[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1356 Introduced in House (IH)]

111th CONGRESS
  1st Session
                                H. R. 1356

            To reduce foreclosures of residential mortgages.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 5, 2009

  Mr. Sestak introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
            To reduce foreclosures of residential mortgages.

    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 ``Homeownership Vesting Plan Act of 
2009''.

SEC. 2. HOMEOWNERSHIP VESTING PLAN.

    Title II of the National Housing Act (12 U.S.C. 1707 et seq.) is 
amended--
            (1) by redesignating section 257, as added by section 
        2124(a) of the Housing and Economic Relief Act of 2008 (12 
        U.S.C. 1715z-24), as section 258; and
            (2) by adding after section 258, as so redesignated, the 
        following new section:

``SEC. 259. HOMEOWNERSHIP VESTING PLAN.

    ``(a) Authority.--The Secretary shall, subject only to the absence 
of requests for insurance under this section and the availability of 
amounts pursuant to subsection (i)--
            ``(1) make commitments to insure and insure any mortgage 
        covering a 1- to 4-family residence that is made for the 
        purpose of paying or prepaying outstanding obligations under an 
        existing mortgage or mortgages on the residence if the mortgage 
        being insured under this section meets the requirements of this 
        section; and
            ``(2) in connection with the insurance of such mortgages--
                    ``(A) make payments under subsection (c) to 
                servicers of eligible mortgages refinanced by such 
                insured mortgages;
                    ``(B) make payments under (b)(4) for the 
                extinguishment of subordinate liens on the properties 
                subject to eligible mortgages refinance by such insured 
                mortgages; and
                    ``(C) make loans under subsection (d) to mortgagors 
                under such insured mortgages.
    ``(b) Eligible Mortgages.--To be eligible for insurance under this 
section, a mortgage shall comply with all of the following 
requirements:
            ``(1) Owner-occupied sole residence.--The residence 
        securing the mortgage insured under this section shall be 
        occupied by the mortgagor as the principal residence of the 
        mortgagor and the mortgagor shall provide a certification to 
        the originator of the insured mortgage that such residence 
        securing the mortgage is the only residence in which the 
        mortgagor has any present ownership interest.
            ``(2) Principal obligation amount.--The principal 
        obligation amount of the mortgage to be insured under this 
        section shall be equal to 97.5 percent of the current appraised 
        value of the residence securing the mortgage.
            ``(3) Required waiver of prepayment penalties and fees.--
        All penalties for prepayment or refinancing of the existing 
        senior mortgage, and all fees and penalties related to default 
        or delinquency on the existing senior mortgage, shall be waived 
        or forgiven.
            ``(4) Extinguishment of subordinate liens.--
                    ``(A) Required agreement.--All holders of existing 
                mortgages on the property to which the eligible 
                mortgage relates shall agree to accept the proceeds of 
                the insured loan, and any payment pursuant to 
                subparagraph (B), as payment in full of all 
                indebtedness under the existing mortgage, and all 
                encumbrances related to such existing mortgage shall be 
                removed. The Secretary may take such actions, in 
                accordance with the standards established pursuant to 
                subparagraph (B), as may be necessary and appropriate 
                to facilitate coordination and agreement between the 
                holders of the existing senior mortgage and any 
                existing subordinate mortgages, taking into 
                consideration the subordinate lien status of such 
                subordinate mortgages.
                    ``(B) Payment.--The Secretary shall provide for the 
                payment to the holder of any existing subordinate 
                mortgage of an amount equal to 5 cents for each dollar 
                of the outstanding principal balance of, and accrued 
                interest on, the outstanding mortgage.
            ``(5) Interest rate and term of mortgage.--The mortgage to 
        be insured under this section shall--
                    ``(A) bear interest at a single rate that is fixed 
                for the entire term of the mortgage; and
                    ``(B) have a maturity of 30 years from the date of 
                the beginning of amortization of such mortgage.
            ``(6) Underwriting standards.--The mortgage insured under 
        this section shall comply with the underwriting standards 
        applicable under the FHA Secure Program (established by 
        mortgagee letter 2007-11, issued September 5, 2007), as such 
        Program is in effect as of February 1, 2009.
            ``(7) Priority of lien for non-vested loan principal.--The 
        mortgage to be insured under this section shall provide that 
        the Secretary's lien pursuant to subsection (d)(4) on the 
        residence that is subject to the mortgage shall have superior 
        priority to the lien under the insured mortgage.
            ``(8) Requirements for existing senior mortgage being 
        refinanced.--
                    ``(A) Origination date.--The existing senior 
                mortgage shall have been originated during the period 
                beginning on January 1, 2003, and ending upon December 
                31, 2007.
                    ``(B) Principal obligation.--The existing senior 
                mortgage shall have had an original principal 
                obligation in an amount that did not exceed the maximum 
                dollar amount limitation in effect on February 1, 2009, 
                under section 203(b)(2) of the National Housing Act (12 
                U.S.C. 1709(b)(2)) for a residence of the applicable 
                size for the area in which the residence is located.
                    ``(C) Debt-to-income ratio upon origination.--As of 
                the time of the origination of the existing senior 
                mortgage, the mortgagor shall have had a ratio of 
                mortgage debt to income, taking into consideration all 
                existing mortgages of that mortgagor at such time, 
                exceeding 30 percent.
                    ``(D) Loan-to-value ratio.--The existing senior 
                mortgage shall, upon origination, have involved a 
                principal obligation (including such initial service 
                charges, appraisal, inspection, and other fees as the 
                Secretary shall approve) in an amount not exceeding 90 
                percent of the appraised value of the property at such 
                time.
    ``(c) Payment to Servicer of Existing Mortgage.--For each mortgage 
