I 111th CONGRESS 1st Session H. R. 1231 IN THE HOUSE OF REPRESENTATIVES February 26, 2009 Ms. Moore of Wisconsin (for herself and Mr. Frank of Massachusetts) introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the Committee on Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To protect the property and security of homeowners who are subject to foreclosure proceedings, and for other purposes.

1.

Short title

This Act may be cited as the Foreclosure Rescue Fraud Act of 2009.

2.

Definitions

For purposes of this Act, the following definitions shall apply: (1)

Commission

The term Commission means the Federal Trade Commission. (2)

Foreclosure consultant

The term foreclosure consultant— (A)means a person who makes any solicitation, representation, or offer to a homeowner facing foreclosure on residential real property to perform, for gain, or who performs, for gain, any service that such person represents will prevent, postpone, or reverse the effect of such foreclosure; and (B)does not include— (i)an attorney licensed to practice law in the State in which the property is located who has established an attorney-client relationship with the homeowner; (ii)a person licensed as a real estate broker or salesperson in the State where the property is located, and such person engages in acts permitted under the licensure laws of such State; (iii)a housing counseling agency approved by the Secretary; (iv)a depository institution (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)); (v)a Federal credit union or a State credit union (as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752)); or (vi)an insurance company organized under the laws of any State. (3)

Homeowner

The term homeowner, with respect to residential real property for which an action to foreclose on the mortgage or deed of trust on such real property is filed, means the person holding record title to such property as of the date on which such action is filed. (4)

Loan servicer

The term loan servicer has the same meaning as the term servicer in section 6(i)(2) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605(i)(2)). (5)

Residential mortgage loan

The term residential mortgage loan means any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling (as defined in section 103(v) of the Truth in Lending Act (15 U.S.C. 1602(v)) or residential real estate upon which is constructed or intended to be constructed a dwelling (as so defined). (6)

Residential real property

The term residential real property has the meaning given the term dwelling in section 103 of the Consumer Credit Protection Act (15 U.S.C. 1602). (7)

Secretary

The term Secretary means the Secretary of Housing and Urban Development.

3.

Mortgage rescue fraud protection

(a)

Limits on foreclosure consultants

A foreclosure consultant may not— (1)claim, demand, charge, collect, or receive any compensation from a homeowner for services performed by such foreclosure consultant with respect to residential real property until such foreclosure consultant has fully performed each service that such foreclosure consultant contracted to perform or represented would be performed with respect to such residential real property; (2)hold any power of attorney from any homeowner, except to inspect documents, as provided by applicable law; (3)receive any consideration from a third party in connection with services rendered to a homeowner by such third party with respect to the foreclosure of residential real property, unless such consideration is fully disclosed, in a clear and conspicuous manner, to such homeowner in writing before such services are rendered; (4)accept any wage assignment, any lien of any type on real or personal property, or other security to secure the payment of compensation with respect to services provided by such foreclosure consultant in connection with the foreclosure of residential real property; or (5)acquire any interest, directly or indirectly, in the residence of a homeowner with whom the foreclosure consultant has contracted. (b)

Contract requirements

(1)

Written contract required

Notwithstanding any other provision of law, a foreclosure consultant may not provide to a homeowner a service related to the foreclosure of residential real property— (A)unless— (i)a written contract for the purchase of such service has been signed and dated by the homeowner; and (ii)such contract complies with the requirements described in paragraph (2); and (B)before the end of the 3-business-day period beginning on the date on which the contract is signed. (2)

Terms and conditions of contract

The requirements described in this paragraph, with respect to a contract, are as follows: (A)The contract includes, in writing— (i)a full and detailed description of the exact nature of the contract and the total amount and terms of compensation; (ii)the name, physical address, phone number, e-mail address, and facsimile number, if any, of the foreclosure consultant to whom a notice of cancellation can be mailed or sent under subsection (d); and (iii)a conspicuous statement in at least 12-point boldface type in immediate proximity to the space reserved for the homeowner’s signature on the contract that reads as follows: You may cancel this contract without penalty or obligation at any time before midnight of the 3rd business day after the date on which you sign the contract. See the attached notice of cancellation form for an explanation of this right.. (B)The contract is written in the principal language used to solicit or market the services to the homeowner. (C)The contract is accompanied by the form required by subsection (c)(2). (c)

Right To cancel contract

(1)

In general

With respect to a contract between a homeowner and a foreclosure consultant regarding the foreclosure on the residential real property of such homeowner, such homeowner may cancel such contract without penalty or obligation by mailing a notice of cancellation not later than midnight of the 3rd business day after the date on which such contract is executed or would become enforceable against the parties to such contract. (2)

Cancellation form and other information

Each contract described in paragraph (1) shall be accompanied by a form, in duplicate, that— (A)has the heading Notice of Cancellation in boldface type; and (B)contains in boldface type the following statement: You may cancel this contract, without any penalty or obligation, at any time before midnight of the 3rd day after the date on which the contract is signed by you. To cancel this contract, mail or deliver a signed and dated copy of this cancellation notice or any other equivalent written notice to [insert name of foreclosure consultant] at [insert address of foreclosure consultant] before midnight on [insert date]. I hereby cancel this transaction on [insert date] [insert homeowner signature]. . (d)

Waiver of rights and protections prohibited

(1)

In general

A waiver by a homeowner of any protection provided by this section or any right of a homeowner under this section— (A)shall be treated as void; and (B)may not be enforced by any Federal or State court or by any person. (2)

Attempt to obtain a waiver

Any attempt by any person to obtain a waiver from any homeowner of any protection provided by this section or any right of the homeowner under this section shall be treated as a violation of this section. (3)

Contracts not in compliance

Any contract that does not comply with the applicable provisions of this Act shall be void and may not be enforceable by any party.

