[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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