II 110th CONGRESS 2d Session S. 2791 IN THE SENATE OF THE UNITED STATES April 1 (legislative day, March 13), 2008 Mr. Voinovich introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To address the foreclosure crisis and to revitalize neighborhoods, and for other purposes.

1.

Short title

This Act may be cited as the Protecting America's Homeowners Act of 2008.

2.

Discharge of indebtedness on principal residence excluded from gross income extension

Subparagraph (E) of section 108(a)(1) of the Internal Revenue Code of 1986 is amended by striking January 1, 2010 and inserting January 1, 2011.

3.

Temporary moratorium of prepayment penalties for all mortgage products

(a)

In general

Notwithstanding any other provision of law, beginning on the date of enactment of this Act and ending on December 31, 2009, the terms of any home mortgage loan that require that a consumer must pay a prepayment penalty for paying all or part of the outstanding principal on such loan before the date on which the principal is due under the terms of the loan agreement shall not be valid. (b)

Definitions

In this section, the following definitions shall apply: (1)

Consumer; credit

The terms consumer and credit have the same meaning as in section 103 of the Truth in Lending Act (15 U.S.C. 1602). (2)

Home mortgage loan

The term home mortgage loan means any consumer credit transaction in which a security interest, including any such interest arising by operation of law, is or will be retained or acquired in any real property located within the United States which is or, upon the completion of the transaction, will be used as the principle residence of the consumer.

4.

Assistance for mortgage foreclosure counseling

(a)

Expeditious distribution of funds already provided

Upon certification by the Neighborhood Reinvestment Corporation under paragraph (4) under the second undesignated paragraph (beginning with the phrase For an additional amount) under the heading Neighborhood Reinvestment Corporation—Payment to the Neighborhood Reinvestment Corporation of Public Law 110–161 that Housing and Urban Development or Neighborhood Reinvestment Corporation-approved counseling intermediaries and State Housing Finance Agencies have the need for additional portions of the $180,000,000 provided therein for mortgage foreclosure mitigation activities in States and areas with high rates of mortgage foreclosures, defaults, or related activities beyond the initial awards, and the expertise to use such funds effectively, the Neighborhood Reinvestment Corporation shall expeditiously continue to award such funds as need and expertise is shown. (b)

Additional funding

There are appropriated out of any money in the Treasury not otherwise appropriated for the fiscal year 2008, for an additional amount for the Neighborhood Reinvestment Corporation—Payment to the Neighborhood Reinvestment Corporation $200,000,000, to remain available until expended, for foreclosure mitigation activities under the terms and conditions contained in the second undesignated paragraph (beginning with the phrase For an additional amount) under the heading Neighborhood Reinvestment Corporation—Payment to the Neighborhood Reinvestment Corporation of Public Law 110–161.

5.

Assistance for the redevelopment of abandoned and foreclosed homes

(a)

Direct appropriations

There are appropriated out of any money in the Treasury not otherwise appropriated for the fiscal year 2008, $1,000,000,000, to remain available until expended, for assistance to States and units of general local government (as such terms are defined in section 102 of the Housing and Community Development Act of 1974 (42 U.S.C. 5302)) for the redevelopment of abandoned and foreclosed homes. (b)

Allocation of appropriated amounts

(1)

In general

The amounts appropriated or otherwise made available to States and units of general local government under this section shall be allocated based on a funding formula established by the Secretary of Housing and Urban Development. (2)

Formula to be devised swiftly

The funding formula required under paragraph (1) shall be established not later than 60 days after the date of enactment of this Act. (3)

Criteria

The funding formula required under paragraph (1) shall ensure that any amounts appropriated or otherwise made available under this section are allocated to States and units of general local government with the greatest need, as such need is determined in the discretion of the Secretary of Housing and Urban Development based on the following factors: (A)The number and percentage of home foreclosures in each State or unit of general local government. (B)The number and percentage of abandoned homes in each State or unit of general local government. (4)

Distribution

Amounts appropriated or otherwise made available to States and units of general local government under this section shall be distributed according to the funding formula required under paragraph (1) not later than 30 days after the establishment of such formula. (c)

Use of funds

(1)

In general

Any State or unit of general local government that receives amounts pursuant to this section shall, not later than 18 months after the receipt of such amounts, use such amounts to redevelop abandoned and foreclosed homes. (2)