insured under this section, the Secretary shall make a payment in the 
amount of $1,000 to the servicer of the existing senior mortgage 
refinanced by such insured mortgage.
    ``(d) Nonamortizing No-Interest Loan.--
            ``(1) In general.--In connection with each mortgage insured 
        under this section, the Secretary shall make a loan under this 
        subsection to the mortgagor, the proceeds of which shall be 
        paid by the Secretary directly to the holder of the existing 
        senior mortgage being refinanced by the mortgage insured under 
        this section. Such loan shall be in an amount equal to the 
        difference between--
                    ``(A) the amount of the outstanding principal 
                obligation under the existing senior mortgage 
                refinanced by such insured mortgage as of the time of 
                the origination of such insured mortgage; and
                    ``(B) the amount of the original principal 
                obligation of the insured mortgage.
            ``(2) Terms.--A loan under this section--
                    ``(A) shall not bear interest; and
                    ``(B) shall not require the borrower to make 
                payments of principal, except as provided in paragraph 
                (3).
            ``(3) Repayment.--A loan under this section shall require 
        repayment of principal only if the borrower defaults with 
        respect to the borrower's obligations under the insured 
        mortgage in connection with which such loan is made during the 
        5-year period that begins on the date that such mortgage is 
        insured, as follows:
                    ``(A) Year 1.--If any such default occurs during 
                the period that begins on the date that such mortgage 
                is insured and ends 1 year after such date of 
                insurance, the Secretary shall be entitled to repayment 
                of 100 percent of the principal amount of the loan.
                    ``(B) Year 2.--If any such default occurs during 
                the period that begins 1 year after such date of 
                insurance and ends 2 years after such date of 
                insurance, the Secretary shall be entitled to 80 
                percent of such principal amount.
                    ``(C) Year 3.--If any such default occurs during 
                the period that begins 2 years after such date of 
                insurance and ends 3 years after such date of 
                insurance, the Secretary shall be entitled to 60 
                percent of such principal amount.
                    ``(D) Year 4.--If any such default occurs during 
                the period that begins 3 years after such date of 
                insurance and ends 4 years after such date of 
                insurance, the Secretary shall be entitled to 40 
                percent of such principal amount.
                    ``(E) Year 5.--If any such default occurs during 
                the period that begins 4 years after such date of 
                insurance and ends 5 years after such date of 
                insurance, the Secretary shall be entitled to 20 
                percent of such principal amount.
                    ``(F) After year 5.--If any such default occurs 
                after the expiration of the 5-year period that begins 
                on such date of insurance, the Secretary shall not be 
                entitled to repayment of any portion of such principal 
                amount.
            ``(4) Lien.--Repayment of the portion of the principal 
        amount of a loan made under this subsection that is required 
        under paragraph (3) shall be secured by a lien on the residence 
        that is subject to the mortgage insured under this section in 
        connection with which such loan was made, that is held by the 
        Secretary, and which shall have priority over all other liens 
        on such residence.
    ``(e) Premiums.--Notwithstanding any other provision of this Act:
            ``(1) In general.--For each eligible mortgage insured under 
        this section, the Secretary shall establish and collect an 
        annual premium in an amount equal to not less than 0.55 percent 
        of the amount of the remaining insured principal balance of the 
        mortgage and not more than 0.75 percent of such remaining 
        insured principal balance, as determined according to a 
        schedule established by the Secretary that assigns such annual 
        premiums based upon the credit risk of the mortgage.
            ``(2) Reduction or termination during mortgage term.--
        Notwithstanding paragraph (1), the Secretary may provide that 
        the annual premiums charged for eligible mortgages insured 
        under this section are reduced over the term of the mortgage or 
        that the collection of such premiums is discontinued at some 
        time during the term of the mortgage, in a manner that is 
        consistent with policies for such reduction or discontinuation 
        of annual premiums charged for mortgages in accordance with 
        section 203(c).
    ``(f) Sunset.--The Secretary may not enter into any new commitment 
to insure any refinanced eligible mortgage, or newly insure any 
refinanced eligible mortgage, pursuant to this section after the 
expiration of the 3-year period beginning upon the date of the 
enactment of this Act.
    ``(g) Definitions.--For purposes of this section, the following 
definitions shall apply:
            ``(1) Eligible mortgage.--The term `eligible mortgage' 
        means a mortgage that meets the requirement under subsection 
        (b) for insurance under this section.
            ``(2) Existing mortgage.--The term `existing mortgage' 
        means, with respect to a mortgage insured or to be insured 
        under this section, a mortgage on the same residence that is to 
        be subject to such mortgage insured under this section that is 
        to be extinguished pursuant to such insured mortgage.
            ``(3) Existing senior mortgage.--The term `existing senior 
        mortgage' means, with respect to a mortgage insured or to be 
        insured under this section, the existing mortgage that has 
        superior priority.
            ``(4) Existing subordinate mortgage.--The term `existing 
        subordinate mortgage' means, with respect to a mortgage insured 
        or to be insured under this section, an existing mortgage that 
        has subordinate priority to the existing senior mortgage.
    ``(h) Authorization of Appropriations.--There is authorized to be 
appropriated for fiscal years 2009 through 2012--
            ``(1) $2,000,000,000 for payments under subsection (c) to 
        servicers of eligible mortgages refinanced by such insured 
        mortgages;
            ``(2) $1,500,000,000 for payments under (b)(4) for the 
        extinguishment of subordinate liens on the properties subject 
        to eligible mortgages refinanced by such insured mortgages; and
            ``(3) $90,000,000,000 for the costs (as such term is 
        defined in section 502 of the Federal Credit Reform Act of 1974 
        (2 U.S.C. 661a)) of loans under subsection (d) to mortgagors 
        under such insured mortgages.''.

