[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 3738 Introduced in Senate (IS)]







110th CONGRESS
  2d Session
                                S. 3738

 To amend the Truth in Lending Act to permit deferrals on certain home 
mortgage foreclosures for a limited period to allow homeowners to take 
remedial action, to require home mortgage servicers to provide advance 
  notice of any upcoming reset of the mortgage interest rate, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

            December 11 (legislative day, December 10), 2008

 Mr. Menendez introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
 To amend the Truth in Lending Act to permit deferrals on certain home 
mortgage foreclosures for a limited period to allow homeowners to take 
remedial action, to require home mortgage servicers to provide advance 
  notice of any upcoming reset of the mortgage interest rate, 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 ``Home Retention and Economic 
Stabilization Act of 2008''.

SEC. 2. FORECLOSURE DEFERMENT.

    (a) In General.--Chapter 2 of the Truth in Lending Act (15 U.S.C. 
1631 et seq.) is amended by inserting after section 128 the following 
new section:
``Sec. 128A. Foreclosure deferment and reset notification for certain 
              mortgages
    ``(a) Definitions.--For purposes of this section, the following 
definitions shall apply:
            ``(1) Deferment payment amount.--The term `deferment 
        payment amount' means the amount of the monthly payment that is 
        due on an eligible deferred-foreclosure mortgage during the 
        deferment period.
            ``(2) Deferment period.--The term `deferment period' means 
        the period that--
                    ``(A) begins when the eligible deferred-foreclosure 
                consumer sends notice of the exercise of the deferral 
                right under subsection (b)(1) with respect to an 
                eligible deferred-foreclosure mortgage to the creditor 
                or servicer; and
                    ``(B) ends on the earliest of the following 
                applicable dates:
                            ``(i) The date that is 270 days after the 
                        beginning of the period.
                            ``(ii) The end of the 30-day period 
                        beginning on any due date for any deferment 
                        payment (on such mortgage, in accordance with 
                        this section) which remains unpaid as of the 
                        end of such 30-day period.
                            ``(iii) The date on which the creditor or 
                        servicer enters into a qualified loan 
                        modification with the consumer.
                            ``(iv) The date on which the deferment is 
                        terminated by judicial order.
            ``(3) Deferment period trigger.--The term `deferment period 
        trigger' means the date on which the consumer becomes eligible 
        for a deferment under subsection (b)(1) with respect to an 
        eligible deferred-foreclosure mortgage and occurs--
                    ``(A) in the case of a subprime mortgage, on the 
                earlier of the date of any adjustment or reset of the 
                interest rate on such mortgage or the date by which the 
                consumer is 60 days delinquent on mortgage payments; 
                and
                    ``(B) in the case of a negative amortization 
                mortgage, the date of the first increase in the minimum 
                monthly payment due under such mortgage after the 
                origination of such mortgage.
            ``(4) Eligible deferred-foreclosure mortgage.--The term 
        `eligible deferred-foreclosure mortgage' means a subprime 
        mortgage or a negative amortization mortgage, that was entered 
        into before January 1, 2008, and has reached the deferment 
        period trigger.
            ``(5) Eligible deferred-foreclosure consumer.--The term 
        `eligible deferred-foreclosure consumer' means a consumer who--
                    ``(A) is a mortgagor on an eligible deferred-
                foreclosure mortgage;
                    ``(B) has resided at the property secured by such 
                mortgage since the mortgage transaction was entered 
                into and intends to reside at such property at least 
                until the end of the deferment period;
                    ``(C) has a current monthly income that, when 
                multiplied by 12, is less than 200 percent of the area 
                median annual income for the relevant family size in 
                the State in which the residence is located; and
                    ``(D) during the deferment period, responds to 
                reasonable inquiries from a creditor or servicer with 
                respect to an eligible deferred-foreclosure mortgage.
            ``(6) Negative amortization mortgage.--The term `negative 
        amortization mortgage' means a consumer credit transaction 
        secured by the consumer's principal residence with the 
        potential for negative amortization of the outstanding 
        principal balance and under which the minimum monthly payment 
        of principal and interest required increases after the date of 
        origination.
            ``(7) Qualified loan modification.--
                    ``(A) In general.--The term `qualified loan 
                modification' means a permanent, sustainable loan 
                modification.
                    ``(B) FDIC regulations.--Not later than 60 days 
                after the date of enactment of the Home Retention and 
                Economic Stabilization Act of 2008, the Chair of the 
                Federal Deposit Insurance Corporation shall promulgate 
                rules establishing under what circumstances a loan 
                modification will qualify as permanent and sustainable.
            ``(8) Subprime mortgage.--The term `subprime mortgage' 
