Duty to engage in loss mitigation

(a)

Duty

The Real Estate Settlement Procedures Act of 1974 is amended by inserting after section 6 (12 U.S.C. 2605) the following new section:

6A.

Duty to engage in loss mitigation

(a)

Duty for covered federally related mortgage loans

(1)

Duty

Upon default of any federally related mortgage loan that is secured by a lien on the principal residence of the borrower or mortgagor, the mortgagee shall engage in reasonable loss mitigation activities that provide for— (A)the long-term affordability of the loan; and (B)the maximum retention of home equity. (2)

Responsibilities by lienholders

With respect to a default referred to in paragraph (1): (A)

Senior Lien

The mortgagee of the senior lien on the residence shall have primary responsibility for the loss mitigation activities required under such paragraph. (B)

Subordinate liens

The mortgagee of any subordinate lien shall refrain from interfering with or inhibiting the modification of the senior lien and shall comply with the rules prescribed in subsection (g) to modify the subordinate lien. (b)

No foreclosure without loss mitigation

(1)

Prohibition

No foreclosure of any covered federally related mortgage loan shall be initiated, continued, or completed if the mortgagee or servicer has at any time failed to comply with the requirements of this section with respect to such loan. (2)

Certification of loss mitigation activities

(A)

Precondition to sale

The filing of a certification of loss mitigation activities with respect to a covered federally related mortgage loan shall be a condition precedent— (i)to any valid sale pursuant to foreclosure of the principal residence that is subject the lien securing the loan; and (ii)to the filing of any action to recover possession of the residence by the purchaser at such a sale. (B)

Filing

In the case of a residence that is subject to a lien securing a covered federally related mortgage loan, after foreclosure on such loan, the State or local government official responsible for recording deeds and other transfers of real property in the jurisdiction in which the residence is located shall not record, nor permit the recordation of, any deed transferring title to such residence unless such official certifies that— (i)that this section does not apply to such federally related mortgage loan; or (ii)the party conducting the sale or transfer has demonstrated that the requirements of this section have been met. (C)

Form and content

The Director of the Bureau of Consumer Financial Protection of the Federal Reserve System shall, by regulation, provide for the form and content of a certification pursuant to this paragraph. (3)

Voidance of sale

Notwithstanding any other provision of Federal or State law or any contract, a sale or other transfer of property in violation of this subsection shall be null and void. (c)

Loss mitigation activities

(1)

In general

For purposes of this section, loss mitigation activities shall include— (A)priority loss mitigation activities under paragraph (5); (B)secondary loss mitigation activities under paragraph (6); and (C)last-resort loss mitigation activities under paragraph (7). (2)

Order of pursuit

In complying with subsection (a), the mortgagee or servicer shall pursue loss mitigation activities in the following order: first priority loss mitigation activities, then secondary loss mitigation activities, and then last-resort loss mitigation activities. If any loss mitigation activity is taken, the mortgagee or servicer shall provide written notice of such activity to the borrower or mortgagor by mail not later than 7 business days after such action is taken. (3)

Consideration of circumstances in provision of loss mitigation activities

(A)

Determination

In determining the type of loss mitigation activity to provide with respect to a covered federally related mortgage loan, the mortgagee or servicer shall consider the nature of the financial hardship experienced by the borrower or mortgagor and whether such hardship is a temporary hardship. The Director shall, by regulation, define hardship and temporary hardship for purposes of this subsection. (B)

Actions based on circumstances

The mortgagee or servicer shall provide— (i)priority loss mitigation activities with respect to borrowers and mortgagees— (I)who cannot make scheduled payments due under the loan or other payments due to financial hardship; and (II)for whom providing such loss mitigation activities are consistent with maximizing net present value of the loan (as determined in accordance with subsection (d)(4)); (ii)secondary loss mitigation activities with respect to borrowers or mortgagors who have experienced a change in their financial condition that has resulted in temporary financial hardship; and (iii)last-resort loss mitigation activities with respect to borrowers or mortgagors who, notwithstanding priority or secondary loss mitigation activities taken with respect to the mortgage, will be unable to make payments due under the loan. (4)

