[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 2136 Reported in Senate (RS)]






                                                       Calendar No. 911
110th CONGRESS
  2d Session
                                S. 2136

 To address the treatment of primary mortgages in bankruptcy, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 3, 2007

    Mr. Durbin (for himself, Mr. Schumer, Mr. Dodd, Mr. Obama, Mr. 
 Whitehouse, Mr. Brown, Mr. Menendez, Mr. Biden, Mr. Harkin, Mr. Reed, 
Mrs. Boxer, Mrs. Clinton, Mrs. Feinstein, and Mr. Kerry) introduced the 
 following bill; which was read twice and referred to the Committee on 
                             the Judiciary

                July 29 (legislative day, July 28), 2008

                Reported by Mr. Leahy, with an amendment
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

_______________________________________________________________________

                                 A BILL


 
 To address the treatment of primary mortgages in bankruptcy, and for 
                            other purposes.

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

<DELETED>SECTION 1. SHORT TITLE.</DELETED>

<DELETED>    This Act may be cited as the ``Helping Families Save Their 
Homes in Bankruptcy Act of 2007''.</DELETED>

          <DELETED>TITLE I--MINIMIZING FORECLOSURES</DELETED>

<DELETED>SEC. 101. SPECIAL RULES FOR MODIFICATION OF LOANS SECURED BY 
              RESIDENCES.</DELETED>

<DELETED>    (a) In General.--Section 1322(b) of title 11, United 
States Code, is amended--</DELETED>
        <DELETED>    (1) in paragraph (10), by striking ``and'' at the 
        end;</DELETED>
        <DELETED>    (2) by redesignating paragraph (11) as paragraph 
        (12); and</DELETED>
        <DELETED>    (3) by inserting after paragraph (10) the 
        following:</DELETED>
        <DELETED>    ``(11) notwithstanding paragraph (2) and otherwise 
        applicable nonbankruptcy law--</DELETED>
                <DELETED>    ``(A) modify an allowed secured claim 
                secured by the debtor's principal residence, as 
                described in subparagraph (B), if, after deduction from 
                the debtor's current monthly income of the expenses 
                permitted for debtors described in section 1325(b)(3) 
                of this title (other than amounts contractually due to 
                creditors holding such allowed secured claims and 
                additional payments necessary to maintain possession of 
                that residence), the debtor has insufficient remaining 
                income to retain possession of the residence by curing 
                a default and maintaining payments while the case is 
                pending, as provided under paragraph (5); and</DELETED>
                <DELETED>    ``(B) provide for payment of such claim--
                </DELETED>
                        <DELETED>    ``(i) for a period not to exceed 
                        30 years (reduced by the period for which the 
                        loan has been outstanding) from the date of the 
                        order for relief under this chapter; 
                        and</DELETED>
                        <DELETED>    ``(ii) at a rate of interest 
                        accruing after such date calculated at a fixed 
                        annual percentage rate, in an amount equal to 
                        the most recently published annual yield on 
                        conventional mortgages published by the Board 
                        of Governors of the Federal Reserve System, as 
                        of the applicable time set forth in the rules 
                        of the Board, plus a reasonable premium for 
                        risk; and''.</DELETED>
<DELETED>    (b) Conforming Amendment.--Section 1325(a)(5) of title 11, 
United States Code, is amended by inserting before ``with respect'' the 
following: ``except as otherwise provided in section 1322(b)(11) of 
this title,''.</DELETED>

<DELETED>SEC. 102. WAIVER OF COUNSELING REQUIREMENT WHEN HOMES ARE IN 
              FORECLOSURE.</DELETED>

<DELETED>    Section 109(h) of title 11, United States Code, is amended 
by adding at the end the following:</DELETED>
<DELETED>    ``(5) Paragraph (1) shall not apply with respect to a 
debtor who files with the court a certification that a foreclosure sale 
of the debtor's principal residence has been scheduled.''.</DELETED>

