H.Amdt. 26House111th Congress (2009-2011)
An amendment numbered 3 printed in House Report 111-21 to provide that, in the case of a debtor whose home is in foreclosure, the debtor could meet the pre-filing credit counseling requirement by receiving counseling either before filing or up to 30 days after filing.
Sponsored by 
Rep. Gary C. Peters (D-MI)
Rep. Gary C. Peters (D-MI)Submitted March 5, 2009
Description
Amendment preserves the requirement for credit counseling but would allow those who have received a foreclosure notice to file for bankruptcy as long as they have obtained the required credit counseling within 30 days after the bankruptcy filing.
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House amendment offered
March 5, 2009
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House amendment offered
March 5, 2009
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Amendment agreed to Committee of the Whole
March 5, 2009 • 5:38 PM
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Roll call votes on amendments in House
March 5, 2009 • 5:38 PM
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House amendment agreed to: On agreeing to the Peters amendment (A003) Agreed to by recorded vote: 423 - 2 (Roll no. 102).
March 5, 2009 • 5:38 PM
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House amendment offered/reported by : Amendment (A003) offered by Mr. Peters.(consideration: CR H3015-3017, H3020-3021; text: CR H3016)
March 5, 2009 • 1:10 PM
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Amendment (A003) offered by Mr. Peters. (consideration: CR H3015-3017, H3020-3021; text: CR H3016)
March 5, 2009 • 1:10 PM
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On agreeing to the Peters amendment (A003) Agreed to by recorded vote: 423 - 2 (Roll no. 102).
March 5, 2009 • 5:38 PM
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1 roll call on this amendment
Text
Offered
HELPING FAMILIES SAVE THEIR HOMES ACT OF 2009
The SPEAKER pro tempore. Pursuant to House Resolution 205 and rule
XVIII, the Chair declares the House in the Committee of the Whole House
on the State of the Union for the further consideration of the bill,
H.R. 1106.
{time} 1215
In the Committee of the Whole
Accordingly, the House resolved itself into the Committee of the
Whole House on the State of the Union for the further consideration of
the bill (H.R. 1106) to prevent mortgage foreclosures and enhance
mortgage credit availability, with Mr. Salazar (Acting Chair) in the
chair.
The Clerk read the title of the bill.
The Acting CHAIR. When the Committee of the Whole rose on Thursday,
February 26, 2009, all time for general debate pursuant to House
Resolution 190 had expired.
Pursuant to House Resolution 205, amendment No. 1, printed in House
Report 111-21, shall be considered as perfected by the modification
printed in House Report 111-23.
Pursuant to House Resolution 190, the bill shall be considered read
for amendment under the 5-minute rule.
The text of the bill is as follows:
H.R. 1106
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as ``Helping
Families Save Their Homes Act of 2009''.
(b) Table of Contents.--The table of contents of this Act
is the following:
Sec. 1. Short title; table of contents.
TITLE I--PREVENTION OF MORTGAGE FORECLOSURES
Subtitle A--Modification of Residential Mortgages
Sec. 101. Eligibility for relief.
Sec. 102. Prohibiting claims arising from violations of the Truth in
Lending Act.
Sec. 103. Authority to modify certain mortgages.
Sec. 104. Combating excessive fees.
Sec. 105. Confirmation of plan.
Sec. 106. Discharge.
Sec. 107. Standing trustee fees.
Sec. 108. Effective date; application of amendments.
Subtitle B--Related Mortgage Modification Provisions
Sec. 121. Adjustments as a result of modification in bankruptcy of
housing loans guaranteed by the department of veterans
affairs.
Sec. 122. Payment of FHA mortgage insurance benefits.
Sec. 123. Adjustments as result of modification of rural single family
housing loans in bankruptcy.
Sec. 124. Unenforceability of certain provision as being contrary to
public policy.
TITLE II--FORECLOSURE MITIGATION AND CREDIT AVAILABILITY
Sec. 201. Servicer safe harbor for mortgage loan modifications.
Sec. 202. Changes to HOPE for Homeowners Program.
Sec. 203. Requirements for FHA-approved mortgagees.
Sec. 204. Enhancement of liquidity and stability of insured depository
institutions to ensure availability of credit and
reduction of foreclosures.
TITLE I--PREVENTION OF MORTGAGE FORECLOSURES
Subtitle A--Modification of Residential Mortgages
SEC. 101. ELIGIBILITY FOR RELIEF.
Section 109 of title 11, United States Code, is amended--
(1) by adding at the end of subsection (e) the following:
``For purposes of this subsection, the computation of debts
shall not include the secured or unsecured portions of--
``(1) debts secured by the debtor's principal residence if
the value of such residence as of the date of the order for
relief under chapter 13 is less than the applicable maximum
amount of noncontingent, liquidated, secured debts specified
in this subsection; or
``(2) debts secured or formerly secured by what was the
debtor's principal residence that was sold in foreclosure or
that the debtor surrendered to the creditor if the value of
such real property as of the date of the order for relief
under chapter 13 was less than the applicable maximum amount
of noncontingent, liquidated, secured debts specified in this
subsection.'', and
(2) by adding at the end of subsection (h) the following:
``(5) The requirements of paragraph (1) shall not apply in
a case under chapter 13 with respect to a debtor who submits
to the court a certification that the debtor has received
notice that the holder of a claim secured by the debtor's
principal residence may commence a foreclosure on the
debtor's principal residence.''.
SEC. 102. PROHIBITING CLAIMS ARISING FROM VIOLATIONS OF THE
TRUTH IN LENDING ACT.
Section 502(b) of title 11, United States Code, is
amended--
(1) in paragraph (8) by striking ``or'' at the end,
(2) in paragraph (9) by striking the period at the end and
inserting ``; or'', and
(3) by adding at the end the following:
``(10) the claim for a loan secured by a security interest
in the debtor's principal residence is subject to a remedy
for rescission under the Truth in Lending Act notwithstanding
the prior entry of a foreclosure judgment, except that
nothing in this paragraph shall be construed to modify,
impair, or supersede any other right of the debtor.''.
SEC. 103. AUTHORITY TO MODIFY CERTAIN MORTGAGES.
Section 1322 of title 11, United States Code, is amended--
(1) in subsection (b)--
(A) by redesignating paragraph (11) as paragraph (12),
(B) in paragraph (10) by striking ``and'' at the end, and
(C) by inserting after paragraph (10) the following:
``(11) notwithstanding paragraph (2), with respect to a
claim for a loan originated before the effective date of this
paragraph and secured by a security interest in the debtor's
principal residence that is the subject of a notice that a
foreclosure may be commenced with respect to such loan,
modify the rights of the holder of such claim (and the rights
of the holder of any claim secured by a subordinate security
interest in such residence)--
``(A) by providing for payment of the amount of the allowed
secured claim as determined under section 506(a)(1);
``(B) if any applicable rate of interest is adjustable
under the terms of such loan by prohibiting, reducing, or
delaying adjustments to such rate of interest applicable on
and after the date of filing of the plan;
``(C) by modifying the terms and conditions of such loan--
``(i) to extend the repayment period for a period that is
no longer than the longer of 40 years (reduced by the period
for which such loan has been outstanding) or the remaining
term of such loan, beginning on the date of the order for
relief under this chapter; and
``(ii) to provide for the payment of interest accruing
after the date of the order for relief under this chapter at
a fixed annual rate equal to the currently applicable average
prime offer rate as of the date of the order for relief under
this chapter, corresponding to the repayment term determined
under the preceding paragraph, as published by the Federal
Financial Institutions Examination Council in its table
entitled `Average Prime Offer Rates--Fixed', plus a
reasonable premium for risk; and
``(D) by providing for payments of such modified loan
directly to the holder of the claim or, at the discretion of
the court, through the trustee during the term of the plan;
and'', and
(2) by adding at the end the following:
``(g) A claim may be reduced under subsection (b)(11)(A)
only on the condition that if the debtor sells the principal
residence securing such claim, before completing all payments
under the plan (or, if applicable, before receiving a
discharge under section 1328(b)) and receives net proceeds
from the sale of such residence, then the debtor agrees to
pay to such holder not later than 15 days after receiving
such proceeds--
``(1) if such residence is sold in the 1st year occurring
after the effective date of the plan, 80 percent of the
amount of the difference between the sales price and the
amount of such claim as originally determined under section
1322(b)(11) (plus costs of sale and improvements), but not to
exceed the unpaid amount of the allowed secured claim
determined as if such claim had not been reduced under such
subsection;
``(2) if such residence is sold in the 2d year occurring
after the effective date of the plan, 60 percent of the
amount of the difference between the sales price and the
amount of such claim as originally determined under section
1322(b)(11) (plus costs of sale and improvements), but not to
exceed the unpaid amount of the allowed secured claim
determined as if such claim had not been reduced under such
subsection;
``(3) if such residence is sold in the 3d year occurring
after the effective date of the plan, 40 percent of the
amount of the difference between the sales price and the
amount of such claim as originally determined under section
1322(b)(11) (plus costs of sale and improvements), but not to
exceed the unpaid amount of the allowed secured claim
determined as if such claim had not been reduced under such
subsection; and
``(4) if such residence is sold in the 4th year occurring
after the effective date of the plan, 20 percent of the
amount of the difference between the sales price and the
amount of such claim as originally determined under section
1322(b)(11) (plus costs of sale and improvements), but not to
exceed the unpaid amount of the allowed secured claim
determined as if such claim had not been reduced under such
subsection.
``(h) With respect to a claim of the kind described in
subsection (b)(11), the plan may not contain a modification
under the authority of subsection (b)(11)--
``(1) in a case commenced under this chapter after the
expiration of the 15-day period beginning on the effective
date of this subsection, unless--
[[Page H2998]]
``(A) the debtor certifies that the debtor attempted, not
less than 15 days before the commencement of the case, to
contact the holder of such claim (or the entity collecting
payments on behalf of such holder) regarding modification of
the loan that is the subject of such claim; or
``(B) a foreclosure sale is scheduled to occur on a date in
the 30-day period beginning on the date the case is
commenced; and
``(2) in any other case pending under this chapter, unless
the debtor certifies that the debtor attempted to contact the
holder of such claim (or the entity collecting payments on
behalf of such holder) regarding modification of the loan
that is the subject of such claim, before--
``(A) filing a plan under section 1321 that contains a
modification under the authority of subsection (b)(11); or
``(B) modifying a plan under section 1323 or 1329 to
contain a modification under the authority of subsection
(b)(11).
``(i) In determining the holder's allowed secured claim
under section 506(a)(1) for purposes of subsection
(b)(11)(A), the value of the debtor's principal residence
shall be the fair market value of such residence on the date
such value is determined.''.
SEC. 104. COMBATING EXCESSIVE FEES.
Section 1322(c) of title 11, United States Code, is
amended--
(1) in paragraph (1) by striking ``and'' at the end,
(2) in paragraph (2) by striking the period at the end and
inserting a semicolon, and
(3) by adding at the end the following:
``(3) the debtor, the debtor's property, and property of
the estate are not liable for a fee, cost, or charge that is
incurred while the case is pending and arises from a debt
that is secured by the debtor's principal residence except to
the extent that--
``(A) the holder of the claim for such debt files with the
court and serves on the trustee, the debtor, and the debtor's
attorney (annually or, in order to permit filing consistent
with clause (ii), at such more frequent periodicity as the
court determines necessary) notice of such fee, cost, or
charge before the earlier of--
``(i) 1 year after such fee, cost, or charge is incurred;
or
``(ii) 60 days before the closing of the case; and
``(B) such fee, cost, or charge--
``(i) is lawful under applicable nonbankruptcy law,
reasonable, and provided for in the applicable security
agreement; and
``(ii) is secured by property the value of which is greater
than the amount of such claim, including such fee, cost, or
charge;
``(4) the failure of a party to give notice described in
paragraph (3) shall be deemed a waiver of any claim for fees,
costs, or charges described in paragraph (3) for all
purposes, and any attempt to collect such fees, costs, or
charges shall constitute a violation of section 524(a)(2) or,
if the violation occurs before the date of discharge, of
section 362(a); and
``(5) a plan may provide for the waiver of any prepayment
penalty on a claim secured by the debtor's principal
residence.''.
SEC. 105. CONFIRMATION OF PLAN.
Section 1325(a) of title 11, United States Code, is
amended--
(1) in paragraph (5) by inserting ``except as otherwise
provided in section 1322(b)(11),'' after ``(5)'',
(2) in paragraph (8) by striking ``and'' at the end,
(3) in paragraph (9) by striking the period at the end and
inserting a semicolon, and
(4) by inserting after paragraph (9) the following:
``(10) notwithstanding subclause (I) of paragraph
(5)(B)(i), whenever the plan modifies a claim in accordance
with section 1322(b)(11), the holder of a claim whose rights
are modified pursuant to section 1322(b)(11) shall retain the
lien until the later of--
``(A) the payment of such holder's allowed secured claim;
or
``(B) completion of all payments under the plan (or, if
applicable, receipt of a discharge under section 1328(b));
and
``(11) whenever the plan modifies a claim in accordance
with section 1322(b)(11), the court finds that such
modification is in good faith and does not find that the
debtor has been convicted of obtaining by actual fraud the
extension, renewal, or refinancing of credit that gives rise
to a modified claim.''.
SEC. 106. DISCHARGE.
Section 1328(a) of title 11, United States Code, is
amended--
(1) by inserting ``(other than payments to holders of
claims whose rights are modified under section 1322(b)(11))''
after ``paid'', and
(2) in paragraph (1) by inserting ``or, to the extent of
the unpaid portion of an allowed secured claim, provided for
in section 1322(b)(11)'' after ``1322(b)(5)''.
SEC. 107. STANDING TRUSTEE FEES.
(a) Amendment to Title 28.--Section 586(e)(1)(B)(i) of
title 28, United States Code, is amended--
(1) by inserting ``(I) except as provided in subparagraph
(II)'' after ``(i)'',
(2) by striking ``or'' at the end and inserting ``and'',
and
(3) by adding at the end the following:
``(II) 4 percent with respect to payments received under
section 1322(b)(11) of title 11 by the individual as a result
of the operation of section 1322(b)(11)(D) of title 11,
unless the bankruptcy court waives all fees with respect to
such payments based on a determination that such individual
has income less than 150 percent of the income official
poverty line (as defined by the Office of Management and
Budget, and revised annually in accordance with section
673(2) of the Omnibus Budget Reconciliation Act of 1981)
applicable to a family of the size involved and payment of
such fees would render the debtor's plan infeasible.''.
(b) Conforming Provision.--The amendments made by this
section shall apply to any trustee to whom the provisions of
section 302(d)(3) of the Bankruptcy Judges, United States
Trustees, and Family Farmer Bankruptcy Act of 1986 (Public
Law 99-554; 100 Stat. 3121) apply.
SEC. 108. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.
(a) Effective Date.--Except as provided in subsection (b),
this subtitle and the amendments made by this subtitle shall
take effect on the date of the enactment of this Act.
(b) Application of Amendments.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this subtitle shall apply with respect to
cases commenced under title 11 of the United States Code
before, on, or after the date of the enactment of this Act.
(2) Limitation.--Paragraph (1) shall not apply with respect
to cases closed under title 11 of the United States Code as
of the date of the enactment of this Act that are neither
pending on appeal in, nor appealable to, any court of the
United States.
Subtitle B--Related Mortgage Modification Provisions
SEC. 121. ADJUSTMENTS AS A RESULT OF MODIFICATION IN
BANKRUPTCY OF HOUSING LOANS GUARANTEED BY THE
DEPARTMENT OF VETERANS AFFAIRS.
(a) In General.--Subsection (a) of section 3732 of title
38, United States Code is amended--
(1) in subsection (a)--
(A) by redesignating paragraph (2) as subparagraph (A) of
paragraph (2), and
(2) by inserting after subparagraph (A) the following new
subparagraph:
``(B) In the event that a housing loan guaranteed under
this chapter is modified under the authority provided under
section 1322(b) of title 11, United States Code, the
Secretary may pay the holder of the obligation the unpaid
balance of the obligation due as of the date of the filing of
the petition under title 11, United States Code, plus accrued
interest, but only upon the assignment, transfer, and
delivery to the Secretary (in a form and manner satisfactory
to the Secretary) of all rights, interest, claims, evidence,
and records with respect to the housing loan.''.
(b) Maturity of Housing Loans.--Paragraph (1) of section
(d) of section 3703 of title 38, United States Code, is
amended by inserting ``at the time of origination'' after
``loan''.
(c) Implementation.--The Secretary of Veterans Affairs may
implement the amendments made by this section through notice,
procedure notice, or administrative notice.
SEC. 122. PAYMENT OF FHA MORTGAGE INSURANCE BENEFITS.
(a) In General.--Subsection (a) of section 204 of the
National Housing Act (12 U.S.C. 1710(a)) is amended--
(1) in paragraph (1), by adding at the end the following
new subparagraph:
``(E) Modification of mortgage in bankruptcy.--
``(i) Authority.--If an order is entered under the
authority provided under section 1322(b) of title 11, United
States Code, that (a) determines the amount of an allowed
secured claim under a mortgage in accordance with section
506(a)(1) of title 11, United States Code, and the amount of
such allowed secured claim is less than the amount due under
the mortgage as of the date of the filing of the petition
under title 11, United States Code, or (b) reduces the
interest to be paid under a mortgage in accordance with
section 1325 of such title, the Secretary may pay insurance
benefits for the mortgage as follows:
``(I) Full payment and assignment.--The Secretary may pay
the insurance benefits for the mortgage, but only upon the
assignment, transfer, and delivery to the Secretary of all
rights, interest, claims, evidence, and records with respect
to the mortgage specified in clauses (i) through (iv) of
paragraph (1)(A). The insurance benefits shall be paid in the
amount equal to the original principal obligation of the
mortgage (with such additions and deductions as the Secretary
determines are appropriate) which was unpaid upon the date of
the filing of by the mortgagor of the petition under title 11
of the United States Code. Nothing in this Act may be
construed to prevent the Secretary from providing insurance
under this title for a mortgage that has previously been
assigned to the Secretary under this subclause. The decision
of whether to utilize the authority under this subclause for
payment and assignment shall be at the election of the
mortgagee, subject to such terms and conditions as the
Secretary may establish.
``(II) Assignment of unsecured claim.--The Secretary may
make a partial payment of the insurance benefits for any
unsecured claim under the mortgage, but only upon the
assignment to the Secretary of any unsecured claim of the
mortgagee against the mortgagor or others arising out of such
order. Such assignment shall be deemed valid irrespective of
whether such claim has been or will be discharged under title
11 of the United States Code. The insurance benefits shall be
paid in the amount specified in subclause (I) of this clause,
as such amount
[[Page H2999]]
is reduced by the amount of the allowed secured claim. Such
allowed secured claim shall continue to be insured under
section 203.
``(III) Interest payments.--The Secretary may make periodic
payments, or a one-time payment, of insurance benefits for
interest payments that are reduced pursuant to such order, as
determined by the Secretary, but only upon assignment to the
Secretary of all rights and interest related to such
payments.
``(ii) Delivery of evidence of entry of order.--
Notwithstanding any other provision of this paragraph, no
insurance benefits may be paid pursuant to this subparagraph
for a mortgage before delivery to the Secretary of evidence
of the entry of the order issued pursuant to title 11, United
States Code, in a form satisfactory to the Secretary.'';
(2) in paragraph (5), in the matter preceding subparagraph
(A), by inserting after ``section 520, and'' the following:
``, except as provided in paragraph (1)(E),''; and
(3) by adding at the end the following new paragraph:
``(10) Loan modification program.--
``(A) Authority.--The Secretary may carry out a program
solely to encourage loan modifications for eligible
delinquent mortgages through the payment of insurance
benefits and assignment of the mortgage to the Secretary and
the subsequent modification of the terms of the mortgage
according to a loan modification approved by the mortgagee.
``(B) Payment of benefits and assignment.--Under the
program under this paragraph, the Secretary may pay insurance
benefits for a mortgage, in the amount determined in
accordance with paragraph (5)(A), without reduction for any
amounts modified, but only upon the assignment, transfer, and
delivery to the Secretary of all rights, interest, claims,
evidence, and records with respect to the mortgage specified
in clauses (i) through (iv) of paragraph (1)(A).
``(C) Disposition.--After modification of a mortgage
pursuant to this paragraph, the Secretary may provide
insurance under this title for the mortgage. The Secretary
may subsequently--
``(i) re-assign the mortgage to the mortgagee under terms
and conditions as are agreed to by the mortgagee and the
Secretary;
``(ii) act as a Government National Mortgage Association
issuer, or contract with an entity for such purpose, in order
to pool the mortgage into a Government National Mortgage
Association security; or
``(iii) re-sell the mortgage in accordance with any program
that has been established for purchase by the Federal
Government of mortgages insured under this title, and the
Secretary may coordinate standards for interest rate
reductions available for loan modification with interest
rates established for such purchase.
``(D) Loan servicing.--In carrying out the program under
this section, the Secretary may require the existing servicer
of a mortgage assigned to the Secretary under the program to
continue servicing the mortgage as an agent of the Secretary
during the period that the Secretary acquires and holds the
mortgage for the purpose of modifying the terms of the
mortgage. If the mortgage is resold pursuant to subparagraph
(C)(iii), the Secretary may provide for the existing servicer
to continue to service the mortgage or may engage another
entity to service the mortgage.''.
