[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 967 Introduced in Senate (IS)]

112th CONGRESS
  1st Session
                                 S. 967

To establish clear regulatory standards for mortgage servicers, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 12, 2011

    Mr. Merkley (for himself, Ms. Snowe, Mr. Reed, Mr. Durbin, Mr. 
Blumenthal, Mr. Inouye, Mrs. Shaheen, Mr. Sanders, Mr. Whitehouse, Mr. 
  Wyden, and Mr. Akaka) introduced the following bill; which was read 
  twice and referred to the Committee on Banking, Housing, and Urban 
                                Affairs

_______________________________________________________________________

                                 A BILL


 
To establish clear regulatory standards for mortgage servicers, and for 
                            other purposes.

    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 ``Regulation of Mortgage Servicing Act 
of 2011''.

SEC. 2. DEFINITIONS.

    In this Act, 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) Director.--The term ``Director'' means the Director of 
        the Bureau of Consumer Financial Protection.
            (5) 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; and
                            (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.
            (6) 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.
            (7) 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), that 
        is secured by a first or subordinate lien on residential real 
        property.
            (8) 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.

SEC. 3. SINGLE POINT OF CONTACT.

    (a) Case Manager Required.--A servicer shall assign 1 case manager 
to each borrower that seeks a loan modification or an alternative to 
foreclosure.
    (b) Duties of Case Manager.--The case manager assigned under 
subsection (a) shall be an individual who--
            (1) manages the communications between the servicer and the 
        borrower;
            (2) has the authority to make decisions about the 
        eligibility of the borrower for a loan modification or an 
        alternative to foreclosure;
            (3) is available to communicate with the borrower by 
        telephone and email during business hours; and
            (4) remains assigned to the borrower until the earliest 
        of--
                    (A) the date on which the borrower accepts a loan 
                modification or an alternative to foreclosure;
                    (B) the date on which the servicer forecloses on 
                the mortgage of the borrower; and
                    (C) 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.
    (c) Assistance for Case Managers.--A servicer may assign an 
employee to assist a case manager assigned under subsection (a), if the 
case manager remains available to communicate with the borrower by 
telephone and email.

SEC. 4. DETERMINATION OF ELIGIBILITY FOR LOAN MODIFICATION PROGRAM OR 
              ALTERNATIVE TO FORECLOSURE REQUIRED BEFORE FORECLOSURE.

    (a) Initiation of Covered Foreclosure Actions.--A servicer may not 
initiate a covered foreclosure action against a borrower unless the 
servicer has--
            (1) 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;
            (2) 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 subsection (c); and
            (3) offered the borrower a loan modification or an 
        alternative to foreclosure, if the borrower is eligible for the 
        loan modification or alternative to foreclosure.
    (b) Suspension of Covered Foreclosure Actions.--
            (1) In general.--A servicer shall suspend a covered 
        foreclosure action that was initiated before the date of 
        enactment of this Act until the servicer--
                    (A) 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;
                    (B) notifies the borrower of the determination 
                under subparagraph (A); and
                    (C) 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.
            (2) Suspension.--During the period of the suspension under 
        paragraph (1), a servicer may not--
                    (A) send a notice of foreclosure to a borrower;
                    (B) conduct or schedule a sale of the real property 
                securing the mortgage of the borrower; or
                    (C) cause final judgment to be entered against the 
                borrower.
            (3) Reasonable efforts.--A servicer is not required to 
        suspend a covered foreclosure action under paragraph (1) if the 
        servicer--
                    (A) 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 subsection (c); and
                    (B) 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 subsection (c).
            (4) 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 a mortgage.
    (c) 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--
            (1) during the 30-day period beginning on the date of 
        delinquency of the borrower, the servicer attempts to establish 
        contact with the borrower by--
                    (A) making not fewer than 4 telephone calls to the 
                telephone number on record for the borrower, at 
                different times of the day; and
                    (B) 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;
            (2) in the case that the borrower responds in writing or by 
        telephone to an attempt to establish contact under paragraph 
        (1), the servicer--
                    (A) notifies 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
                    (B) sends the borrower a written request that the 
                borrower transmit to the servicer all information 
                necessary to determine whether the borrower is eligible 
                for a loan modification or an alternative to 
                foreclosure, not later than 30 days after the date on 
                which the servicer sends the request;
            (3) in the case that the servicer does not receive from the 
        borrower all information requested under paragraph (2)(B) on or 
        before the date that is 30 days after the date on which the 
        servicer sends the notice under paragraph (2), the servicer 
        sends the borrower a written request that the borrower transmit 
        to the servicer all information necessary to determine whether 
        the borrower is eligible for a loan modification or an 
        alternative to foreclosure, not later than 15 days after the 
        date on which the servicer sends the request; and
            (4) in the case that the servicer does not receive from the 
        borrower all information requested under paragraph (3) on or 
        before the date that is 15 days after the date on which the 
        servicer sends the request under paragraph (3), the servicer 
        notifies the borrower that the servicer intends to initiate or 
        continue a covered foreclosure action.

SEC. 5. THIRD PARTY REVIEW.

    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--
            (1) review the file of the borrower; and
            (2) determine whether the borrower is eligible for a loan 
        modification or an alternative to foreclosure.

SEC. 6. BAR TO FORECLOSURE ACTIONS.

    (a) In General.--Subject to subsection (b), a violation of this Act 
shall be a bar to a covered foreclosure action.
    (b) Effect of Subsequent Compliance.--If a servicer is in 
compliance with this Act, the servicer may bring or proceed with a 
covered foreclosure action, without regard to a prior violation of this 
Act by the servicer.

SEC. 7. REGULATIONS.

    Not later than 90 days after the date of enactment of this Act, the 
Director, in consultation with the Secretary of Housing and Urban 
Development and the Secretary of the Treasury, shall issue regulations 
to carry out this Act.

SEC. 8. REPORT.

    Not later than 1 year after the date of enactment of this Act, the 
Director shall submit to Congress a report that contains--
            (1) an evaluation of the effect of this Act on--
                    (A) State law; and
                    (B) communication between servicers and borrowers; 
                and
            (2) a description of any problems concerning the 
        implementation of this Act.
                                 <all>