[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4963 Introduced in House (IH)]

113th CONGRESS
  2d Session
                                H. R. 4963

 To amend the Real Estate Settlement Procedures Act of 1974 to provide 
           protections to borrowers, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 25, 2014

 Ms. Michelle Lujan Grisham of New Mexico (for herself and Ms. Kaptur) 
 introduced the following bill; which was referred to the Committee on 
                           Financial Services

_______________________________________________________________________

                                 A BILL


 
 To amend the Real Estate Settlement Procedures Act of 1974 to provide 
           protections to borrowers, 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 ``National Homeowners Bill of Rights 
Act of 2014''.

SEC. 2. SERVICER TREATMENT OF BORROWERS.

    The Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601 
et seq.) is amended by inserting after section 6 the following:

``SEC. 6A. SERVICER TREATMENT OF BORROWERS.

    ``(a) Servicer Requirements.--
            ``(1) Single electronic record and single point of 
        contact.--Each servicer of a federally related mortgage loan, 
        or agents of such servicer, shall, with respect to the 
        borrower, establish a single electronic record for each 
        account, the contents of which shall be accessible throughout 
        the servicer, or agents of such servicer, including to all 
        affordable loan modification staff, all foreclosure staff, and 
        all bankruptcy staff.
            ``(2) Availability of net present value information.--
        Servicers shall maintain a free and publicly accessible website 
        where borrowers may check their estimated net present value.
    ``(b) Protections for Homeowners With Limited English 
Proficiency.--
            ``(1) Free oral interpretation.--Servicers shall provide 
        free oral interpretation services for borrowers who request 
        such services and such services may be provided by contracting 
        with housing counseling agencies that are approved by the 
        Department of Housing and Urban Development and that have 
        appropriate language capacity.
            ``(2) Notation in file.--Servicers shall--
                    ``(A) note a request for translation services in 
                the borrower's file and make such note available to all 
                relevant servicer personnel; and
                    ``(B) note in the borrower's file any time the 
                borrower has communicated or sought to communicate with 
                the servicer in a language other than English, and 
                shall include such other language.
            ``(3) Translated documents.--
                    ``(A) Providing documents.--
                            ``(i) In general.--Servicers shall, if a 
                        borrower asks for translated documents, provide 
                        key documents to the borrower translated into 
                        the language of the borrower, including 
                        periodic statements, affordable loan 
                        modification applications, denial notices, and 
                        loan modification offers, including any trial 
                        period plan.
                            ``(ii) Exception.--Clause (i) shall only 
                        require providing documents in--
                                    ``(I) commonly spoken languages in 
                                the United States, as determined by the 
                                Bureau;
                                    ``(II) with respect to a particular 
                                servicer, languages spoken by a 
                                significant number of individuals 
                                living in any markets in which the 
                                servicer does business, as determined 
                                by the Bureau.
                    ``(B) Accepting documents.--Servicers shall only be 
                required to accept documents in languages in which the 
                servicer already provides documents, that are 
                considered to be part of routine business transactions 
                in the market in which the mortgage loan was made, or 
                that are used in documents provided to the public by 
                any department or agency of the Federal Government.
            ``(4) Exception.--Subparagraph (A) of paragraph (3) shall 
        not apply to small servicers, as defined under section 
        1026.41(e)(4)(ii) of title 12, Code of Federal Regulations.
    ``(c) Requirements During Affordable Loan Modification Process.--
            ``(1) Borrowers facing imminent default.--Servicers shall 
        evaluate a borrower facing imminent default (as such term is 
        defined by the Bureau), as well as those in default, for 
        affordable loan modification assistance, as described in this 
        section.
            ``(2) Assistance to borrowers.--
                    ``(A) Assistance in applying for affordable loan 
                modification.--Servicers shall--
                            ``(i) have available and sufficient staff 
                        to answer questions borrowers may have about 
                        filling out documents; and
                            ``(ii) provide borrowers a list of non-
                        profit legal services organizations and housing 
                        agencies approved by the Department of Housing 
                        and Urban Development, that can assist the 
                        borrowers with documents.
                    ``(B) Treatment of successors in interest.--
                Servicers shall--
                            ``(i) provide full information and complete 
                        loss mitigation options to successor homeowners 
                        protected from an acceleration of a mortgage 
                        loan under the Garn-St Germain Depository 
                        Institutions Act of 1982, if requested by the 
                        successor homeowner; and
                            ``(ii) review a mortgage loan for loss 
                        mitigation, as though the successor homeowner 
                        was the borrower, and provide a decision on 
                        available loss mitigation prior to an 
                        assumption of the mortgage loan, if requested 
                        by the succeeding homeowner.
            ``(3) After reviewing application.--If a servicer denies an 
        application for an affordable loan modification, the servicer 
        shall notify the borrower of other loss mitigation options that 
        may be available to the borrower and shall consider the 
        borrower for such other loss mitigation options.
            ``(4) Rule of construction.--Nothing in this section shall 
        be construed as prohibiting a servicer from considering a 
        borrower for other loss mitigation options, so long as the 