(b) Amendment to Partial Claim Authority.--Paragraph (1) of
section 230(b) of the National Housing Act (12 U.S.C.
1715u(b)(1)) is amended by striking ``12 of the monthly
mortgage payments'' and inserting ``30 percent of the unpaid
principal balance of the mortgage''.
(c) Implementation.--The Secretary of Housing and Urban
Development may implement the amendments made by this section
through notice or mortgagee letter.
SEC. 123. ADJUSTMENTS AS RESULT OF MODIFICATION OF RURAL
SINGLE FAMILY HOUSING LOANS IN BANKRUPTCY.
(a) Guaranteed Rural Housing Loans.--Subsection (h) of
section 502 of the Housing Act of 1949 (42 U.S.C. 1472(h)) is
amended--
(1) in paragraph (7)--
(A) in subparagraph (A), by inserting before the period at
the end the following: ``, unless the maturity date of the
loan is modified in a bankruptcy proceeding or at the
discretion of the Secretary''; and
(B) in subparagraph (B), by inserting before the semicolon
the following: ``, unless such rate is modified in a
bankruptcy proceeding'';
(2) by redesignating paragraphs (13) and (14) as paragraphs
(14) and (15), respectively; and
(3) by inserting after paragraph (12) the following new
paragraph:
``(13) Payment of guarantee.--In addition to all other
authorities to pay a guarantee claim, the Secretary may also
pay the guaranteed portion of any losses incurred by the
holder of a note or the servicer resulting from a
modification of a note by a bankruptcy proceeding.''.
(b) Insured Rural Housing Loans.--Subsection (j) of section
517 of the Housing Act of 1949 (42 U.S.C. 1487(j)) is
amended--
(1) by redesignating paragraphs (2) through (7) as
paragraphs (3) through (8), respectively; and
(2) by inserting after paragraph (1) the following new
paragraph:
``(2) to pay for losses incurred by holders or servicers in
the event of a modification pursuant to a bankruptcy
proceeding;''.
(c) Implementation.--The Secretary of Agriculture may
implement the amendments made by this section through notice,
procedure notice, or administrative notice.
SEC. 124. UNENFORCEABILITY OF CERTAIN PROVISION AS BEING
CONTRARY TO PUBLIC POLICY.
No provision in any investment contract between a servicer
and a securitization vehicle or investor in effect as of the
date of enactment of this Act that requires excess bankruptcy
losses that exceed a certain dollar amount on residential
mortgages to be borne by classes of certificates on a pro
rata basis that refers to types of bankruptcy losses that
could not have been incurred under the law in effect at the
time such contract was entered into shall be enforceable, as
such provision shall be contrary to public policy.
Notwithstanding this section, such reference to types of
bankruptcy losses that could have been incurred under the law
in effect at the time such contract was entered into shall be
enforceable.
TITLE II--FORECLOSURE MITIGATION AND CREDIT AVAILABILITY
SEC. 201. SERVICER SAFE HARBOR FOR MORTGAGE LOAN
MODIFICATIONS.
(a) Safe Harbor.--
(1) Loan modifications and workout plans.--Notwithstanding
any other provision of law, and notwithstanding any
investment contract between a servicer and a securitization
vehicle or investor, a servicer that acts consistent with the
duty set forth in section 129A(a) of Truth in Lending Act (15
U.S.C. 1639a) shall not be liable for entering into a loan
modification, workout, or other loss mitigation plan,
including, but not limited to, disposition with respect to
any such mortgage that meets all of the criteria set forth in
paragraph (2)(B) to--
(A) any person, based on that person's ownership of a
residential mortgage loan or any interest in a pool of
residential mortgage loans or in securities that distribute
payments out of the principal, interest and other payments in
loans on the pool;
(B) any person who is obligated pursuant to a derivatives
instrument to make payments determined in reference to any
loan or any interest referred to in subparagraph (A); or
(C) any person that insures any loan or any interest
referred to in subparagraph (A) under any law or regulation
of the United States or any law or regulation of any State or
political subdivision of any State.
(2) Ability to modify mortgages.--
(A) Ability.--Notwithstanding any other provision of law,
and notwithstanding any investment contract between a
servicer and a securitization vehicle or investor, a
servicer--
(i) shall not be limited in the ability to modify
mortgages, the number of mortgages that can be modified, the
frequency of loan modifications, or the range of permissible
modifications; and
(ii) shall not be obligated to repurchase loans from or
otherwise make payments to the securitization vehicle on
account of a modification, workout, or other loss mitigation
plan for a residential mortgage or a class of residential
mortgages that constitute a part or all of the mortgages in
the securitization vehicle,
if any mortgage so modified meets all of the criteria set
forth in subparagraph (B).
(B) Criteria.--The criteria under this subparagraph with
respect to a mortgage are as follows:
(i) Default on the payment of such mortgage has occurred or
is reasonably foreseeable.
(ii) The property securing such mortgage is occupied by the
mortgagor of such mortgage.
(iii) The servicer reasonably and in good faith believes
that the anticipated recovery on the principal outstanding
obligation of the mortgage under the particular modification
or workout plan or other loss mitigation action will exceed,
on a net present value basis, the anticipated recovery on the
principal outstanding obligation of the mortgage to be
realized through foreclosure.
(3) Applicability.--This subsection shall apply only with
respect to modifications, workouts, and other loss mitigation
plans initiated before January 1, 2012.
(b) Reporting.--Each servicer that engages in loan
modifications or workout plans subject to the safe harbor in
subsection (a) shall report to the Secretary on a regular
basis regarding the extent, scope and results of the
servicer's modification activities. The Secretary shall
prescribe regulations specifying the form, content, and
timing of such reports.
(c) Definition of Securitization Vehicles.--For purposes of
this section, the term ``securitization vehicle'' means a
trust, corporation, partnership, limited liability entity,
special purpose entity, or other structure that--
(1) is the issuer, or is created by the issuer, of mortgage
pass-through certificates, participation certificates,
mortgage-backed securities, or other similar securities
backed by a pool of assets that includes residential mortgage
loans; and
(2) holds such mortgages.
SEC. 202. CHANGES TO HOPE FOR HOMEOWNERS PROGRAM.
(a) Program Changes.--Section 257 of the National Housing
Act (12 U.S.C. 1715z-23) is amended--
(1) in subsection (c)--
[[Page H3000]]
(A) in the heading for paragraph (1), by striking ``the
board'' and inserting ``secretary'';
(B) in paragraph (1), by striking ``Board'' inserting
``Secretary, after consultation with the Board,''; and
(C) by adding after paragraph (2) the following:
``(3) Duties of board.--The Board shall advise the
Secretary regarding the establishment and implementation of
the HOPE for Homeowners Program.''.
(2) by striking ``Board'' each place such term appears in
subsections (e), (h)(1), (h)(3), (j), (l), (n), (s)(3), and
(v) and inserting ``Secretary'';
(3) in subsection (e)--
(A) by striking paragraph (1) and inserting the following:
``(1) Borrower certification.--
``(A) No intentional default or false information.--The
mortgagor shall provide a certification to the Secretary that
the mortgagor has not intentionally defaulted on the existing
mortgage or mortgages and has not knowingly, or willfully and
with actual knowledge, furnished material information known
to be false for the purpose of obtaining the eligible
mortgage to be insured.
``(B) Liability for repayment.--The mortgagor shall agree
in writing that the mortgagor shall be liable to repay to the
Secretary any direct financial benefit achieved from the
reduction of indebtedness on the existing mortgage or
mortgages on the residence refinanced under this section
derived from misrepresentations made by the mortgagor in the
certifications and documentation required under this
paragraph, subject to the discretion of the Secretary.'';
(B) in paragraph (7), by striking the semicolon and all
that follows through ``new second lien'';
(C) in paragraph (9)--
(i) by striking ``by procuring (A) an income tax return
transcript of the income tax return of the mortgagor, or
(B)'' and inserting ``in accordance with procedures and
standards that the Secretary shall establish, which may
include requiring the mortgagee to procure''; and
(ii) by striking ``and by any other method, in accordance
with procedures and standards that the Board shall
establish''; and
(D) by adding after paragraph (11) the following new
paragraph:
``(12) Ban on millionaires.--The mortgagor shall not have a
net worth, as of the date the mortgagor first applies for a
mortgage to be insured under the Program under this section,
that exceeds $1,000,000.'';
(4) in subsection (h)(2)--
(A) by striking ``The Board shall prohibit the Secretary
from paying'' and inserting ``The Secretary shall not pay'';
and
(B) by inserting after the period at the end the following:
``In implementing this provision with respect to a failure by
a mortgagor to make a first payment, the Secretary shall
establish policies and timing of endorsements as consistent
as is possible with endorsement policies established with
respect to mortgages insured under section 203(b)'';
(5) in subsection (i)--
(A) by inserting ``, after weighing maximization of
participation with consideration of collection of premiums,''
after ``Secretary shall'';
(B) in paragraph (1), by striking ``equal to 3 percent''
and inserting ``not more than 2 percent''; and
(C) in paragraph (2), by striking ``equal to 1.5 percent''
and inserting ``not more than 1 percent'';
(6) in subsection (k)--
(A) by striking the subsection heading and inserting ``Exit
Fee'';
(B) in paragraph (1), in the matter preceding subparagraph
(A), by striking ``such sale or refinancing'' and inserting
``the mortgage being insured under this section''; and
(C) in paragraph (2), by striking ``and the mortgagor'' and
all that follows through the end and inserting ``may, upon
any sale or disposition of the property to which the mortgage
relates, be entitled to up to 50 percent of appreciation, up
to the appraised value of the home at the time when the
mortgage being refinanced under this section was originally
made. The Secretary may share any amounts received under this
paragraph with the holder of the eligible mortgage refinanced
under this section.'';
(7) in the heading for subsection (n), by striking ``the
Board'' and inserting ``Secretary'';
(8) in subsection (p), by striking ``Under the direction of
the Board, the'' and inserting ``The'';
(9) in subsection (s)--
(A) in the first sentence of paragraph (2), by striking
``Board of Directors of'' and inserting ``Advisory Board
for''; and
(B) in paragraph (3)(A)(ii), by striking ``subsection
(e)(1)(B) and such other'' and inserting ``such'';
(10) in subsection (v), by inserting after the period at
the end the following: ``The Secretary shall conform
documents, forms, and procedures for mortgages insured under
this section to those in place for mortgages insured under
section 203(b) to the maximum extent possible consistent with
the requirements of this section.''; and
(11) by adding at the end the following new subsections:
``(x) Payment to Existing Loan Servicer.--The Secretary may
establish a payment to the servicer of the existing senior
mortgage for every loan insured under the HOPE for Homeowners
Program in an amount, for each such loan, that does not
exceed $1,000.
``(y) Auctions.--The Secretary, with the concurrence of the
Board, shall, if feasible, establish a structure and organize
procedures for an auction to refinance eligible mortgages on
a wholesale or bulk basis.''.
(b) Reducing TARP Funds To Offset Costs of Program
Changes.--Paragraph (3) of section 115(a) of the Emergency
Economic Stabilization Act of 2008 (12 U.S.C. 5225) is
amended by inserting ``, as such amount is reduced by
$2,316,000,000,'' after ``$700,000,000,000''.
SEC. 203. REQUIREMENTS FOR FHA-APPROVED MORTGAGEES.
(a) Mortgagee Review Board.--Paragraph (2) of section
202(c) of the National Housing Act (12 U.S.C. 1708(c)) is
amended--
(1) in subparagraph (E), by inserting ``and'' after the
semicolon;
(2) in subparagraph (F), by striking ``; and'' and
inserting a period; and
(3) by striking subparagraph (G).
(b) Limitations on Participation and Mortgagee Approval and
Use of Name.--Section 202 of the National Housing Act (12
U.S.C. 1708) is amended--
(1) by redesignating subsections (d), (e), and (f) as
subsections (e), (f), and (g), respectively;
(2) by inserting after subsection (c) the following new
subsection:
``(d) Limitations on Participation in Origination and
Mortgagee Approval.--
``(1) Requirement.--Any person or entity that is not
approved by the Secretary to serve as a mortgagee, as such
term is defined in subsection (c)(7), shall not participate
in the origination of an FHA-insured loan except as
authorized by the Secretary.
``(2) Eligibility for approval.--In order to be eligible
for approval by the Secretary, an applicant mortgagee shall
not be, and shall not have any officer, partner, director,
principal, or employee of the applicant mortgagee who is--
``(A) currently suspended, debarred, under a limited denial
of participation (LDP), or otherwise restricted under part 24
or 25 of title 24 of the Code of Federal Regulations, or any
successor regulations to such parts, or under similar
provisions of any other Federal agency;
``(B) under indictment for, or has been convicted of, an
offense that reflects adversely upon the applicant's
integrity, competence or fitness to meet the responsibilities
of an approved mortgagee;
``(C) subject to unresolved findings contained in a
Department of Housing and Urban Development or other
governmental audit, investigation, or review;
``(D) engaged in business practices that do not conform to
generally accepted practices of prudent mortgagees or that
demonstrate irresponsibility;
``(E) convicted of, or who has pled guilty or nolo
contendre to, a felony related to participation in the real
estate or mortgage loan industry--
``(i) during the 7-year period preceding the date of the
application for licensing and registration; or
``(ii) at any time preceding such date of application, if
such felony involved an act of fraud, dishonesty, or a breach
of trust, or money laundering;
``(F) in violation of provisions of the S.A.F.E. Mortgage
Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any
applicable provision of State law; or
``(G) in violation of any other requirement as established
by the Secretary.''; and
(3) by adding at the end the following new subsection:
``(h) Use of Name.--The Secretary shall, by regulation,
require each mortgagee approved by the Secretary for
participation in the FHA mortgage insurance programs of the
Secretary--
``(1) to use the business name of the mortgagee that is
registered with the Secretary in connection with such
approval in all advertisements and promotional materials, as
such terms are defined by the Secretary, relating to the
business of such mortgagee in such mortgage insurance
programs; and
``(2) to maintain copies of all such advertisements and
promotional materials, in such form and for such period as
the Secretary requires.''.
(c) Change of Status.--The National Housing Act is amended
by striking section 532 (12 U.S.C. 1735f-10) and inserting
the following new section:
``SEC. 532. CHANGE OF MORTGAGEE STATUS.
``(a) Notification.--Upon the occurrence of any action
described in subsection (b), an approved mortgagee shall
immediately submit to the Secretary, in writing, notification
of such occurrence.
``(b) Actions.--The actions described in this subsection
are as follows:
``(1) The debarment, suspension of a Limited Denial of
Participation (LDP), or application of other sanctions,
fines, or penalties applied to the mortgagee or to any
officer, partner, director, principal, manager, supervisor,
loan processor, loan underwriter, or loan originator of the
mortgagee pursuant to applicable provisions of State or
Federal law.
``(2) The revocation of a State-issued mortgage loan
originator license issued pursuant to the S.A.F.E. Mortgage
Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any other
similar declaration of ineligibility pursuant to State
law.''.
(d) Civil Money Penalties.--Section 536 of the National
Housing Act (12 U.S.C. 1735f-14) is amended--
[[Page H3001]]
(1) in subsection (b)--
(A) in paragraph (1)--
(i) in the matter preceding subparagraph (A), by inserting
``or any of its owners, officers, or directors'' after
``mortgagee or lender'';
(ii) in subparagraph (H), by striking ``title I'' and all
that follows through ``Act of 1989)'' and inserting ``title I
or II''; and
(iii) by inserting after subparagraph (J) the following:
``(K) Violation of section 202(d) of this Act (12 U.S.C.
1708(d)).''; and
(B) in paragraph (2)--
(i) in subparagraph (B), by striking ``or'' at the end;
(ii) in subparagraph (C), by striking the period at the end
and inserting ``; or''; and
(iii) by adding at the end the following new subparagraph:
``(D) causing or participating in any of the violations set
forth in paragraph (1) of this subsection.''; and
(2) in subsection (g), by striking ``The term'' and all
that follows through the end of the sentence and inserting
``For purposes of this section, a person acts knowingly when
a person has actual knowledge of acts or should have known of
the acts.''.
(e) Expanded Review of FHA Mortgagee Applicants and Newly
Approved Mortgagees.--Not later than the expiration of the 3-
month period beginning upon the date of the enactment of this
Act, the Secretary of Housing and Urban Development shall--
(1) expand the existing process for reviewing new
applicants for approval for participation in the mortgage
insurance programs of the Secretary for mortgages on 1- to 4-
family residences for the purpose of identifying applicants
who represent a high risk to the Mutual Mortgage Insurance
Fund; and
(2) implement procedures that, for mortgagees approved
during the 12-month period ending upon such date of
enactment--
(A) expand the number of mortgages originated by such
mortgagees that are reviewed for compliance with applicable
laws, regulations, and policies; and
(B) include a process for random reviews of such mortgagees
and a process for reviews that is based on volume of
mortgages originated by such mortgagees.
SEC. 204. ENHANCEMENT OF LIQUIDITY AND STABILITY OF INSURED
DEPOSITORY INSTITUTIONS TO ENSURE AVAILABILITY
OF CREDIT AND REDUCTION OF FORECLOSURES.
(a) Permanent Increase in Deposit Insurance.--
(1) Amendments to federal deposit insurance act.--Effective
upon the date of the enactment of this Act, section 11(a) of
the Federal Deposit Insurance Act (12 U.S.C. 1821(a)) is
amended--
(A) in paragraph (1)(E), by striking ``$100,000'' and
inserting ``$250,000'';
(B) in paragraph (1)(F)(i), by striking ``2010'' and
inserting ``2015'';
(C) in subclause (I) of paragraph (1)(F)(i), by striking
``$100,000'' and inserting ``$250,000'';
(D) in subclause (II) of paragraph (1)(F)(i), by striking
``the calendar year preceding the date this subparagraph
takes effect under the Federal Deposit Insurance Reform Act
of 2005'' and inserting ``calendar year 2008''; and
(E) in paragraph (3)(A), by striking ``, except that
$250,000 shall be substituted for $100,000 wherever such term
appears in such paragraph''.
(2) Amendment to federal credit union act.--Section 207(k)
of the Federal Credit Union Act (12 U.S.C. 1787(k)) is
amended--
(A) in paragraph (3)--
(i) by striking the opening quotation mark before
``$250,000'';
(ii) by striking ``, except that $250,000 shall be
substituted for $100,000 wherever such term appears in such
section''; and
(iii) by striking the closing quotation mark after the
closing parenthesis; and
(B) in paragraph (5), by striking ``$100,000'' and
inserting ``$250,000''.
(3) Repeal of eesa provision.--Section 136 of the Emergency
Economic Stabilization Act (12 U.S.C. 5241) is hereby
repealed.
(b) Extension of Restoration Plan Period.--Section
7(b)(3)(E)(ii) of the Federal Deposit Insurance Act (12
U.S.C. 1817(b)(3)(E)(ii)) is amended by striking ``5-year
period'' and inserting ``8-year period''.
(c) FDIC and NCUA Borrowing Authority.--
(1) FDIC.--Section 14(a) of the Federal Deposit Insurance
Act (12 U.S.C. 1824(a)) is amended by striking
``$30,000,000,000'' and inserting ``$100,000,000,000''.
(2) NCUA.--Section 203(d)(1) of the Federal Credit Union
Act (12 U.S.C. 1783(d)(1)) is amended by striking
``$100,000,000'' and inserting ``$6,000,000,000''.
(d) Expanding Systemic Risk Special Assessments.--Section
13(c)(4)(G)(ii) of the Federal Deposit Insurance Act (12
U.S.C. 1823(c)(4)(G)(ii)) is amended to read as follows:
``(ii) Repayment of loss.--
``(I) In general.--The Corporation shall recover the loss
to the Deposit Insurance Fund arising from any action taken
or assistance provided with respect to an insured depository
institution under clause (i) from 1 or more special
assessments on insured depository institutions, depository
institution holding companies (with the concurrence of the
Secretary of the Treasury with respect to holding companies),
or both, as the Corporation determines to be appropriate.
``(II) Treatment of depository institution holding
companies.--For purposes of this clause, sections 7(c)(2) and
18(h) shall apply to depository institution holding companies
as if they were insured depository institutions.
``(III) Regulations.--The Corporation shall prescribe such
regulations as it deems necessary to implement this clause.
In prescribing such regulations, defining terms, and setting
the appropriate assessment rate or rates, the Corporation
shall establish rates sufficient to cover the losses incurred
as a result of the actions of the Corporation under clause
(i) and shall consider: the types of entities that benefit
from any action taken or assistance provided under this
subparagraph; economic conditions, the effects on the
industry, and such other factors as the Corporation deems
appropriate and relevant to the action taken or the
assistance provided. Any funds so collected that exceed
actual losses shall be placed in the Deposit Insurance
Fund.''.
(e) Establishment of a National Credit Union Share
Insurance Fund Restoration Plan Period.--Section 202(c)(2) of
the Federal Credit Union Act (12 U.S.C. 1782(c)(2)) is
amended by adding at the end the following new subparagraph:
``(D) Fund restoration plans.--
``(i) In general.--Whenever--
``(I) the Board projects that the equity ratio of the Fund
will, within 6 months of such determination, fall below the
minimum amount specified in subparagraph (C) for the
designated equity ratio; or
``(II) the equity ratio of the Fund actually falls below
the minimum amount specified in subparagraph (C) for the
equity ratio without any determination under sub-clause (I)
having been made,
the Board shall establish and implement a Share Insurance
Fund restoration plan within 90 days that meets the
requirements of clause (ii) and such other conditions as the
Board determines to be appropriate.