    <DELETED>TITLE II--PROVIDING OTHER DEBTOR PROTECTIONS</DELETED>

<DELETED>SEC. 201. COMBATING EXCESSIVE FEES.</DELETED>

<DELETED>    Section 1322(c) of title 11, the United States Code, is 
amended--</DELETED>
        <DELETED>    (1) in paragraph (1), by striking ``and'' at the 
        end;</DELETED>
        <DELETED>    (2) in paragraph (2), by striking the period at 
        the end and inserting ``; and''; and</DELETED>
        <DELETED>    (3) by adding at the end the following:</DELETED>
        <DELETED>    ``(3) to the extent that an allowed secured claim 
        is secured by the debtor's principal residence, the value of 
        which is greater than the amount of such claim, fees, costs, or 
        charges arising during the pendency of the case may be added to 
        secured debt provided for by the plan only if--</DELETED>
                <DELETED>    ``(A) notice of such fees, costs or 
                charges is filed with the court before the expiration 
                of the earlier of--</DELETED>
                        <DELETED>    ``(i) 1 year after the time at 
                        which they are incurred; or</DELETED>
                        <DELETED>    ``(ii) 60 days before the 
                        conclusion of the case; and</DELETED>
                <DELETED>    ``(B) such fees, costs, or charges are 
                lawful, reasonable, and provided for in the underlying 
                contract;</DELETED>
        <DELETED>    ``(4) the failure of a party to give notice 
        described in paragraph (3) shall be deemed a waiver of any 
        claim for fees, costs, or charges described in paragraph (3) 
        for all purposes, and any attempt to collect such fees, costs, 
        or charges shall constitute a violation of section 524(a)(2) of 
        this title or, if the violation occurs before the date of 
        discharge, of section 362(a) of this title; and</DELETED>
        <DELETED>    ``(5) a plan may provide for the waiver of any 
        prepayment penalty on a claim secured by the principal 
        residence of the debtor.''.</DELETED>

<DELETED>SEC. 202. MAINTAINING DEBTORS' LEGAL CLAIMS.</DELETED>

<DELETED>    Section 554(e) of title 11, United States Code, is amended 
by adding at the end the following:</DELETED>
<DELETED>    ``(e) In any action in State or Federal court with respect 
to a claim or defense asserted by an individual debtor in such action 
that was not scheduled under section 521(a)(1) of this title, the 
trustee shall be allowed a reasonable time to request joinder or 
substitution as the real party in interest. If the trustee does not 
request joinder or substitution in such action, the debtor may proceed 
as the real party in interest, and no such action shall be dismissed on 
the ground that it is not prosecuted in the name of the real party in 
interest or on the ground that the debtor's claims were not properly 
scheduled in a case under this title.''.</DELETED>

<DELETED>SEC. 203. RESOLVING DISPUTES.</DELETED>

<DELETED>    Section 1334 of title 28, United States Code, is amended 
by adding at the end the following: ``Notwithstanding any agreement for 
arbitration that is subject to chapter 1 of title 9, in any core 
proceeding under section 157(b) of this title involving an individual 
debtor whose debts are primarily consumer debts, the court may hear and 
determine the proceeding, and enter appropriate orders and judgments, 
in lieu of referral to arbitration.''.</DELETED>

<DELETED>SEC. 204. ENACTING A HOMESTEAD FLOOR FOR DEBTORS OVER 55 YEARS 
              OF AGE.</DELETED>

<DELETED>    (a) In General.--Section 522(b)(3) of title 11, United 
States Code, is amended--</DELETED>
        <DELETED>    (1) in subparagraph (B), by striking ``and'' at 
        the end;</DELETED>
        <DELETED>    (2) in subparagraph (C), by striking the period at 
        the end and inserting ``; and''; and</DELETED>
        <DELETED>    (3) by adding at the end and inserting the 
        following:</DELETED>
        <DELETED>    ``(D) if the debtor, as of the date of the filing 
        of the petition, is 55 years old or older, the debtor's 
        aggregate interest, not to exceed $75,000 in value, in real 
        property or personal property that the debtor or a dependent of 
        the debtor uses as a principal residence, or in a cooperative 
        that owns property that the debtor or a dependent of the debtor 
        uses as a principal residence.''.</DELETED>
<DELETED>    (b) Exemption Authority.--Section 522(d)(1) of title 11, 
United States Code, is amended by inserting ``or, if the debtor is 55 
years of age or older, $75,000 in value,'' before ``in real 
property''.</DELETED>