        means--
                    ``(A) any residential mortgage loan that 
                constitutes a first lien on the dwelling or real 
                property securing the loan and either--
                            ``(i) has an annual percentage rate that 
                        equals or exceeds the yield on securities 
                        issued by the Secretary of the Treasury under 
                        chapter 31 of title 31, United States Code, 
                        that bear comparable periods of maturity by 
                        more than 3 percentage points; or
                            ``(ii) has an annual percentage rate that 
                        equals or exceeds the most recent conventional 
                        mortgage rate, or such other annual percentage 
                        rate as may be established by the Board by 
                        regulation, by more than 175 basis points; and
                    ``(B) any residential mortgage loan that is not the 
                first lien on the dwelling or real property securing 
                the loan and either--
                            ``(i) has an annual percentage rate that 
                        equals or exceeds the yield on securities 
                        issued by the Secretary of the Treasury under 
                        chapter 31 of title 31, United States Code, 
                        that bear comparable periods of maturity by 
                        more than 5 percentage points; or
                            ``(ii) has an annual percentage rate that 
                        equals or exceeds the most recent conventional 
                        mortgage rate, or such other annual percentage 
                        rate as may be established by the Board by 
                        regulation, by more than 375 basis points.
    ``(b) Right to Deferment of Institution of or Action on 
Foreclosure.--
            ``(1) Right established.--Any eligible deferred-foreclosure 
        consumer shall have the right to defer any initiation of a 
        foreclosure, whether judicial or nonjudicial, or any action in 
        connection with a foreclosure already instituted, including any 
        foreclosure sale, with respect to any eligible deferred-
        foreclosure mortgage by any creditor, servicer, or holder of 
        such mortgage, or any other person acting on behalf of any such 
        creditor, servicer, or holder, until the end of the deferment 
        period.
            ``(2) Enforcement of right.--An eligible deferred-
        foreclosure consumer may defend against a foreclosure or bring 
        an action in any court of competent or general jurisdiction to 
        compel compliance with the right of the consumer under 
        paragraph (1) to defer any initiation of a foreclosure or any 
        action in connection with a foreclosure already instituted, 
        including any foreclosure sale, with respect to any eligible 
        deferred-foreclosure mortgage.
    ``(c) Notice to Consumer Before Any Foreclosure Action.--
            ``(1) Notice of right required.--Before initiating any 
        foreclosure with respect to any eligible deferred-foreclosure 
        mortgage, the creditor or servicer shall notify, by personal 
        service, any eligible deferred-foreclosure consumer with 
        respect to such mortgage of such consumer's right under 
        subsection (b) to defer the initiation of foreclosure.
            ``(2) Contents of notice.--The Board shall prescribe, by 
        regulations under sections 105 and 122, the content and format, 
        including the size of the font, of the notices under paragraph 
        (1) in a manner that maximizes the likelihood that the consumer 
        will obtain and understand all the information necessary to 
        exercise the right to defer any action to institute 
        foreclosure, including--
                    ``(A) the manner and format for obtaining such 
                deferral, including a sample notice form, an 
                identification form, and a certification form for the 
                consumer to use in complying with subsection (d)(1);
                    ``(B) contact information for the creditor or 
                servicer, as the case may be and any third party 
                involved in foreclosure proceedings, including State or 
                local officials; and
                    ``(C) contact information for obtaining any 
                counseling concerning the exercise of such deferral 
                from a counselor approved by the appropriate State 
                housing finance agency or the Secretary of Housing and 
                Urban Development.
            ``(3) Timing.--No foreclosure action or proceeding with 
        respect to any eligible deferred-foreclosure mortgage shall be 
        valid unless the creditor or servicer has provided the notice 
        required under this subsection to the consumer at least 30 days 
        before instituting any such action or proceeding and at least 
        once during each subsequent 30-day period until the foreclosure 
        becomes final.
    ``(d) Institution of Deferment.--
            ``(1) Procedure required.--Any eligible deferred-
        foreclosure consumer who chooses to exercise a deferment right 
        under subsection (b) shall provide--
                    ``(A) notice of the exercise of such to the 
                servicer or other person described in the notice to the 
                consumer under subsection (e) by any reasonable means 
                including by mail, service whether directly or to any 
                agent, including at the address of any registered 
                agent;
                    ``(B) a clear identification of the eligible 
                deferred-foreclosure consumer and the address of the 
                property securing the mortgage; and
                    ``(C) a certification that at least 1 consumer 