``(ii) Requirements of restoration plan.--A Share Insurance
Fund restoration plan meets the requirements of this clause
if the plan provides that the equity ratio of the Fund will
meet or exceed the minimum amount specified in subparagraph
(C) for the designated equity ratio before the end of the 5-
year period beginning upon the implementation of the plan (or
such longer period as the Board may determine to be necessary
due to extraordinary circumstances).
``(iii) Transparency.--Not more than 30 days after the
Board establishes and implements a restoration plan under
clause (i), the Board shall publish in the Federal Register a
detailed analysis of the factors considered and the basis for
the actions taken with regard to the plan.''.
The Acting CHAIR. No amendment to the bill is in order except those
printed in House Report 111-21. Each amendment may be offered only in
the order printed in the report, by a Member designated in the report,
shall be considered read, shall be debatable for the time specified in
the report, equally divided and controlled by the proponent and an
opponent of the amendment, shall not be subject to amendment, and shall
not be subject to a demand for division of the question.
Amendment No. 1 Offered by Ms. Zoe Lofgren of California, as Modified
The Acting CHAIR. It is now in order to consider amendment No. 1
printed in House Report 111-21, as perfected by the modification
printed in House Report 111-23.
Ms. ZOE LOFGREN of California. I have this amendment at the desk.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 1 offered by Ms. Zoe Lofgren of California,
as modified:
In the table of contents of the bill, in the item relating
to section 121, strike ``department of veterans affairs'' and
insert ``Department of Veterans Affairs''.
Page 2, after line 6, insert the following (and make such
technical and conforming changes as may be appropriate):
SEC. 100. DEFINITION.
Section 101 of title 11, United States Code, is amended by
inserting after paragraph (43) the following (and make such
technical and conforming changes as may be appropriate):
``(43A) The term `qualified loan modification' means a loan
modification agreement made in accordance with the guidelines
of the Obama Administration's Homeowner Affordability and
Stability Plan as implemented March 4, 2009, that--
``(A) reduces the debtor's payment (including principal and
interest, and payments for real estate taxes, hazard
insurance, mortgage insurance premium, homeowners'
association dues, ground rent, and special assessments) on a
loan secured by a senior security interest in the principal
residence of the debtor, to a percentage of the debtor's
income in accordance with such guidelines, without any period
of negative amortization or under which the aggregate amount
of the regular periodic payments would not fully amortize the
outstanding principal amount of such loan;
``(B) requires no fees or charges to be paid by the debtor
in order to obtain such modification; and
``(C) permits the debtor to continue to make payments under
the modification
[[Page H3002]]
agreement notwithstanding the filing of a case under this
title, as if such case had not been filed.''.
Beginning on page 7, strike line 6 and all that follows
through line 16 on page 8, and insert the following:
``(1) if such residence is sold in the 1st year occurring
after the effective date of the plan, 90 percent of the
amount of the difference between the sales price and the
amount of such claim as originally determined under
subsection (b)(11) (plus costs of sale and improvements), but
not to exceed the unpaid amount of the allowed secured claim
determined as if such claim had not been reduced under such
subsection;
`(2) if such residence is sold in the 2d year occurring
after the effective date of the plan, 70 percent of the
amount of the difference between the sales price and the
amount of such claim as originally determined under
subsection (b)(11) (plus costs of sale and improvements), but
not to exceed the unpaid amount of the allowed secured claim
determined as if such claim had not been reduced under such
subsection;
``(3) if such residence is sold in the 3d year occurring
after the effective date of the plan, 50 percent of the
amount of the difference between the sales price and the
amount of such claim as originally determined under
subsection (b)(11) (plus costs of sale and improvements), but
not exceed the unpaid amount of the allowed secured claim
determined as if such claim had not been reduced under such
subsection;
``(4) if such residence is sold in the 4th year occurring
after the effective date of the plan, 30 percent of the
amount of the difference between the sales price and the
amount of such claim as originally determined under
subsection (b)(11) (plus costs of sale and improvements), but
not to exceed the unpaid amount of the allowed secured claim
determined as if such claim had not been reduced under such
subsection; and
``(5) if such residence is sold in the 5th year occurring
after the effective date of the plan, 10 percent of the
amount of the difference between the sales price and the
amount of such claim as originally determined under
subsection (b)(11) (plus costs of sale and improvements), but
not to exceed the unpaid amount of the allowed secured claim
determined as if such claim had not been reduced under such
subsection.''.
Beginning on page 8, strike line 17 and all that follows
through line 7 on page 9, and insert the following (and make
such technical and conforming changes as may be appropriate):
``(h) With respect to a claim of the kind described in
subsection (b)(11), the plan may not contain a modification
under the authority of subsection (b)(11)--
``(1) in a case commenced under this chapter after the
expiration of the 30-day period beginning on the effective
date of this subsection, unless--
``(A) the debtor certifies that the debtor--
``(i) not less than 30 days before the commencement of the
case, contacted the holder of such claim (or the entity
collecting payments on behalf of such holder) regarding
modification of the loan that is the subject of such claim;
``(ii) provided the holder of the claim (or the entity
collecting payments on behalf of such holder) a written
statement of the debtor's current income, expenses, and debt
substantially conforming with the schedules required under
section 521(a) or such other form as is promulgated by the
Judicial Conference of the United States for such purpose;
and
``(iii) considered any qualified loan modification offered
to the debtor by the holder of the claim (or the entity
collecting payments on behalf of such holder); or
``(B) a foreclosure sale is scheduled to occur on a date in
the 30-day period beginning on the date of case is
commenced;''.
Page 9, line 24, insert ``and, if the issue of value is
contested, the court shall determine such value in accordance
with the appraisal rules used by the Federal Housing
Administration'' after ``determined''.
Page 11, strike lines 23 through 25, insert the following
(and make such technical and conforming changes as may be
appropriate):
(1) in the matter preceding paragraph (1) strike
``subsection (b)'' and insert ``subsections (b) and (d)''.
(2) in paragraph (5)--
(A) by inserting ``except as otherwise provided in section
1322(b)(11),'' after ``(5)'', and
(B) in subparagraph (B)(iii)(I) by inserting ``(including
payments of a claim modified under section 1322(b)(11))''
after ``payments'' the 1st place it appears,
Page 12, line 20, insert the following after ``faith'':
(Lack of good faith exists if the debtor has no need for
relief under this paragraph because the debtor can pay all of
his or her debts and any future payment increases on such
debts without difficulty for the foreseeable future,
including the positive amortization of mortgage debt. In
determining whether a reduction of the principal amount of
loan resulting from a modification made under the authority
of section 1322(b)(11) is made in good faith, the court shall
consider whether the holder of such claim (or the entity
collecting payments on behalf of such holder) has offered to
the debtor a qualified loan modification that would enable
the debtor to pay such debts and such loan without reducing
such principal amount.)''.
Page 12, after line 24, insert the following (and make such
technical and conforming changes as may be appropriate):
(b) Section 1325 of title 11, United States Code, is
amended by adding at the end the following (and make such
technical and conforming changes as may be appropriate):
``(d) Notwithstanding section 1322(b)(11)(C)(ii), the
court, on request of the debtor or the holder of a claim
secured by a senior security interest in the debtor's
principal residence, may confirm a plan proposing a reduction
in the interest rate on the loan secured by such security
interest and that does not reduce the principal, provided the
total monthly mortgage payment is reduced to a percentage of
the debtor's income in accordance with the guidelines of the
Obama Administration's Homeowner Affordability and Stability
Plan as implemented March 4, 2009, if, taking into account
the debtor's financial situation, after allowance of expenses
that would be permitted for a debtor under this chapter
subject to paragraph (3) of subsection (b), regardless of
whether the debtor is otherwise subject to such paragraph,
and taking into account additional debts and fees that are to
be paid in this chapter and thereafter, the debtor would be
able to prevent foreclosure and pay a fully amortizing 30-
year loan at such reduced interest rate without such
reduction in principal.''.
Page 15, after line 8, insert the following (and make such
technical and conforming changes as may be appropriate):
SEC. 109. GAO STUDY.
The Comptroller General shall carry out a study, and submit
to the Committee on the Judiciary of the House of
Representatives and the Committee on the Judiciary of the
Senate, not later than 2 years after the date of the
enactment of this Act a report containing--
(1) the results of such study of--
(A) the number of debtors who filed, during the 1-year
period beginning on the date of the enactment of this Act,
cases under chapter 13 of title 11 of the United States Code
for the purpose of restructuring their principal residence
mortgages,
(B) the number of mortgages restructured under the
amendments made by this subtitle that subsequently resulted
in default and foreclosure,
(C) a comparison between the effectiveness of mortgages
restructured under programs outside of bankruptcy, such as
Hope Now and Help for Homeowners, and mortgages restructured
under the amendments made by this subtitle,
(D) the number of cases presented to the bankruptcy courts
where mortgages were restructured under the amendments made
by this subtitle that were appealed,
(E) the number of cases presented to the bankruptcy courts
where mortgages were restructured under the amendments made
by the subtitle that were overturned on appeal, and
(F) the number of bankruptcy judges disciplined as a result
of actions taken to restructure mortgages under the
amendments made by this subtitle, and
(2) a recommendation as to whether such amendments should
be amended to include a sunset clause.
SEC. 110. REPORT TO CONGRESS.
Not later than 18 months after the date of the enactment of
this Act, the Comptroller General, in consultation with the
Federal Housing Administration, shall submit to the Congress,
a report containing--
(1) a comprehensive review of the effects of the amendments
made by this subtitle on bankruptcy court,
(2) a survey of whether the program should limit the types
of homeowners eligible for the program., and
(3) a recommendation on whether such amendments should
remain in effect.
Page 15, line 15, strike ``Subsection (a) of section'' and
insert ``Section''.
Page 25, after line 9, insert the following (and make such
technical and conforming changes as may be appropriate):
SEC. 125. MORTGAGE MODIFICATION DATA COLLECTING AND
REPORTING.
(a) Reporting Requirements.--Not later than 120 days after
the date of the enactment of this Act, and quarterly
thereafter, the Comptroller of the Currency, in coordination
with the Director of the Office of Thrift Supervision, shall
submit a report to the Committee on Banking, Housing, and
Urban Affairs of the Senate, the Committee on Financial
Services of the House of Representatives, and the Joint
Economic Committee on the volume of mortgage modifications
reported to the Office of the Comptroller of the Currency and
the Office of Thrift Supervision, under the mortgage metrics
program of each such Office, during the previous quarter,
including the following:
(1) A copy of the data collection instrument currently used
by the Office of the Comptroller of the Currency and the
Office of Thrift Supervision to collect data on loan
modifications.
(2) The total number of mortgage modifications resulting in
each of the following:
(A) Additions of delinquent payments and fees to loan
balances.
(B) Interest rate reductions and freezes.
(C) Term extensions.
(D) Reductions of principal.
(E) Deferrals of principal.
(F) Combinations of modifications described in subparagraph
(A), (B), (C), (D), or (E).
(3) The total number of mortgage modifications in which the
total monthly principal and interest payment resulted in the
following:
[[Page H3003]]
(A) An increase.
(B) Remained the same.
(C) Decreased less than 10 percent.
(D) Decreased between 10 percent and 20 percent.
(E) Decreased 20 percent or more.
(4) The total number of loans that have been modified and
then entered into default, where the loan modification
resulted in--
(A) higher monthly payments by the homeowner;
(B) equivalent monthly payments by the homeowner;
(C) lower monthly payments by the homeowner of up to 10
percent;
(D) lower monthly payments by the homeowner of between 10
percent to 20 percent; or
(E) lower monthly payments by the homeowner of more than 20
percent.
(b) Data Collection.--
(1) Required.--
(A) In general.--Not later than 60 days after the date of
the enactment of this Act, the Comptroller of the Currency
and the Director of the Office of Thrift Supervision, shall
issue mortgage modification data collection and reporting
requirements to institutions covered under the reporting
requirement of the mortgage metrics program of the
Comptroller or the Director.
(B) Inclusiveness of collections.--The requirements under
subparagraph (A) shall provide for the collection of all
mortgage modification data needed by the Comptroller of the
Currency and the Director of the Office of Thrift Supervision
to fulfill the reporting requirements under subsection (a).
(2) Report.--The Comptroller of the Currency shall report
all requirements established under paragraph (1) to each
committee receiving the report required under subsection (a).
Page 25, line 24, after ``disposition'' insert the
following: ``, including any modification or refinancing
undertaken pursuant to standard loan modification, sale, or
disposition guidelines issued by the Secretary of the
Treasury or his designee under the Emergency Economic
Stabilization Act of 2008,''.
Page 28, strike lines 18 and 19 and insert the following:
(c) Definitions.--For purposes of this section, the
following definitions shall apply:
(1) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury.
(2) Securitization vehicle.--The term ``securitization
vehi-
Page 28, strike line 22 and insert the following:
(A) is the issuer, or is created by the issuer, of
Page 29, strike line 3 and insert the following:
(B) holds such mortgages.
Page 30, line 12, before the period insert the following:
``and has not been convicted under Federal or State law for
fraud during the 10-year period ending upon the insurance of
the mortgage under this section''.
Page 30, after line 23, insert the following:
(B) in paragraph (4)(A), by striking ``; subject to
standards established by the Board under subparagraph (B),'';
Page 31, line 1, strike lines 1 through 3 and insert the
following:
(C) in paragraph (7), by striking ``and provided that'' and
all that follows through ``new second lien'' and inserting
``and except that the Secretary may, under such terms and
conditions as the Secretary may establish, permit the
establishment of a second lien on a property under an
eligible mortgage to be insured, for the purpose of
facilitating payment of closing or refinancing costs by a
State or locality using funds provided under the HOME
Investment Partnerships program under title II of the
Cranston-Gonzalez National Affordable Housing Act (42 U.S.C.
12721 et seq.) or the community development block grants
program under title I of the Housing and Community
Development Act of 1974 (42 U.S.C. 5301 et seq.) or by a
State or local housing finance agency'';
Page 31, line 4, strike ``(C)'' and insert ``(D)''.
Page 31, line 15, strike ``and''.
Page 31, after line 15, insert the following:
(E) by striking subparagraph (10);
(F) in paragraph (11), by inserting before the period at
the end the following: ``, except that the Secretary may
provide exceptions to such latter requirement (relating to
present ownership interest) for any mortgagor who has
inherited a property or for any mortgagor who has relocated
to a new jurisdiction, and is in the process of trying to
sell such property or has been unable to sell such property
due to adverse market conditions'';
(G) by redesignating paragraph (11) as paragraph (10); and
Page 31, line 16, strike ``(D) by adding after paragraph
(11)'' and insert ``(H) by adding at the end''.
Page 31, line 18, strike ``(12)'' and insert ``(11)''.
Page 36, line 6, strike ``or employee'' and insert
``manager, supervisor, loan processor, loan underwriter, or
loan originator''.
Page 37, strike the quotation marks in line 19 and all that
follows through the end of the line.
Page 37, after line 19, insert the following:
``(3) Rulemaking and implementation.--The Secretary shall
conduct a rulemaking to carry out this subsection. The
Secretary shall implement this subsection not later than the
expiration of the 60-day period beginning upon the date of
the enactment of this subsection by notice, mortgagee letter,
or interim final regulations, which shall take effect upon
issuance.''; and
Page 47, after line 13, insert the following (and make such
technical and conforming changes as may be appropriate):
SEC. 205. APPLICATION OF GSE CONFORMING LOAN LIMIT TO
MORTGAGES ASSISTED WITH TARP FUNDS.
In making any assistance available to prevent and mitigate
foreclosures on residential properties, including any
assistance for mortgage modifications, using any amounts made
available to the Secretary of the Treasury under title I of
the Emergency Economic Stabilization Act of 2008, the
Secretary shall provide that the limitation on the maximum
original principal obligation of a mortgage that may be
modified, refinanced, made, guaranteed, insured, or otherwise
assisted, using such amounts shall not be less than the
dollar amount limitation on the maximum original principal
obligation of a mortgage that may be purchased by the Federal
Home Loan Mortgage Corporation that is in effect, at the time
that the mortgage is modified, refinanced, made, guaranteed,
insured, or otherwise assisted using such amounts, for the
area in which the property involved in the transaction is
located.
SEC. 206. MORTGAGES ON CERTAIN HOMES ON LEASED LAND.
Section 255(b)(4) of the National Housing Act (12 U.S.C.
1715z-20(b)(4)) is amended by striking subparagraph (B) and
inserting:
``(B) under a lease that has a term that ends no earlier
than the minimum number of years, as specified by the
Secretary, beyond the actuarial life expectancy of the
mortgagor or comortgagor, whichever is the later date.''.
SEC. 207. SENSE OF CONGRESS REGARDING MORTGAGE REVENUE BOND
PURCHASES.
It is the sense of the Congress that the Secretary of the
Treasury should use amounts made available in this Act to
purchase mortgage revenue bonds for single-family housing
issued through State housing finance agencies and through
units of local government and agencies thereof.
Page 47, at the end of title II, add the following (and
conform the table of contents accordingly):
TITLE III--MORTGAGE FRAUD
SEC. 301. SHORT TITLE.
This title may be cited as the ``Nationwide Mortgage Fraud
Task Force Act of 2009''.
SEC. 302. NATIONWIDE MORTGAGE FRAUD TASK FORCE.
(a) Establishment.--There is established in the Department
of Justice the Nationwide Mortgage Fraud Task Force
(hereinafter referred to in this section as the ``Task
Force'') to address mortgage fraud in the United States.
(b) Support.--The Attorney General shall provide the Task
Force with the appropriate staff, administrative support, and
other resources necessary to carry out the duties of the Task
Force.
(c) Executive Director.--The Attorney General shall appoint
one staff member provided to the Task Force to be the
Executive Director of the Task Force and such Executive
Director shall ensure that the duties of the Task Force are
carried out.
(d) Branches.--The Task Force shall establish, oversee, and
direct branches in each of the 10 States determined by the
Attorney General to have the highest concentration of
mortgage fraud.
(e) Mandatory Functions.--The Task Force, including the
branches of the Task Force established under subsection (d),
shall--
(1) establish coordinating entities, and solicit the
voluntary participation of Federal, State, and local law
enforcement and prosecutorial agencies in such entities, to
organize initiatives to address mortgage fraud, including
initiatives to enforce State mortgage fraud laws and other
related Federal and State laws;
(2) provide training to Federal, State, and local law
enforcement and prosecutorial agencies with respect to
mortgage fraud, including related Federal and State laws;
(3) collect and disseminate data with respect to mortgage
fraud, including Federal, State, and local data relating to
mortgage fraud investigations and prosecutions; and
(4) perform other functions determined by the Attorney
General to enhance the detection of, prevention of, and
response to mortgage fraud in the United States.
(f) Optional Functions.--The Task Force, including the
branches of the Task Force established under subsection (d),
may--
(1) initiate and coordinate Federal mortgage fraud
investigations and, through the coordinating entities
established under subsection (e), State and local mortgage
fraud investigations;
(2) establish a toll-free hotline for--
(A) reporting mortgage fraud;
(B) providing the public with access to information and
resources with respect to mortgage fraud; and
(C) directing reports of mortgage fraud to the appropriate
Federal, State, and local law enforcement and prosecutorial
agency, including to the appropriate branch of the Task Force
established under subsection (d);
(3) create a database with respect to suspensions and
revocations of mortgage industry licenses and certifications
to facilitate the sharing of such information by States;
(4) make recommendations with respect to the need for and
resources available to provide the equipment and training
necessary for the Task Force to combat mortgage fraud; and
[[Page H3004]]
(5) propose legislation to Federal, State, and local
legislative bodies with respect to the elimination and
prevention of mortgage fraud, including measures to address
mortgage loan procedures and property appraiser practices
that provide opportunities for mortgage fraud.
(g) Definition.--In this section, the term ``mortgage
fraud'' means a material misstatement, misrepresentation, or
omission relating to the property or potential mortgage
relied on by an underwriter or lender to fund, purchase, or
insure a loan.
Page 47, at the end of the bill, add the following (and
conform the table of contents accordingly):
TITLE IV--FORECLOSURE MORATORIUM PROVISIONS
SEC. 401. SENSE OF THE CONGRESS ON FORECLOSURES.
(a) In General.--It is the sense of the Congress that
mortgage holders, institutions, and mortgage servicers should
not initiate a foreclosure proceeding or a foreclosure sale
on any homeowner until the foreclosure mitigation provisions,
like the Hope for Homeowners program, as required under title
II, and the President's ``Homeowner Affordability and
Stability Plan'' have been implemented and determined to be
operational by the Secretary of Housing and Urban Development
and the Secretary of the Treasury.
(b) Scope of Moratorium.--The foreclosure moratorium
referred to in subsection (a) should apply only for first
mortgages secured by the owner's principal dwelling.
(c) FHA-Regulated Loan Modification Agreements.--If a
mortgage holder, institution, or mortgage servicer to which
subsection (a) applies reaches a loan modification agreement
with a homeowner under the auspices of the Federal Housing
Administration before any plan referred to in such subsection
takes effect, subsection (a) shall cease to apply to such
institution as of the effective date of the loan modification
agreement.