SEC. 3. SERVICER SAFE HARBOR.

    (a) Safe Harbor.--
            (1) Loan modifications and workout plans.--Notwithstanding 
        any other provision of law, and notwithstanding any investment 
        contract between a servicer and a securitization vehicle or 
        investor, a servicer that acts consistent with the duty set 
        forth in section 129A(a) of Truth in Lending Act (15 U.S.C. 
        1639a) shall not be liable for entering into a loan 
        modification or workout plan with respect to any such mortgage 
        that meets all of the criteria set forth in paragraph (2)(B) 
        to--
                    (A) any person, based on that person's ownership of 
                a residential mortgage loan or any interest in a pool 
                of residential mortgage loans or in securities that 
                distribute payments out of the principal, interest and 
                other payments in loans on the pool;
                    (B) any person who is obligated pursuant to a 
                derivatives instrument to make payments determined in 
                reference to any loan or any interest referred to in 
                subparagraph (A); or
                    (C) any person that insures any loan or any 
                interest referred to in subparagraph (A) under any law 
                or regulation of the United States or any law or 
                regulation of any State or political subdivision of any 
                State.
            (2) Ability to modify mortgages.--
                    (A) Ability.--Notwithstanding any other provision 
                of law, and notwithstanding any investment contract 
                between a servicer and a securitization vehicle or 
                investor, a servicer--
                            (i) shall not be limited in the ability to 
                        modify mortgages, the number of mortgages that 
                        can be modified, the frequency of loan 
                        modifications, or the range of permissible 
                        modifications; and
                            (ii) shall not be obligated to repurchase 
                        loans from or otherwise make payments to the 
                        securitization vehicle on account of a 
                        modification, workout, or other loss mitigation 
                        plan for a residential mortgage or a class of 
                        residential mortgages that constitute a part or 
                        all of the mortgages in the securitization 
                        vehicle,
                if any mortgage so modified meets all of the criteria 
                set forth in subparagraph (B).
                    (B) Criteria.--The criteria under this subparagraph 
                with respect to a mortgage are as follows:
                            (i) Default on the payment of such mortgage 
                        has occurred or is reasonably foreseeable.
                            (ii) The property securing such mortgage is 
                        occupied by the mortgagor of such mortgage.
                            (iii) The servicer reasonably and in good 
                        faith believes that the anticipated recovery on 
                        the principal outstanding obligation of the 
                        mortgage under the particular modification or 
                        workout plan or other loss mitigation action 
                        will exceed, on a net present value basis, the 
                        anticipated recovery on the principal 
                        outstanding obligation of the mortgage to be 
                        realized through foreclosure.
            (3) Applicability.--This subsection shall apply only with 
        respect to modifications, workouts, and other loss mitigation 
        plans initiated before January 1, 2012.
    (b) Reporting.--Each servicer that engages in loan modifications or 
workout plans subject to the safe harbor in subsection (a) shall report 
to the Secretary on a regular basis regarding the extent, scope and 
results of the servicer's modification activities. The Secretary shall 
prescribe regulations specifying the form, content, and timing of such 
reports.
    (c) Definition of Securitization Vehicles.--For purposes of this 
section, the term ``securitization vehicle'' means a trust, 
corporation, partnership, limited liability entity, special purpose 
entity, or other structure that--
            (1) is the issuer, or is created by the issuer, of mortgage 
        pass-through certificates, participation certificates, 
        mortgage-backed securities, or other similar securities backed 
        by a pool of assets that includes residential mortgage loans; 
        and
            (2) holds such mortgages.
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