I 111th CONGRESS 1st Session H. R. 703 IN THE HOUSE OF REPRESENTATIVES January 27, 2009 Mr. Frank of Massachusetts introduced the following bill; which was referred to the Committee on Financial Services A BILL To promote bank liquidity and lending through deposit insurance, the HOPE for Homeowners Program, and other enhancements.

1.

Permanent increase in deposit insurance

(a)

Amendments to Federal Deposit Insurance Act

Section 11(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)) is amended— (1)in paragraph (1)(E), by striking $100,000 and inserting $250,000; (2)in paragraph (1)(F)(i), by striking 2010 and inserting 2015; (3)in subclause (I) of paragraph (1)(F)(i), by striking $100,000 and inserting $250,000; (4)in subclause (II) of paragraph (1)(F)(i), by striking the calendar year preceding the date this subparagraph takes effect under the Federal Deposit Insurance Reform Act of 2005 and inserting calendar year 2008; and (5)in paragraph (3)(A)(iii), by striking , except that $250,000 shall be substituted for $100,000 wherever such term appears in such paragraph. (b)

Repeal of EESA Provision

Section 136 of the Emergency Economic Stabilization Act (Public Law 110–343; 122 Stat. 3765) is hereby repealed. (c)

Amendment to Federal Credit Union Act

Section 207(k) of the Federal Credit Union Act (12 U.S.C. 1787(k)) is amended— (1)in paragraph (3)— (A)by striking the opening quotation mark before $250,000; (B)by striking , except that $250,000 shall be substituted for $100,000 wherever such term appears in such section; and (C)by striking the closing quotation mark after the closing parenthesis; and (2)in paragraph (5), by striking $100,000 and inserting $250,000.

2.

Extension of restoration plan period

Section 7(b)(3)(E)(ii) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(3)(E)(ii)) is amended by striking 5-year period and inserting 8-year period.

3.

FDIC borrowing authority

Section 14(a) of the Federal Deposit Insurance Act (12 U.S.C. 1824(a)) is amended— (1)by striking $30,000,000,000 and inserting $100,000,000,000; and (2)by inserting prior to the last sentence, the following new sentence: The Corporation may request in writing to borrow, and the Secretary may authorize and approve the borrowing of, additional amounts above $100,000,000,000 to the extent that the Board of Directors and the Secretary determine such borrowing to be necessary..

4.

FDIC systemic risk special assessments

Section 13(c)(4)(G)(ii) of the Federal Deposit Insurance Act (12 U.S.C. 1823(c)(4)(G)(ii)) is amended to read as follows: (ii)

Repayment of loss

(I)

In general

The Corporation shall recover the loss to the Deposit Insurance Fund arising from any action taken or assistance provided with respect to an insured depository institution under clause (i) from 1 or more special assessments on insured depository institutions, depository institution holding companies (with the concurrence of the Secretary of the Treasury with respect to holding companies), or both, as the Corporation determines to be appropriate. (II)

Treatment of depository institution holding companies

For purposes of this clause, sections 7(c)(2) and 18(h) shall apply to depository institution holding companies as if they were insured depository institutions. (III)

Regulations

The Corporation shall prescribe such regulations as it deems necessary to implement this clause. In prescribing such regulations, defining terms, and setting the appropriate assessment rate or rates, the Corporation shall consider: the types of entities that benefit from any action taken or assistance provided under this subparagraph; economic conditions; the effects on the industry; and such other factors as the Corporation deems appropriate. .

5.

Changes to HOPE for Homeowners Program

Section 257 of the National Housing Act (12 U.S.C. 1715z–23) is amended— (1)in subsection (e)— (A)in paragraph (1), by striking subparagraph (B); (B)in paragraph (2)(B), by striking 90 percent and inserting 93 percent; (C)by striking paragraph (7); and (D)by redesignating paragraphs (8), (9), (10), and (11) as paragraphs (7), (8), (9), and (10), respectively; (2)in subsection (h)(2), by striking , or in any case in which a mortgagor fails to make the first payment on a refinanced eligible mortgage; (3)by striking subsection (i) and inserting the following new subsection: (i)

Annual Premiums

(1)

In general

For each refinanced 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 Board 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 refinanced 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). ; (4)in subsection (k)— (A)by striking the subsection heading and inserting Exit Fee; (B)in paragraph (1), in the matter preceding subparagraph (A), by striking such sale or refinancing and inserting the mortgage being insured under this section; and (C)by striking paragraph (2); (5)in subsection (s)(3)(A)(ii), by striking subsection (e)(1)(B) and such other and inserting such; (6)in subsection (v), by inserting after the period at the end the following: The Board shall conform documents, forms, and procedures for mortgages insured under this section to those in place for mortgages insured under section 203(b) to the maximum extent possible consistent with the requirements of this section.; (7)in subsection (w)(1)(C), by striking (e)(4)(A) and inserting (e)(3)(A); and (8)by adding at the end the following new subsection: (x)

Payment to Existing Loan Servicer

The Board may establish a payment to the servicer of the existing senior mortgage for every loan insured under the HOPE for Homeowners Program. .

6.

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 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.

7.

Availability of TARP funds to smaller community institutions

(a)

Prompt Action

The Secretary shall promptly take all necessary actions to provide assistance under title I of the Emergency Economic Stabilization Act of 2008 to smaller community financial institutions, including such institutions that are privately held. (b)

Comparable Terms

An institution that receives assistance after the date of the enactment of the this Act, shall do so on terms comparable to the terms applicable to institutions that received assistance prior to the date of the enactment of this Act if the institution— (1)has submitted an application on which no action has been taken, such as institutions that are C corporations (including privately held institutions) and community development financial institutions; or (2)is of a type for which the Secretary has not yet established an application deadline or for which any such deadline has not yet occurred as of the date of the enactment of this Act, such as institutions that are non-stock corporations, S-corporations, mutually owned insured depository institutions (as defined in section 3 of the Federal Deposit Insurance Act). (c)

Definitions

For purposes of this section, the terms S Corporation and C Corporation shall have the same meaning given to those terms in section 1361(a) of the Internal Revenue Code of 1986.