(d) Duty of Consumer to Maintain Property.--Any homeowner
for whose benefit any foreclosure proceeding or sale is
barred under subsection (a) from being instituted, continued
, or consummated with respect to any homeowner mortgage
should not, with respect to any property securing such
mortgage, destroy, damage, or impair such property, allow the
property to deteriorate, or commit waste on the property.
(e) Duty of Consumer to Respond to Reasonable Inquiries.--
Any homeowner for whose benefit any foreclosure proceeding or
sale is barred under subsection (a) from being instituted,
continued, or consummated with respect to any homeowner
mortgage should respond to reasonable inquiries from a
creditor or servicer during the period during which such
foreclosure proceeding or sale is barred.
The Acting CHAIR. Pursuant to House Resolution 190, the gentlewoman
from California (Ms. Zoe Lofgren) and a Member opposed each will
control 15 minutes.
The Chair recognizes the gentlewoman from California.
Ms. ZOE LOFGREN of California. Mr. Chairman, I yield myself such time
as I may consume.
(Ms. ZOE LOFGREN of California asked and was given permission to
revise and extend her remarks.)
Ms. ZOE LOFGREN of California. Mr. Chairman, this important bill
gives families whose home mortgages are in distress a better
opportunity to come to terms with their lender, to bring their mortgage
payments in line with prevailing lending rates in the lending market
and with prevailing values in the housing market. This is the same
opportunity that owners of vacation homes, investment properties,
private jets, and luxury yachts have long enjoyed. I think it's only
fair that we offer it now to average families as well. The economic
crisis engulfing this country and the world had its start in the
housing foreclosure crisis. The Helping Families Save Their Homes Act
will begin to address this underlying cause, and it will provide
meaningful relief to struggling homeowners.
In developing this legislation, we have benefited at every step of
the way from constructive engagement from members on and off the
Judiciary Committee, from lenders and brokers, from consumer groups,
from bankruptcy judges and trustees. With their help, we've reached
consensus on a series of significant changes culminating in the
manager's amendment before us today. I should note that the amendment
is the Lofgren-Tauscher-Cardoza amendment, and the changes that it
encompasses make this a much better bill.
Under the manager's amendment, the homeowner must notify the lender,
submit financial records and work in good faith for at least 30 days to
try to modify a mortgage outside of the bankruptcy using the Obama
mortgage modification plan outlined yesterday. We provide also that,
should those efforts not prove fruitful and as a last resort an
individual ends up in Chapter 13 proceedings, the court should utilize
the Obama mortgage modification plan as a guideline for the court in
reviewing and in helping a homeowner to meet obligations.
We also have required that bankruptcy courts will use the FHA
appraisal guidelines, repayment plans, and for equal monthly mortgage
payments. If a homeowner sells a home while still under a Chapter 13
payment plan, the lender is going to share in the profit, and that's
only fair. The closer in time of the mortgage modification, the greater
the lender's share, and the manager's amendment actually further
increases the lender's share at each point over the period.
Homeowners who engage in bad faith, such as filing for bankruptcy
when they could really afford to pay their mortgages, will be
disqualified for assistance in chapter 13, and a special Justice
Department task force is set up to investigate reports of possible
mortgage fraud. These are in addition to improvements already made at
earlier stages. The changes are all described in greater detail in a
summary that was sent to all of your offices today. I have brought
copies of a summary with me today.
In short, we have sought to respond in a reasonable manner to every
single concern brought to our attention. We've achieved a balanced
reform that will bring meaningful help to families in genuine need
without costing taxpayers a dime.
The bill is not going to usher in a rash of bankruptcy filings. In
fact, by setting up a homeowner-lender negotiating process that begins
well before bankruptcy, it is designed to keep more families out of
bankruptcy and out of foreclosure. The number of new chapter 13
mortgage modifications that may result will be far less than the number
of foreclosures that will be prevented, and preventing foreclosures is
the key. That will benefit not only homeowners and their families but
also neighborhoods, their communities, their lenders, and the entire
American economy.
It's worth noting that any time there is a foreclosure, the average
decline of property values for neighboring property is 9 percent, so
this is important to every American to avert these foreclosures.
I thank Mrs. Tauscher, Mr. Cardoza, Mr. Marshall, Brad Miller, John
Conyers, and all of the other Members who have worked so hard to
improve this bill through the manager's amendment.
I reserve the balance of my time.
Mr. SMITH of Texas. Mr. Chairman, I rise in opposition to the
amendment, and I will yield myself such time as I may consume.
Unfortunately, this amendment does little to change the fact that the
bankruptcy provisions in this legislation will fail to solve the
foreclosure crisis. Some claim the manager's amendment will narrow the
bill's bankruptcy provisions, but there is nothing in this amendment
that meaningfully changes the underlying bill. Meaningful change would
have meant a true requirement for bankruptcy petitioners to exhaust
other options before going to bankruptcy court.
As Speaker Pelosi observed just this week, ``Bankruptcy, by its
nature, should require a judge to see that other remedies had been
exhausted and that good faith overtures from the lender had not been
dismissed by the borrower.''
The manager's amendment does not do that. Rather, it merely requires
that judges consider whether the lender offered the borrower a loan
modification when determining whether to approve the borrower's
bankruptcy plan. So a judge is free to consider a loan modification the
lender offered and then approve a cramdown despite the lender's offer.
The judge can approve a cramdown even if the borrower signed a pre-
bankruptcy modification with the lender and then went shopping for a
sweeter deal in bankruptcy.
The manager's amendment also contains a major loophole that will
allow borrowers to avoid any requirement that they contact their lender
about a loan modification prior to filing for bankruptcy. Under the
manager's amendment, a borrower can do nothing, fail to seek a
qualifying loan modification and still be entitled to get a
[[Page H3005]]
bankruptcy cramdown once a foreclosure sale was scheduled. In other
words, bankruptcy relief is available to those who fail to seek a loan
modification under the Obama plan.
Meaningful change also would have meant substantially narrowing the
class of loans eligible for bankruptcy modification. Senator Durbin,
the principal sponsor of the companion legislation in the Senate, has
acknowledged the merit and proposals to limit the bill to subprime
loans.
[From American Banker, Feb. 27, 2009]
Transcript of Remarks by Sen. Durbin
The following is a transcript of remarks between Sen.
Richard Durbin and an American Banker reporter, Tuesday
evening after President Obama's speech to Congress.
AB Reporter: ``Sen. Durbin, do you have a moment today on
bankruptcy reform?''
Sen. Durbin: ``Sure.''
AB Reporter: ``I know that in the House, at least regarding
this week, the lenders are still trying to make the
restrictions so that you have to exhaust all other recourses
before bankruptcy pretty tough, even today I heard about
making HUD or one of the regulators certify that you had a
modification or something that didn't work before you could
go through bankruptcy. What are your thoughts on what the
standard ought to be?''
Sen. Durbin: ``I think that it is reasonable to require the
borrower to be in communication for a reasonable time before
they file for bankruptcy. You know if a borrower will not
talk to a bank they should not be able to avail themselves
but it's really difficult to write into law a measurement of
good faith so the best you can do is give them an opportunity
to meet. Remember 99% of foreclosed homes end up owned by the
bank so it isn't as if they are going to end up coming out
ahead if the person's losing their home. They get stuck with
$50,000 in costs and a house to maintain; to protect from
vandalism, and to show and try to sell, so the banks ought to
be much more forthcoming. Every attempt we've tried, every
voluntary attempt we've tried has failed. You have to have
this bankruptcy provision as the last resort if there is a
failure to negotiate the mortgage.''
AB Reporter: ``Do you know when the Senate might be taking
this up?''
Sen. Durbin: ``After the House and we might change it of
course. There are variations we're looking at. But I'm
willing to restrict this to homeowners to eliminate
speculators; to subprime mortgages, only those currently in
existence. I want to make this a reasonable limited--
AB Reporter: ``You're willing to limit it to subprime
mortgages?''
Sen. Durbin: ``We've talked about that as a possibility.
But I am willing to negotiate. I want this to be a reasonable
approach, but we have to include it. If we don't include it
we'll be stuck in the same mess we're in today.''
AB Reporter: ``What about the time limitation as far as
when the loans were originated. I understand there are some
who would like to see it limited to loan underwritten in the
last few years?''
Sen. Durbin: ``My version will not be prospective. So it
has to be existing loans.''
Mr. Chairman, the manager's amendment makes no attempt to narrow the
class of eligible loans. That class is as wide as it ever was. Finally,
rather than narrowing the bill, the manager's amendment actually
provides that, if the judge doesn't want to give a cramdown, he can
just rewrite the mortgage as a no-interest loan over the full term of a
new 30-year mortgage. What a gift and what an insult to those who pay
their mortgages on time. The only borrower the manager's amendment
suggests should be denied relief is the borrower who ``can pay all of
his or her debts and any future payment increases on such debts without
difficulty for the foreseeable future,'' but that person will never
need to be in bankruptcy court, by definition.
Mr. Chairman, the manager's amendment continues the majority's policy
of punishing the successful, taxing the responsible and holding no one
accountable. It is unfair for Congress to bail out mortgage lenders and
borrowers on the backs of responsible homeowners who continue to pay
their mortgages even in these troubled economic times. Clearly, the
American people are not willing to pay for their neighbors'
irresponsible actions. The manager's amendment hardly narrows the scope
of the underlying bill. In some areas, it actually makes it worse.
Members should oppose both this amendment and the underlying bill.
Mr. Chairman, I reserve the balance of my time.
Ms. ZOE LOFGREN of California. Mr. Chairman, I would now like to
yield 1 minute to the gentleman from Vermont (Mr. Welch).
Mr. WELCH. Mr. Chairman, it is important to understand that Citigroup
supports this bill. Why? They're a huge lender. It's because they
understand that we have to stabilize home values in order to begin the
recovery, and they need a tool to accomplish it.
So this is about lenders as much as it is about borrowers. Why?
Because these mortgages that have been sliced and diced into 40 or 50
different sections make it impossible even for a mortgage company and a
borrower, homeowner or a family to come together to resolve the problem
that they share together. So this bankruptcy provision, written
narrowly so that it is a last resort, is not only fair, but is
necessary to lenders as well as to borrowers.
I applaud both committees for the work that they have done.
The Acting CHAIR. Without objection, the gentleman from Virginia (Mr.
Goodlatte) will control the remainder of the time of the gentleman from
Texas (Mr. Smith).
There was no objection.
Mr. GOODLATTE. Mr. Chairman, at this time, I am pleased to yield 1
minute to the gentlewoman from Minnesota (Mrs. Bachmann).
Mrs. BACHMANN. Mr. Chairman, of the foundational policies of American
exceptionalism, the concepts that have inspired our great Nation are
the sanctity of private contracts and upholding the rule of law. This
cramdown bill crassly undercuts both of these pillars of American
exceptionalism.
Why would a lender make a 30-year loan if they fear the powers of the
Federal Government will violate the very terms of that loan? They will
only make those loans at a great cost both to the borrower and to our
society. Surely as day follows night, we will witness yet another nail
in the coffin of home developers who already are reeling under the
burden of poisonous government policies.
Experts currently estimate that the additional cost due to this risk
of the cramdown bill would raise mortgage rates as much as two full
percentage points or would substantially increase required down
payments. This is the last thing homeowners need, the last thing our
economy needs. There are responsible homeowners all across America who
are living within their means, who are making honest representations on
their loan applications, who are paying their debts, and who are
working hard to achieve the American dream. Let's not disadvantage
them.
Ms. ZOE LOFGREN of California. I would just note that yesterday was
the anniversary of our Constitution's going into effect, March 4, 1789.
In that Constitution was article I, section 8 that provides for
bankruptcy.
I would yield 40 seconds to Mr. Marshall.
Mr. MARSHALL. Mr. Chairman, there are a number of misconceptions
about this bill because it only affects existing mortgages, not home
loans in the future. It will have no impact on the cost of borrowing
into the future. For all of those homeowners like me who haven't been
part of this latest credit crisis, I see my property values declining
dramatically, in part, because there are foreclosures and vacancies
occurring all over the country.
In essence, what this bill would do is force the parties--the lender
and the borrower--without putting any taxpayer dollars in it, to deal
with their circumstances without adding more properties vacant on the
market, declining home prices that are affecting all Americans. It's
good for lenders. It's good for homeowners. It does not pose a risk of
an increased cost of credit.
{time} 1230
Ms. ZOE LOFGREN of California. Mr. Chairman, I would further yield 1
minute to a member of the committee, Ms. Sheila Jackson-Lee of Texas.
(Ms. JACKSON-LEE of Texas asked and was given permission to revise
and extend her remarks.)
Ms. JACKSON-LEE of Texas. Mr. Chairman, I thank the manager for all
of her hard work.
I want to pay tribute to Chairman Conyers for standing up in early
January and insisting that we complete our tasks, and I always come to
the floor to say, this is the little guy's day.
I came earlier today to speak of an individual who had foreclosure
issues, but as I proceeded to read her case, she actually went into
loan modification with her mortgager, her lender, Countrywide. And
isn't it interesting that as her fees were paid and the loan was
[[Page H3006]]
supposed to be modified, that some days later, here comes the mortgager
with the foreclosure notice or a foreclosure person at her door taking
pictures trying to decide what the situation was. Interestingly enough,
the house had gone into sale.
These are the unscrupulous types of activities that have come about
when there is no binding, if you will, judgment that can come about
through the bankruptcy court.
Again, this bill forces no one to pay anything. It takes no money out
of the government. All it does is it allows us to treat those fairly
who are going into foreclosure.
Mr. Chairman, I rise in strong support of H.R. 1106, ``Helping
Families Save Their Homes in Bankruptcy Act of 2009.'' I would like to
thank Chairman Conyers of the House Judiciary Committee and Chairman
Barney Frank of the Financial Services Committee for their leadership
on this issue. I also would like to thank Arthur D. Sidney of my staff
who serves as my able Legislative Director.
Mr. Chairman, I urge my colleagues to support this bill because it
provides a viable medium for bankruptcy judges to modify the terms of
mortgages held by homeowners who have little recourse but to declare
bankruptcy.
This bill could not have come at a more timely moment. This bill is
on the floor of the House within weeks after the President's address
before the Joint Session of Congress where President Obama outlined his
economic plan for America and discussed the current economic situation
that this country is facing.
To be sure, there are many economic woes that saddle this country.
The statistics are staggering.
Home foreclosures are at an all-time high and they will increase as
the recession continues. In 2006, there were 1.2 million foreclosures
in the United States, representing an increase of 42 percent over the
prior year. During 2007 through 2008, mortgage foreclosures were
estimated to result in a whopping $400 billion worth of defaults and
$100 billion in losses to investors in mortgage securities. This means
that one per 62 American households is currently approaching levels not
seen since the Depression.
The current economic crisis and the foreclosure blight have affected
new home sales and depressed home value generally. New home sales have
fallen by about 50 percent. One in six homeowners owes more on a
mortgage than the home is worth which raises the possibility of
default. Home values have fallen nationwide from an average of 19% from
their peak in 2006, and this price plunge has wiped out trillions of
dollars in home equity. The tide of foreclosure might become self-
perpetuating. The nation could be facing a housing depression--
something far worse than a recession.
Obviously, there are substantial societal and economic costs of home
foreclosures that adversely impact American families, their
neighborhoods, communities and municipalities. A single foreclosure
could impose direct costs on local government agencies totaling more
than $34,000.
I am glad that this legislation is finally on the floor of the United
States House of Representatives. I have long championed in the first
TARP bill that was introduced and signed late last Congress, that
language be included to specifically address the issue of mortgage
foreclosures. I had asked that $100 billion be set aside to address
that issue. Now, my idea has been vindicated as the TARP today has
included language and we here today are continuing to engage in the
dialogue to provide monies to those in mortgage foreclosure. I have
also asked for modification of homeowners' existing loans to avoid
mortgage foreclosure. I believe that the rules governing these loans
should be relaxed. These are indeed tough economic times that require
tough measures.
Because of the pervasive home foreclosures, federal legislation is
necessary to curb the fallout from the subprime mortgage crisis. For
consumers facing a foreclosure sale who want to retain their homes,
Chapter 13 of the Bankruptcy Code provides some modicum of protection.
The Supreme Court has held that the exception to a Chapter 13's ability
to modify the rights of creditors applies even if the mortgage is
under-secured. Thus, if a Chapter 13 debtor owes $300,000 on a mortgage
for a home that is worth less than $200,000, he or she must repay the
entire amount in order to keep his or her home, even though the maximum
that the mortgage would receive upon foreclosure is the home's value,
i.e., $200,000, less the costs of foreclosure.
Importantly, H.R. 1106 provides for a relaxation of the bankruptcy
provisions and waives the mandatory requirement that a debtor must
receive credit counseling prior to the filing for bankruptcy relief,
under certain circumstances. The waiver applies in a Chapter 13 case
where the debtor submits to the court a certification that the debtor
has received notice that the holder of a claim secured by the debtor's
principal residence may commence a foreclosure proceeding against such
residence.
This bill also prohibits claims arising from violations of consumer
protection laws. Specifically, this bill amends the Bankruptcy Code to
disallow a claim that is subject to any remedy for damages or
rescission as a result of the claimant's failure to comply with any
applicable requirement under the Truth in Lending Act or other
applicable state or federal consumer protection law in effect when the
noncompliance took place, notwithstanding the prior entry of a
foreclosure judgment.
H.R. 1106 also amends the Bankruptcy Code to permit modification of
certain mortgages that are secured by the debtor's principal residence
in specified respects. Lastly, the bill provides that the debtor, the
debtor's property, and property of the bankruptcy estate are not liable
for a fee, cost, or charge incurred while the Chapter 13 case is
pending and that arises from a debt secured by the debtor's principal
residence, unless the holder of the claim complies with certain
requirements.
I have long championed the rights of homeowners, especially those
facing mortgage foreclosure. I have worked with the Chairman of the
House Judiciary Committee to include language that would relax the
bankruptcy provisions to allow those facing mortgage foreclosure to
restructure their debt to avoid foreclosure.
Manager's Amendment
Because I have long championed the rights of homeowners facing
mortgage foreclose in the recent TARP bill and before the Judiciary
Committee, I have worked with Chairman Conyers and his staff to add
language that would make the bill stronger and that would help more
Americans. I co-sponsored sections of the Manager's Amendment and I
urge my colleagues to support the bill.
Specifically, I worked with Chairman Conyers to ensure that in
section 2 of the amendment, section 109(h) of the Bankruptcy Code would
be amended to waive the mandatory requirement, under current law, that
a debtor receive credit counseling prior to filing for bankruptcy
relief. Under the amended language there is now a waiver that will
apply where the debtor submits to the court a certification that the
debtor has received notice that the holder of a claim secured by the
debtor's principal residence may commence a foreclosure proceeding
against such residence.
This is important because it affords the debtor the maximum relief
without having to undergo a slow credit counseling process. This will
help prevent the debtor's credit situation from worsening, potentially
spiraling out of control, and result in the eventual loss of his or her
home.
Section 4 of the Manager's Amendment relaxes certain Bankruptcy
requirements under Chapter 13 so that the debtor can modify the terms
of the mortgage secured by his or her primary residence. This is an
idea that I have long championed in the TARP legislation--the ability
of debtors to modify their existing primary mortgages. Section 4 allows
for a modification of the mortgage for a period of up to 40 years. Such
modification cannot occur if the debtor fails to certify that it
contacted the creditor before filing for bankruptcy. In this way, the
language in the Manager's Amendment allows for the creditor to
demonstrate that it undertook its ``last clear'' chance to work out the
restructuring of the debt with its creditor before filing bankruptcy.
Importantly, the Manager's Amendment amends the bankruptcy code to
provide that a debtor, the debtor's property, and property of the
bankruptcy estate are not liable for fees and costs incurred while the
Chapter 13 case is pending and that arises from a claim for debt
secured by the debtor's principal residence.
Lastly, I worked to get language in the Manager's Amendment that
would allow the debtors and creditors to negotiate before a declaration
of bankruptcy is made. I made sure that the bill addresses present
situations at the time of enactment where homeowners are in the process
of mortgage foreclosure. This is done with a view toward consistency,
predictability, and a hope that things will improve.
Rules Committee
During this time, debtors and average homeowners found themselves in
the midst of a home mortgage foreclosure crisis of unprecedented
levels. Many of the mortgage foreclosures were the result of subprime
lending practices.
I have worked with my colleagues to strengthen the housing market and
the economy, expand affordable mortgage loan opportunities for families
at risk of foreclosure, and strengthen consumer protections against
risky loans in the future. Unfortunately, problems in the subprime
mortgage markets have helped push the housing market into its worst
slump in 16 years.
Before the Rules Committee, I offered an amendment that would prevent
homeowners
[[Page H3007]]
and debtors, who were facing mortgage foreclosure as a result of the
unscrupulous and unchecked lending of predatory lenders and financial
institutions, from having their mortgage foreclosure count against them
in the determination of their credit score. It is an equitable result
given that the debtors ultimately faced mortgage foreclosure because of
the bad practices of the lender.
Simply put, my amendment would prevent homeowners who have declared
mortgage foreclosure as a result of subprime mortgage lending and
mortgages from having the foreclosure count against the debtor/
homeowner in the determination of the debtor/homeowner's credit score.