        servicer first offers the borrower an affordable loan 
        modification if the borrower is eligible for such a 
        modification.
            ``(5) Requirements related to transfer of loans.--
                    ``(A) In general.--For any transfer of servicing to 
                a successor servicer of a federally related mortgage 
                loan or subservicer, the transferring servicer shall--
                            ``(i) inform the successor servicer 
                        (including a subservicer) whether a loan 
                        modification request is pending;
                            ``(ii) provide the successor servicer with 
                        all documentation related to the mortgage loan, 
                        including any documentation relating to a loan 
                        modification or loss mitigation process;
                            ``(iii) ensure that the successor servicer 
                        has the operational capacity to manage the 
                        transferred loan;
                            ``(iv) ensure that the successor servicer 
                        shall accept and continue processing prior loan 
                        modification requests, by including such 
                        requirement in the agreement made between the 
                        servicers when transferring the loan;
                            ``(v) ensure that successor servicer shall 
                        honor trial and permanent loan modification 
                        agreements entered into by the transferring 
                        servicer by including such requirement in the 
                        agreement made between the servicers when 
                        transferring the loan; and
                            ``(vi) notify the borrower of the 
                        transferred loan that the new servicer is 
                        required to accept and continue processing 
                        prior loan modification requests, if any, and 
                        is required to honor trial and permanent loan 
                        modification agreements entered into by the 
                        transferring servicer, if any.
                    ``(B) Honoring of existing loan modifications and 
                applications in process.--The successor servicer shall 
                agree to honor and accept any existing loan 
                modification and continue any loan modification 
                applications.
                    ``(C) Prohibition on foreclosure.--During the 60-
                day period beginning on the effective date of transfer 
                of the servicing of any federally related mortgage 
                loan, the mortgage loan subject to such transfer may 
                not be subject to initiation of a judicial or non-
                judicial foreclosure or be subject to a foreclosure 
                sale.
    ``(d) Subsequent Applications for Affordable Loan Modification.--If 
a borrower has submitted an application or request in the past, the 
servicer shall allow such borrower to make a subsequent affordable loan 
modification application if the borrower experiences a material change 
in circumstances, as defined by the Bureau.
    ``(e) Limitation on Foreclosure Proceedings.--
            ``(1) Stop of sales pending application.--If a borrower 
        submits an initial application for affordable loan modification 
        assistance more than 7 business days before a scheduled 
        foreclosure sale, the servicer must stop and cancel the 
        foreclosure sale.
            ``(2) Initiation of foreclosure.--A servicer may not 
        initiate or continue a nonjudicial foreclosure or a judicial 
        foreclosure that is otherwise authorized under State law 
        against a mortgagor that has submitted an initial application 
        for an affordable loan modification or other loss mitigation, 
        unless the servicer--
                    ``(A) has determined whether the mortgagor is 
                eligible for an affordable loan modification; and
                    ``(B) has made such a modification, if the 
                mortgagor is eligible for a modification.
            ``(3) Foreclosure proceedings permitted.--Notwithstanding 
        paragraph (2), a servicer may initiate or continue a judicial 
        or nonjudicial foreclosure under State law against a borrower, 
        if--
                    ``(A) the servicer--
                            ``(i) determines that the borrower is not 
                        eligible for a modification;
                            ``(ii) notifies the borrower of the 
                        determination under clause (i); and
                            ``(iii) provides the borrower--
                                    ``(I) a copy of any net present 
                                value calculation made by the servicer 
                                in relation to an affordable loan 
                                modification, including any information 
                                providing a basis for such net present 
                                value calculation;
                                    ``(II) a copy of any note, deed of 
                                trust, or other document necessary to 
                                establish the right of the servicer to 
                                foreclose on the mortgage, including 
                                proof of assignment of the mortgage to 
                                the servicer and the right of the 
                                servicer to enforce the relevant note 
                                under the law of the State in which the 
                                real property securing the mortgage is 
                                located;
                                    ``(III) a copy of any language in 
                                the pooling or servicing agreement with 
                                respect to the mortgage that the 
                                servicer relies upon in asserting that 
                                it is prohibited or limited in 
                                providing a modification of the 
                                mortgage note;
                                    ``(IV) a copy of all correspondence 
                                between the servicer and the borrowers 
                                and investors in which the servicer 
                                attempts to obtain permission to make a 
                                modification; and
                                    ``(V) the alternatives to 
                                foreclosure available to the borrower, 
                                including deed in lieu of foreclosures 
                                and short sales; or
                    ``(B) a borrower--
                            ``(i) declines to be considered for a loan 
                        modification in writing or declines an 
