To establish a program to assist homeowners experiencing unavoidable, temporary difficulty making payments on mortgages insured under the National Housing Act.

January 26, 2005

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

To establish a program to assist homeowners experiencing unavoidable, temporary difficulty making payments on mortgages insured under the National Housing Act.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Homeowners' Emergency Mortgage Assistance Act'.

SEC. 2. MORTGAGE EMERGENCY ASSISTANCE PROGRAM.

(a) In General- The Secretary shall establish a program to make payments on a mortgage insured under the National Housing Act for a 1- to 4-family residence when--

(1) the mortgagee has given the mortgagor notice in accordance with section 3(b) that it intends to foreclose the mortgage;

(2) at least 2 full monthly installments due on the mortgage are unpaid after the application of any partial payments that may have been accepted but not yet applied to the mortgage account;

(3) the mortgagor is suffering financial hardship due to circumstances beyond the control of the mortgagor which render the mortgagor unable to correct the delinquency on the mortgage and unable to make full mortgage payments before the expiration of the 60-day period beginning on the date that notice was sent to the mortgagor in accordance with section 3(b);

(4) there is a reasonable prospect that the mortgagor will be able to resume full mortgage payments not later than 36 months after the beginning of the period for which assistance payments are provided and to pay the mortgage in full by its maturity date or by a later date agreed upon by the mortgagee;

(5) the property mortgaged is the mortgagor's principal place of residence;

(6) the mortgagor does not own other property which is subject to a mortgage insured or held by the Secretary;

(7) the mortgagor has applied to the Secretary for assistance in accordance with section 4; and

(8) the mortgagor has not been more than 60 days in arrears on a residential mortgage within the 2-year period preceding the delinquency for which assistance is requested, unless the mortgagor can demonstrate that the prior delinquency was the result of financial hardship due to circumstances beyond the control of the mortgagor.

(b) Effect of Finding of Ineligibility- If, after reviewing an application for assistance submitted in accordance with section 4, the Secretary determines that the mortgagor has not met the conditions of eligibility described in subsection (a), the mortgagor shall be prohibited from reapplying for assistance under this Act until the expiration of the 6-month period beginning on the date of such determination unless there is a material change in the financial circumstances of the mortgagor.

(c) Determination Relating to Financial Hardship- In determining whether a financial hardship (which may be caused by a reduction in income or an increase in expenses, or both) is due to circumstances beyond the control of a mortgagor, the Secretary may consider information regarding the mortgagor's employment record, credit history, and current income. Such circumstances shall include, but not be limited to--

(1) loss of job of a member of the household;

(2) salary, wage or earnings reduction of a member of the household;

(3) injury, disability or illness of a member of the household;

(4) divorce or separation in the household; or

(5) death of a member of the household.

(d) Housing Counseling Agencies- The Secretary shall designate and approve nonprofit housing counseling agencies in each State to be available to assist the Secretary in implementing the program established pursuant to subsection (a) of this section and to section 4(b)(1)(A). Nonprofit housing agencies designated and approved under this subsection shall provide assistance to an eligible mortgagor during the entire period that such mortgagor receives assistance under this Act.

SEC. 3. LEGAL ACTION.

(a) Conditions Under Which Legal Action Is Prohibited- Except as otherwise provided in the Act, a mortgagee of a mortgage which is insured under the National Housing Act for a 1- to 4-family residence may not accelerate the maturity of or commence any legal action regarding such a mortgage (including, but not limited to, mortgage foreclosure to recover under such obligation) or take possession of any security of the mortgagor for such mortgage obligation unless the mortgagee has sent to the mortgagor notice pursuant to subsection (b). In addition, the mortgagee may not take such action--

(1) before the expiration of the 30-day period beginning on the date that notice of the intent to take such action was sent to the mortgagor in accordance with subsection (b);

(2) before the expiration of the 30-day period beginning on the date of the initial meeting between the mortgagor and an approved counseling agency held in accordance with section 4(a);

(3) if an application for such assistance under this Act has been submitted to the Secretary on behalf of the mortgagor and such application--

(A) is pending; or

(B) has been approved but payments have not yet been made toward the mortgage; or

(4) if payment toward the mortgage is being made under this Act.

(b) Requirements of Notice- The Secretary shall issue regulations that include, but are not limited to, a uniform notice under this section. Such notice shall be in plain language and shall--

(1) inform the mortgagor in large bold type that he or she may be eligible for temporary assistance in making mortgage payments;

(2) include an explanation of the mortgage assistance program under this Act;

(3) inform the mortgagor that to apply for mortgage assistance, he or she shall attend a meeting in accordance with section 4(a) within 30 days of the date of the notice;

(4) include the legal action intended and the basis therefore;

(5) include a list of approved counseling agencies located in the State in which the mortgagor resides;

(6) be sent via first class mail to the last known address of the mortgagor; and

(7) be subject to such other requirements as prescribed by the Secretary.

SEC. 4. APPLICATION FOR ASSISTANCE.

(a) Meeting-

(1) IN GENERAL- To apply for assistance under this Act, not later than 30 days after receiving notice in accordance with section 3(b), a mortgagor shall attend a face to face meeting with the mortgagee or an approved counseling agency to attempt to prevent legal action for which the notice was sent by restructuring the mortgage payment schedule. A meeting under this paragraph may be conducted over the telephone under circumstances prescribed by the Secretary.