4.

Warnings to homeowners of foreclosure rescue scams

(a)

In general

If a loan servicer finds that a homeowner has failed to make 2 consecutive payments on a residential mortgage loan and such loan is at risk of being foreclosed upon, the loan servicer shall notify such homeowner of the dangers of fraudulent activities associated with foreclosure. (b)

Notice requirements

Each notice provided under subsection (a) shall— (1)be in writing; (2)be included with a mailing of account information; (3)have the heading Notice Required by Federal Law in a 14-point boldface type in English and Spanish at the top of such notice; and (4)contain the following statement in English and Spanish: Mortgage foreclosure is a complex process. Some people may approach you about saving your home. You should be careful about any such promises. There are government and nonprofit agencies you may contact for helpful information about the foreclosure process. Contact your lender immediately at [____], call the Department of Housing and Urban Development Housing Counseling Line at (800) 569–4287 to find a housing counseling agency certified by the Department to assist you in avoiding foreclosure, or visit the Department's Tips for Avoiding Foreclosure website at http://www.hud.gov/foreclosure for additional assistance. (the blank space to be filled in by the loan servicer and successor telephone numbers and Uniform Resource Locators (URLs) for the Department of Housing and Urban Development Housing Counseling Line and Tips for Avoiding Foreclosure website, respectively.).

5.

Civil liability

(a)

In general

Any foreclosure consultant who fails to comply with any provision of section 3 or 4 with respect to any other person shall be liable to such person in an amount equal to the greater of— (1)the amount of any actual damage sustained by such person as a result of such failure; or (2)any amount paid by the person to the foreclosure consultant. (b)

Attorneys' fees

In the case of any successful action to enforce any liability under subsection (a), the foreclosure consultant shall also be liable to the person in an amount equal to the costs of the action, together with reasonable attorneys' fees.

6.

Administrative enforcement

(a)

Enforcement by Federal Trade Commission

(1)

Unfair or deceptive act or practice

A violation of a prohibition described in section 3 or a failure to comply with any provision of section 3 or 4 shall be treated as a violation of a rule defining an unfair or deceptive act or practice promulgated under section 18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B)). (2)

Actions by the Federal Trade Commission

The Federal Trade Commission shall enforce the provisions of sections 3 and 4 in the same manner, by the same means, and with the same jurisdiction, powers, and duties as though all applicable terms and provisions of the Federal Trade Commission Act (15 U.S.C. 41 et seq.) were incorporated into and made part of this Act. (b)

State action for violations

(1)

Authority of States

In addition to such other remedies as are provided under State law, whenever the chief law enforcement officer of a State, or an official or agency designated by a State, has reason to believe that any person has violated or is violating the provisions of section 3 or 4, the State— (A)may bring an action to enjoin such violation in any appropriate United States district court or any other court of competent jurisdiction; (B)may bring an action on behalf of its residents to recover damages for which the person is liable to such residents under section 5 as a result of the violation; and (C)in the case of any successful action under subparagraph (A) or (B), shall be awarded the costs of the action. (2)

Rights of Federal Trade Commission

(A)

Notice to commission

The State shall serve prior written notice of any civil action under paragraph (1) upon the Commission and provide the Commission with a copy of its complaint, except in any case in which such prior notice is not feasible, in which case the State shall serve such notice immediately upon instituting such action. (B)

Intervention

The Commission shall have the right— (i)to intervene in any action referred to in subparagraph (A); (ii)upon so intervening, to be heard on all matters arising in the action; (iii)to remove the action to the appropriate United States district court; and (iv)to file petitions for appeal in such actions. (3)

Investigatory powers

For purposes of bringing any action under this subsection, nothing in this subsection shall prevent the chief law enforcement officer, or an official or agency designated by a State, from exercising the powers conferred on the chief law enforcement officer or such official by the laws of such State to conduct investigations or to administer oaths or affirmations, or to compel the attendance of witnesses or the production of documentary and other evidence. (4)

Limitation

Whenever the Federal Trade Commission has instituted a civil action for a violation of section 3 or 4, no State may, during the pendency of such action, bring an action under this section against any defendant named in the complaint of the Commission for any violation of section 3 or 4 that is alleged in that complaint.

7.

Preemption

No provision of this Act shall be construed as affecting any provision of State or local law respecting any foreclosure consultant, residential mortgage loan, or residential real property that provides equal or greater protection to homeowners than what is provided under this Act.