                        affordable modification in writing; or
                            ``(ii) does not respond to the servicer's 
                        outreach activities (as defined by the Bureau) 
                        to obtain underlying information to complete an 
                        application or fails to make a trial or 
                        permanent loan modification payment.
        For purposes of subparagraph (A), a `pooling and servicing 
        agreement' is any contract establishing the transaction rights 
        and duties of the parties to any mortgage-backed securitization 
        transaction.
            ``(4) Bar to foreclosure.--Failure to comply with the 
        requirements of this subsection shall be a bar to the 
        foreclosure of a mortgage, deed of trust, or substantially 
        similar instrument.
            ``(5) Fees.--
                    ``(A) Waiver of late fees.--If a borrower's 
                application for affordable loan modification assistance 
                is accepted, the servicer shall waive any foreclosure 
                fees and any late fees related to the delinquency in 
                payment.
                    ``(B) No fee accrual while application is 
                pending.--A borrower shall not accrue additional late 
                or foreclosure fees during the period beginning on the 
                date that the borrower submits an affordable loan 
                modification application and the date on which the 
                servicer makes a determination on such application.
            ``(6) Notification.--With respect to a foreclosure sale 
        that is postponed by reason of this subsection, the servicer 
        shall notify the borrower in writing of such postponement and, 
        if a date for such foreclosure sale is rescheduled, shall 
        notify the borrower in writing of the new foreclosure sale 
        date.
            ``(7) Certification of determination of eligibility 
        required for sale.--
                    ``(A) Sale of property prohibited.--If the servicer 
                of a mortgage does not file a certification with the 
                appropriate land records office in the jurisdiction 
                where the property securing the mortgage is located, 
                stating that the servicer has determined the 
                eligibility of the mortgagor for an affordable loan 
                modification in compliance with this section--
                            ``(i) the mortgagee may not sell the 
                        property securing the mortgage; and
                            ``(ii) no person that purchases the 
                        property securing the mortgage may initiate an 
                        action to recover possession of the property.
                    ``(B) Violations.--A sale of property in violation 
                of this paragraph shall be void.
            ``(8) Initial application defined.--For purposes of this 
        subsection, the term `initial application' means a completed 
        Uniform Borrower Assistance Form 710 of the Federal National 
        Mortgage Association or the Federal Home Loan Mortgage 
        Corporation, a Request for Modification and Affidavit of the 
        Making Home Affordable Program, or other equivalent form that 
        sets forth the borrower's financial, income, and hardship 
        information and Form 4506-T of the Internal Revenue Service.
    ``(f) Affordable Loan Modifications.--
            ``(1) Affordable loan modification defined.--For purposes 
        of this section, the term `affordable loan modification' means 
        an agreement to reduce the amount of scheduled regular 
        payments, determined by the borrower's debt-to-income ratio or 
        residual income, and subject to such terms and conditions as 
        may be set by the Bureau, including any reduction of the 
        principal amount of the mortgage note as described in paragraph 
        (4), that is reflected in a permanent change to the terms of 
        the mortgage note under such terms as the Bureau shall define.
            ``(2) Calculation of target affordable regular mortgage 
        payment.--For purposes of this subsection, the target 
        affordable regular mortgage payment shall be an amount 
        determined by the borrower's debt-to-income ratio or residual 
        income, and subject to such terms and conditions as may be set 
        by the Bureau, subject to such terms and conditions as may be 
        set by the Bureau. Such terms shall be based on a fully 
        amortizing principal and interest payment over the remainder of 
        the term of the mortgage, as modified by any reduction in 
        principal.
            ``(3) Eligibility.--A mortgagor shall be eligible to 
        participate in an affordable loan modification if--
                    ``(A) such person is a borrower under a federally 
                related loan secured by the principal residence of the 
                borrower or a person eligible to assume such a loan as 
                a successor homeowner protected from an acceleration of 
                a mortgage loan under the Garn-St Germain Depository 
                Institutions Act of 1982, who is unable to make 
                payments on a federally related mortgage loan under 
                such criteria as the Director of the Bureau shall 
                define, in consultation with the Secretary of Housing 
                and Urban Development and the Secretary of the 
                Treasury;
                    ``(B) such residence is occupied by the mortgagor; 
                and
                    ``(C) the loan modification has a positive net 
                present value (as defined under paragraph 
                (4)(B)(iv)(II)).
            ``(4) Earned principal forgiveness.--
                    ``(A) In general.--If, after reducing mortgage note 
                principal under earned principal forgiveness provided 
                in subparagraph (B), a target affordable regular 
                mortgage payment has not been achieved, the servicer of 
                the mortgage shall comply with the affordable loan 
                modification plan waterfall steps as set out by the 
                Bureau of interest rate reduction, term extension, and 
                principal forbearance, as necessary to achieve a target 
                affordable regular mortgage payment.
                    ``(B) Earned principal forgiveness.--
                            ``(i) Principal reduction.--The Bureau 
                        shall determine standards by which a mortgagor 
                        who has received an affordable loan 
                        modification shall remain in good standing in 
                        order to participate in a reduction in mortgage 
                        note principal under this subsection.
                            ``(ii) Principal reduction required.--
                        Except as provided under clause (iii), a 
                        servicer shall offer a borrower an affordable 