Prohibitions

A mortgagee or servicer with respect to a covered federally related mortgage loan— (A)may not limit the number of loss mitigation activities provided with respect to a borrower or mortgagor if such activities are provided in connection with financial hardships of differing natures, but may limit the number of loss mitigation activities provided with respect to a borrower or mortgagor pursuant to recurring financial hardships of the same nature; (B)shall comply with the requirements of under this section with respect to the loan without regard to whether there has been a previous default under the loan; and (C)initiate foreclosure proceedings while simultaneously providing loss mitigation activities to a borrower or mortgagor; and (D)assess fees for the provision of loss mitigation services, notwithstanding the fees permitted under section 128B of the Truth in Lending Act. (5)

Priority loss mitigation activities

For purposes of this section, the term priority loss mitigation activities includes, with respect to a covered federally related mortgage loan, activities that preserve the borrower’s or mortgagor’s ownership interest in the property that is subject to the lien securing the loan by modifying the contractual terms of the loan. Priority loss mitigation activities include modification of the loan terms that provide for the following: (A)

Alteration of terms

Reduction of the interest rate of the loan, forgiveness of loan principal or interest, conversion from an adjustable rate mortgage to a fixed rate mortgage, and reamortization of the loan in connection with an extension of the final maturity date of the loan such that the total term of the loan does not exceed 40 years. (B)

Short refinancing

Short refinancing of the loan consisting of acceptance of payment from or on behalf of the borrower or mortgagor of an amount that is less than the full amount alleged to be due and owing under the loan, including principal, interest, and fees, in full satisfaction of the obligation under the loan and as part of a refinance transaction under which the property that is subject to the lien securing the loan is intended to remain the principal residence of the borrower or mortgagor.

In the case of priority loss mitigation activities, the mortgagee or servicer shall waive any late payment charge, penalty interest, or any other fees or charges, including legal fees, or any combination thereof, that would otherwise apply to the loan.

(6)

Secondary loss mitigation activities

For purposes of this section, the term secondary loss mitigation activities includes, with respect to a covered federally related mortgage loan, other activities that avoid foreclosure and preserve the borrower’s or mortgagor’s ownership interest in the property that is subject to the lien securing the loan, but do not change the contractual terms of the loan. Secondary loss mitigation activities include the following activities: (A)Waiver of any late payment charge, penalty interest, or any other fees or charges, including legal fees, or any combination thereof. (B)Establishment of a repayment plan under which the borrower or mortgagor resumes regularly scheduled payments and pays additional amounts at scheduled intervals to cure the delinquency. (C)Forbearance under the loan that provides for a temporary reduction in, or cessation of, monthly payments followed by a reamortization of the amounts due under the loan, including arrearage, and a new schedule of repayment amounts. (7)

Last-resort loss mitigation activities

For purposes of this section, the term last-resort loss mitigation activities includes, with respect to a covered federally related mortgage loan, activities that avoid foreclosure but do not preserve the borrower’s or mortgagor’s ownership interest in the property that is subject to the lien securing the loan. Last-resort loss mitigation activities include the following activities: (A)Short sale of the principal residence that is subject to the lien securing the loan, consisting of acceptance of payment from or on behalf of the borrower or mortgagor of an amount less than the amount alleged to be due and owing under the loan, including principal, interest, and fees, in full satisfaction of the obligation under such loan and as part of a sale transaction in which the property is not intended to remain the principal residence of the borrower or mortgagor. (B)Assumption of the borrower’s obligations under the loan by a third party. (C)Cancellation or postponement of a foreclosure sale to allow the borrower or mortgagor additional time to sell the property. (D)Acquisition of the property by the mortgagee or servicer by deed in lieu of foreclosure. (8)

Limitations on loss mitigation

(A)

Annual certifications of income

A borrower or mortgagor under a covered federally related mortgage loan who has received loss mitigation activities provided under this section shall annually provide a certification of the income of such borrower or mortgagor to the servicer or mortgagee of the loan. The servicer or mortgagee under the loan may increase the monthly payment due under the loan from the borrower or mortgagee if such certification reveals that the income of such borrower or mortgagee has increased, except such increase in payment due may not exceed an amount that is commensurate with such increase in income. (B)