Priority

Any State or unit of general local government that receives amounts pursuant to this section shall in distributing such amounts give priority emphasis and consideration to those metropolitan areas, metropolitan cities, urban areas, rural areas, low- and moderate-income areas, and other areas with the greatest need, including those with the greatest percentage of abandoned and foreclosed homes. (3)

Eligible uses

(A)

In general

Amounts made available under this section may be used to— (i)make grants, loans, and other financing mechanisms to community development financial institutions (as such term is defined under section 103(5) of the Community Development Banking and Financial Institutions Act of 1994 (12 U.S.C. 4702(5))), national intermediaries, and nonprofit housing or community development organizations and others to purchase and rehabilitate homes that have been abandoned or foreclosed upon, in order to sell, rent, or redevelop such homes; (ii)establish financing mechanisms for redevelopment of foreclosed upon homes, including such mechanisms as soft-seconds, loan loss reserves, and shared-equity loans for low- and moderate-income homebuyers; (iii)purchase and rehabilitate homes that have been abandoned or foreclosed upon, in order to sell, rent, or redevelop such homes; (iv)establish land banks for homes that have been foreclosed upon; and (v)demolish blighted structures. (B)

Limitation

Any funds used under this section for the purchase of an abandoned or foreclosed upon home shall be at a discount from cost equal to or less than the current market appraised value of the home, taking into account its current condition, and such discount appraisal shall ensure that purchasers are paying below-market value for the homes as part of a broader neighborhood stabilization strategy. (d)

Rule of construction

Amounts appropriated or otherwise made available to States and units of general local government under this section shall be treated as though such funds were community development block grant funds under title I of the Housing and Community Development Act of 1974. (e)

Waiver authority

In administering any amounts appropriated or otherwise made available under this section, the Secretary of Housing and Urban Development may waive, or specify alternative requirements for, any provision of any statute or regulation that the Secretary administers in connection with the obligation by the Secretary or the use by the recipient of such funds (except for requirements related to fair housing, nondiscrimination, labor standards, and the environment), in order to expedite or facilitate the use of such funds. (f)

Periodic audits

In consultation with the Secretary of Housing and Urban Development, the Comptroller General of the United States shall conduct periodic audits to ensure that funds appropriated, made available, or otherwise distributed under this title are being used in a manner consistent with the criteria provided in this title. (g)

Across-the-board rescissions in non-defense, non-homeland-security discretionary spending for fiscal year 2009

(1)

Across-the-board rescissions

There is hereby rescinded an amount equal to 0.25 percent of— (A)the budget authority provided (or obligation limitation imposed) for fiscal year 2009 for any non-defense, non-homeland-security discretionary account in any fiscal year 2009 appropriation Act; (B)the budget authority provided in any advance appropriation for fiscal year 2009 for any non-defense, non-homeland-security discretionary account in any prior fiscal year appropriation Act; and (C)the contract authority provided in fiscal year 2009 for any program that is subject to a limitation contained in any fiscal year 2009 appropriation Act for any non-defense, non-homeland-security discretionary account. (2)

Non-defense, Non-homeland-security discretionary account

For purposes of paragraph (1), the term non-defense, non-homeland security discretionary account means any discretionary account, other than— (A)any account included in a Department of Defense Appropriations Act; (B)any account included in a Department of Homeland Security Appropriations Act; (C)any account of the Department of Defense included in a Military Quality of Life and Veterans Affairs Appropriations Act; or (D)any account for Department of Energy defense activities included in an Energy and Water Development Appropriations Act. (3)

Proportionate application

Any rescission made by paragraph (1) shall be applied proportionately— (A)to each discretionary account and each item of budget authority described in such paragraph; and (B)within each such account and item, to each program, project, and activity (with programs, projects, and activities as delineated in the appropriation Act or accompanying reports for the relevant fiscal year covering such account or item, or for accounts and items not included in appropriation Acts, as delineated in the most recently submitted President's budget). (4)

Subsequent appropriation laws

In the case of any fiscal year 2009 appropriation Act enacted after the enactment of this subsection, any rescission required by paragraph (1) shall take effect immediately after the enactment of such Act.

6.

Enhanced mortgage loan disclosures

(a)

In general

The Truth In Lending Act (15 U.S.C. 1601 et seq.) is amended by inserting after section 129 the following new section:

129A.

