construed 
to prevent any successor in interest in a property pursuant to 
foreclosure on a covered residential mortgage from entering into, with 
any tenant of the property under the authority of a lease entered into 
before such foreclosure, a new lease for the property or from honoring 
or extending such previous lease.

SEC. 11. REQUIREMENT TO FILE NOTICE OF SALE BEFORE FORECLOSURE SALE.

    Notwithstanding any provision of State law, in the case of any 
covered residential mortgage for which any judicial or non-judicial 
foreclosure has been initiated, no sale of the property subject to such 
mortgage may be initiated unless--
            (1) the mortgagee has filed for record, in the appropriate 
        public office for filing or recordation of interest in or 
        against real property for the State or jurisdiction in which 
        the property subject to the mortgage is located, a notice of 
        sale that includes--
                    (A) a statement that a notice of default required 
                under section 2 was filed;
                    (B) a declaration that the mortgagee has complied 
                with the requirements under section 3 (relating to 
                requirements for filing notice of default);
                    (C) identification of the time, place, and location 
                of the foreclosure auction or sale; and
                    (D) an address and telephone number at which to 
                contact the mortgagee; and
            (2) a copy of the notice filed under paragraph (1)--
                    (A) is posted on the property to subject to the 
                foreclosure sale for the 21-day period ending upon such 
                sale;
                    (B) published in a daily or weekly publication 
                having wide circulation in the area in which the 
                property is located not less than once a week during 
                the 3-week period ending upon such sale; and
                    (C) is mailed to the borrower not less than 20 days 
                before the sale and to any other party that requests 
                the mortgagee to provide such notice.

SEC. 12. ADMINISTRATIVE ENFORCEMENT.

    Compliance with the requirements of this Act shall be enforced in 
the same manner and by the same means that compliance with the 
requirements imposed under the Truth in Lending Act are enforced under 
section 108 of such Act (15 U.S.C. 1607).

SEC. 13. PREEMPTION.

    This Act shall not preempt any provision of State law that provides 
greater protection to borrowers under residential mortgages.

SEC. 14. DEFINITIONS.

    For purposes of this Act, the following definitions shall apply:
            (1) Covered residential mortgage.--The term ``covered 
        residential mortgage'' means a mortgage that is a first or 
        subsequent lien on residential real property (including 
        individual units of condominiums and cooperatives) that is 
        designed principally for the occupancy of from one to four 
        families and is used as a residence of the borrower under the 
        mortgage.
            (2) Mortgagee.--The term ``mortgagee'' includes, with 
        respect to a mortgage, any beneficiary or authorized agent of 
        the mortgagee.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of Housing and Urban Development.

SEC. 15. INAPPLICABILITY AND EFFECTIVE DATE.

    (a) Inapplicability.--This Act shall not apply to any covered 
residential mortgage--
            (1) for which the mortgagee has filed notice of default 
        before the date of the enactment of this Act;
            (2) secured by a lien on property that the borrower has 
        surrendered, as evidenced by a written confirmation of the 
        surrender or delivery of the keys to the property to the 
        mortgagee; or
            (3) the borrower under which has filed for bankruptcy and 
        for which the proceedings have not been finalized.
    (b) Effective Date.--This Act shall take effect on the date of the 
enactment of this Act.
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