Specifically, my amendment language was the following:
SEC. 205. FORBEARANCE IN CREATION OF CREDIT SCORE.
(a) In General.--Section 609 of the Fair Credit Reporting
Act (15 U.S.C. 1681g) is amended by adding at the end the
following new subsection:
``(h) Foreclosure on Subprime Not Taken Into Account for
Credit Scores.--
``(1) In general.--A foreclosure on a subprime mortgage of
a consumer may not be taken into account by any person in
preparing or calculating the credit score (as defined in
subsection (f)(2)) for, or with respect to, the consumer.
``(2) Subprime defined.--The term `subprime mortgage' means
any consumer credit transaction secured by the principal
dwelling of the consumer that bears or otherwise meets the
terms and characteristics for such a transaction that the
Board has defined as a subprime mortgage.''.
(b) Regulations.--The Board shall prescribe regulations
defining a subprime mortgage for purposes of the amendment
made by subsection (a) before the end of the 90-day period
beginning on the date of the enactment of this Act.
(c) Effective Date.--The amendment made by subsection (a)
shall take effect at the end of the 30-day period beginning
on the date of the enactment of this Act and shall apply
without regard to the date of the foreclosure.
The homeowners should not be required to pay for the bad acts of the
lenders. It would take years for a homeowner to recover from a mortgage
foreclosure. My amendment would have strengthened this already much
needed and well thought out bill.
I intend to offer a bill later this Congress to address this issue. I
am delighted, however, that the Judiciary Committee has expressed their
willingness to incorporate my language in the Conference language for
this bill. Without a doubt, this issue is important to me and it is
critical to Americans who are facing mortgage foreclosure and
bankruptcy.
Other Amendments
There were four amendments that were made in order by the Rules
Committee. I will address my support or non-support for each amendment.
conyers amendment
I support the Manager's Amendment offered by Chairman Conyers. The
amendment makes sense and makes clear that H.R. 1106 is intended to
help those that cannot afford to repay their mortgage without
intervention. Indeed it is strength to the underlying bill by providing
finality to the decisions worked out by the bankruptcy courts. These
decisions would provide finality between lenders and borrowers.
Moreover, the debtors are afforded certain protections by the Second
Degree Amendment. The Second Degree Amendment provides that the lender
could receive additional funding from the sale of the foreclosed home.
The Manager's Amendment would do the following:
(1) require courts to use FHA appraisal guidelines where the fair
market value of a home is in dispute;
(2) deny relief to individuals who can afford to repay their
mortgages without judicial mortgage modification; and
(3) extend the negotiation period from 15 to 30 days, requiring the
debtor to certify that he or she contacted the lender, provided the
lender with income, expense and debt statements, and that there was a
process for the borrower and lender to seek to reach agreement on a
qualified loan modification.
The Conyers Amendment would require a GAO study regarding the
effectiveness of mortgage modifications outside of bankruptcy and
judicial modifications, whether there should be a sunset, the impact of
the amendment on bankruptcy courts, whether relief should be limited to
certain types of homeowners. The GAO must analyze how bankruptcy judges
restructure mortgages, including the number of judges disciplined as a
result of actions taken to restore mortgages.
The Conyers Amendment would clarify that loan modifications, workout
plans or other loss mitigation plans are eligible for the servicer safe
harbor. Further, it would require HUD to receive public input before
implementing certain FHA approval provisions.
With respect to the HOPE for Homeowners Program: recasts the
prohibition against having committed fraud over the last 10 years from
a freestanding prohibition to a borrower certification. The Conyers
Amendment would amend the National Housing Act to broaden eligibility
for Home Equity Conversion Mortgage (HECM) or ``reverse mortgage.''
Provides that the GAO must submit to Congress a review of the effects
of the judicial modification program.
Requires the Comptroller of Currency, in coordination with the
Director of Thrift Supervision, to submit reports to Congress on the
volume of mortgage modifications and issue modification data collection
and reporting requirements.
Expresses the Sense of Congress that the Treasury Secretary should
use amounts made available under the Act to purchase mortgage revenue
bonds for single-family housing.
Expresses the Sense of Congress that financial institutions should
not foreclose on any principal homeowner until the loan modification
programs included in H.R. 1106 and the President's foreclosure plan are
implemented and deemed operational by the Treasury and HUD Secretaries.
Establishes a Justice Department Nationwide Mortgage Fraud Task Force
to coordinate anti-mortgage fraud efforts. Would provide that the
Treasury Secretary shall provide that the limit on the maximum original
principal obligation of a mortgage that may be modified using EESA
funds shall not be less than the dollar limit on the maximum original
principal obligation of a mortgage that may be purchased by the Federal
Home Loan Mortgage Corporation that is in effect at the time the
mortgage is modified.
PRICE, TOM AMENDMENT
I oppose the Price Amendment. The Price Amendment provides that if a
homeowner who has had a mortgage modified in a bankruptcy proceeding
sells the home at a profit, the lender can recapture the amount of
principal lost in the modification.
I oppose the Price Amendment for the following reasons.
First, the Price amendment would make homeowners into renters for
life. It will lead to poorly maintained homes and lower property values
for all of us. It takes away any incentive for homeowners to maintain
their homes or insist on competitive sale prices.
Second, the Manager's Amendment already allows lenders to get back a
substantial portion of any amount a home appreciates after bankruptcy.
But it leaves in place incentives for homeowners to maintain and
improve homes.
Third, the Price Amendment is opposed by the Center for Responsible
Lending, Consumers Union, Leadership Conference on Civil Rights,
National Association of Consumer Advocates, National Association of
Consumer Bankruptcy Attorneys, National Community Reinvestment
Coalition, National Consumer Law Center, National Legal Aid and
Defender Association, National Policy and Advocacy Council on
Homelessness, and USPIRG.
For the foregoing reasons, I oppose the Price Amendment and I urge my
colleagues to vote ``no'' on this amendment.
PETERS, GARY AMENDMENT
I support this amendment. This amendment is straightforward and is
intended to help the borrower by providing a last clear chance to
garner much needed information. It is my hope that this information
would be used to provide financial assistance and education to the
consumer.
In many cases, proper education about the use of credit and mortgages
could have made all the difference in the consumers choices. Simply
put, if the consumers made wise and informed credit decisions in the
first instance, they might not have been in bankruptcy or facing
foreclosure. I find this amendment incredibly prudent and helpful to
debtors and consumers. I urge my colleagues to support this amendment.
TITUS AMENDMENT
The Titus Amendment would require a servicer that receives an
incentive payment under the HOPE for homeowners to notify all
mortgagors under mortgages they service who are ``at-risk homeowners''
(as such term is defined by the Secretary), in a form and manner as
shall be prescribed by the Secretary, that they may be eligible for the
HOPE for Homeowners Program and how to obtain information regarding the
program.
The HOPE for Homeowners (H4H) program was created by Congress to help
those at risk of default and foreclosure refinance into more
affordable, sustainable loans. H4H is an additional mortgage option
designed to keep borrowers in their homes.
The program is effective from October 1, 2008 to September 30, 2011.
How the program works
There are four ways that a distressed homeowner could pursue
participation in the HOPE for Homeowners program:
1. Homeowners may contact their existing lender and/or a new lender
to discuss how to qualify and their eligibility for this program.
[[Page H3008]]
2. Servicers working with troubled homeowners may determine that the
best solution for avoiding foreclosure is to refinance the homeowner
into a HOPE for Homeowners loan.
3. Originating lenders who are looking for ways to refinance
potential customers out from under their high-cost loans and/or who are
willing to work with servicers to assist distressed homeowners.
4. Counselors who are working with troubled homeowners and their
lenders to reach a mutually agreeable solution for avoiding
foreclosure.
It is envisioned that the primary way homeowners will initially
participate in this program is through the servicing lender on their
existing mortgage. Servicers that do not have an underwriting component
to their mortgage operations will partner with an FHA-approved lender
that does.
Because I am committed to helping Americans obtain homes and remain
in their homes, I support the HOPE for Homeowners Program and I support
this amendment. I urge my colleagues to support this bill. Indeed, I
feel personally vindicated that Congress has set aside a bill to
address the issue of mortgage foreclosure, an issue that I have long
championed in the 110th Congress.
Housing, Foreclosures, and Texas
Texas ranks 17th in foreclosures. Texas would have faired far worse
but for the fact that homeowners enjoy strong constitutional
protections under the state's home-equity lending law. These consumer
protections include a 3% cap on lender's fees, 80% loan-to-value ratio
(compared to many other states that allow borrowers to obtain 125% of
their home's value), and mandatory judicial sign-off on any foreclosure
proceeding involving a defaulted home-equity loan.
Still, in the last month, in Texas alone there have been 30,720
foreclosures and sadly 15,839 bankruptcies. Much of this has to do with
a lack of understanding about finance--especially personal finance.
Last year, American's Personal income decreased $20.7 billion, or 0.2
percent, and disposable personal income (DPI) decreased $11.8 billion,
or 0.1 percent, in November, according to the Bureau of Economic
Analysis. Personal consumption expenditures (PCE) decreased $56.1
billion, or 0.6 percent. In India, household savings are about 23
percent of their GDP.
Even though the rate of increase has showed some slowing,
uncertainties remain. Foreclosures and bankruptcies are high and could
still beat last year's numbers.
Home foreclosures are at an all-time high and they will increase as
the recession continues. In 2006, there were 1.2 million foreclosures
in the United States, representing an increase of 42 percent over the
prior year. During 2007 through 2008, mortgage foreclosures were
estimated to result in a whopping $400 billion worth of defaults and
$100 billion in losses to investors in mortgage securities. This means
that one per 62 American households is currently approaching levels not
seen since the Depression.
The current economic crisis and the foreclosure blight has affected
new home sales and depressed home value generally. New home sales have
fallen by about 50 percent.
One in six homeowners owes more on a mortgage than the home is worth
raising the possibility of default. Home values have fallen nationwide
from an average of 19% from their peak in 2006 and this price plunge
has wiped out trillions of dollars in home equity. The tide of
foreclosure might become self-perpetuating. The nation could be facing
a housing depression--something far worse than a recession.
Obviously, there are substantial societal and economic costs of home
foreclosures that adversely impact American families, their
neighborhoods, communities and municipalities. A single foreclosure
could impose direct costs on local government agencies totaling more
than $34,000.
Recently, the Congress set aside $100 billion to address the issue of
mortgage foreclosure prevention. I have long championed that money be a
set aside to address this very important issue. I believe in
homeownership and will do all within my power to ensure that Americans
remain in their houses.
Bankruptcy
We have come full circle in our discussion today. The bill before us
today is on bankruptcy and mortgage foreclosures.
I have long championed in the first TARP bill that was introduced and
signed late last Congress, that language be included to specifically
address the issue of mortgage foreclosures. I had asked that $100
billion be set aside to address that issue. Now, my idea has been
vindicated as the TARP that was voted upon this week has included
language that would give $100 billion to address the issue of mortgage
foreclosure. I am continuing to engage in the dialogue with Leadership
to provide monies to those in mortgage foreclosure. I have also asked
for modification of homeowners' existing loans to avoid mortgage
foreclosure.
I believe that the rules governing these loans should be relaxed.
These are indeed tough economic times that require tough measures.
Again, I feel a sense of vindication on this point, because this bill,
H.R. 1106 addresses this point.
Credit Crunch
A record amount of commercial real estate loans coming due in Texas
and nationwide the next three years are at risk of not being renewed or
refinanced, which could have dire consequences, industry leaders warn.
Texas has approximately $27 billion in commercial loans coming up for
refinancing through 2011, ranking among the top five states, based on
data provided by research firms Foresight Analytics LLC and Trepp LLC.
Nationally, Foresight Analytics estimates that $530 billion of
commercial debt will mature through 2011. Dallas-Fort Worth has nearly
$9 billion in commercial debt maturing in that time frame.
Most of Texas' $27 billion in loans maturing through 2011--$18
billion--is held by financial institutions. Texas also has $9 billion
in commercial mortgage-backed securities, the third-largest amount
after California and New York, according to Trepp.
Mr. Chairman, my amendment would have helped alleviate these
problems. Although my amendment language was not included in the bill,
I am confident that it will be included in the Conference language.
All in all, I believe that this bill is important and will do
yeoman's work helping America get back on the right track with respect
to the economy and the mortgage foreclosure crisis. I wholeheartedly
urge my colleagues to support this bill.
Mr. GOODLATTE. Mr. Chairman, I yield myself 3 minutes.
First, I'd like to respond to the gentleman from Vermont who said
that Citigroup endorsed this legislation. Well, I must tell you the
American Banking Association doesn't support this, nor do the community
bankers, the bankers who still have their heads above water all across
my congressional district and many other districts across the country
that are making mortgage loans day in and day out. They don't support
this legislation. But a bank that is receiving already tens of billions
of dollars in government assistance supports it. That should convince
us that this legislation leads us in the right direction?
Then to the gentleman from Georgia, I would point out that the
Congress, a number of years ago, created a special Chapter 12
bankruptcy proceeding for farmers, and that was a temporary change in
the law as well, as this one is. The gentleman is correct; it only
applies to existing mortgages. But that law, created many, many years
ago, still exists because it's been extended and extended, and we are
at risk of having the same thing happen here, particularly when the
mindset is that we should turn to the advice of banks that are failing
to tell us a good way to handle a problem that banks that are
succeeding say it is a bad, bad practice.
And I also want to speak against this amendment. Far from making
bankruptcy a last resort, this gives homeowners two bites at the apple.
Even if they obtain the Obama compliant loan modification from their
lenders, i.e., workouts that meet the terms of President Obama's
mortgage program, they can still go into bankruptcy. Once there, they
can shop for a better deal from the bankruptcy court. Lenders,
meanwhile, have to honor the already-cut voluntary deals all the way
through bankruptcy.
At the end of the case, the homeowner keeps whichever deal is
sweeter. That's not making bankruptcy a last resort. That's
guaranteeing abuse of both voluntary modification and bankruptcy. We're
going to see a run on the bankruptcy courts if this legislation is
adopted.
Meanwhile, what happens to the borrower who rejects an offer meeting
President Obama's terms? Nothing. The bankruptcy court can
theoretically refuse to confirm a borrower's cramdown plan, but under
the terms of the amendment, that will likely happen only when the
lender offered a modification without a voluntary cramdown and the
borrower has no need for bankruptcy relief anyway.
And what about borrowers who are within 30 days of foreclosure sales?
They don't even have to contact their lenders about voluntary
modifications. So none of the amendment modifications do not apply.
The new manager's amendment does nothing to change this exception
that
[[Page H3009]]
swallows the whole bill. As a result, borrowers who may have entered
into mortgages that they shouldn't have in the first place, and
bankruptcy attorneys can game the system by simply waiting until
borrowers are within the 30 days of a foreclosure sale to file for
bankruptcy.
I reserve the balance of my time.
Ms. ZOE LOFGREN of California. Mr. Chairman, I would just note that
the National Association of Community Development Credit Unions has
announced their support of this measure as altered.
I yield 2 minutes to the gentleman from North Carolina (Mr. Miller),
who's worked so hard on this measure, who was the author of the
underlying bill in the last Congress.
Mr. MILLER of North Carolina. Mr. Chairman, this has been a pretty
remarkable debate. We've heard we're now going down a dangerous road,
and we'll begin the modification or altering contracts in court. Mr.
Chairman, that is what bankruptcy does. That is the rule of law. We do
enforce contracts. Except when people get hopelessly in debt, we allow
them to draw a line to pay what they can, and then to get a fresh start
in life. That's what bankruptcy does.
In fact, home mortgages is the only kind of debt that can't be
modified, and it is not because that was brought down on stone tablets
from Mount Sinai. That exception is just a special-interest give which
we see around here all the time. In 1978, the mortgage industry got
that exception as a special-interest provision.
We've heard that this will result in arbitrary modifications. No.
There are more than a million bankruptcy cases a year. We have a pretty
good idea what bankruptcy judges are going to do. They're going to do
the same thing with this kind of interest that they do with every
other, including family farms, and this is exactly like the treatment
of family farms.
We've heard it will help speculators. No. Speculators already can be
helped. Investors already can modify their mortgage in bankruptcy. It
is only people who live in their homes who can't get relief. We've
heard it will help people who bought too much house. No. If you can't
afford a 100-percent mortgage at higher than the prime rate, it doesn't
help you.
The most infuriating argument is that the opposition is really not
about helping the banking industry and the securities industry. It's
all about helping the little people that's going to increase interest
rates on the little people. Mr. Chairman, I have been hearing that the
whole time I have been in Congress. It's never been about helping the
banks get rich, according to the banks. It's always been about helping
the little people. No matter how crooked their business practices may
seem on their face, it's always something they need to do to help the
little people.
Here's a reality. Two years ago, just a couple years ago, 40 percent
of all corporate profits were for the financial services' sector, 40
percent. That's after all of their salaries and their bonuses and their
$50 million corporate jets and their golf tournaments and everything
else.
The Acting CHAIR. The time of the gentleman has expired.
Ms. ZOE LOFGREN of California. Mr. Chairman, I would yield the
gentleman an additional 15 seconds.
Mr. MILLER of North Carolina. This amendment simply gives lenders one
last chance to make a voluntary modification. That is undoubtedly
better for a borrower to get a voluntary modification rather than
having to go through bankruptcy.
I support this amendment.
Mr. GOODLATTE. Mr. Chairman, I yield myself 30 seconds.
First, I say to the gentlewoman from California that the largest
credit union association in the world, Credit Union National
Association, a member-owned collection of credit unions around the
United States, strongly opposes this legislation. When we talk about
the ``little people'' and the organizations that reach out and help
people day-to-day with loans, they know the impact that this will have.
And secondly, to the gentleman from North Carolina, the fact of the
matter is cramdowns were entirely prohibited going back to the 1898
law. So for more than 100 years, when they liberalized in other areas,
they simply continued in this area. It's not true that they have only
prohibited cramdowns since 1978.
Mr. Chairman, I yield 2 minutes to the gentleman from Iowa (Mr.
King).
Mr. KING of Iowa. I thank the gentleman from Virginia for yielding.
Mr. Chairman, this amendment before us allows for actual fraud,
misrepresentation or obtaining a loan or refinancing by false
pretenses. It's specific. We passed an amendment in the Judiciary
Committee that prohibited such things, but the language has been
changed after the fact. The language has been changed now so that it
reads that the court does not find that the debtor has been convicted
of obtaining--by actual fraud--the extension, renewal or refinancing of
credit that gives rise to a modification claim.
In other words, whatever kind of fraud and misrepresentation or false
pretenses might be used, it's not going to be considered by a cramdown
court unless there is an actual conviction. That's a breathtaking
position to take in print here in the United States Congress.
I think this cramdown, when you break the contract, you allow a
judge--a judge perhaps yet to be appointed, a judge with a different
idea on what a contract is--to break that contract, sever it apart, and
readjust the principal and the interest to meet what the judge believes
is convenient to the borrower and give them two bites at the apple and
let them pick whatever is the best deal for them?
I can tell you what happens, Mr. Chairman, and that is this: The
degree of risk must be proportional to the potential for profit. That's
the business equation. Lenders will not loan money unless they have a
prospective profit on the other side of this.
So that means that they're going to ask for more down money, and
they're going to ask for more interest, and there will be fewer people
owning homes, not more. There may be some temporary relief over this
window over the next couple of years, and maybe this economy comes back
around. But the long run is this: We'll have fewer homeowners, not
more. The price for that will end up being more public housing, not
less, to replace the homeowners that aren't able to own their own home.
This is the public housing promotion bill in the end. That's where it
takes us. It was misplaced thinking to pass the Community Reinvestment
Act, it's misplaced thinking not to hold Fannie and Freddie, and it's
misplaced thinking to push this cramdown.
Ms. ZOE LOFGREN of California. Mr. Chairman, may I inquire as to the
time remaining on each side?
The Acting CHAIR. The gentlelady from California has 5\3/4\ minutes,
and the gentleman from Virginia has 4\1/2\ minutes.
Ms. ZOE LOFGREN of California. Mr. Chairman, I yield to the gentleman
from Florida (Mr. Meek) 1 minute.
Mr. MEEK of Florida. Mr. Chairman, I just want to let the Members
know on this great piece of legislation and this amendment that we're
debating now that we have a mortgage fraud task force to be created in
the Department of Justice.
This same language passed this House 350-23 in the last Congress. I
think it's important, with this Nationwide task force, we have a number
of communities and a number of victims of those individuals that have
obtained loans and tried to get even second loans to be able to save
their homes, they find themselves falling to these predators that are
out there now.
This task force will be a voluntary participation between Federal,
State and local law enforcement officials to be able to close down on
these individuals. In my State of Florida, we came in first in 2006,
2007, 2008 of having these mortgage fraud individuals carrying out
their acts against Floridians. I think it's also important that the
increase was 168 percent in Florida. And as we look at making sure that
we protect not only the borrower but also making sure that lenders can
be trusted in this process, that we do have bad apples amongst the
lending community.
I thank you for allowing me this minute.
Mr. GOODLATTE. Mr. Chairman, at this time I am pleased to yield 1\1/
2\ minutes to the gentleman from Georgia (Mr. Price).
Mr. PRICE of Georgia. I thank the gentleman for yielding. I want to
thank him for his leadership on this issue.
[[Page H3010]]
Mr. Chairman, I rise to just point out a couple fallacies on the
arguments on the other side.