                        loan modification having the maximum amount of 
                        principal reduction that results in a positive 
                        net present value calculation. For purposes of 
                        calculating net present value, a servicer may 
                        use their own formula, if it has been approved 
                        by the Bureau, or may use a default formula 
                        determined by the Bureau.
                            ``(iii) Exceptions.--
                                    ``(I) Greater principal 
                                reduction.--A servicer may offer a 
                                greater principal reduction, if such a 
                                reduction is consistent with the terms 
                                of any contract with respect to the 
                                mortgage.
                                    ``(II) Loan-to-value ratio.--A 
                                servicer is not required to offer a 
                                principal reduction that would result 
                                in a loan-to-value ratio of less than 
                                100 percent.
                            ``(iv) Rules of construction.--
                                    ``(I) Maximum amount of principal 
                                reduction.--A principal reduction 
                                amount may be considered the maximum 
                                amount if it is within $1,000 of the 
                                actual maximum amount.
                                    ``(II) Positive net present value 
                                calculation.--A net present value 
                                calculation shall be deemed to be 
                                `positive' for the mortgage investors 
                                if the net present value result for an 
                                affordable loan modification scenario 
                                is greater than the net present value 
                                result if no affordable loan 
                                modification is made. Net present value 
                                shall be calculated as the benefit of 
                                all investors in a securitization 
                                rather than the benefit of any 
                                particular class of investors.
                            ``(v) Principal forgiveness.--
                                    ``(I) Treatment of principal 
                                reduction amount.--Any amount of 
                                principal reduction under clause (ii) 
                                shall be treated as non-interest-
                                bearing principal forbearance until the 
                                dates described under subclause (II). 
                                The principal reduction described in 
                                this clause shall be deemed to be 
                                separate from and exclusive of any 
                                other forbearance that may be offered 
                                in conjunction with a modification 
                                under an affordable loan modification 
                                program.
                                    ``(II) Reduction of principal.--The 
                                servicer of a mortgage modified under 
                                an affordable loan modification plan 
                                shall reduce the unpaid balance of the 
                                principal of the mortgage by an amount 
                                equal to \1/3\ of the total amount of 
                                the principal reduction under clause 
                                (ii) on each of the following dates:
                                            ``(aa) The date that is 1 
                                        year after the date on which 
                                        the affordable loan 
                                        modification begins.
                                            ``(bb) The date that is 2 
                                        years after the date on which 
                                        the affordable loan medication 
                                        begins.
                                            ``(cc) The date that is 3 
                                        years after the date on which 
                                        the affordable loan 
                                        modification begins.
                            ``(vi) Certain modifications.--With respect 
                        to a borrower that is not underwater and does 
                        not qualify for principle reduction, the 
                        servicer shall offer such borrower an 
                        affordable loan modification to reach the 
                        target affordable regular mortgage payment 
                        amount, if the borrower qualifies.
            ``(5) Treatment of junior liens.--With respect to a 
        borrower, if a primary mortgage loan is modified pursuant to 
        this subsection, the servicer of any junior mortgage loan shall 
        make a modification available to the borrower on the same terms 
        as the modification of the primary mortgage loan, unless 
        prohibited by contract.
            ``(6) Rule of construction.--Nothing in this section shall 
        be construed as prohibiting a servicer from providing a loan 
        modification that does not produce a positive net present value 
        (as defined under paragraph (4)(B)(iv)(II)).
    ``(g) Bar to Foreclosure.--In any judicial or non-judicial 
foreclosure proceeding, it shall be a bar to foreclosure that the 
servicer of the federally related mortgage loan on the property to be 
foreclosed violated any provision of this section.
    ``(h) Civil Penalty.--
            ``(1) In general.--Any servicer who violates a provision of 
        this section shall be subject to a fine in an amount, as 
        determined by the Bureau, not to exceed $5,000 for each 
        violation except that the maximum penalty for all violations by 
        any particular servicer during any 1-year period shall not 
        exceed $1,000,000.
            ``(2) Liability to borrower.--Any servicer that violates a 
        provision of this section with respect to a loan shall be 
        liable to the borrower of such loan in the amount of $10,000 
        per violation.
            ``(3) Continuing violations.--In the case of a continuing 
        violation, as determined by the Bureau, each day shall 
        constitute a separate violation for purposes of this 
        subsection.
            ``(4) Adjustment of amounts.--After the end of the 1-year 
        period beginning on the date of the enactment of this 
        subsection, the Bureau shall annually adjust amounts specified 
        under this subsection to reflect inflation.