Enhanced mortgage loan disclosures

(a)

Definitions

As used in this section, the term home mortgage loan means any consumer credit transaction in which a security interest is or will be retained or acquired in any real property located in the United States which is or, upon completion of the transaction, will be used as the principle residence of the consumer. (b)

Disclosures for mortgage loans

(1)

In general

Subject to the rules of the Board, with respect to a home mortgage loan, the creditor shall disclose to the consumer, in addition to any other disclosures required under this title, a good faith estimate of— (A)the amount of the loan; (B)the term of the loan; (C)the annual percentage rate of interest for the loan if such rate is fixed; (D)the annual percentage rate of interest for the loan if such rate is variable, provided that for such a variable rate the creditor also discloses— (i)the initial interest rate; (ii)the duration of the initial interest rate; (iii)the date on which the interest rate will be adjusted or reset; (iv)the fully indexed rate (expressed as an estimate of the interest rate after it is adjusted or reset); and (v)an estimate of the maximum possible applicable annual percentage rate of interest, including language expressing that if there is no maximum rate, the applicable State usury rate shall be disclosed; (E)any prepayment fees or penalties that may be imposed with respect to the loan, including— (i)the amount of such fee or penalty; and (ii)a brief description, in plain English, of the circumstances or events which would trigger the imposition of the prepayment fee or penalty; (F)any balloon payment that may be required with respect to the loan, including— (i)the date on which the balloon payment is due, and the estimated amount of the balloon payment; and (ii)a brief statement, in plain English, that a balloon payment mortgage does not fully pay off the loan, that a large balloon payment of the remaining principal will be required at the end of the loan term, and that many borrowers must secure another loan to make the balloon payment; (G)whether or not the creditor automatically provides for the escrow of taxes and insurance; and (H)the total settlement costs, including if the consumer shall be required to maintain private mortgage insurance or take out a subordinate lien mortgage or deed of trust (also referred to as a piggyback loan) on the real property securing the loan to cover the cost of acquiring the property. (2)

Range for estimate

The disclosure required under paragraph (1)(H) of the good faith estimate of the total settlement costs of a home mortgage loan shall indicate whether such estimated costs are or are not guaranteed to come within 10 percent of the actual final settlement costs related to the loan, subject to approval of such terms by the consumer and the appraisal of the real property securing the loan. (c)

Timing of disclosures

The disclosures required by this section shall be provided to the consumer at the time of approval of the home mortgage loan, but in no case later than 7 days before the date on which the home mortgage loan is consummated. (d)

Format

The disclosures required by this section shall be presented to the consumer— (1)in plain English; (2)to the extent possible, as a 1-page, single document; and (3)when provided in conjunction with or at the same time as other required written disclosures, as the first of such documents. (e)

Tolerances for accuracy

The provisions of section 106(f), relating to tolerances for accuracy, and any rules of the Board issued under that subsection, shall apply to disclosures required under this section.

. (b)

Amendment to Real Estate Settlement Procedures

Section 4 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2603) is amended by adding at the end the following: (c)

Truth in lending act disclosures

The form required under section 129A of the Truth in Lending Act shall be provided to the borrower at the time of settlement by the person conducting the settlement, in addition to any other disclosures required by this Act. In no case may a federally related mortgage loan be consummated if such form has not been provided to the borrower, both at the time of the approval of the loan, in accordance with that section 129A, and at settlement. .

7.

Calculation of finance charge and APR

(a)

Calculation of finance charge

Section 106 of the Truth in Lending Act (15 U.S.C. 1605) is amended— (1)in subsection (a), by adding at the end of the last sentence the following: (F)Settlement costs. ; (2)by striking subsection (e); and (3)by redesignating subsection (f) as subsection (e). (b)

Calculation of APR

Section 107 of the Truth in Lending Act (15 U.S.C. 1606) is amending by adding at the end the following: (f)

Extensions of credit secured by an interest in real property

In the case of any extension of credit secured by an interest in real property, the annual percentage rate applicable to such extension of credit shall include any settlement costs applicable in the determination of the finance charge in connection with such extension of credit. .

8.

Registration of GSEs under securities laws

(a)

Fannie Mae

(1)

Mortgage-backed securities

Section 304(d) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1719(d)) is amended by striking the fourth sentence and inserting the following: Securities issued by the corporation under this subsection shall not be exempt securities for purposes of the Securities Act of 1933.. (2)

Subordinate obligations

Section 304(e) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1719(e)) is amended by striking the fourth sentence and inserting the following: Obligations issued by the corporation under this subsection shall not be exempt securities for purposes of the Securities Act of 1933.. (3)

Securities

Section 311 of the Federal National Mortgage Association Charter Act (12 U.S.C. 1723c) is amended— (A)in the section heading, by striking association; (B)by inserting (a) In General.— after Sec. 311.; (C)in the second sentence, by inserting by the Association after issued; and (D)by adding at the end the following: (b)

