Standards for mortgage servicers

(a)

In general

Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631) is amended by adding at the end the following new section:

129I.

Standards for servicers of residential mortgages

(a)

Definitions

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

Alternative to foreclosure

The term alternative to foreclosure— (A)means a course of action with respect to a mortgage offered by a servicer to a borrower as an alternative to a covered foreclosure action; and (B)includes a short sale and a deed in lieu of foreclosure. (2)

Borrower

The term borrower means a mortgagor under a mortgage who is in default or at risk of imminent default, as determined by the Director, by rule. (3)

Covered foreclosure action

The term covered foreclosure action means a judicial or nonjudicial foreclosure. (4)

Independent reviewer

The term independent reviewer— (A)means an entity that has the expertise and capacity to determine whether a borrower is eligible to participate in a loan modification program; and (B)includes— (i)an entity that is not a servicer; or (ii)a division within a servicer that is independent of, and not under the same immediate supervision as, any division that makes determinations with respect to applications for loan modifications or alternatives to foreclosure. (5)

Loan modification program

The term loan modification program— (A)means a program or procedure designed to change the terms of a mortgage in the case of the default, delinquency, or imminent default or delinquency of a mortgagor; and (B)includes— (i)a loan modification program established by the Federal Government, including the Home Affordable Modification Program of the Department of the Treasury; and (ii)a loan modification program established by a servicer. (6)

Mortgage

The term mortgage means a federally related mortgage loan, as defined in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602(3)), that is secured by a first or subordinate lien on residential real property that is the primary residence of the borrower. (7)

Servicer

The term servicer— (A)has the same meaning as in section 6(i) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605(i)); and (B)includes a person responsible for servicing a pool of mortgages. (b)

Single point of contact

(1)

Case Manager Required

A servicer shall assign 1 case manager to each borrower that seeks a loan modification or an alternative to foreclosure. (2)

Duties of Case Manager

The case manager assigned under paragraph (1) shall be an individual who— (A)manages the communications between the servicer and the borrower; (B)has the authority to make decisions about the eligibility of the borrower for a loan modification or an alternative to foreclosure; (C)is available to communicate with the borrower by telephone and email during business hours; and (D)remains assigned to the borrower until the earliest of— (i)the date on which the borrower accepts a loan modification or an alternative to foreclosure; (ii)the date on which the servicer forecloses on the mortgage of the borrower; or (iii)the date on which a release of the mortgage of the borrower is recorded in the appropriate land records office, as determined by the Director, by rule. (3)

Assistance for Case Managers

A servicer may assign an employee to assist a case manager assigned under paragraph (1), if the case manager remains available to communicate with the borrower by telephone and email. (c)

Determination of eligibility for loan modification program or alternative to foreclosure required before foreclosure

(1)

Initiation of Covered Foreclosure Actions

A servicer may not initiate a covered foreclosure action against a borrower unless the servicer has— (A)completed a full review of the file of the borrower to determine whether the borrower is eligible for a loan modification or an alternative to foreclosure; (B)made a reasonable effort to obtain the information necessary to determine whether the borrower is eligible for a loan modification or an alternative to foreclosure, as described in paragraph (3); and (C)offered the borrower a loan modification or an alternative to foreclosure, if the borrower is eligible for the loan modification or alternative to foreclosure. (2)

Suspension of Covered Foreclosure Actions

(A)

In general

A servicer shall suspend a covered foreclosure action that was initiated before the date of enactment of this section until the servicer— (i)completes a full review of the file of the borrower to determine whether the borrower is eligible for a loan modification or an alternative to foreclosure; (ii)notifies the borrower of the determination under clause (i); and (iii)offers the borrower a loan modification or an alternative to foreclosure, if the borrower is eligible for a loan modification or an alternative to foreclosure. (B)

Suspension

During the period of the suspension under subparagraph (A), a servicer may not— (i)send a notice of foreclosure to a borrower; (ii)conduct or schedule a sale of the residential real property securing the mortgage of the borrower; or (iii)cause final judgment to be entered against the borrower. (C)