I think it's important that everybody appreciate why this law is in
place in the first place, why isn't cramdown allowed in a bankruptcy on
a primary residence. And the reason, Mr. Chairman, as you well know, is
that it's to encourage primary residence ownership. If lenders don't
know what amount of principal they are going to be able to get back on
any loan, then they will not be encouraged to loan men and women across
this Nation money to purchase a primary reason. That's why. It's very
simple.
So what this will do is make it so there will be less money available
for homeowner purchasers, there will be less money available for
individuals to gain their primary residence.
Higher interest rates will certainly occur. The gentleman from
Vermont, I chuckled when he said that Citigroup was supporting this.
Well, as has been said in the past, Mr. Chairman, ``Surprise, surprise,
surprise.'' Citigroup is supporting it because it gets billions of
dollars from the Federal Government. What can it do? In this political
economy, under this leadership and this administration, in this
political economy, politicians are directing who the winners and losers
are, who gets money; and consequently, Citigroup can do nothing but
support what this majority and this administration wants.
It's a political economy. It's not a market economy. We need to
return to a market economy so that the American people can realize
their hopes and dreams and make it so that more individuals are able to
purchase their primary residence without the imposition of the Federal
Government.
{time} 1245
Ms. ZOE LOFGREN of California. Mr. Chairman, I would like to yield 15
seconds to Mr. Marshall.
Mr. MARSHALL. To the gentlemen from Georgia and Virginia, again, this
only applies to existing debt. Even if the bill is extended, its terms
only apply to existing debt now. You would have to change that for it
to apply to future loans.
The argument, if it's valid at all--and there is, frankly,
scholarship to the contrary--but the argument that the price of a home
mortgage has gone up just doesn't hold water.
Ms. ZOE LOFGREN of California. Mr. Chairman, I yield 1 minute to a
member of the committee, Mr. Maffei.
Mr. MAFFEI. I thank the gentlewoman for yielding and for her
leadership on this bill.
I, too, had some hesitation about broadening the bankruptcy judges'
jurisdiction on this. But what I did was I listened to the other side
and I worked with the gentlewoman from California and the distinguished
chairman from Michigan, and we were able to get a lot of changes in
this bill--and particularly in this manager's amendment--that would
make sure that the lender and the borrower would get together, that
there would be a safe haven to protect banks and make sure that they
could, in fact, renegotiate these loans, and to keep anyone from using
this for anything but an absolute last resort. However, as a last
resort, it's a necessary, because if we don't have this, then whatever
the borrower does, they may not have recourse.
In my district, this is not the biggest problem, foreclosures are not
the biggest thing. But yet, even if one family comes to me and says,
we're desperate, we have to declare bankruptcy, and if we had a second
home, it would be covered, if we had a yacht, it would be covered, but
our first home would not be covered, that's a very difficult thing to
explain. So I support the manager's amendment.
Ms. ZOE LOFGREN of California. Let me mention one point that has been
discussed, which is the potential that enacting this legislation would
somehow impact future interest rates for principal mortgages.
I would like to mention that Mark Zandi, who was Senator John
McCain's economic adviser during his campaign for President, said this:
``Given that the total cost of foreclosure to lenders is much greater
than that associated with Chapter 13 bankruptcy, there is no reason to
believe that the cost of mortgage credit across all mortgage loan
products should rise.''
I think that this is a bogus argument. And I think that if we don't
act to provide fairness to this system, we will be letting down our
constituents, and once again, the little guy will lose.
Mr. Chairman, I reserve the balance of my time.
Mr. GOODLATTE. Mr. Chairman, I yield myself 1 minute.
Some of the other issues raised in this manager's amendment that need
to be pointed out are that the amendment provides an alternative to
cramdown of principal, but astoundingly the alternative is free money.
If the judge does not want to give a cramdown, he can just rewrite the
mortgage as a no-interest loan over the full term of a new 30-year
deal. Now, just like there's no such thing as a free lunch, there's no
such thing as free money for banks or credit unions to lend to the
people who come to them.
So while the gentleman--in fact, several have made the point that
this only applies to existing mortgages. The fact of the matter is the
money to pay for the modifications that are made here has got to come
from someplace. And while I remain concerned that all you would have to
do in the future would be to advance the enactment date--everything
else in the law would be the same--so you could continue this policy
and make it permanent, even if you didn't, money from future borrowers
is what's going to be used to fund these changes in current mortgages.
It's wrong.
Ms. ZOE LOFGREN of California. Mr. Chairman, may I inquire as to how
much time remains on each side.
The Acting CHAIR. The gentlelady from California has 3 minutes
remaining and the gentleman from Virginia has 2 minutes remaining.
Ms. ZOE LOFGREN of California. I would like to yield 1 minute to the
gentleman from Georgia (Mr. Marshall) at this point.
Mr. MARSHALL. In reply to my friend from Virginia, in his observation
that, in fact, there are going to be losses and those losses that might
be incurred as a result of foreclosures for less than the amount of the
loan, all the expenses that are involved in attempting a foreclosure,
the expenses associated with maintaining vacant properties--which are
huge, by the way--all of those losses could wind up causing credit to
increase in the future. Obviously, I described those losses the way I
did because, frankly, having a bankruptcy write down is similar to the
other kinds of losses that are associated with a foreclosure setting, a
setting in which there is a distressed property. And in most instances,
the result for the creditor in a bankruptcy process is less expensive
than in other processes available to creditors in circumstances like
these.
Bottom line, if we can limit these vacancies, we limit the falling
home values, which helps the portfolios of most of the lenders that I
know.
Mr. GOODLATTE. Mr. Chairman, I yield myself the remaining time.
Mr. Chairman, the bottom line, in response to the gentleman from
Georgia's argument, is that his case is the strongest one for leaving
the bankruptcy laws the way they are because the incentives already
exist for them to avoid the cost that he described. So somebody who is
struggling right now with their mortgage payments, the incentive exists
for them to work with the financial institution and for the financial
institution to work with them so they don't face the uncertainties that
occur in bankruptcy court.
So, the bottom line is that what this is going to do is it's going to
pass along to future people who want to buy homes, whether the law is
extended in the future or not, the cost that will be borne by credit
unions and community banks and others who are making these mortgages
today--they have to cover costs that are unanticipated when they made
the mortgages--they're going to have to pass them along in the future.
To the extent that they can voluntarily work that out with the existing
homeowner, that is the best solution. But that occurs right now and
that incentive exists right now under the law. To change the law in the
manner that's provided for here, even with the changes in this
amendment, simply does not work. And it does not give the assurance to
those who said that there needs to be a second chance, a second
opportunity to negotiate between the lender and the homeowner
voluntarily
[[Page H3011]]
because, as I pointed out earlier, any clever bankruptcy attorney will
advise his client to simply wait until they're within 30 days of
foreclosure, then they don't have to engage in that, they can go
straight to the bankruptcy court, bypass exactly what he was calling
for happening, and go to the court and see what they can accomplish
there under this very, very harmful law from the standpoint of the
health of currently healthy banking institutions.
So I urge my colleagues to oppose this amendment and to oppose the
underlying bill. This is not the way to keep a healthy system by
allowing people to continue to borrow and buy homes.
Ms. ZOE LOFGREN of California. Mr. Chairman, I yield 30 seconds to
the gentleman from Georgia, who, I would like to point out, was
actually, in his prior life before Congress, an expert in this area of
the law.
Mr. MARSHALL. Again, to my friend from Virginia, the bankruptcy
process is set up so that the creditor receives, essentially in fair
value, the treatment that the creditor otherwise would have received.
And the reality is, in most instances--almost all instances--debtors
who default on their mortgages have already got huge problems with
other creditors and other debt, and lenders typically know that it's
just throwing good money after bad to spend an awful lot of time on
workouts. And that's why we've seen the programs that we've put in
place thus far in an attempt to stem the foreclosures and the vacancies
that are hurting all of us, those programs aren't working, and it's in
large part because these debtors need relief from bankruptcy. Outside
bankruptcy, for the most part it is just not going to work.
Ms. ZOE LOFGREN of California. Mr. Chairman, I yield myself the
remaining time.
Nearly six million households are facing the possibility of
foreclosure in our country. And as a result, responsible families who
did everything right, who have a traditional mortgage, are facing
foreclosure or their neighborhoods are struggling. It's estimated that
each foreclosed home reduces the price of the surrounding property--
people who did nothing wrong--by 9 percent, or sometimes more. That's
when the meth dealers move that is the ``sometimes more.''
This bill takes a number of steps. We've talked about bankruptcy, but
that's just a small part of it. It provides a safe harbor for servicers
to modify loans. It increases the FDIC insured rate for banks. It makes
improvements to the HOPE for Homeowners Program. But it also narrowly
affects the exemption for primary residences under Chapter 13.
As has been pointed out, speculators can go into Chapter 13 and get
complete relief; it's only the individual homeowner who is not able to
get that relief. That's just not fair. There's no way you can possibly
defend how that is fair, that the big guys and the speculators get
their way, but the individual struggling homeowner does not.
We have worked very hard in these last few weeks to narrow this
provision, to listen to every objection that was honestly made, that
was credible, and to accommodate it. This amendment is a consensus
measure that makes the bill better. I urge its passage.
Mr. CONYERS. Mr. Chair, Title I of H.R. 1106, the Helping Families
Save Their Homes Act of 2009, is based in part on H.R. 200, legislation
approved by the Judiciary Committee last month to give families whose
home mortgage is in distress a better opportunity to come to terms with
their lender on workable payment terms--more realistically based on
current market interest rates and current home market values.
Because the provisions in title I of this bill differ in a number of
respects from H.R. 200 as reported, and differ further with the
adoption of the manager's amendment, I am inserting in the Record a
section-by-section analysis of this bill, as a further supplement to
the legislative history in the floor debate today and last week, and in
the hearings and committee report for H.R. 200.
H.R. 1106, the ``Helping Families Save Their Homes Act of 2009,''
Section-by-Section Explanation (as Amended by the Revised Manager's
Amendment)
Section 1. Short Title; Table of Contents. Subsection (a)
sets forth the short title of this Act as the ``Helping
Families Save Their Homes Act of 2009.'' Subsection (b)
consists of the table of contents.
Title I--Prevention of Mortgage Foreclosures
Subtitle A--Modification of residential mortgages
Section 100. Bankruptcy Code section 101 defines various
terms. Section 100 amends this provision to add a definition
of ``qualified loan modification,'' which is defined as a
loan modification agreement made in accordance with the
guidelines of the Obama Administration's Homeowner
Affordability and Stability Plan, as implemented on March 4,
2009 with respect to a loan secured by a senior security
interest in the debtor's principal residence. To qualify as
such, the agreement must reduce the debtor's mortgage payment
(including principal and interest) and payments for various
other specified expenses (i.e., real estate taxes, hazard
insurance, mortgage insurance premium, homeowners'
association dues, ground rent, and special assessments) to a
percentage of the debtor's income in accordance with such
guidelines. The payment may not include any period of
negative amortization and it must fully amortize the
outstanding mortgage principal. In addition, the agreement
must not require the debtor to pay any fees or charges to
obtain the modification. And, the agreement must permit the
debtor to continue to make these payments notwithstanding the
debtor having filed a bankruptcy case as if he or she had not
filed for such relief.
Section 101. Eligibility for Relief. Bankruptcy Code
section 109(e) sets forth secured and unsecured debt limits
to establish a debtor's eligibility for relief under chapter
13. Section 101 of the Act amends this provision to provide
that the computation of debts does not include the secured or
unsecured portions of debts secured by the debtor's principal
residence, under certain circumstances. The exception applies
if the value of the debtor's principal residence as of the
date of the order for relief under chapter 13 is less than
the applicable maximum amount of the secured debt limit
specified in section 109(e). Alternatively, the exception
applies if the debtor's principal residence was sold in
foreclosure or the debtor surrendered such residence to the
creditor and the value of such residence as of the date of
the order for relief under chapter 13 is less than the
secured debt limit specified in section 109(e). This
amendment is not intended to create personal liability on a
debt if there would not otherwise be personal liability on
such debt.
In addition, section 101 amends Bankruptcy Code section
109(h) to waive the mandatory requirement that a debtor
receive credit counseling prior to filing for bankruptcy
relief, under certain circumstances. The waiver applies in a
chapter 13 case where the debtor submits to the court a
certification that the debtor has received notice that the
holder of a claim secured by the debtor's principal residence
may commence (or has commenced) a foreclosure proceeding
against such residence.
Section 102. Prohibiting Claims Arising from Violations of
the Truth in Lending Act. Under the Truth in Lending Act, a
mortgagor has a right of rescission with respect to a
mortgage secured by his or her residence, under certain
circumstances. Bankruptcy Code section 502(b) enumerates
various claims of creditors that are not entitled to payment
in a bankruptcy case, subject to certain exceptions. Section
102 amends Bankruptcy Code section 502(b) to provide that a
claim for a loan secured by a security interest in the
debtor's principal residence is not entitled to payment in a
bankruptcy case to the extent that such claim is subject to a
remedy for rescission under the Truth in Lending Act,
notwithstanding the prior entry of a foreclosure judgment. In
addition, section 102 specifies that nothing in this
provision may be construed to modify, impair, or supersede
any other right of the debtor.
Section 103. Authority to Modify Certain Mortgages. Under
Bankruptcy Code section 1322(b)(2), a chapter 13 plan may not
modify the terms of a mortgage secured solely by real
property that is the debtor's principal residence. Section
103 amends Bankruptcy Code section 1322(b) to create a
limited exception to this prohibition. The exception only
applies to a mortgage that: (1) originated before the
effective date of this provision; and (2) is the subject of a
notice that a foreclosure may be (or has been) commenced with
respect to such mortgage.
In addition, the debtor must certify pursuant to new
section 1322(h) that he or she contacted--not less than 30
days before filing for bankruptcy relief--the mortgagee (or
the entity collecting payments on behalf of such mortgagee)
regarding modification of the mortgage. The debtor must also
certify that he or she provided the mortgagee (or the entity
collecting payments on behalf of such mortgagee) a written
statement of the debtor's current income, expenses, and debt
in a format that substantially conforms with the schedules
required under Bankruptcy Code section 521 or with such other
form as promulgated by the Judicial Conference of the United
States. Further, the certification must include a statement
that the debtor considered any qualified loan modification
offered to the debtor by the mortgagee (or the entity
collecting payments on behalf of such holder). This
requirement does not apply if the foreclosure sale is
scheduled to occur within 30 days of the date on which the
debtor files for bankruptcy relief. If the chapter 13 case is
pending at the time new section 1322(h) becomes effective,
then the
[[Page H3012]]
debtor must certify that he or she attempted to contact the
mortgagee (or the entity collecting payments on behalf of
such mortgagee) regarding modification of the mortgage before
either: (1) filing a plan under Bankruptcy Code section 1321
that contains a modification pursuant to new section
1322(b)(11); or (2) modifying a plan under Bankruptcy Code
section 1323 or section 1329 to contain a modification
pursuant to new section 1322(b)(11).
Under new section 1322(b)(11), the debtor may propose a
plan modifying the rights of the mortgagee (and the rights of
the holder of any claim secured by a subordinate security
interest in such residence) in several respects. It is
important to note that the intent of new section
1322(b)(11) is permissive. Accordingly, a chapter 13 may
propose a plan that proposes any or all types of
modification authorized under section 1322(b)(11).
First, the plan may provide for payment of the amount of
the allowed secured claim as determined under section
506(a)(1). In making such determination, the court, pursuant
to new section 1322(i), must use the fair market value of the
property as of when the value is determined. If the issue of
value is contested, the court must determine such value in
accordance with the appraisal rules used by the Federal
Housing Administration.
Second, the plan may prohibit, reduce, or delay any
adjustable interest rate applicable on and after the date of
the filing of the plan.
Third, it may extend the repayment period of the mortgage
for a period that is not longer than the longer of 40 years
(reduced by the period for which the mortgage has been
outstanding) or the remaining term of the mortgage beginning
on the date of the order for relief under chapter 13.
Fourth, the plan may provide for the payment of interest at
a fixed annual rate equal to the currently applicable average
prime offer rate as of the date of the order for relief under
chapter 13, as determined pursuant to certain specified
criteria. The rate must correspond to the repayment term
determined under new section 1322(b)(11)(C)(i) as published
by the Federal Financial Institutions Examination Council in
its table entitled, ``Average Prime Offer Rates--Fixed.'' In
addition, the rate must include a reasonable premium for
risk.
Fifth, the plan, pursuant to new section 1322(b)(11)(D),
may provide for payments of such modified mortgage directly
to the holder of the claim or, at the discretion of the
court, through the chapter 13 trustee during the term of the
plan. The reference in new section 1322(b)(11)(D) to ``holder
of the claim'' is intended to include a servicer of such
mortgage for such holder. It is anticipated that the court,
in exercising its discretion with respect to allowing the
debtor to make payments directly to the mortgagee or by
requiring payments to be made through the chapter 13 trustee,
will take into consideration the debtor's ability to pay the
trustee's fees on payments disbursed through the trustee.
New section 1322(g) provides that a claim may be reduced
under new section 1322(b)(11)(A) only on the condition that
the debtor agrees to pay the mortgagee a stated portion of
the net proceeds of sale should the home be sold before the
completion of all payments under the chapter 13 plan or
before the debtor receives a discharge under section 1328(b).
The debtor must pay these proceeds to the mortgagee within 15
days of when the debtor receives the net sales proceeds. If
the residence is sold in the first year following the
effective date of the chapter 13 plan, the mortgagee is to
receive 90 percent of the difference between the sales price
and the amount of the claim as originally determined under
section 1322(b)(11) (plus costs of sale and improvements),
but not to exceed the unpaid amount of the allowed secured
claim determined as if such claim had not been reduced under
new section 1322(b)(11)(A). If the residence is sold in
the second year following the effective date of the
chapter 13 plan, then the applicable percentage is 70
percent. If the residence is sold in the third year
following the effective date of the chapter 13 plan, then
the applicable percentage is 50 percent. If the residence
is sold in the fourth year following the effective date of
the chapter 13 plan, then the applicable percentage is 30
percent. If the residence is sold in the fifth year
following the effective date of the chapter 13 plan, then
the applicable percentage is ten percent. It is the intent
of this provision that if the unsecured portion of the
mortgagee's claim is partially paid under this provision
it should be reconsidered under 502(j) and reduced
accordingly.
Section 104. Combating Excessive Fees. Section 104 amends
Bankruptcy Code section 1322(c) to provide that the debtor,
the debtor's property, and property of the bankruptcy estate
are not liable for a fee, cost, or charge that is incurred
while the chapter 13 case is pending and that arises from a
claim for debt secured by the debtor's principal residence,
unless the holder of the claim complies with certain
requirements. It is the intent of this provision that its
reference to a fee, cost, or charge includes an increase in
any applicable rate of interest for such claim. It also
applies to a change in escrow account payments.
To ensure such fee, cost, or charge is allowed, the
claimant must comply with certain requirements. First, the
claimant must file with the court and serve on the chapter 13
trustee, the debtor, and the debtor's attorney an annual
notice of such fee, cost, or charge (or on a more frequent
basis as the court determines) before the earlier of one year
of when such fee, cost, or charge was incurred or 60 days
before the case is closed.
Second, the fee, cost, or charge must be lawful under
applicable nonbankruptcy law, reasonable, and provided for in
the applicable security agreement.
Third, the value of the debtor's principal residence must
be greater than the amount of such claim, including such fee,
cost or charge.
If the holder fails to give the required notice, such
failure is deemed to be a waiver of any claim for such fees,
costs, or charges for all purposes. Any attempt to collect
such fees, costs, or charges constitutes a violation of the
Bankruptcy Code's discharge injunction under section
524(a)(2) and the automatic stay under section 362(a),
whichever is applicable.
Section 104 further provides that a chapter 13 plan may
waive any prepayment penalty on a claim secured by the
debtor's principal residence.
Section 105. Confirmation of Plan. Bankruptcy Code section
1325 sets forth the criteria for confirmation of a chapter 13
plan. Section 105 amends section 1325(a)(5) (which specifies
the mandatory treatment that an allowed secured claim
provided for under the plan must receive) to provide an
exception for a claim modified under new section 1322(b)(11).
The amendment also clarifies that payments under a plan that
includes a modification of a claim under new section
1322(b)(11) must be in equal monthly amounts pursuant to
section 1325(a)(5)(B)(iii)(I).
In addition, section 105 specifies certain protections for
a creditor whose rights are modified under new section
1322(b)(11). As a condition of confirmation, new section
1325(a)(10) requires a plan to provide that the creditor must
retain its lien until the later of when: (1) the holder's
allowed secured claim (as modified) is paid; (2) the debtor
completes all payments under the chapter 13 plan; or (3) if
applicable, the debtor receives a discharge under section
1328(b).
Section 105 also provides standards for confirming a
chapter 13 plan that modifies a claim pursuant to new section
1322(b)(11). First, the debtor cannot have been convicted of
obtaining by actual fraud the extension, renewal, or
refinancing of credit that gives rise to such modified claim.
Second, the modification must be in good faith. Lack of good
faith exists if the debtor has no need for relief under this
provision because the debtor can pay all of his or her debts
and any future payment increases on such debts without
difficulty for the foreseeable future, including the positive
amortization of mortgage debt. In determining whether a
modification under section 1322(b)(11) that reduces the
principal amount of the loan is made in good faith, the court
must consider whether the holder of the claim (or the entity
collecting payments on behalf of such holder) has offered the
debtor a qualified loan modification that would enable the
debtor to pay such debts and such loan without reducing the
principal amount of the mortgage.