Treatment of corporation securities

(1)

In general

Any stock, obligations, securities, participations, or other instruments issued or guaranteed by the corporation pursuant to this title shall not be exempt securities for purposes of the Securities Act of 1933. (2)

Exemption for approved sellers

Notwithstanding any other provision of this title or the Securities Act of 1933, transactions involving the initial disposition by an approved seller of pooled certificates that are acquired by that seller from the corporation upon the initial issuance of the pooled certificates shall be deemed to be transactions by a person other than an issuer, underwriter, or dealer for purposes of the Securities Act of 1933. (3)

Definitions

For purposes of this subsection, the following definitions shall apply: (A)

Approved seller

The term approved seller means an institution approved by the corporation to sell mortgage loans to the corporation in exchange for pooled certificates. (B)

Pooled certificates

The term pooled certificates means single class mortgage-backed securities guaranteed by the corporation that have been issued by the corporation directly to the approved seller in exchange for the mortgage loans underlying such mortgage-backed securities. (4)

Mortgage related securities

A single class mortgage-backed security guaranteed by the corporation that has been issued by the corporation directly to the approved seller in exchange for the mortgage loans underlying such mortgage-backed securities or directly by the corporation for cash shall be deemed to be a mortgage related security, as defined in section 3(a) of the Securities Exchange Act of 1934. . (b)

Freddie Mac

Section 306(g) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1455(g)) is amended to read as follows: (g)

Treatment of securities

(1)

In general

Any securities issued or guaranteed by the Corporation shall not be exempt securities for purposes of the Securities Act of 1933. (2)

Exemption for approved sellers

Notwithstanding any other provision of this title or the Securities Act of 1933, transactions involving the initial disposition by an approved seller of pooled certificates that are acquired by that seller from the Corporation upon the initial issuance of the pooled certificates shall be deemed to be transactions by a person other than an issuer, underwriter, or dealer for purposes of the Securities Act of 1933. (3)

Definitions

For purposes of this subsection, the following definitions shall apply: (A)

Approved seller

The term approved seller means an institution approved by the Corporation to sell mortgage loans to the Corporation in exchange for pooled certificates. (B)

Pooled certificates

The term pooled certificates means single class mortgage-backed securities guaranteed by the Corporation that have been issued by the Corporation directly to the approved seller in exchange for the mortgage loans underlying such mortgage-backed securities. . (c)

Limitation on fees

Section 6(b)(2) of the Securities Act of 1933 (15 U.S.C. 77f(b)(2)) is amended by adding at the end the following: Notwithstanding any other provision of this title, no applicant, or group of affiliated applicants that does not include any investment company registered under the Investment Company Act of 1940, filing a registration statement subject to a fee shall be required in any fiscal year with respect to all registration statements filed by such applicant in such fiscal year to pay an aggregate amount in fees to the Commission pursuant to this subsection in an amount that exceeds 5 percent of the target offsetting collection amount for such fiscal year. Fees paid in connection with registration statements relating to business combinations shall not be included in calculating the total fees paid by any such applicant.. (d)

No effect on other law

Nothing in this section or the amendments made by this section shall be construed to affect any exemption from the provisions of the Trust Indenture Act of 1939 provided to the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation. (e)

Regulations

The Securities and Exchange Commission may issue such regulations as may be necessary or appropriate to carry out this section and the amendments made by this section. (f)

Establishment of financial counseling and foreclosure prevention fund

(1)

Establishment

There is established in the Securities and Exchange Commission a Financial Counseling and Foreclosure Prevention Fund (in this subsection referred to as the Fund), which shall be used by the Commission to provide assistance to the Neighborhood Reinvestment Corporation to make grants to counseling intermediaries approved by the Department of Housing and Urban Development or the Neighborhood Reinvestment Corporation to provide mortgage foreclosure mitigation assistance primarily to States and areas with high rates of defaults and foreclosures, as authorized by the Neighborhood Reinvestment Corporation Act (42 U.S.C. 8101–8107). (2)

Deposits

The Fund established under subsection (a) shall consist of any registration fees paid by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation to the Securities and Exchange Commission pursuant to section 6 of the Securities Act of 1933 (15 U.S.C. 77f). (3)

Management of Fund

The Fund shall be administered and managed by the Securities and Exchange Commission, which shall establish reasonable and prudent criteria for the management and operation of any amounts in the Fund.