No obligation to modify fraudulent loans

Subsections (a) and (b) shall not apply with respect to a covered federally related mortgage loan if the borrower or mortgagor under the loan committed fraud by providing false or misleading information in connection with the loss mitigation activities for the loan. This subparagraph may not be construed to exempt subsections (a) and (b) from applying to any loan because of any fraud committed by the originator of the loan during the application and approval process for the loan. (d)

Affordable payments

(1)

Consideration in reasonability of loss mitigation activities

The affordability of any scheduled payments due from the borrower or mortgagor under a covered federally related mortgage loan pursuant to loss mitigation activities for the loan and whether the activities are in the best financial interests of the borrower or mortgagor shall be taken into consideration in determining whether a mortgagee has engaged, for purposes of subsection (a)(1), in reasonable loss mitigation activities that provide for long-term affordability of the loan. (2)

Affordability

(A)

In general

Payments under a loan shall be considered to be affordable for a borrower or mortgagor for purposes of this subsection if such payments do not cause the total monthly debts of the borrower or mortgagor, including amounts due under the loan, to exceed— (i)a percentage established by the Director, by regulation, of the monthly gross income of the borrower or mortgagor; or (ii)such other maximum percentage of such income as the Director may establish, by regulation, which regulations shall take into consideration the amount of income of the borrower or mortgagor available to pay regular expenses after payment of all installment and revolving debt. (B)

Underwater loans

Notwithstanding subparagraph (A), payments under a loan having a loan-to-value ratio that exceeds 100 percent shall not be considered to be affordable for a borrower or mortgagor for purposes of this subsection unless the amount of the remaining principal balance on such loan that exceeds 100 percent is reduced. (3)

Income used in determining affordability

(A)

Documentation

A mortgagee or servicer shall request documentation of the income of a borrower or mortgagor before commencing loss mitigation activities. (B)

Verification

The borrower’s or mortgagor’s income shall be verified by— (i)the Federal wage and tax statement (Form W–2 of the Internal Revenue Service) of the borrower or mortgagor; or (ii)tax returns, payroll receipts, financial institution records, or other third-party documents that provide reasonably reliable evidence of the income or assets of the borrower or mortgagor. (4)

Standard net present value test

(A)

Test

Upon the request of a borrower or mortgagor under a covered federally related mortgage loan who is qualified for loss mitigation activities under this section, the mortgagee or servicer under the loan shall perform a standard test to compare the expected net present value of modifying the loan to the net present value of foreclosing on such loan. (B)

Effect

If application of the standard test referred to in subparagraph (A) to a covered federally related mortgage loan shows that the net present value, to the mortgagee or in the aggregate, of modifying the loan exceeds the net present value of foreclosing on the loan, all persons that hold an interest in the mortgage agreement shall agree to modify such loan in a manner as the Bureau has prescribed. (C)

Components

The Director shall, by regulation, establish the components of the standard test for purposes of subparagraph (A), which shall not— (i)prohibit the modification of negatively amortizing loans; (ii)prohibit the modification of loans with negative equity; or (iii)prohibit the modification of loans to minority and low-income borrowers or mortgagors. (5)

Debt-to-income ratio

In determining the debt-to-income ratio or residual income of a mortgagor or borrower under a covered federally related mortgage loan for purposes of this subsection, the amount of monthly payment under the loan shall include principal, interest, taxes, insurance, flood insurance, any homeowner’s association and condominium fees, and any second or subordinate liens. (6)

Monthly income

In determining monthly income of a mortgagor or borrower for purposes of this subsection, all wages, salary, overtime, fees, commissions, tips, Social Security benefits, pensions, and all other income shall be considered. (7)

Written notification of affordability calculation

The mortgagee or servicer shall notify the borrower or mortgagor in writing of the results of the determination of affordability under this subsection and the income on which the determination was based. Such written notice shall be provided by mail not later than 7 business days after such action is taken or as part of the written notice required under subsection (c)(2), whichever is earlier. (e)

Explanation of denial

A mortgagee or servicer under a covered federally related mortgage loan shall provide, to each borrower or mortgagor who has requested loss mitigation activities under this section and been denied the provision of such activities by the mortgagee or servicer, an explanation of why such activities were denied and the eligibility standards used by such mortgagee or servicer in assessing the provision of loss mitigation activities. (f)

