II 111th CONGRESS 2d Session S. 3161 IN THE SENATE OF THE UNITED STATES March 24, 2010 Mrs. Shaheen introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To establish penalties for servicers that fail to timely evaluate the applications of homeowners under home loan modification programs.

1.

Short title

This Act may be cited as the Mortgage Modification Reform Act of 2010.

2.

Definitions

In this Act— (1)the term covered trial loan modification means a trial loan modification— (A)offered by a servicer to a homeowner under a home loan modification program; and (B)for which the servicer has received from the homeowner the information required for a trial loan modification; (2)the term home loan modification program means a home loan modification program put into effect by the Secretary under title I of division A of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5211 et seq.), including the Home Affordable Modification Program; (3)the term homeowner means an individual who applies for a home loan modification under a home loan modification program; (4)the term permanent loan modification means any agreement reached between a homeowner and a servicer on a long-term basis, as determined by the Secretary, under a home loan modification program; (5)the term qualified counselor means a qualified counselor described in section 255(f) of the National Housing Act (12 U.S.C. 1715z–20(f)); (6)the term Secretary means the Secretary of the Treasury; (7)the term servicer has the same meaning as in section 129 of the Truth in Lending Act (15 U.S.C. 1639a) (relating to the duties of servicers of residential mortgages), as added by section 201(b) of the Helping Families Save Their Homes Act of 2009 (Public Law 111–22; 123 Stat. 1638); (8)the term servicer incentive payment means a payment that is made by the Secretary to a servicer— (A)in exchange, or as an incentive, for making a loan modification under a home loan modification program; and (B)at the time the servicer makes an offer of a trial or permanent modification to a homeowner; and (9)the term trial loan modification means any agreement reached between a homeowner and a servicer on a temporary basis, as determined by the Secretary, under a home loan modification program.

3.

Foreclosure

A servicer may not initiate or continue a foreclosure proceeding with respect to the mortgage of a homeowner if— (1)the homeowner submitted an application for a loan modification under a home loan modification program— (A)before receiving a notice of foreclosure from the servicer; or (B)not later than 30 days after the homeowner received a notice of foreclosure from the servicer; and (2)the servicer has not made a determination, as described in section 5(a) that the homeowner does not qualify for a loan modification under a home loan modification program.

4.

Process for review of improper denials

(a)

Process for review

(1)

In general

The Secretary shall establish a process by which a homeowner may request the Secretary to review a denial by a servicer of an application by the homeowner for a trial loan modification or permanent loan modification. (2)

Qualified counselors

The process established under paragraph (1) shall include the use of qualified counselors to report wrongful denials of trial loan modifications and permanent loan modifications. (3)

Supporting documentation

The Secretary shall require a servicer to submit supporting documentation with respect to any denial by the servicer of an application by a homeowner for a trial loan modification or permanent loan modification that is reviewed by the Secretary under the process established under paragraph (1). (b)

Penalties

If the Secretary determines after a review under the process established under subsection (a) that a servicer has wrongly denied the application of a homeowner for a trial loan modification or a permanent loan modification, the Secretary shall impose a penalty on the servicer.

5.

Penalties for servicers that do not timely evaluate homeowners

(a)

Time for evaluation of homeowners

Not later than 3 months after the date on which a homeowner submits an application for a loan modification to a servicer that participates in a home loan modification program, the servicer shall— (1)evaluate the application of the homeowner; and (2)notify the homeowner that— (A)the homeowner is qualified for a trial loan modification or a permanent loan modification under the home loan modification program; or (B)the servicer has denied the application. (b)

Priority for evaluating amendments

(1)

Priority

A servicer that participates in a home loan modification program shall evaluate the applications of homeowners for loan modifications in the order in which the servicer receives the applications. (2)

Prohibition

A servicer that participates in a home loan modification program may not select the order in which the applications of homeowners are evaluated for loan modifications— (A)on the basis of— (i)the income of the homeowner that made the application; or (ii)the value of the loan for which a modification is requested; or (B)for any reason other than the time at which the servicer receives the applications. (c)

Late fees for servicers

(1)

Reduced servicer incentive payments for loans individual homeowners

The Secretary shall reduce the amount of any servicer incentive payment with respect to the loan modification of an individual homeowner by 10 percent for each full month that— (A)follows the date that is 3 months after the date on which the homeowner submits an application for a loan modification to the servicer; and (B)precedes the date on which the servicer notifies the homeowner under subsection (a)(2). (2)

Reduced payments for all loans

If the Secretary determines that, on the date that is 3 months after the date of enactment of this Act, less than 75 percent of all homeowners who applied to a servicer for loan modifications under a home loan modification program have been evaluated within 3 months of the date of the application, the Secretary shall reduce by 25 percent the amount of any servicer incentive payment the servicer would otherwise be eligible to receive under the home loan modification program. (d)

Delinquency Fees Charged to Homeowners

No servicer may impose a fee on a homeowner due to delinquency during the period beginning on the date on which the homeowner submits an application to the servicer for a loan modification and ending on the date on which the homeowner receives notice under subsection (a)(2). (e)

Collection and Report of Data

(1)

Collection of data

Each servicer shall report to the Secretary, at such time and in such manner as the Secretary may determine, data relating to the processing by the servicer of applications for loan modifications. (2)

Report of data

The Secretary shall publish a monthly report containing the data collected under paragraph (1).

6.

Reduced payments for failure to evaluate homeowners for permanent modifications

If the Secretary determines that, on the date that is 3 months after the date of enactment of this Act, less than 70 percent of all covered trial loan modifications offered by a servicer have been evaluated for conversion to permanent loan modifications before the date that is 3 months after the date on which the servicer and the homeowner entered into an agreement for a trial loan modification, the Secretary shall reduce by 25 percent the amount of any servicer incentive payment the servicer would otherwise be eligible to receive under the home loan modification program. Such reduction shall be in addition to any other reduction in payment that may have been imposed on the servicer for any other violation of this Act.

7.

Rule of construction relating to payments to homeowners

Nothing in this Act may be construed to require a reduction of a payment by the Secretary made on behalf or for the benefit of a homeowner in connection with a loan modification.