[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3519 Introduced in House (IH)]

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114th CONGRESS
  1st Session
                                H. R. 3519

To establish pilot programs to encourage the use of shared appreciation 
            mortgage modifications, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 16, 2015

 Mr. Ellison introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
To establish pilot programs to encourage the use of shared appreciation 
            mortgage modifications, 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 ``Preserving American Homeownership 
Act of 2015''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) The stability of the economy, housing market, and 
        neighborhoods of the United States depends upon reducing the 
        number of foreclosures in the United States.
            (2) Homeowners struggling to make payments on homes with 
        mortgages that are deeply underwater are some of the most at 
        risk of foreclosure.
            (3) A properly carried out principal modification program 
        will preserve the assets of the Government-sponsored mortgage 
        enterprises assets and reduce taxpayer losses, consistent with 
        the mission of the Federal Housing Finance Agency as the 
        enterprises' conservator, and will help foster a more resilient 
        national housing market.

SEC. 3. SHARED APPRECIATION MORTGAGE MODIFICATION PILOT PROGRAMS.

    (a) Definitions.--In this section--
            (1) the term ``capital improvement'' means a home 
        improvement described in table 4 of Publication 530 of the 
        Internal Revenue Service, or any successor thereto;
            (2) the term ``covered mortgage'' means a mortgage--
                    (A) that is--
                            (i) sold to the Federal National Mortgage 
                        Association, the Government National Mortgage 
                        Association, or the Federal Home Loan Mortgage 
                        Corporation; or
                            (ii) insured under title II of the National 
                        Housing Act (12 U.S.C. 1707 et seq.);
                    (B) that is secured by real property that is the 
                primary residence of a homeowner;
                    (C) that has an outstanding principal balance of an 
                amount that is greater than the appraised value of the 
                real property securing the mortgage, on or about the 
                date on which the homeowner is approved to participate 
                in the pilot program under subsection (b);
                    (D) with respect to which the homeowner is, both as 
                of the date of the enactment of this Act and as of the 
                date of the modification under a pilot program under 
                subsection (b)--
                            (i) not fewer than 60 days delinquent; or
                            (ii) at risk of imminent default; and
                    (E) of a homeowner who has a documented financial 
                hardship that prevents or will prevent the homeowner 
                from making mortgage payments;
            (3) the term ``Director'' means the Director of the Federal 
        Housing Finance Agency;
            (4) the term ``enterprise'' has the same meaning as in 
        section 1303 of the Federal Housing Enterprises Financial 
        Safety and Soundness Act of 1992 (12 U.S.C. 4502);
            (5) the term ``homeowner'' means the mortgagor under a 
        covered mortgage;
            (6) the term ``investor'' means--
                    (A) the mortgagee under a covered mortgage; or
                    (B) in the case of a covered mortgage that 
                collateralizes an asset-backed security, as defined in 
                section 3(a) of the Securities Exchange Act of 1934 (15 
                U.S.C. 78c(a)), the trustee for the asset-backed 
                security;
            (7) the term ``pilot program'' means a pilot program 
        established under subsection (b); and
            (8) the term ``shared appreciation mortgage modification'' 
        means a modification of a covered mortgage in accordance with 
        subsection (c).
    (b) Pilot Programs Established.--The Director of the Federal 
Housing Finance Agency and the Federal Housing Commissioner, in 
consultation with the Secretary of the Treasury, shall each establish a 
pilot program to encourage, through assistance provided under the Home 
Affordable Modification Program under the Making Home Affordable 
initiative of the Secretary of the Treasury, the use of shared 
appreciation mortgage modifications that are designed to return greater 
cash flow to investors than other loss-mitigation activities, including 
foreclosure, and result in positive net present value for the investor.
    (c) Shared Appreciation Mortgage Modification.--For purposes of the 
pilot program, a shared appreciation mortgage modification shall--
            (1) reduce the loan-to-value ratio of a covered mortgage--
                    (A) to 115 percent immediately upon such 
                modification, by immediately reducing the amount of 
                principal under the covered mortgage accordingly; and
                    (B) to 95 percent within 3 years, by reducing the 
                amount of principal under the covered mortgage by \1/3\ 
                at the end of each year for 3 years;
            (2) reduce the interest rate for a covered mortgage, if a 
        reduction of principal under paragraph (1) would not result in 
        a reduced monthly payment that is affordable to the homeowner;
            (3) reduce the amount of any periodic payment required to 
        be made by the homeowner, so that the amount payable by the 
        homeowner is equal to the amount that would be payable by the 
        homeowner if, on the date on which the shared appreciation 
        mortgage modification takes effect--
                    (A) all reductions of the amount of principal under 
                paragraph (1) had been made; and
                    (B) any reduction in the interest rate under 
                paragraph (2) for which the covered mortgage is 
                eligible had been made;
            (4) require the homeowner to pay to the investor after 
        refinancing or selling the real property securing a covered 
        mortgage a percentage of the amount of any increase (not to 
        exceed 50 percent of such increase) in the value of the real 
        property during the period beginning on the date on which the 
        homeowner was approved to participate in the pilot program and 
        ending on the date of the refinancing or sale that is equal to 