Presumption of compliance

An offer, made by a mortgagee or servicer under a covered federally related mortgage loan to a borrower or mortgagor, of a priority loss mitigation alternative that is in compliance with the requirements under subsection (d) (relating to affordable payments) and any regulations carrying out such subsection shall be presumed to constitute compliance with the requirement to perform reasonable loss mitigation under subsection (a) with respect to the loan. (g)

Subordinate liens

(1)

Information sharing

Each mortgagee with respect to a subordinate lien shall provide to any mortgagee holding a senior lien under a covered federally related mortgage loan information needed by such senior mortgagees to engage in reasonable loss mitigation as required by this section with respect. (2)

Maintenance of lien status

Any priority loss mitigation activity under subsection (c)(5) undertaken with respect to a senior lien as part of loss mitigation activity shall not impair the priority status of liens under the modified loan, to the extent that there are no additional funds advanced to the borrower in connection with such priority loss mitigation activity. (3)

Automatic modification upon modification of senior lien

Upon the provision of loss mitigation activities in accordance with this Act by the holder of a senior lien, a mortgagee with respect to a subordinate lien shall modify such lien in proportion to the modification of the senior lien. (4)

Underwater subordinate liens

If the combined loan-to-value ratio under the covered federally related mortgage loan secured by the senior lien and any loans secured by subordinate liens exceeds 100 percent, the mortgagee of each such subordinate lien shall perform one or more of the following actions: (A)Reduce the principal amount on such lien to an amount that results in a total loan-to-value ratio of not more than 100 percent when combined with the primary lien. (B)Release the residential real property that is subject to such subordinate lien from the subordinate lien. (h)

Direct access to authorized loss mitigation personnel

(1)

Provision of contact information

The mortgagee or servicer of a covered federally related mortgage loan shall provide, on each regular account statement for the loan, a toll-free or collect-call telephone number that provides the borrower with direct access to a person with the information and authority to answer questions and fully resolve issues related to loss mitigation activities for the loan. (2)

Requirement of single point of contact

(A)

Requirement

For any borrower or mortgagor that contacts a mortgagee or servicer through the telephone number provided pursuant to paragraph (1) or through any other means, the mortgagee or servicer shall assign to such borrower or mortgagor a single point of contact that will personally and primarily assist such borrower or mortgagor with the resolution or implementation of loss mitigation activities requested by such borrower or mortgagor. (B)

Definition

For purposes of this paragraph the term single point of contact means an individual employed by a servicer with specialized training in loss mitigation and customer service who serves as the primary point of contact for any negotiations, questions, or other informational needs a for borrower or mortgagor who has requested loss mitigation. (3)

Prohibition on outsourcing

In carrying out subsection (a) with respect to a covered federally related mortgage loan, any contact by or on behalf of a mortgagee or servicer with the homeowner and any processing of any loss mitigation activities shall be conducted only by agents of the mortgagee or servicer who are physically located in the United States. (i)

Third-Party loan modifications

The mortgagee or servicer of a covered federally related mortgage loan shall not accept or provide loss mitigation activities with respect to such loan at the request of any entity or individual that is not party to the loan unless— (1)the entity or individual is authorized by the borrower or mortgagee to act on behalf of the borrower or mortgagor; and (2)(A)is a representative of a housing counseling agency approved by the Secretary of Housing and Urban Development; or (B)provides documentation to the servicer or mortgagee that the entity or individual— (i)has not charged any fee to the borrower or mortgagor for such request; or (ii)(I)has charged a nominal fee for such request; (II)has entered into a written contract, in plain English or the primary language of the borrower or mortgagor, with the borrower or mortgagor, that includes provisions for cancellation without penalty; and (III)will refund any such fees to the borrower or mortgagor in the event the request for loss mitigation is denied. (j)

Duty to refer to HUD-Certified housing counseling agency

(1)

Referral by servicer or mortgagee

In the case of any payment due under a covered federally related mortgage loan that is more than 60 days late, the servicer or mortgagee shall forward to a housing counseling agency approved by the Secretary of Housing and Urban Development the contact information of the borrower. (2)