<DELETED>SEC. 205. DISALLOWING CLAIMS FROM VIOLATIONS OF CONSUMER 
              PROTECTION LAWS.</DELETED>

<DELETED>    Section 502(b) of title 11, United States Code, is 
amended--</DELETED>
        <DELETED>    (1) in paragraph (8), by striking ``or'' at the 
        end;</DELETED>
        <DELETED>    (2) in paragraph (9), by striking the period at 
        the end and inserting ``; or''; and</DELETED>
        <DELETED>    (3) by adding at the end the following:</DELETED>
        <DELETED>    ``(10) the claim is subject to any remedy for 
        damages or rescission due to failure to comply with any 
        applicable requirement under the Truth in Lending Act (15 
        U.S.C. 1601 et seq.), or any other provision of applicable 
        State or Federal consumer protection law that was in force when 
        the noncompliance took place, notwithstanding the prior entry 
        of a foreclosure judgment.''.</DELETED>

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Helping Families Save Their Homes in 
Bankruptcy Act of 2008''.

                    TITLE I--MINIMIZING FORECLOSURES

SEC. 101. DEFINITIONS.

    Section 101 of title 11, United States Code, is amended--
            (1) by redesignating paragraphs (40A) and (40B) as 
        paragraphs (40B) and (40C), respectively;
            (2) by inserting after paragraph (40) the following:
            ``(40A) The term `nontraditional mortgage' means a security 
        interest in the debtor's principal residence that secures a 
        debt for a loan that at any period during the term of the loan 
        provides for the deferral of payment of principal or interest 
        through permitting periodic payments that do not cover the full 
        amount of interest due or that cover only the interest due, 
        except that such term excludes--
                    ``(A) a loan that at any period during the term of 
                the loan provides for the deferral of payment of 
                principal through permitting periodic payments that 
                cover only the interest due, if the creditor 
                demonstrates that it determined in good faith at the 
                time the loan was consummated, after undergoing a full 
                underwriting process based on verified and documented 
                information, that the debtor had a reasonable ability 
                to repay at the full interest and principal payment 
                amount (assuming an initial 30 year full amortization), 
                and payments under the loan resulted in a debt-to-
                income ratio of the debtor in an amount equal to or 
                less than that which would have been permitted under 
                guidelines and directives established by the Secretary 
                of Housing and Urban Development pursuant to section 
                203.33 of title 24, Code of Federal Regulations, for 
                loans subject to such section;
                    ``(B) a home equity line of credit that is in a 
                subordinate lien position; and
                    ``(C) a reverse mortgage.'';
            (3) by redesignating paragraphs (53B) through (53D) as 
        paragraphs (53C), (53D), (53E), and (53F), respectively; and
            (4) by inserting after paragraph (53A) the following:
            ``(53B) The term `subprime mortgage' means a security 
        interest in the debtor's principal residence that secures a 
        debt for a loan that has an annual percentage rate that is 
        greater than--
                    ``(A) the sum of 3 percent plus the yield on United 
                States Treasury securities having comparable periods of 
                maturity, if the loan is secured by a first mortgage or 
                first deed of trust; or
                    ``(B) the sum of 5 percent plus the yield on United 
                States Treasury securities having comparable periods of 
                maturity, if the loan is secured by a subordinate 
                mortgage or subordinate deed of trust.
        Without regard to whether such loan is subject to or reportable 
        under the Home Mortgage Disclosure Act, the difference between 
        the annual percentage rate of such loan and the yield on United 
        States Treasury securities having comparable periods of 
        maturity shall be determined using the procedures and 
        calculation methods applicable to loans that are subject to the 
        reporting requirements of such Act, except that such yield 
        shall be determined as of the 15th day of the month preceding 
        the month in which a completed application is submitted for 
        such loan. If such loan provides for a fixed interest rate for 
        an introductory period and then resets or adjusts to a variable 
        interest rate, the determination of the annual percentage rate 
        shall be based on the greater of the introductory rate and the 
        fully indexed rate. For purposes of this paragraph, the term 
        `fully indexed rate' means the prevailing index rate on a 
        residential mortgage loan at the time at which the loan is 
        made, plus the margin that will apply after the expiration of 
        an introductory interest rate.''.