                borrower with respect to such mortgage resides at the 
                property secured by such mortgage and intends to reside 
                at such property at least until the end of the 
                deferment period.
            ``(2) Sufficiency of notice.--
                    ``(A) In general.--Notice and delivery of an 
                affidavit under paragraph (1) may be made by any 
                reasonable means including by mail, service whether 
                directly or to any agent, including at the address of 
                any registered agent with the secretary of state for 
                the State in which the property is located, or any 
                attorney representing the consumer, or by such means as 
                the terms of the mortgage or regulations prescribed by 
                the Board may provide.
                    ``(B) Other parties.--If any court, any sheriff or 
                other official designated under State law, or any other 
                person authorized under State law and the contracts of 
                the parties to maintain any foreclosure proceeding or 
                conduct any foreclosure sale receives, directly or 
                indirectly, a copy of any notice provided under this 
                subsection by an eligible deferred-foreclosure consumer 
                with respect to any eligible deferred-foreclosure 
                mortgage, no foreclosure action may be taken by the 
                court, sheriff, official, or other person with respect 
                to such mortgage during the applicable deferred-
                foreclosure period.
            ``(3) Acknowledgment.--
                    ``(A) In general.--Any creditor, servicer, or 
                holder of an eligible deferred-foreclosure mortgage, or 
                any other person acting on behalf of any such creditor, 
                servicer, or holder, who receives a notice from a 
                consumer under paragraph (2) shall acknowledge to the 
                consumer the receipt of the notice of the exercise of 
                the deferment right under subsection (b) before the end 
                of the 10-business day period beginning on the date of 
                such receipt.
                    ``(B) Contents of notice.--The acknowledgment 
                provided to any eligible deferred-foreclosure consumer 
                under subparagraph (A) shall include the date on which 
                the next payment is due on the eligible deferred-
                foreclosure mortgage, the deferment payment amount, the 
                date on which each subsequent payment is due, and the 
                address or the delivery method for each such payment 
                that is acceptable to the recipient.
            ``(4) Monthly payment notices.--Each periodic statement of 
        account submitted by the creditor or servicer with respect to 
        any eligible deferred-foreclosure mortgage during the period 
        while any deferment right under subsection (b) is in effect 
        shall include--
                    ``(A) the due date and the amount of the next 
                payment due on such mortgage;
                    ``(B) the address or the delivery method for such 
                payment;
                    ``(C) the date on which the deferral of the 
                foreclosure will terminate; and
                    ``(D) a notice that failure to make such payment in 
                a timely manner will jeopardize the continuation of the 
                deferral of the foreclosure.
    ``(e) Deferment Payment.--
            ``(1) In general.--During the deferment period with respect 
        to any eligible deferred-foreclosure mortgage for which any 
        deferment right has been exercised under subsection (b), 
        monthly payments shall continue to be made by the consumer with 
        respect to such mortgage.
            ``(2) Amount of payment.--The deferment payment amount for 
        purposes of monthly payments under paragraph (1) with respect 
        to any eligible deferred-foreclosure mortgage shall be--
                    ``(A) in the case of any subprime mortgage, the 
                lesser of--
                            ``(i) the minimum monthly payment of 
                        principal and interest on the date the loan was 
                        originated; or
                            ``(ii) a monthly payment based on the 
                        outstanding loan principal plus a rate of 
                        interest calculated at a fixed annual 
                        percentage rate, in an amount equal to the most 
                        recent conventional mortgage rate plus a 100 
                        basis point premium for risk, amortized over a 
                        period of 30 years minus the period of time 
                        since the origination of the loan; and
                    ``(B) in the case of any negative amortization 
                mortgage, the amount of the first minimum monthly 
                payment due under the mortgage after the origination of 
                such mortgage.
            ``(3) Amortization of difference.--The difference between 
        the amount of any monthly payment due under the terms of any 
        eligible deferred-foreclosure mortgage and the deferment 
        payment amount shall be amortized over the life of the mortgage 
        beginning after the deferred-foreclosure period in accordance 
        with regulations which the Board shall prescribe.
            ``(4) Charges prohibited.--No creditor or servicer may 
        impose any late fee or other fee or charge during the deferment 
        period with respect to any eligible deferred-foreclosure 
        mortgage for which any deferment right has been exercised under 
        subsection (b) or in connection with the exercise of such 
        deferment right.
    ``(f) Notice of Reset and Alternatives.--During the 1-month period 