Expression of borrower preference

The borrower may communicate to the servicer or mortgagee a preference for a particular housing counseling agency approved by the Secretary of Housing and Urban Development— (A)in writing at the time of closing on the loan; or (B)in writing at any time during the term of the loan, including by conveyance of signed authorization form from the approved housing counseling agency of the borrower’s choice, which shall be transmitted by such agency to the mortgagee or servicer. (3)

Referral relationship

A mortgagee or servicer may establish a referral relationship with a housing counseling agency approved by the Secretary of Housing and Urban Development, but such relationship may not be exclusive and the mortgagee or servicer may not refuse to respond to qualified written requests and other communications from another housing counseling agency approved by the Secretary of Housing and Urban Development or any other agent that is authorized by the borrower. (k)

Prohibition on waiver of rights

A mortgagee for a covered federally related mortgage loan may not— (1)when engaging in loss mitigation activities pursuant to subsection (a), require a borrower to limit or waive the rights of such borrower to bring any claims, defenses, demands, proceedings, actions, or causes of action against the mortgagee or servicer as a condition of accepting an offer of any loss mitigation activities, including any activities under subsection (c); or (2)require the borrower to agree to arbitration as a condition of receiving loan modification activities.

Any waiver or arbitration provision in a written agreement prohibited under this subsection shall be void and unenforceable.

(l)

Short sale and deed-in-Lieu of foreclosure protections

(1)

Right to sell

If a borrower or mortgagor under a covered federally related mortgage loan presents documentation to the mortgagee or servicer of such loan an objective circumstance under paragraph (2) that supports a request of the borrower or mortgagor for the immediate sale of the property subject to the loan, the mortgagee or servicer shall not prevent or otherwise interfere with the borrower or mortgagor from selling the property subject to such loan for an amount that is less than the amount owed to such mortgagee or servicer. (2)

Objective circumstance

Only the following objective circumstances may be considered by the mortgagee or servicer, for purposes of paragraph (1), in determining whether an immediate sale of the property subject to the loan is required: (A)A member of the household of the borrower or mortgagor has obtained a new job. (B)A member of the household of the borrower or mortgagor is attending a new school. (C)The health and well-being of a member of the household of the borrower or mortgagor. (3)

Prohibition on demand payments

In any case in which an immediate sale of a property is determined under paragraph (1) to be required, the mortgagee or servicer for the covered federally related mortgage loan, or any agent thereof, shall not demand an additional payment from the borrower or mortgagor, or any agent thereof, or a potential purchaser of the property as a condition of allowing the sale of the property to occur. (4)

Right to recapture

This Act may not be construed to prevent, in the case of any immediate sale pursuant to paragraph (1), a mortgagee or servicer from recovering after such sale from the mortgagee or borrower, to the extent provided under State law, the difference between the amount owed under the covered federally related mortgage loan and the sale price of the property. (m)

Reporting on loss mitigation activities

(1)

In general

Each mortgagee or servicer of a covered federally related mortgage loan shall report monthly and comprehensively to the Comptroller of the Currency, the Director, and the Board of Governors of the Federal Reserve System on the extent and scope of the loss mitigation activities of the mortgagee. Each such report shall include data on loss mitigation activities disaggregated according to the categories specified in each of the subparagraphs of paragraphs (5), (6), and (7) of subsection (c), any loss mitigation activities not covered by such categories, the number of loans receiving loss mitigation that have become performing loans, the number of loans receiving loss mitigation that have proceeded to foreclosure, the total number of foreclosures initiated during the reporting period, and such other information as the Comptroller, the Director, or the Board of Governors determines to be relevant. (2)

Compilation of aggregate data

(A)

Commencement

Beginning with data for calendar year 2012, the Comptroller of the Currency shall, in consultation with the Director and the Chairman of the Board of Governors of the Federal Reserve System, compile for each year, for each primary metropolitan statistical area, metropolitan statistical area, and consolidated metropolitan statistical area that is not comprised of designated primary metropolitan statistical areas, aggregate data by census tract for each mortgagee or servicer that is required to disclose data under this subsection. (B)

Scope

Each such report shall include loan-level disclosures of outstanding loans with information related to— (i)the location of the security property; (ii)the loan amount; (iii)the value of such security property; (iv)the age of borrower or mortgagee; (v)the date on which such loan was originated; (vi)the type of entity owning such loan; (vii)the performance status of such loan; (viii)the monetary losses incurred by the investor in such loan in connection with the termination of such loan; (ix)the loss mitigation activities provided in reference to such loan according to the categories specified in each of the subparagraphs of paragraphs (5), (6), and (7) of subsection (c); (x)the loss mitigation activities provided in reference to such loan that are not covered by such categories; (xi)the magnitude of such modification or loss mitigation activities; (xii)the dates of consideration, approval, or rejection of such loss mitigation activities; (xiii)the reasons for such rejection; and (xiv)any other relevant information.

