[Congressional Record Volume 172, Number 22 (Friday, January 30, 2026)]
[Senate]
[Page S420]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. REED (for himself, Ms. Smith, Mr. Wyden, Mr. Schumer, and 
        Mr. Merkley):
  S. 3753. A bill to provide requirements for the bulk auction or group 
sale of certain non-performing loans, and for other purposes; to the 
Committee on Banking, Housing, and Urban Affairs.
  Mr. REED. Mr. President, today I am reintroducing the Preserving 
Homes and Communities Act with Senators Smith, Wyden, Merkley, and 
Schumer. This legislation would reform Federal Housing Administration, 
FHA, Fannie Mae, and Freddie Mac note sale programs to protect 
homeowners from foreclosure and keep properties in the hands of 
families and local civic institutions. I want to thank the National 
Consumer Law Center, on behalf of its low-income clients, and the 
National Community Stabilization Trust for their support of this bill.
  For over a decade, FHA, Fannie Mae, and Freddie Mac have sold 
nonperforming and reperforming loans to protect their balance sheets. 
These transactions, known as note sales, transfer ownership of hundreds 
or thousands of mortgages to bulk purchasers, which are predominately 
private equity firms and other institutional investors. While selling 
nonperforming and reperforming loans may marginally reduce financial 
risk for FHA, Fannie Mae, and Freddie Mac, these sales harm borrowers 
and shift home ownership from individuals to large investors.
  Loans insured by FHA or securitized by Fannie Mae or Freddie Mac have 
strong foreclosure protections for borrowers that ensure servicers 
offer specific loss mitigation options to eligible borrowers before 
beginning foreclosure proceedings. These protections often help 
borrowers avoid foreclosure and catch up on their payments, but 
borrowers lose many of these protections when a mortgage is included in 
a note sale.
  Unfortunately, the lack of robust, required protections after a note 
sale has very real consequences for homeowners. Over 90 percent of the 
homeowners who were subject to an FHA reverse mortgage note sale 
through 2024 ultimately lost their homes. Meanwhile, the U.S. 
Government Accountability Office reported in 2019 that nonperforming 
loans sold by FHA are more likely to face foreclosure than comparable 
loans that FHA keeps on its own balance sheet. Similarly, the majority 
of homeowners with nonperforming loans sold by Fannie Mae and Freddie 
Mac have also lost their homes after servicers reached a final 
resolution.
  Making matters worse. note sale purchasers are predominately private 
equity arms and institutional investors, which often move foreclosed 
properties out of the owner-occupied market. Approximately 35 percent 
of properties foreclosed upon or voluntarily turned over to a lender 
after a Fannie Mae or Freddie Mac nonperforming loan note sale are sold 
to an investor, held by the purchaser for rental, or sit on a lender's 
books. In other words, more than one-third of these homes may be taken 
out of the owner-occupied market, reducing home ownership opportunities 
for families and shifting property ownership to large corporations that 
often drive up rents. The data is similar for FHA notes sales. Of the 
homes in FHA pools that were foreclosed on or went through deed in lieu 
of foreclosure, 40 percent were ultimately bought by investors.
  The Preserving Homes and Communities Act tackles these problems. It 
would protect homeowners by requiring mortgage servicers to complete 
Agency-required loss mitigation actions before FHA, Fannie Mae, or 
Freddie Mac can sell a nonperforming mortgage and by improving loss 
mitigation protections for these mortgages after they are sold.
  It would also protect communities by giving local entities with 
public missions, including States, municipalities, and nonprofits, the 
first opportunity to purchase nonperforming and reperforming 
mortgages--ahead of private equity and institutional investors. 
Finally, it requires purchasers that foreclose on nonperforming note 
sale properties to prioritize owner-occupants and low- and moderate-
income households when selling or renting these homes.
  In sum, our legislation seeks to help homeowners remain in their 
homes and prevent institutional investors from acquiring homes on the 
cheap from Americans who are struggling to make ends meet. Even 
President Trump has acknowledged the negative impact institutional 
investors are having in the single-family housing market and has called 
for reforms. So I hope my colleagues on both sides of the aisle will 
embrace this proposal and work with me to make it law.
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