SEC. 102. SPECIAL RULES FOR MODIFICATION OF LOANS SECURED BY 
              RESIDENCES.

    (a) In General.--Section 1322(b) of title 11, United States Code, 
is amended--
            (1) in paragraph (10), by striking ``and'' at the end;
            (2) by redesignating paragraph (11) as paragraph (12); and
            (3) by inserting after paragraph (10) the following:
            ``(11) notwithstanding paragraph (2) and otherwise 
        applicable nonbankruptcy law--
                    ``(A) modify an allowed secured claim for a debt 
                incurred prior to the effective date of this paragraph 
                secured by a nontraditional mortgage, or a subprime 
                mortgage, and any lien subordinate to such claim, on 
                the debtor's principal residence, as described in 
                subparagraph (B), if, after deduction from the debtor's 
                current monthly income of the expenses permitted for 
                debtors described in section 1325(b)(3) of this title 
                (other than amounts contractually due to creditors 
                holding such allowed secured claims and additional 
                payments necessary to maintain possession of that 
                residence), the debtor has insufficient remaining 
                income to retain possession of the residence by curing 
                a default and maintaining payments while the case is 
                pending, as provided under paragraph (5);
                    ``(B) provide for payment of such claim--
                            ``(i) in an amount equal to the amount of 
                        the allowed secured claim;
                            ``(ii) for a period that is the longer of 
                        30 years (reduced by the period for which the 
                        loan has been outstanding) or the remaining 
                        term of such loan, beginning on the date of the 
                        order for relief under this chapter; and
                            ``(iii) at a rate of interest accruing 
                        after such date calculated at a fixed annual 
                        percentage rate, in an amount equal to the most 
                        recently published annual yield on conventional 
                        mortgages published by the Board of Governors 
                        of the Federal Reserve System, as of the 
                        applicable time set forth in the rules of the 
                        Board, plus a reasonable premium for risk; and
                    ``(C) if a claim has been modified to an amount 
                below the original principal of the loan pursuant to 
                subparagraph (B)(i) and the debtor's principal 
                residence is sold during the term of the plan, the 
                holder of the claim shall be entitled to receive, in 
                addition to the unpaid portion of the allowed secured 
                claim, the net proceeds of the sale, or the amount of 
                the holder's allowed unsecured claim, whichever is 
                less; and''.
    (b) Conforming Amendment.--Section 1325(a)(5) of title 11, United 
States Code, is amended by inserting before ``with respect'' the 
following: ``except as otherwise provided in section 1322(b)(11) of 
this title,''.

SEC. 103. WAIVER OF COUNSELING REQUIREMENT WHEN HOMES ARE IN 
              FORECLOSURE.

    Section 109(h) of title 11, United States Code, is amended by 
adding at the end the following:
    ``(5) Paragraph (1) shall not apply with respect to a debtor who 
files with the court a certification that a foreclosure sale of the 
debtor's principal residence has been scheduled.''.

              TITLE II--PROVIDING OTHER DEBTOR PROTECTIONS

SEC. 201. COMBATING EXCESSIVE FEES.