Section 105 further amends section 1325 to add a new
provision. New section 1325(d) authorizes the court, on
request of the debtor or the mortgage holder, to confirm a
plan proposing to reduce the interest rate lower than that
specified in new section 1322(b)(11)(C)(ii), provided: (1)
the modification does not reduce the mortgage principal; (2)
the total mortgage payment is reduced through interest rate
reduction to the percentage of the debtor's income that is
the standard for a modification in accordance with the Obama
Administration's Homeowner Affordability and Stability Plan,
as implemented on March 4, 2009; (3) the court determines
that the debtor can afford such modification in light of the
debtor's financial situation, after allowance of expense
amounts that would be permitted for a debtor subject to
section 1325(b)(3), regardless of whether the debtor is
otherwise subject to such paragraph, and taking into account
additional debts and fees that are to be paid in chapter 13
and thereafter; and (4) the debtor is able to prevent
foreclosure and pay a fully amortizing 30-year loan at such
reduced interest rate without such reduction in principal. If
the mortgage holder accepts a debtor's proposed modification
under this provision, the plan's treatment is deemed to
satisfy the requirements of section 1325(a)(5)(A) and the
proposal should not be rejected by the court.
Section 106. Discharge. Bankruptcy Code section 1328 sets
forth the requirements by which a chapter 13 debtor may
obtain a discharge and the scope of such discharge. Section
106 amends section 1328(a) to clarify that the unpaid portion
of an allowed secured claim modified under new section
1322(b)(11) is not discharged. This provision is not intended
to create a claim for a deficiency where such a claim would
not otherwise exist.
Section 107. Standing Trustee Fees. Section 108(a) amends 28 U.S.C.
Sec. 586(e)(1)(B)(i) to provide that a chapter 13 trustee may receive a
commission set by the Attorney General of no more than four percent on
payments made under a chapter 13 plan and disbursed by the chapter 13
trustee to a creditor whose claim was modified under Bankruptcy Code
section 1322(b)(11), unless the bankruptcy court waives such fees based
on a determination that the debtor has income less
[[Page H3013]]
than 150 percent of the official poverty line applicable to the size of
the debtor's family and payment of such fees would render the debtor's
plan infeasible.
With respect to districts not under the United States trustee system,
section 108(b) makes a conforming revision to section 302(d)(3) of the
Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy
Act of 1986.
Section 108. Effective Date; Application of Amendments. Section
108(a) provides that this measure and the amendments made by it, except
as provided in subsection (b), take effect on the Act's date of
enactment.
Section 108(b)(1) provides, except as provided in paragraph (2), that
the amendments made by this measure apply to cases commenced under
title 11 of the United States Code before, on, or after the Act's date
of enactment.
Section 108(b)(2) specifies that paragraph (1) does not apply with
respect to cases that are closed under the Bankruptcy Code as of the
date of the enactment of this Act.
Section 109. GAO Study. Section 109 requires the Government
Accountability Office to complete a study and to submit a report to the
House and Senate Judiciary Committees within two years from the
enactment of this Act a report. The report must contain the results of
the study of: (1) the number of debtors who filed cases under chapter
13, during the one-year period beginning on the date of the enactment
of this Act for the purpose of restructuring their principal residence
mortgages; (2) the number of mortgages restructured under this Act that
subsequently resulted in default and foreclosure; (3) a comparison
between the effectiveness of mortgages restructured under programs
outside of bankruptcy, such as Hope Now and Hope for Homeowners, and
mortgages restructured under this Act; (4) the number of appeals in
cases where mortgages were restructured under this Act; (5) the number
of such appeals where the bankruptcy court's decision was overturned;
and (6) the number of bankruptcy judges disciplined as a result of
actions taken to restructure mortgages under this Act. In addition, the
report must include a recommendation as to whether such amendments
should be amended to include a sunset clause.
Section 110. Report to Congress. Not later than 18 months after the
date of enactment of this Act, the Government Accountability Office, in
consultation with the Federal Housing Administration, must submit to
Congress a report containing: (1) a comprehensive review of the effects
of the Act's amendments on bankruptcy courts; (2) a survey of whether
the types of homeowners eligible for the program should be limited; and
(3) a recommendation on whether such amendments should remain in
effect.
Title III--Mortgage Fraud
Section 301. Short Title. Section 301 sets forth the short
title of title III as the Nationwide Mortgage Fraud Task
Force Act of 2009.
Section 302. Nationwide Mortgage Fraud Task Force.
Subsection (a) establishes a nationwide mortgage fraud task
force within the Justice Department to address mortgage fraud
in the United States. Subsection (b) mandates that the
Attorney General must provide the task force with appropriate
staff, administrative support, and other resources necessary
so that the task force can carry out its duties. Subsection
(c) requires the Attorney General to appoint one staff member
to be the executive director of the task force who, in turn,
will ensure that the task force carries out its duties.
Subsection (d) requires the task force to establish, oversee,
and direct branches in each of the ten states determined by
the Attorney General to have the highest concentration of
mortgage fraud. Subsection (e) requires the task force to
coordinate with federal, state and local law enforcement to
establish mortgage fraud initiatives; provide training; and
collect and disseminate data. Subsection (f), among other
matters, authorizes the task force to establish a toll-free
hotline for reporting mortgage fraud; provide the public with
access to information and resources with respect to mortgage
fraud; establish a data base; and make legislative proposals.
Subsection (g), for purposes of this provision, defines
mortgage fraud as a material misstatement, misrepresentation
or omission relating to the property or potential mortgage
relied on by an underwriter or lender to fund, purchase, or
insure a loan.
Title IV--Foreclosure Moratorium Provisions
Section 401. Sense of the Congress on Foreclosures.
Subsection (a) expresses a sense of the Congress that
mortgage holders, institutions, and mortgage servicers should
not initiate a foreclosure proceeding or sale until the
foreclosure mitigation provisions, such as Hope for
Homeowners Program and the President's Homeowner
Affordability and Stability Plan, have been implemented and
determined to be operational by the Secretary of the Treasury
and the Secretary of Housing and Urban Development.
Subsection (b) states that the foreclosure moratorium should
apply only for first mortgages secured by the owner's
principal dwelling. Subsection (c) provides that if a
mortgage holder, institution, or mortgage servicer (to which
subsection (a) applies) reaches a loan modification agreement
with a homeowner under the auspices of the Federal Housing
Administration before any plan referred to in such subsection
takes effect, subsection (a) shall cease to apply to such
institution as of the effective date of the loan modification
agreement. Subsection (d) states that any homeowner for whose
benefit any foreclosure proceeding or sale is barred under
subsection (a) from being instituted, continued or
consummated with respect to any homeowner mortgage should not
destroy, damage, or impair such property, allow it to
deteriorate, or commit waste on the property. Subsection (e)
provides that any homeowner for whose benefit any foreclosure
proceeding is barred under subsection (a) from being
instituted, continued, or consummated with respect to any
homeowner mortgage should respond to reasonable inquiries
from a creditor or servicer during the period during which
such foreclosure proceeding or sale is barred.
Mrs. MALONEY. Mr. Chair, I rise today in strong support of H.R. 1106,
the ``Helping Families Save Their Homes Act.'' This legislation is
needed now more than ever, and I want to commend Chairman Frank,
Chairman Conyers, and the Leadership for working together to bring this
bill to the Floor.
It is important to remember that behind the economic and housing
statistics are real people--the hard-working Americans and their
families who are facing difficulties paying their bills every day. H.R.
1106 contains several key provisions to ensure that homeowners will
have more options available to them to stay in their homes.
The bill before us would make necessary improvements to the Hope for
Homeowners program including reducing current fees that have
discouraged lenders from voluntarily participating and offering a
$1,000 incentive payment to servicers for each successful refinance of
existing loans. H.R. 1106 will ensure that predatory lenders, who bear
some of the responsibility for today's housing situation, will not be
approved as lenders under FHA programs. The legislation also provides a
safe harbor from liability to mortgage servicers who engage in certain
loan modifications, and it makes permanent an increase, from $100,000
to $250,000, in the amount of bank or credit union deposits insured by
Federal banks and credit union regulators. H.R. 1106 establishes a 5-
year restoration plan for the National Credit Union Administration
(NCUA) which is currently required to restore the equity ratio of the
Share Insurance Fund within one year.
I think most of us agree that bankruptcy should be the option of last
resort. However, for those homeowners facing bankruptcy, H.R. 1106 will
allow bankruptcy judges to reduce the principal, extend the repayment
period, or authorize the reduction of an exorbitant interest rate to a
level that helps make a mortgage more affordable. I am glad that we
have been able to make changes to this legislation that will enable
homeowners to stay in their homes, while at the same time providing
greater certainty to lenders and to the secondary market.
I am hopeful that this bill will help to stem the tide of
foreclosures and ensure that our neighborhoods do not experience a
cascade of increased vacant lots and decreased property values.
The President has proposed a plan to help make it easier for
homeowners, including those who are still in repayment but at risk for
default, to refinance their mortgages at around the current market
rate, or modify their loans. H.R. 1106 is an important step in moving
forward with that plan. We must act now. The American people deserve no
less than our full commitment to helping them through these troubled
times.
I urge my colleagues to support this legislation.
Ms. ZOE LOFGREN of California. Mr. Chairman, I yield back the balance
of my time.
The Acting CHAIR. The question is on the amendment, as modified,
offered by the gentlewoman from California (Ms. Zoe Lofgren).
The question was taken; and the Acting Chair announced that the ayes
appeared to have it.
Mr. GOODLATTE. Mr. Chairman, I demand a recorded vote.
The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentlewoman from California
will be postponed.
[[Page H3014]]
Amendment No. 2 Offered by Mr. Price of Georgia
The Acting CHAIR. It is now in order to consider amendment No. 2
printed in House Report 111-21.
Mr. PRICE of Georgia. Mr. Chairman, I have an amendment made in order
by the rule.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 2 offered by Mr. Price of Georgia:
Beginning on page 7, strike line 5 and all that follows
through line 16 on page 8, insert the following (and make
such technical and conforming changes as may be appropriate):
days after receiving such proceeds, if such residence is sold
after the effective date of the plan, the amount of the
difference between the sales price and the amount of such
claim as originally determined under subsection (b)(11) (plus
costs of sale and improvements), but not to exceed the unpaid
amount of the allowed secured claim determined as if such
claim had not been reduced under such subsection.
The Acting CHAIR. Pursuant to House Resolution 190, the gentleman
from Georgia (Mr. Price) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentleman from Georgia.
Mr. PRICE of Georgia. Mr. Chairman, at a time when the government is
going to unprecedented lengths to stabilize the banking system, this
legislation is short-sighted, untimely, unfair, and counterproductive.
Now, while some might see cramdown as a quick fix, in reality the
legislation will have a costly impact on generations to come. Ranking
Member Smith of the Judiciary Committee sent a thoughtful letter to the
administration raising concerns about the bill, saying that it would
lead to, one, significant taxpayer liability for Federal mortgage
guarantees by redistributing wealth from responsible taxpayers to
irresponsible borrowers and lenders; two, the hoarding by banks of
hundreds of billions of dollars in capital, undermining the efforts
that have been undertaken by the government since September to
stabilize the financial market; and three, additional constriction in
the home lending market. This bill punishes those who have lived within
their means and acted prudently by forcing them to subsidize those who
made irresponsible choices.
One of the many problems with this bill is that it doesn't have any
safeguards to prevent the very people who profited from risky behavior
and irresponsible choices from further benefiting at taxpayer expense.
The text of the underlying legislation will allow for a partial payback
of the cramdown amount if the house is sold within 4 years of the
modification. The manager's amendment barely changes the language
already in the bill by extending by 1 year and 10 percent the possible
partial recapture.
If a mortgagee sells his or her home 6 years after going through a
cramdown at a profit, he or she can pocket all of the difference. Mr.
Chairman, no one should be able to profit off of a bankruptcy
proceeding. Bankruptcy should not be an opportunity to game the system.
Hence my amendment.
The amendment would prevent this from happening by simply saying that
if a homeowner who has had a mortgage modified in a bankruptcy
proceeding sells the home at a profit, the lender--the individuals
originally at risk for the money--may recapture the amount of principal
lost in the modification or cramdown.
By putting lenders in a position of hedging against cramdown losses,
this legislation will raise interest rates for the very individual
whose tax dollars are paying all of these government bailouts. Some
suggest that the cramdown may raise interest rates as much as 2
percentage points. The 92 percent of homeowners who are working to pay
off their mortgages should not be forced to subsidize the mistakes of
irresponsible borrowing or lending. By restoring the lender the money
that is owed them, we will mitigate the amount to which the industry
will need to raise interest rates on responsible homeowners.
This bill is yet another ``Joe the plumber'' moment here in this
Congress, providing for the redistribution of wealth from responsible,
accountable taxpayers to borrowers and lenders who will not be held
accountable.
{time} 1300
President Obama has spoken repeatedly of the importance of fairness
and personal responsibility. This amendment is an important step in
that direction.
I urge my colleagues to adopt the amendment, a responsible and simple
amendment, and reserve the balance of my time.
Ms. ZOE LOFGREN of California. Mr. Chairman, I must oppose this
amendment, and I yield myself such time as I may consume.
The issue it addresses is already addressed in the bill and, again,
in the manager's amendment. This would take the issue another step
further, and I will say it's a step too far.
This would have the effect of making it practically impossible for a
family to move to pursue another job. Families would not only keep
their homes, they would be trapped there.
The bill also leaves no room for a homeowner to reap a windfall,
either calculated or happenstance, so this amendment is unrequired.
I would note that the Price amendment would turn homeowners really
into renters for life. It would remove any incentive for a homeowner
who needed to sell a house to seek top value in the sale of that house
or even to keep up appearances on that house.
It's a mistake, and it's not what the American Dream is all about.
I reserve the balance of my time.
Mr. PRICE of Georgia. May I inquire as to the time remaining?
The Acting CHAIR. The gentleman from Georgia has 2 minutes and the
gentlelady from California has 4 minutes.
Mr. PRICE of Georgia. I am pleased to yield to my friend from
Virginia (Mr. Goodlatte) 1 minute.
Mr. GOODLATTE. I thank the gentleman for yielding me the time, and I
am pleased to support his amendment, which addresses a serious problem
that's in the underlying bill that is not corrected by the manager's
amendment, and that is that the cramdown bill will reduce the incentive
for many solvent borrowers to keep making payments on their mortgages.
While there are 3 million borrowers who are 60 days or more
delinquent on their mortgages, 52 million borrowers remain current in
their payments. The cramdown bill gives struggling, but still solvent,
borrowers a powerful incentive to stop paying off their mortgages,
trigger foreclosure notices and go into bankruptcy to cramdown their
mortgage principal and restructure or eliminate all of their other
debts.
We will have an outright catastrophe on our hands if most borrowers
get the idea that they can successfully game the bankruptcy system in
this way. The gentleman's amendment would correct this problem and make
sure that we don't have a run on the bankruptcy courts of great
magnitude by creating what is currently in the bill now, an incentive
to file bankruptcy if the value of your mortgage is greater than the
value of your home.
The Four Worst Things About the Mortgage Cramdown Bill (H.R. 200)
No. 1: Back to the Financial Meltdown--The cramdown bill
seriously threatens to send us through a time warp straight
back to the September financial meltdown. Write-downs of
mortgages in bankruptcy will inexorably force downgrades of
mortgage-backed securities based on those mortgages. The
downgrades will in turn force banks and insurance companies
on the hook for the securities to boost their capital
reserves. (For example, if a AAA-rated security is downgraded
to a BB rating, a bank or insurance company will have to hold
10-times the capital reserves.) The resulting hoarding of
capital could total hundreds of billions of dollars, freeze
lending, kill many already wounded banks, and send us
straight back to the brink we faced in September 2008. This
could precipitate another bank bailout to the tune of
hundreds of billions of dollars, and it will undermine
everything we yet have done to stem the financial crisis.
No. 2: Moral Hazard--The cramdown bill will reduce the
incentive for many solvent borrowers to keep making payments
on their mortgages. While 3 million borrowers are 60 days or
more delinquent on their mortgages, 52 million borrowers
remain current in their payments. The cramdown bill gives
struggling but still solvent borrowers a powerful incentive
to stop paying off their mortgages, trigger foreclosure
notices, and go into bankruptcy to cram down their mortgage
principal and restructure or eliminate all of their other
debts. We will have an outright catastrophe on our hands if
most borrowers get the idea that they can successfully game
the bankruptcy system in this way.
[[Page H3015]]
No. 3: Higher Interest Rates and Down Payment
Requirements--Including for the Innocent and the Risky
Borrowers Most in Need--The cramdown bill is not the last
step. It is the key step in the Democratic Congress' walk-up
to its long-sought repeal of the primary residence mortgage
exception from the Bankruptcy Code. Once the primary
residence exception is gone, lenders' greatly increased risk
will surely lead to higher interest rates, higher down
payment requirements, and other, tighter terms of principal
residence mortgages. This will especially hurt already risky,
lower-income borrowers, anyone who needs to refinance out of
a challenging mortgage, and everyone who responsibly waited
on the home-buying sidelines until the housing bubble burst.
In fact, once the first, very big step is taken through the
cramdown bill, lenders would be foolish not to begin pricing
in their likely increased risk right away. So what's the
result of the cramdown bill? Nothing more than swapping the
victims.
No. 4: We Still Have Better Options We Can Try--Backers of
the cramdown bill say we've tried everything else to stem the
foreclosure crisis, and nothing else has worked. That's
nonsense. The most recent voluntary programs are working
better, and top-flight academics have proposed a terrific
solution to get at the mortgages we still haven't been able
to reach--mortgages served by third-party servicers that
don't own the loans. These servicers lack sufficient
incentive to seek loan modifications rather than to
foreclose. What is more, if they do modify loans, they can be
sued by mortgage-backed securities investors. Still on the
table is a proposal to fix this problem by giving third-party
servicers a small, per-loan incentive out of TARP funds, and
cutting off litigation risk by overriding problem contract
clauses and affording a litigation safe-harbor. This proposal
appears to be the best possible solution for the critical
mass of the remaining problem loans. It will cost little more
than $10 billion in TARP funds. Why on earth would we risk
the parade of horribles and hundreds of billions of dollars
of downside risk threatened by the cramdown bill, when we
still haven't tried other, better options.
Ms. ZOE LOFGREN of California. I would yield to the gentleman from
Georgia (Mr. Marshall) 1 minute.
Mr. MARSHALL. Mr. Chairman, in response to the motion, I understand
that the gentleman from Georgia is opposed to the bill. In effect, the
gentleman's amendment, proposed amendment, would simply gut the bill.
People would not take advantage of this relief.
I am not somebody who is interested in taking taxpayer dollars and
injecting the taxpayer dollars into a bad deal, either to help out the
lender or help out the borrower. I am somebody who is interested, for
the sake of our lenders, and all of our homeowners, in seeing the
number of vacancies diminish, not increase, in finding some sort of
bottom to home values. Now, this bill does that.
It also, and I was largely the author of this, it also provides that
there is a claw-back provision where equity is concerned. The borrower
has incentives to take care of the property to improve the property
because, gradually, the borrower acquires equity in the property. But
initially the borrower does not have equity in the property following
cramdown.
What this bill provides is that if a borrower defaults hard on the
heels of cramdown, 100 percent of the value, upside value, goes to the
lender.
The Acting CHAIR. The time of the gentleman has expired.
Ms. ZOE LOFGREN of California. I would yield the gentleman an
additional 15 seconds.
Mr. MARSHALL. One hundred percent of the upside goes to the lender,
and then gradually the borrower, by performing appropriately, obtains
equity in the property.
It's a reasonable balance here. The balance could have been struck
some other way. In effect, the lender continues to have an interest and
the balance is appropriate--does not go so far as the gentleman's
suggestion goes, because the gentleman's suggestion would essentially
kill the bill and continue these vacancies that are hurting all of us.
Mr. PRICE of Georgia. I will continue to reserve.
Ms. ZOE LOFGREN of California. I believe I have the right to close,
do I not? Does the gentleman have additional speakers?
Mr. PRICE of Georgia. I don't; do you?
Ms. ZOE LOFGREN of California. No, we don't.
Mr. PRICE of Georgia. Mr. Chairman, this is a very simple amendment.
What it says is that if a bank loans an individual $150,000 to purchase
a home, and that is subject to a bankruptcy provision and a cramdown,
and a judge says that principal will only be $100,000, and that
individual who owns the home then sells it at a future date, more than
5 years, for somewhere between $100,000 and $150,000, then that amount
of money goes to the lender, the individuals that were individually at
risk for the money, loaned the money. If it was over $150,000, then the
old homeowner is able to pocket that profit appropriately.
It's a very simple provision. It's a provision, an amendment of
fairness, of simplicity. It doesn't gut the bill. In fact, what it does
is actually makes the system fair and responsible and rewards
responsible activity.
I urge my colleagues to support a commonsense, responsible amendment
and yield back the balance of my time.