        the percentage by which the investor reduced the amount of 
        principal under the covered mortgage under paragraph (1); and
            (5) result in a positive net present value for the investor 
        after taking into account the principal reduction under 
        paragraph (1) and, if necessary, any interest rate reduction 
        under paragraph (2).
    (d) Determination of Value of Home.--
            (1) In general.--For purposes of this section, the value of 
        real property securing a covered mortgage shall be determined 
        by a licensed appraiser who is independent of and does not 
        otherwise do business with the homeowner, servicer, investor, 
        or an affiliate of the homeowner, servicer, or investor, except 
        that, where available, such value may be determined using a 
        reliable estimate of value provided by an automated valuation 
        model of an enterprise.
            (2) Time for determination.--The value of real property 
        securing a covered mortgage shall be determined on a date that 
        is as close as practicable to the date on which a homeowner 
        begins to participate in a pilot program.
            (3) Cost.--
                    (A) Responsibility for cost.--
                            (i) Initial cost.--The investor shall pay 
                        the cost of an appraisal or other determination 
                        of value under paragraph (1).
                            (ii) Deduction from homeowner share.--At 
                        the option of the investor, the cost of an 
                        appraisal or other determination of value under 
                        paragraph (1) may be added to the amount paid 
                        by the homeowner to the investor under 
                        subsection (c)(4).
                    (B) Reasonableness of cost.--The cost of an 
                appraisal or other determination of value under 
                paragraph (1) shall be reasonable, as determined by the 
                Director and the Federal Housing Commissioner.
            (4) Second appraisal.--At the time of refinancing or sale 
        of real property securing a covered mortgage, the investor may 
        request a second appraisal of the value of the real property, 
        at the expense of the investor, by a licensed appraiser who is 
        independent of and does not otherwise do business with the 
        homeowner, servicer, investor, or an affiliate of the 
        homeowner, servicer, or investor, if the investor believes that 
        the sale price or claimed value at the time of the refinancing 
        is not an accurate reflection of the fair market value of the 
        real property.
    (e) Eligibility for Reduction of Principal.--Each pilot program 
shall provide that a homeowner is not eligible for a reduction in the 
amount of principal under a covered mortgage under a shared 
appreciation mortgage modification if, after the homeowner begins 
participating in the pilot program, the homeowner--
            (1)(A) is delinquent on more than 3 payments under the 
        shared appreciation mortgage modification during any of the 3 
        successive 1-year periods beginning on the date on which the 
        shared appreciation mortgage modification is made; and
            (B) fails to be current with all payments described in 
        paragraph (1) before the end of each 1-year period described in 
        paragraph (1); or
            (2) obtains a mortgage, loan, or credit, or incurs any 
        other debt, that creates any additional lien on the residence 
        that is subject to the covered mortgage for which the shared 
        appreciation mortgage modification or for which such residence 
        is used as collateral.
The Director shall require, as a condition for participation in a pilot 
program by a homeowner, that the homeowner enter into such agreements 
as the Director considers necessary to ensure compliance with this 
subsection.
    (f) Notification.--
            (1) In general.--Each pilot program shall require that the 
        servicer of a covered mortgage transmit to each homeowner 
        participating in the pilot program written notice, in clear and 
        simple language, of how to maintain and submit any 
        documentation of capital improvements that is necessary to 
        ensure that the shares of any increase in the value of the real 
        property securing the covered mortgage to which the investor 
        and the homeowner are entitled are determined accurately.
            (2) Timing.--The pilot program shall require that a 
        servicer provide the notice described in paragraph (1)--
                    (A) before the homeowner accepts a shared 
                appreciation mortgage modification; and
                    (B) before the homeowner sells or refinances the 
                real property securing the covered mortgage.
    (g) Participation by Servicers.--The Director shall require each 
enterprise to require that any servicer of a covered mortgage in which 
the enterprise is an investor participate in the pilot program of the 
Federal Housing Finance Agency by offering shared appreciation mortgage 
modifications to a random and statistically significant sampling of 
homeowners with covered mortgages.
    (h) Mortgage Insurance.--The Director shall--
            (1) provide that an enterprise may negotiate regarding a 
        shared appreciation mortgage modification of a covered mortgage 
        with any provider of mortgage insurance for a mortgage on the 
        property subject to the covered mortgage; and
            (2) allow advance claim agreements with respect to such 
        mortgage insurance policies.
    (i) Maintenance of Lien Status.--A shared appreciation mortgage 
modification of a covered mortgage under a pilot program under this 
section shall not impair the priority status of liens on the residence 
that is subject to the mortgage.
    (j) Studies and Reports.--The Director and the Federal Housing 
Commissioner shall--
            (1) conduct annual studies of the pilot programs of the 
        Federal Housing Finance Agency and the Federal Housing 
        Administration, respectively; and
            (2) submit a report to the Congress containing the results 
        of each study at the end of each of the 3 successive 1-year 
        periods beginning on the date on which the pilot program is 
        established.
    (k) Termination.--On and after the date that is 2 years after the 
date of enactment of this Act, the Director and the Federal Housing 
Commissioner may not enter into any agreement under the pilot program 
with respect to a shared appreciation mortgage modification.
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