``SEC. 6B. MORTGAGE SERVICER OMBUDSMAN.

    ``(a) In General.--The Director of the Bureau shall appoint a 
Mortgage Servicer Ombudsman (the `Ombudsman') within the Bureau.
    ``(b) Duties.--The Ombudsman shall provide assistance to servicers 
and borrowers in complying with Federal law with respect to the 
servicing of mortgage loans and offer resolution to borrowers who are 
facing noncompliance.
    ``(c) Focus on Low-Income Borrowers.--In carrying out this section, 
the Ombudsman shall focus on providing assistance to low-income 
borrowers.
    ``(d) Consultation.--The Ombudsman shall consult with--
            ``(1) attorneys general of States in carrying out this 
        section; and
            ``(2) other offices of the Bureau that engage in dispute 
        resolution.
    ``(e) Non-Duplication.--The Ombudsman may not carry out any 
activities that would be duplicative with activities of other Bureau 
offices.

``SEC. 6C. PENALTIES FOR ROBO-SIGNING.

    ``Any servicer who records or files with a land records office or a 
court more than one document with material deficiencies with respect to 
a mortgage loan shall be subject to a fine of not more than $7,500 for 
each such loan.''.

SEC. 3. EXTENSION OF THE PROTECTING TENANTS AT FORECLOSURE ACT OF 2009.

    Section 704 of the Protecting Tenants at Foreclosure Act of 2009 
(12 U.S.C. 5201 note; 12 U.S.C. 5220 note; 42 U.S.C. 1437f note) is 
hereby repealed.

SEC. 4. RULE OF CONSTRUCTION.

    Nothing in this Act, or the amendments made by this Act, shall be 
construed as preempting any State or local law with respect to 
foreclosures that provides greater protections for consumers.

SEC. 5. RULEMAKING.

    The Bureau of Consumer Financial Protection shall, not later than 
the end of the 12-month period beginning on the date of the enactment 
of this Act, issue regulations to carry out this Act and the amendments 
made by this Act, and the Bureau shall provide that such regulations 
take effect not later than the end of the 6-month period beginning on 
the date the regulations are issued.
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