Such reports shall also include information identical to that required upon loan origination by the Home Mortgage Disclosure Act of 1975.

(C)

Data tables

The Comptroller, in consultation with the Director and the Chairman of the Board of Governors of the Federal Reserve System, shall also produce tables indicating for each primary metropolitan statistical area, metropolitan statistical area, and consolidated metropolitan statistical area that is not comprised of designated primary metropolitan statistical areas, aggregate loss mitigation patterns for various categories of census tracts grouped according to location, age of housing stock, income level, and racial and ethnic characteristics. (D)

Availability to public

The data and tables required pursuant to this paragraph shall be made available to the public not later than 6 months after such data is reported pursuant to subparagraph (A). (n)

Definitions

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

Covered federally related mortgage loan

The term covered federally related mortgage loan means a federally related mortgage loan described in subsection (a). (2)

Director

The term Director means the Director of the Bureau of Consumer Financial Protection of the Federal Reserve System. (3)

Mortgagee

The term mortgagee means, with respect to a federally related mortgage loan, the original lender under the loan and any affiliates, agents, subsidiaries, successors, or assignees of such lender, and any subsequent purchaser, trustee, or transferee of the loan or credit instrument issued by such lender. (4)

Servicer

The term servicer has the meaning given such term in section 6(i). (5)

Subordinate lien

The term subordinate lien means, with respect to a covered federally related mortgage loan, a lien that— (A)is an interest on the same property that is subject to the lien that secures the covered federally related mortgage loan; and (B)has subordinate priority to the lien that secures the covered federally related mortgage loan. (o)

Report to Congress

Not later than the expiration of the 12-month period beginning upon the date of the enactment of the Foreclosure Prevention and Sound Mortgage Servicing Act of 2011, and of each consecutive 12-month period thereafter, the Comptroller of the Currency, in consultation with the Director and the Chairman of the Board of Governors of the Federal Reserve System, shall provide a report to the Congress on the extent of compliance by mortgagees and servicers with the requirements of this section and paragraphs (4) through (7) of section 6(e). (p)

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 such State laws are inconsistent with the provisions of this section, and then only to the extent of such inconsistency. (2)

Standard for inconsistency

A State law shall not be considered to be inconsistent with this section if the protection such State law affords any consumer is greater than the protection afforded by this section. (q)

Rule of construction

Nothing in this section may be construed to prohibit any mortgagee or servicer of a covered federally related mortgage loan from providing a loan modification that exceeds the standards established by the regulations issued pursuant to subsection (r). (r)

Regulations

The Director shall issue regulations to carry out this section. Such regulations shall be issued not later than the expiration of the 180-day period beginning upon the date of the enactment of the Foreclosure Prevention and Sound Mortgage Servicing Act of 2011.

(b)

Duty of loan servicer To respond to borrower inquiries

Section 6(e) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605(e)) is amended— (1)in paragraph (1), by striking subparagraph (A) and inserting the following:

(A)

In general

If any servicer of a federally related mortgage loan receives a qualified written request from the borrower, an agent of the borrower, or a housing counseling agency approved by the Secretary of Housing and Urban Development for information relating to the servicing of such loan (including documents executed at the time the loan was consummated or other documents related to the loan), the servicer shall take action with respect to such inquiry as specified in paragraph (2).