Ms. ZOE LOFGREN of California. Mr. Chairman, this amendment would
enrich lenders and really gut the bill, damage communities and damage
home values. In the bill there is a responsible provision for lenders
who have had their mortgages adjusted in chapter 13 to recover on a
graduated basis, should property values appreciate at sale. What this
amendment would do would be to turn homeowners into renters for life.
I will just point out something else. In bankruptcy law, if you are a
speculator, you go in and you buy three condominiums on spec, and you
hope you are going to make a fortune on it. But, instead, the market
turns. You go into chapter 13, you can get the principal written down,
you can get the interest written down but the homeowner in a condo
cannot.
I would point out that if condo values rise, the speculator under the
Price amendment gets all the value, the lender gets none. Only the
homeowner would be made a renter for life. Now, how is that fair in
America, a country that's looking for fairness?
I would like to note that currently, if a lender forecloses on a
home, it receives none of the home's appreciation. So what is in the
manager's amendment, the balanced amendment--I want to credit Mr.
Marshall for his excellent work in putting this in--is a vast
improvement over current bankruptcy law as it relates to homeowners.
Now, why is this important? Lenders benefit by getting part of their
appreciated value and by savings on foreclosure costs. Homeowners share
in the value of their home's increasing value, and that's the American
Dream.
I would note also that it provides incentives for homeowners who have
gone through the tragic circumstance of losing so much and reorganizing
in chapter 13 and the stigma that that entails. It provides them
incentive to continue to keep up their properties, to paint their
houses and to keep up appearances because they have a stake in the
future as well, it's not just some remote bank.
Finally, communities benefit because homeowners have this incentive
to maintain their properties. So it's important that this measure
proceed. As I mentioned earlier, the Price amendment would basically
gut this bill and that would be a mistake.
With 6 million homeowners facing foreclosure, that is a disaster not
just for those 6 million but for their neighbors. I have seen areas in
our country where half the houses are in foreclosure, and I will tell
you, it's a nightmare for everyone in that community. The meth dealers
move in, the property values decline.
Reject the Price amendment.
Mr. SHERMAN. Mr. Chair, the Price amendment to H.R. 1106 fails to
deal appropriately with post-bankruptcy improvements made by the
homeowner.
The Acting CHAIR. All time for debate has expired.
The question is on the amendment offered by the gentleman from
Georgia (Mr. Price).
The question was taken; and the Acting Chair announced that the noes
appeared to have it.
Mr. PRICE of Georgia. Mr. Chairman, I demand a recorded vote.
The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from Georgia will
be postponed.
Amendment No. 3 Offered by Mr. Peters
The Acting CHAIR. It is now in order to consider amendment No. 3
printed in House Report 111-21.
Mr. PETERS. I have an amendment at the desk.
The Acting CHAIR. The Clerk will designate the amendment.
[[Page H3016]]
The text of the amendment is as follows:
Amendment No. 3 offered by Mr. Peters:
Beginning on page 3, strike line 21 and all that follows
through line 2 on page 4, insert the following:
``(5) Notwithstanding the 180-day period specified in
paragraph (1), with respect to a debtor in a case under
chapter 13 who submits to the court a certification that the
debtor has received notice that the holder of a claim secured
by the debtor's principal residence may commence a
foreclosure on the debtor's principal residence, the
requirements of paragraph (1) shall be considered to be
satisfied if the debtor satisfies such requirements not later
than the expiration of the 30-day period beginning on the
date of the filing of the petition.''.
The Acting CHAIR. Pursuant to House Resolution 190, the gentleman
from Michigan (Mr. Peters) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentleman from Michigan.
Mr. PETERS. Mr. Chairman, I would like to yield myself such time as I
may consume.
Today we are considering some important legislation that is going to
provide borrowers, lenders and the government with a number of very
important tools to address the housing and foreclosure crisis in this
country. Much of the focus of this debate has been on the bankruptcy
reform portion, which is also the focus of the amendment on the floor
right now.
Under current law, those filing for bankruptcy must receive
counseling services from an improved credit counseling agency during
the 180-day period before the bankruptcy filing. H.R. 1106 eliminates
the counseling requirement for those who have already received a
foreclosure notice because of a concern that the requirement would be a
procedural burden for those who file for bankruptcy quickly in order to
save their homes.
The Peters' amendment would preserve the requirement for credit
counseling but would allow those who have received a foreclosure notice
to file for bankruptcy so long as they obtained the required credit
counseling within 30 days after the bankruptcy filing.
This will ensure that everyone who enters the bankruptcy process will
continue to receive this very important service, but it also makes
clear that no one will lose their home because they could not get
access to counseling on time.
Credit counseling is an incredibly important service. In some cases
the independent credit counselors can review a debtor's finances and
recommend options other than bankruptcy that may be appropriate. It
should always be our goal to keep people out of bankruptcy whenever
possible.
In every case, however, credit counselors can provide important tools
for budgeting that will help the debtor adjust to living under the
kinds of financial restrictions that bankruptcy requires.
Mr. Chairman, I urge my colleagues to support this amendment, and I
reserve the balance of my time.
Mr. GOODLATTE. Mr. Chairman, I rise to claim the time in opposition
to the amendment, even though I am not opposed to the amendment.
The Acting CHAIR. Is there objection to the request of the gentleman
from Virginia?
There was no objection.
Mr. GOODLATTE. Mr. Chairman, I yield myself such time as I may
consume.
The amendment seeks partially to reinstate a credit counseling
requirement for chapter 13 bankruptcy petitioners that H.R. 1106 will
strip entirely away. There is no good reason to wipe out the credit
counseling requirement for debtors facing foreclosure.
Bankruptcy credit counseling benefits consumers by providing the
financial education needed to emerge successfully from bankruptcy.
Homeowners facing foreclosure are ideal candidates for credit
counseling. This is not always because they can avoid bankruptcy.
It is often so that they can get help to increase their prospects of
being successful after bankruptcy. The vast majority of Americans who
receive credit counseling believe strongly that it benefits them.
Finally, credit counseling offers one last real opportunity for a
homeowner to reach out to a lender and determine whether a loan
modification is possible. A majority claims that many borrowers were
hoodwinked into obtaining their loans. That's largely why the majority
wants homeowners to be able to take their loans into bankruptcy.
But if credit counseling might show homeowners a better option than
bankruptcy, why not let them try counseling. The amendment we are
considering does not go far enough. It does not fully restore the
requirement for counseling that is in current law.
The Rules Committee should have made Mr. Forbes' credit counseling
amendment in order. That amendment would fully restore the counseling
requirement and ensure that borrowers receive counseling before they
file for bankruptcy.
However, because the amendment before us does restore at least a
limited requirement for counseling, I support it.
I reserve the balance of my time.
Mr. PETERS. I would like to yield to the gentlewoman from California
(Ms. Zoe Lofgren) for 1 minute.
Ms. ZOE LOFGREN of California. Mr. Chairman, I rise to support this
amendment offered by my colleague from Michigan (Mr. Peters).
It was a pleasure to work with him to reach agreement on his
amendment, and I appreciate his commitment to ensuring that Americans
have credit counseling under the Bankruptcy Code, especially in these
difficult economic times.
His amendment, Mr. Peters' amendment, ensures that homeowners will be
able to meet their obligations, to obtain credit counseling without
risking foreclosure. It strikes the right balance, and it shows real
foresight, judgment and skill on Mr. Peters' part, and I appreciate
supporting his amendment, and I appreciate his presence here in our
body.
Mr. GOODLATTE. Mr. Chairman, may I ask how much time is remaining on
each side?
The Acting CHAIR. There are 3\1/2\ minutes for the gentleman from
Virginia and 2 minutes for the gentleman from Michigan.
{time} 1315
Mr. GOODLATTE. Mr. Chairman, I yield such time as he may consume to
the gentleman from Texas (Mr. Gohmert).
Mr. GOHMERT. Mr. Chairman, the crisis that we're in right now had a
number of factors that helped create it. One, we had investment bankers
on Wall Street that got a little too greedy. Congress forced banks to
make some loans that they shouldn't have made.
But throughout all this process, community banks, generally speaking,
by and large, have done a great job of staying stable even through the
toughest of times. But we keep rewarding greed and improper conduct and
then keep hurting the people who have done the most good.
Now, I understand the hearts of those on the other side that are
pushing this, and I understand that my colleagues feel like it's going
to help. But the fact is you talk to the community banks who have
really been hurt, starting with Paulson's screaming that we'll take
care of dollar for dollar of every dime in money market accounts but
banks are only covered to $100,000. People withdrew their money from
the banks. They still survived and they're doing well.
But you've got to look at what banks are required to do. They're
required to be solvent. And that means on the asset side, they have to
show a net plus. And if we pass this, then that net plus will be an
uncertainty. They will not know what they have because we'll have a
bankruptcy judge who can come in and just at his whim change the
principal on a mortgage. And I see my colleague shaking her head. A
bankruptcy judge will be able to lower the principal. That's what this
is about, and that is going to be creating such uncertainty in the
banks.
And here at a time when we have just in 2 months added what will
ultimately be more taxes to the next generation and the generation
after that than they could possibly pay, now if this passes, those
banks will have to be so sure that people will not file bankruptcy,
they're going to need to have a good credit history for 10, 15 years,
20 years. So not only are we adding all this tax burden to them, we're
also telling
[[Page H3017]]
them, and, by the way, you're not going to be able to get a home loan
for years to come until you have such a great track record that a bank
can be certain you won't file bankruptcy because otherwise their bank
financial statement will be uncertain.
We've done enough damage to the next generations. It's time to stop
hurting the next generations. Let's take care of this with our
generation. Let's not reward problem activity. Let's let the community
banks survive this process without hurting them any worse.
Mr. PETERS. Mr. Chairman, I do not have any further requests for
time, and I reserve the balance of my time.
Mr. GOODLATTE. Mr. Chairman, may I ask how much time is remaining?
The Acting CHAIR. The gentleman from Virginia has 30 seconds
remaining.
Mr. GOODLATTE. Mr. Chairman, let me take the 30 seconds to say that
while I think this is a good amendment and I support it, it doesn't go
as far as it should have. We should have had the opportunity to vote
today and debate today the amendment offered by Congressman Forbes from
Virginia. But nonetheless, that not being the case, I support this
amendment.
But I still strongly oppose this underlying legislation, which is
going to cause hardships for future homeowners who are going to wind up
paying higher mortgage rates and larger down payments for the problems
that exist today. That's wrong. We should not pass that and spread that
risk to those people, and we should not jeopardize legitimate credit
unions and community banks that have been doing so much to help extend
credit in this country.
Mr. PETERS. Mr. Chairman, my amendment is a commonsense compromise
that ensures that everyone who enters into the bankruptcy process will
continue to get important credit counseling services, while at the same
time giving those who do not have the time to complete the counseling
and are in danger of losing their home the opportunity to do so after
they have filed for bankruptcy. The amendment is supported by the
Financial Counseling Research Roundtable, which is comprised of the
Nation's leading nonprofit organizations providing Americans with
bankruptcy, housing, consumer credit, and financial counseling.
I'd also like to take this opportunity to thank Chairman Conyers for
working with me on this amendment and for his leadership in helping to
put together this package.
Mr. Chairman, I yield back the balance of my time.
The Acting CHAIR. The question is on the amendment offered by the
gentleman from Michigan (Mr. Peters).
The question was taken; and the Acting Chair announced that the ayes
appeared to have it.
Mr. GOODLATTE. Mr. Chairman, I demand a recorded vote.
The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from Michigan
will be postponed.
Amendment No. 4 Offered by Ms. Titus
The Acting CHAIR. It is now in order to consider amendment No. 4
printed in House Report 111-21.
Ms. TITUS. Mr. Chair, I have an amendment at the desk.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 4 offered by Ms. Titus:
Page 34, strike line 13, and insert the following:
``(x) Payment to Existing Loan Servicers.--
``(1) Payment.--The''.
Page 34, after line 17, insert the following:
``(2) Notification requirement.--The Secretary shall
require each servicer that receives a payment under this
paragraph to notify all mortgagors under mortgages serviced
by such servicer who are at-risk homeowners (as such term is
defined by the Secretary), in a form and manner as shall be
prescribed by the Secretary, that they may be eligible for
the HOPE for Homeowners Program under this section and how to
obtain information regarding the program.''.
The Acting CHAIR. Pursuant to House Resolution 190, the gentlewoman
from Nevada (Ms. Titus) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentlewoman from Nevada.
Ms. TITUS. Mr. Chairman, I rise today with an amendment to H.R. 1106,
the Helping Families Save Their Homes Act.
As you know, the foreclosure crisis is wreaking havoc across the
entire Nation, but my district in Southern Nevada is particularly hard
hit. Nevada has the highest foreclosure rate in the country. Home
prices have dropped significantly. Thousands of families are upside-
down on their mortgages, and foreclosures are extending into the prime
market. In fact, there was a report that was issued today by the First
American CoreLogic group that stated there were 58.2 percent of Las
Vegas houses upside-down and another 3.5 percent that are fast
approaching that for a total of 61.7 percent of all outstanding
mortgages. Compounding the problem even further, the unemployment rate
in Nevada is over 9 percent, well above the national average. Families
who are responsible and bought a home within their means are now facing
foreclosure due to loss of a job or reduction of hours at work.
Foreclosure prevention, I believe, is a critical part of any strategy
to get us back on track. I strongly believe that aggressive outreach to
borrowers can help prevent unnecessary foreclosures, and that is
exactly what my amendment seeks to address.
The amendment is simple and straightforward. In short, it would
require that servicers who participate in the HOPE for Homeowners
Program and receive government incentives paid for by taxpayer dollars
notify at-risk homeowners that they may be eligible for the program and
tell them how to obtain information regarding the program. It also
requires that the HUD Secretary define who are at-risk homeowners and
prescribe a form and manner of notifying them of their potential
eligibility for assistance.
By requiring HUD to define what is meant by ``at risk'' and to
prescribe the method of notification of eligible homeowners, my
amendment attempts to limit the administrative burden on the servicers.
At the same time, it ensures that homeowners who are in danger of
losing their homes and may be eligible for help will receive as much
information as possible about the HOPE for Homeowners Program. Many
people in trouble do not even know what help is available to them, and
this amendment will help resolve that problem so they can find out
about HOPE for Homeowners in a timely fashion before it's too late. I
cannot tell you how many calls I have received from constituents in my
district office who are facing foreclosure and don't know where to
turn. This amendment will provide them with the information and help
they need under this very important legislation.
Mr. Chairman, I have discussed this issue with Chairman Frank of the
Financial Services Committee and understand that he has some
reservations regarding the scope of the amendment. He intended to be
here but was delayed by a press conference. Although I intend to
withdraw the amendment, I think it's important that we have the
discussion on this issue today, and I appreciate your indulgence. I
also look forward to working with Chairman Frank as we move forward to
improve notification requirements and address the foreclosure crisis in
our country.
Mr. Chairman, I reserve the balance of my time.
Mrs. CAPITO. Mr. Chairman, I rise to claim the time in opposition;
although I'm not opposed to the gentlewoman's amendment.
The Acting CHAIR. Without objection, the gentlewoman is recognized
for 5 minutes.
There was no objection.
Mrs. CAPITO. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, I am not in opposition to the gentlewoman's amendment,
but I do want to talk about my opposition to the underlying package
before the House today.
Our Nation is facing significant challenges, especially in the
mortgage market. We once had a flowing market providing the funds
critical to the origination of mortgages to our home buyers.
One of the proposals before us today is to allow judges to alter the
terms of a mortgage product in bankruptcy. I really understand the
desire to help families avoid foreclosure and agree that we should do
everything we can to help them. However, this solution to helping
should not adversely affect the
[[Page H3018]]
overwhelming majority of the population that are tightening their
family budgets to continue paying their mortgages on time. Passage of
this legislation in its current form could send mortgage rate fees
higher for our regular homeowners as creditors pass on the risk of
bankruptcy procedures. This is a question of fairness, in my mind. We
must be certain that in the pursuit of helping those who deserve help
and need help that we do not unduly burden those who have worked hard
to keep their heads above water.
I also have concerns about the state of the HOPE for Homeowners
Program. During a recent hearing in our Financial Services Committee,
one of the witnesses from the Department of Housing and Urban
Development agreed with me when I posited the question: Should we just
scrap this and start over? Realizing that as of today, HOPE for
Homeowners, which has been in effect for several months now, has only
helped 50 homeowners in their current situation. I offered an
amendment, and I feel that we should give the FHA new authority to
reshape this program where it can really work quickly and is targeted
to the population who desperately need this help. I offered an
amendment to the Rules Committee to achieve this goal, but I was
prevented from offering it on the floor and am, therefore, prevented
from discussing it on the floor in a fuller manner. So later today I
will be introducing that proposal as stand-alone legislation, the REFI
for Homeowners Act.
There are some provisions in this bill that I do support, like the
safe harbor provisions that will encourage more modifications, the
increasing of deposit insurance for FDIC and NCUA, and the ultimate
goal of this bill, which is to help homeowners. However, the cramdown
of mortgages and the continuation of the HOPE for Homeowners Program
that is not working is not in the best interest of our taxpayers. I
think we can do better than what this bill offers.
Mr. Chair, I reserve the balance of my time.
Ms. TITUS. Mr. Chairman, I yield such time as he may consume to
Chairman Frank.
Mr. FRANK of Massachusetts. I thank the gentlewoman for yielding.
Mr. Chair, I think her amendment is a very important one. I would ask
her if we could withhold further action to do a little work on it
because the notion that we should put a requirement on these servicers
to get funding is a valid one. There are some interconnections here,
and I think we could actually make it apply to more people. But, also,
if a servicer is only doing two or three of these, the requirement that
they notify everybody might become a deterrent to doing some. So I
would like to sharpen it and broaden it at the same time. And if the
gentlewoman would agree, we could work on this, and I think by the time
this gets through the Senate, never known for breakneck speed, we would
have a version that would improve it. So I would suggest that to the
gentlewoman.
Mrs. CAPITO. Mr. Chairman, I yield 45 seconds to the gentleman from
Texas (Mr. Culberson).
Mr. CULBERSON. Mr. Chair, we fiscal conservatives are in the
minority, unfortunately, and have been working hard to lay out
alternatives to stimulate the economy with immediate tax cuts, with
spending cuts.
The new majority in Congress, with this new President, has spent more
money in less time than any Congress in history. In fact, that's all
borrowed money. About $1.3 trillion in borrowed money has already been
spent by this Congress.
I would like to ask the Congresswoman from Nevada (Ms. Titus), who
ran on a record of being fiscally responsible, Ms. Titus, how is it
fiscally responsible that you voted for $1.2 trillion in new spending,
borrowed money, which is going to be paid for by our children and
grandchildren? How is that fiscally responsible?
{time} 1330
Ms. ZOE LOFGREN of California. Mr. Chairman, that is not a germane
point. I would raise a point of order.
The Acting CHAIR. The gentleman's time has expired.
Ms. TITUS. Mr. Chairman, I would just like to comment on Chairman
Frank's offer to help work on this amendment in terms of both its scope
and depth. I appreciate that offer of assistance. I think we can
improve the amendment. I think it is very important that we have an
aggressive borrower outreach program so people who are in trouble can
find out about the help that is available to them and find that out
before it is too late.
Mr. Chairman, I would ask unanimous consent that the amendment be
withdrawn.
The Acting CHAIR. Without objection, the amendment is withdrawn.
There was no objection.
Mrs. CAPITO. Mr. Chairman, I have time remaining; is that correct?
I reserve the right to object.
The Acting CHAIR. The gentlewoman could have reserved the right to
object before the amendment was withdrawn, but the amendment has been
withdrawn.
Mr. FRANK of Massachusetts. Mr. Chairman, it was not our intention to
shut off the gentlewoman from West Virginia. Is it in order to ask
unanimous consent that she be allowed the remaining time as if it had
not been withdrawn?
The Acting CHAIR. Yes, it is.
Mr. FRANK of Massachusetts. Then I would make a unanimous consent
request that the gentlewoman from West Virginia be able to conclude her
remarks as if the amendment had not been withdrawn.
The Acting CHAIR. Without objection, the gentlewoman from West
Virginia reclaims the balance of her time.
There was no objection.
Mrs. CAPITO. I thank the chairman for the unanimous consent request.
I yield the time I have remaining to the gentleman from Indiana (Mr.
Burton).
Mr. BURTON of Indiana. You know, one of the things that concerns me
is that we have spent trillions of dollars in the last few weeks,
trillions. The people of this country were very concerned about the
money they had in the banks so the Federal Deposit Insurance
Corporation raised the amount of money from $100,000 to $250,000 so
people will feel secure, they will know their money is safe in the
banks. Yet today, the head of the FDIC, Sheila Bair, said the fund
could become insolvent this year.
That is the craziest thing this woman could possibly say. If she
wants to avoid a run on the banks and scaring the American people to
death, she shouldn't be making these kinds of comments. To say that the
FDIC is not going to insure the deposits of the people of this country
is insane, especially at a time when everybody in this country is
scared to death.
Ms. ZOE LOFGREN of California. Mr. Chairman, I move that the
Committee do now rise.
The motion was agreed to.
Accordingly, the Committee rose; and the Speaker pro tempore (Ms.
Titus) having assumed the chair, Mr. Salazar, Acting Chair of the
Committee of the Whole House on the state of the Union, reported that
that Committee, having had under consideration the bill (H.R. 1106) to
prevent mortgage foreclosures and enhance mortgage credit availability,
had come to no resolution thereon.
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