    Section 1322(c) of title 11, the United States Code, is amended--
            (1) in paragraph (1), by striking ``and'' at the end;
            (2) in paragraph (2), by striking the period at the end and 
        inserting a semicolon; and
            (3) by adding at the end the following:
            ``(3) the plan need not provide for the payment of, and the 
        debtor, the debtor's property, and property of the estate shall 
        not be liable for, any fee, cost, or charge, notwithstanding 
        section 506(b), that arises in connection with a claim secured 
        by the debtor's principal residence if the event that gives 
        rise to such fee, cost, or charge occurs while the case is 
        pending but before the discharge order, except to the extent 
        that--
                    ``(A) notice of such fees, costs or charges is 
                filed with the court, and served on the debtor and the 
                trustee, before the expiration of the earlier of--
                            ``(i) 1 year after the event that gives 
                        rise to such fee, cost, or charge occurs; or
                            ``(ii) 60 days before the closing of the 
                        case; and
                    ``(B) such fees, costs, or charges are lawful, 
                reasonable, and provided for in the agreement under 
                which such claim or security interest arose;
            ``(4) the failure of a party to give notice described in 
        paragraph (3) shall be deemed a waiver of any claim for fees, 
        costs, or charges described in paragraph (3) for all purposes, 
        and any attempt to collect such fees, costs, or charges shall 
        constitute a violation of section 524(a)(2) of this title or, 
        if the violation occurs before the date of discharge, of 
        section 362(a) of this title; and
            ``(5) a plan may provide for the waiver of any prepayment 
        penalty on a claim secured by the principal residence of the 
        debtor.''.

SEC. 202. MAINTAINING DEBTORS' LEGAL CLAIMS.

    Section 554(e) of title 11, United States Code, is amended by 
adding at the end the following:
    ``(e) In any action in State or Federal court with respect to a 
claim or defense asserted by an individual debtor in such action that 
was not scheduled under section 521(a)(1) of this title, the trustee 
shall be allowed a reasonable time to request joinder or substitution 
as the real party in interest. If the trustee does not request joinder 
or substitution in such action, the debtor may proceed as the real 
party in interest, and no such action shall be dismissed on the ground 
that it is not prosecuted in the name of the real party in interest or 
on the ground that the debtor's claims were not properly scheduled in a 
case under this title.''.

SEC. 203. RESOLVING DISPUTES.

    Section 1334 of title 28, United States Code, is amended by adding 
at the end the following: ``Notwithstanding any agreement for 
arbitration that is subject to chapter 1 of title 9, in any core 
proceeding under section 157(b) of this title involving an individual 
debtor whose debts are primarily consumer debts, the court may hear and 
determine the proceeding, and enter appropriate orders and judgments, 
in lieu of referral to arbitration.''.

SEC. 204. ENACTING A HOMESTEAD FLOOR FOR DEBTORS OVER 55 YEARS OF AGE.

    (a) In General.--Section 522(b)(3) of title 11, United States Code, 
is amended--
            (1) in subparagraph (B), by striking ``and'' at the end;
            (2) in subparagraph (C), by striking the period at the end 
        and inserting ``; and''; and
            (3) by adding at the end and inserting the following:
            ``(D) if the debtor, as of the date of the filing of the 
        petition, is 55 years old or older, the debtor's aggregate 
        interest, not to exceed $75,000 in value, in real property or 
        personal property that the debtor or a dependent of the debtor 
        uses as a principal residence, or in a cooperative that owns 
        property that the debtor or a dependent of the debtor uses as a 
        principal residence.''.
    (b) Exemption Authority.--Section 522(d)(1) of title 11, United 
States Code, is amended by inserting ``or, if the debtor is 55 years of 
age or older, $75,000 in value,'' before ``in real property''.

SEC. 205. DISALLOWING CLAIMS FROM VIOLATIONS OF CONSUMER PROTECTION 
              LAWS.

    Section 502(b) of title 11, United States Code, is amended--
            (1) in paragraph (8), by striking ``or'' at the end;
            (2) in paragraph (9), by striking the period at the end and 
        inserting ``; or''; and
            (3) by adding at the end the following:
            ``(10) the claim is subject to any remedy for damages or 
        rescission due to failure to comply with any applicable 
        requirement under the Truth in Lending Act (15 U.S.C. 1601 et 
        seq.), or any other provision of applicable State or Federal 
        consumer protection law that was in force when the 
        noncompliance took place, notwithstanding the prior entry of a 
        foreclosure judgment.''.
                                                       Calendar No. 911

110th CONGRESS

  2d Session

                                S. 2136

_______________________________________________________________________

                                 A BILL

 To address the treatment of primary mortgages in bankruptcy, and for 
                            other purposes.

_______________________________________________________________________

                July 29 (legislative day, July 28), 2008

                       Reported with an amendment