;

(2)in paragraph (2), in the matter preceding subparagraph (A), by striking 60 days and all that follows through any borrower and inserting the following: 14 calendar days after the receipt from any borrower, borrower’s agent, or housing counseling agency approved by the Secretary of Housing and Urban Development; and (3)in paragraph (3), by striking 60-day and inserting 14-day. (c)

Comprehensive disclosure and fair processing of qualified written requests

Section 6(e) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605(e)) is amended by adding at the end the following new paragraphs:

(4)

Provision of information regarding mortgage

The servicer of a covered federally related mortgage loan (as such term is defined in section 6A(n)) shall have available at all times the following information, which shall be provided to the borrower or borrower’s agent in response to a qualified written request by the borrower submitted in accordance with the deadlines set forth in paragraph (1)(A): (A)Whether the account relating to such loan is current, or if not, the date the account went into default. (B)The current balance due on the loan, including the amount of principal due, an itemization of all fees due, an explanation of the escrow balance, and whether there are any escrow deficiencies or shortages. (C)A full payment history that shows, in a clear and easily understandable manner, all of the activity on the loan since the origination of the loan, including the escrow account, and the application of payments made under the loan. (D)The initial terms of the loan. (E)A copy of the original note and security instrument. (F)Identification of the owner of the mortgage note and any investors in the note. (G)Any documents that limit, explain, or modify the loss mitigation activities offered by the servicer. (H)Any other information requested by the borrower that is reasonably related to loss mitigation activities. (I)Documents executed at the time the loan was consummated or other documents related to the loan. (5)

Prohibition of wrong door actions for qualified written requests

All written communications from the mortgagee or servicer of a federally related mortgage loan to the borrower shall include the address for receipt and handling of qualified written requests. Any qualified written request received by the mortgagee or servicer shall be valid notwithstanding receipt at any address other than that designated by the mortgagee or servicer for receipt and handling of such requests. (6)

Prohibition of fee for response to qualified written requests

A mortgagee or servicer for a federally related mortgage loan may not impose any fee for, or on account of, the preparation and submission by such mortgagee or servicer of any response or statement required by this subsection. (7)

Prohibition of foreclosure pending disclosure

In the case of a covered federally related mortgage loan (as such term is defined in section 6A(n)), no foreclosure proceeding may be initiated or continued against the borrower or the principal residence of the borrower during any period in which a qualified written request under this subsection is pending and the mortgagee or servicer has not complied with the requirements of this subsection regarding the request.

(d)

Damages and costs

Section 6(f) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605(f)) is amended— (1)in the matter preceding paragraph (1), by inserting or of section 6A after this section; (2)in paragraphs (1)(B) and (2)(B)— (A)by striking a pattern or practice each place such term appears; and (B)by striking $1,000 each place such term appears and inserting $2,000 for each violation; and (3)in paragraph (2)(B)(i), by striking $500,000 and inserting $1,000,000. (e)

Conforming amendment

Section 17 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2615) is amended by striking Nothing and inserting Except as provided in sections 6(e)(7) and 6A, nothing.

Duties of lenders and loan servicers

The Truth in Lending Act is amended by inserting before section 130 (15 U.S.C. 1640) the following new section:

129I.

Duties of lenders and loan servicers

(a)

Standard of care

(1)

Agency relationship

In the case of any home loan serviced by a loan servicer on behalf of a lender, the loan servicer shall be deemed an agent of that lender, and shall be subject to all requirements of agents otherwise applicable under Federal or State law. (2)

Fair dealing

Each lender and loan servicer shall, in addition to the duties imposed by otherwise applicable provisions of Federal or State law, with respect to each home mortgage loan, including any home mortgage loan in default or in which the homeowner has filed for bankruptcy— (A)act with reasonable skill, care, diligence, and in accordance with the highest standards; and (B)act in good faith and with fair dealing in any transaction, practice, or course of business associated with the home mortgage loan. (3)

Training and competency

Each lender and loan servicer shall institute training, procedures, and standards to ensure that borrowers are treated fairly and competently. (b)

Rules for assessment of fee

(1)

In general

No home mortgage loan contract may require, nor may any lender or loan servicer assess or receive, any fees or charges other than interest, late fees as specifically authorized in this section, or fees assessed for nonsufficient funds, and charges allowed pursuant to subsection (h)(1)(B), until the home mortgage loan is the subject of a foreclosure proceeding and the debt on such loan has been accelerated. (2)

Fee limitations

Any permissible fee or charge described under paragraph (1) shall be— (A)reasonable; (B)for services actually rendered; and (C)specifically authorized by the terms of the home mortgage loan contract and State law. (3)

