H.R. 1106

Helping Families Save Their Homes Act of 2009 (Introduced in House)

[ Passed in House of Representatives on March 6, 2009 ]

February 23, 2009

Mr. CONYERS (for himself, Mr. FRANK of Massachusetts, Mr. BERMAN, Mr. BLUMENAUER, Mr. COHEN, Mr. DELAHUNT, Ms. EDWARDS of Maryland, Mr. ELLISON, Mr. GONZALEZ, Mr. GUTIERREZ, Ms. JACKSON-LEE of Texas, Mr. JOHNSON of Georgia, Mr. LEWIS of Georgia, Ms. ZOE LOFGREN of California, Mr. MILLER of North Carolina, Mr. NADLER of New York, Ms. LINDA T. SANCHEZ of California, Ms. WASSERMAN SCHULTZ, Ms. WATERS, and Mr. MARSHALL) introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the Committees on the Judiciary and Veterans' Affairs, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To prevent mortgage foreclosures and enhance mortgage credit availability.

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--

`(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).