that ends 120 days before the date on which, in the case of a subprime 
mortgage, the interest rate in effect during the introductory period of 
the mortgage adjusts or resets to a variable interest rate, or in the 
case of a negative amortization mortgage, the minimum monthly payment 
of principal and interest required first increases from the amount of 
the first such minimum monthly payment due under the mortgage after the 
origination of such mortgage, the creditor or servicer of such loan 
shall provide a written notice, separate and distinct from all other 
correspondence to the consumer, that includes the following:
            ``(1) Any index or formula used--
                    ``(A) in the case of any subprime mortgage, in 
                determining the annual percentage rate applicable as of 
                the effective date of such reset or adjustment; and
                    ``(B) in the case of any negative amortization 
                mortgage, in making increases in the minimum monthly 
                payments due, and a source of information about the 
                index or formula.
            ``(2) A good faith estimate, based on accepted industry 
        standards and disclosed in a clear and conspicuous manner, of 
        the creditor or servicer of the amount of the monthly payment 
        that will apply after the date of the adjustment or reset, or 
        increase, as applicable, and the assumptions on which this 
        estimate is based.
            ``(3) A list of alternatives consumers may pursue before 
        the date of adjustment or reset, or increase, as applicable, 
        and descriptions of the actions consumers must take to pursue 
        these alternatives, including--
                    ``(A) refinancing;
                    ``(B) renegotiation of loan terms;
                    ``(C) payment forbearances;
                    ``(D) pre-foreclosure sales; and
                    ``(E) any payment assistance available from the 
                State in which the property is located.
            ``(4) The names, addresses, telephone numbers, and Internet 
        addresses of counseling agencies or programs reasonably 
        available to the consumer that have been certified or approved 
        and made publicly available by the Secretary of Housing and 
        Urban Development or a State housing finance authority (as 
        defined in section 1301 of the Financial Institutions Reform, 
        Recovery, and Enforcement Act of 1989).
            ``(5) The address, telephone number, and Internet address 
        for the State housing finance authority (as so defined) for the 
        State in which the consumer resides.
    ``(g) Most Recent Conventional Mortgage Rate.--For purposes of 
subsection (f)(1)(A)(ii), the term `most recent conventional mortgage 
rate' means the contract interest rate on commitments for fixed-rate 
first mortgages most recently published in the Federal Reserve 
Statistical Release on selected interest rates (daily or weekly), and 
commonly referred to as the H.15 release (or any successor 
publication), in the week preceding a date of determination for 
purposes of applying this subsection.
    ``(h) Duty of Consumer To Maintain Property.--
            ``(1) In general.--Any eligible deferred-foreclosure 
        consumer for whom a deferment of foreclosure is in effect under 
        this section with respect to any eligible deferred-foreclosure 
        mortgage may not, with respect to any property securing such 
        mortgage, destroy, damage, or impair such property, allow the 
        property to deteriorate, or commit waste on the property.
            ``(2) Enforcement.--Any consumer may be liable to any 
        creditor or servicer for any violation of paragraph (1) under 
        section 130(a)(1) and for such purposes section 130(a) shall be 
        applied by substituting `consumer' for `creditor' each place 
        such term appears.
    ``(i) Declaration of Rights.--In addition to the right of any party 
to a mortgage to seek a declaratory judgment under section 2201 of 
title 28, United States Code, any such party may apply prior to the end 
of the deferment period to any State court of competent or general 
jurisdiction for an order establishing the rights, duties, and 
conditions imposed on or applicable to any party to the mortgage, 
including the terms and conditions of a deferment.
    ``(j) Coordination With State Law.--
            ``(1) In general.--No provision of this section shall be 
        construed as annulling, altering, or affecting the laws of any 
        State relating to deferment of foreclosures, except to the 
        extent that those laws are inconsistent with the provisions of 
        this section, and then only to the extent of the inconsistency.
            ``(2) Rule of construction.--A State law is not 
        inconsistent with this section if the protection such law 
        affords any consumer is greater than the protection afforded by 
        this subsection.''.
    (b) Clerical Amendment.--The table of sections for chapter 2 of the 
Truth in Lending Act is amended by inserting after the item relating to 
section 128 the following new item:

``128A. Foreclosure deferment and reset notification for certain 
                            mortgages.''.

SEC. 3. AUTHORIZATION OF APPROPRIATIONS FOR HOUSING COUNSELING.

    There is authorized to be appropriated for fiscal year 2008, 
$200,000,000 for the Neighborhood Reinvestment Corporation, for 
carrying out foreclosure mitigation activities under the terms and 
conditions contained in the second paragraph under the heading 
``Neighborhood Reinvestment Corporation--Payment to the Neighborhood 
Reinvestment Corporation'' in title III of division K of Public Law 
110-161 (121 Stat. 2441), which may include use for costs of providing 
additional counselors, translators, and other staffers and costs of 
providing additional computers and improving databases and overall 
operations to better assist mortgagor families.
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