Assessment and disclosure

(A)

In general

Any permissible fee or charge described under paragraph (1) shall be— (i)assessed not later than 30 days after the date on which the fee was accrued; and (ii)explained clearly and conspicuously in the next monthly accounting statement provided to the borrower designated in the home mortgage loan contract. (B)

Failure to comply

Failure by a lender or loan servicer to comply with the requirements set forth under subparagraph (A) shall result in the waiver of the fee. (4)

Required statements

Each month a lender or loan servicer shall provide to each borrower designated in a home mortgage loan contract entered into by such lender or loan servicer a periodic statement that clearly and in plain English explains— (A)the application of the prior month’s payment by the borrower, including the allocation of the payment to interest, principal, escrow, and fees; (B)the status of the escrow account held on behalf of the borrower, including the payments into and from the escrow account; and (C)the assessment of fees accruing in the previous month, including the reason that such fee accrued and the date such fee accrued. (c)

Maximum allowable late fees charged after loan closing

(1)

In general

No lender or loan servicer may impose a charge or fee for late payment of any amount due on a home mortgage loan— (A)unless the home mortgage loan contract specifically authorizes the charge or fee; (B)in an amount in excess of 5 percent of the amount of the payment past due; (C)before the end of the 15-day period after the date the payment is due, or in the case of a home mortgage loan on which interest on each installment is paid in advance, before the end of the 30-day period after the date the payment is due; or (D)more than once with respect to a single late payment. (2)

Rule of construction

For purposes of this subsection, payments on any amount due on a home mortgage loan shall be applied first to current installments, then to delinquent payments, and then to delinquency charges. (3)

Coordination with subsequent late fees

If a home loan mortgage payment is otherwise a full payment for the applicable period and is paid on its due date or within an applicable grace period, and the only delinquency or insufficiency of payment is attributable to a late fee or delinquency charge assessed on an earlier payment, no late fee or delinquency charge may be imposed on such payment. (d)

Payoff statements

(1)

Prohibition on fees

(A)

In general

No lender or loan servicer (or any third party acting on behalf of such lender or loan servicer) may charge a fee for transmitting to any borrower the amount due to pay off the outstanding balance on the home mortgage loan of such borrower. (B)

Exception

After a lender or loan servicer (or any third party acting on behalf of such lender or loan servicer) has provided the information described in subparagraph (A) without charge on 4 occasions during a calendar year, the lender or loan servicer (or any third party acting on behalf of such lender or loan servicer) may thereafter charge a reasonable fee for providing such information during the remainder of the calendar year. (2)

Timing

The information described in subparagraph (A) shall be provided to the borrower within a reasonable period of time but in any event not more than 5 business days after the receipt of the request by the lender or loan servicer. (e)

Civil Liability

(1)

In general

Any lender or loan servicer who fails to comply with any requirement of this section with respect to a borrower designated in a home mortgage loan contract, is liable to such borrower in an amount equal to the sum of— (A)any actual damages sustained by such borrower as a result of the failure; (B)an amount not less than $5,000; or (C)in the case of any successful action to enforce the foregoing liability the costs of the action, together with a reasonable attorney’s fee as determined by the court. (2)

Jurisdiction

Any action by a borrower for a failure to comply with the requirements of this section may be brought in any United States district court, or in any other court of competent jurisdiction, not later than 3 years from the date of the occurrence of such violation. This subsection does not bar a person from asserting a violation of this section in an action by a lender or loan servicer to collect the debt owed on a home mortgage loan, or foreclose upon the home securing a home mortgage loan, or to stop a foreclosure upon that home, which was brought more than 3 years after the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action. An action under this section does not create an independent basis for removal of an action to a United States district court. (3)

State Attorney General enforcement

An action to enforce a violation of this section may also be brought by the appropriate State attorney general in any appropriate United States district court, or any other court of competent jurisdiction, not later than 3 years after the date on which the violation occurs. An action under this section does not create an independent basis for removal of an action to a United States district court. (f)

Definitions

In this section, the following definitions shall apply: (1)

Lender

The term lender has the same meaning as in section 3500.2 of title 24, Code of Federal Regulations, as in effect on the date of enactment of this section. (2)

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)).