Reasonable efforts

A servicer is not required to suspend a covered foreclosure action under subparagraph (A) if the servicer— (i)makes a reasonable effort to obtain information necessary to determine whether the borrower is eligible for a loan modification or an alternative to foreclosure, as described in paragraph (3); and (ii)documents that the servicer has not received information necessary to determine whether the borrower is eligible for a loan modification or an alternative to foreclosure before the end of the applicable period under paragraph (3). (D)

Rule of construction

Nothing in this section may be construed to require a servicer to delay an unavoidable foreclosure, such as foreclosure that results from a borrower abandoning the residential real property securing the mortgage of such borrower. (3)

Reasonable effort to obtain necessary information

A servicer shall be deemed to have made a reasonable effort to obtain information necessary to determine whether the borrower is eligible for a loan modification or an alternative to foreclosure if such servicer takes the following steps: (A)

30-day period after delinquency

(i)

In general

During the 30-day period beginning on the date of delinquency of the borrower, the servicer shall attempt to establish contact with the borrower by— (I)making not fewer than 4 telephone calls to the telephone number on record for the borrower, at different times of the day; and (II)sending not fewer than 2 written notices to the borrower at the address on record for the borrower, at least 1 of which shall be delivered by certified mail, requesting that the borrower contact the servicer. (ii)

Contact not established

In the case that a servicer is not able to establish contact with the borrower by telephone under subclause (I) of clause (i) or such borrower does not respond to the notices sent under subclause (II) of such clause, such servicer shall, following a third party review under subsection (d), notify the borrower that the servicer intends to initiate or continue a covered foreclosure action. (B)

Contact established with borrower

In the case that a servicer is able to establish contact with the borrower under subparagraph (A)(i), the servicer shall— (i)notify the borrower, in writing, that the servicer lacks information necessary to determine whether the borrower is eligible for a loan modification or an alternative to foreclosure; and (ii)send the borrower a written request that the borrower transmit to the servicer, not later than 30 days after the date on which such request sent by the servicer is postmarked, all information necessary to determine whether the borrower is eligible for a loan modification or an alternative to foreclosure. (C)

Necessary information not received

In the case that the servicer does not receive from the borrower all information requested under clause (ii) of subparagraph (B) within the time period described in such subparagraph, the servicer shall send the borrower an additional written request that the borrower transmit to the servicer, not later than 15 days after the date on which such request sent by the servicer is postmarked, all information necessary to determine whether the borrower is eligible for a loan modification or an alternative to foreclosure. (D)

Notification of foreclosure

In the case that the servicer does not receive from the borrower all information requested under subparagraph (C) within the time period described in such subparagraph, the servicer shall, following a third party review under subsection (d), notify the borrower that the servicer intends to initiate or continue a covered foreclosure action. (d)

Third party review

(1)

In general

Unless otherwise provided for in this subsection, before a servicer notifies a borrower that the borrower is not eligible for a loan modification or an alternative to foreclosure, the servicer shall obtain the services of an independent reviewer to— (A)review the file of the borrower; and (B)determine whether the borrower is eligible for a loan modification or an alternative to foreclosure. (2)

Exemption

Paragraph (1) shall not apply to a servicer that is a community financial institution, as defined in section 2(10) of the Federal Home Loan Bank Act (12 U.S.C. 1422(10)). (e)

Bar to foreclosure actions

(1)

In General

Subject to paragraph (2), a violation of this Act shall be a bar to a covered foreclosure action. (2)

Effect of Subsequent Compliance

If a servicer is in compliance with this section, the servicer may bring or proceed with a covered foreclosure action, without regard to a prior violation of this section by the servicer. (f)

Liability

(1)

In general

A servicer that fails to comply with any requirement imposed under this section shall be liable to a borrower in the same manner that a creditor who fails to comply with any requirement under this chapter is liable to a person under section 130. (2)

Joint and several liability

A creditor or assignee that is connected to a mortgage serviced by a servicer that fails to comply with any requirement imposed under this section shall, with respect to that mortgage, have joint and several liability with such servicer for such failure to comply.

(b)

Table of contents

The table of contents of chapter 2 of such Act is amended by adding at the end the following new item:

129I. Standards for servicers of residential mortgages.