(2) NOTICE- If the mortgagor meets with the approved counseling agency within the period specified in paragraph (1), the approved counseling agency shall send notice of the meeting which includes, but is not limited to, the date of the meeting, to the mortgagee not later than 5 business days after the meeting.

(b) Preparation; Submission-

(1) IN GENERAL- If the mortgagor is not able to resolve the default and prevent foreclosure before the expiration of the 30-day period beginning on the date of the meeting, the mortgagor may file an application for mortgage assistance under this Act. At the request of the mortgagor, an approved counseling agency shall--

(A) assist the mortgagor in preparing an application for assistance under this Act; and

(B) not later than 30 days after the mortgagor initially requests assistance in the preparation of the application, submit the completed application to the Secretary.

(2) FEES- The Secretary may pay approved counseling agencies a fee, in an amount determined by the Secretary, for rendering assistance pursuant to this Act.

(c) Notice to Mortgagee- If the approved counseling agency submits an application for assistance to the Secretary on behalf of a mortgagor, the approved counseling agency shall, not later than 5 business days after submitting the application, inform the mortgagee of the date that the application was submitted.

(d) Form; Contents- An application for assistance under this Act shall be submitted on a form prescribed by the Secretary and shall include a financial statement disclosing all assets and liabilities of the mortgagor, whether singly or jointly held, and all household income regardless of source.

(e) Effect of Misrepresentation- A mortgagor who intentionally misrepresents any financial information in connection with the filing of an application for assistance under this Act may be denied assistance and required to immediately repay any amount of assistance received, and the mortgagee may, at any time thereafter, take any legal action to enforce the mortgage without any further restrictions or requirements under this Act.

(f) Availability- An application for assistance under this Act may be obtained from an approved counseling agency.

(g) Determination on Application-

(1) TIME PERIOD- The Secretary shall determine eligibility of a mortgagor for assistance under this Act not later than 60 days after receipt of the application of the mortgagor.

(2) NOTIFICATION- Not later than 5 business days after making the determination on an application for assistance, the Secretary shall notify the mortgagor and the mortgagee as to whether the application has been approved or disapproved.

SEC. 5. ASSISTANCE PAYMENTS BY SECRETARY.

(a) Amount to Bring Mortgage Current- If the Secretary determines that a mortgagor is eligible for assistance under this Act, the Secretary shall pay to the mortgagee from the Mutual Mortgage Insurance Fund the full amount due to the mortgagee pursuant to the terms of the mortgage without regard to any acceleration under the mortgage, or the full amount of any alternative mortgage payments agreed to by the mortgagee and mortgagor on the date that the application is approved by the Secretary. This amount shall include the amount of principal, interest, taxes, assessments, ground rents, hazard insurance, any mortgage insurance or credit insurance premiums, and reasonable attorneys' fees incurred by such mortgagee in relation to the arrearage.

(b) Monthly Assistance Payments-

(1) IN GENERAL- The Secretary shall make monthly mortgage assistance payments to the mortgagee on behalf of the mortgagor pursuant to this Act.

(2) OBLIGATION OF THE MORTGAGOR- A mortgagor on whose behalf the Secretary is making the mortgage assistance payments shall pay monthly payments to the Secretary. Such payments shall be in an amount which will cause the mortgagor's total housing expense not to exceed 35 percent of the mortgagor's net effective income. This shall be the maximum amount the mortgagor can be required to pay during the 36 months a mortgagor is eligible for mortgage assistance.

(3) OBLIGATION OF THE SECRETARY- Upon receipt of this payment from the mortgagor, the Secretary or the Secretary's duly authorized agent shall send the total mortgage payment directly to the mortgagee.

(c) Review Upon Delinquency- If the mortgagor fails to pay to the Secretary any amounts due directly from the mortgagor under this section not later than 15 days after such due date, the Secretary or its designated agent shall review the mortgagor's financial circumstances to determine whether a delinquency in payments due from the mortgagor under this section or section 6 is the result of a change in the mortgagor's financial circumstances since the payment amount was last determined. If the delinquency is not the result of a change in the mortgagor's financial circumstances, the Secretary shall terminate future mortgage assistance payments and the mortgagee may, at any time thereafter, take any legal action to enforce its mortgage without any further restriction or requirement. If the delinquency is the result of such a change, the Secretary shall modify the mortgagor's required payments to the Secretary as the Secretary shall determine.

(d) Period for Assistance- Payments under this Act shall be provided for a period not to exceed 36 months, either consecutively or nonconsecutively. The Secretary shall establish procedures for periodic review of the mortgagor's financial circumstances for the purpose of determining the necessity for continuation, termination, or adjustment of the amount of the payments.

SEC. 6. REPAYMENT OF ASSISTANCE.

(a) Assistance Loan- The amount by which the assistance payments made by the Secretary to the mortgagee exceeds the amount of payments made by the mortgagor to the Secretary shall be a loan by the Secretary to the mortgagor. The loan shall be evidenced by such documents as the Secretary shall determine necessary to protect the interests of the United States.

(b) Repayment of Assistance Loan- Before making assistance payments under this Act on behalf of a mortgagor, the Secretary shall enter into an agreement with the mortgagor for repayment of all mortgage assistance made by the Secretary under section 5, plus interest as provided in subsection (c). The agreement shall provide for monthly payments by the mortgagor to the Secretary which (1) shall begin once the Secretary has determined that continuation of mortgage assistance payments to the mortgagee is unnecessary, and (2) shall be in an amount determined as follows:

(1) HOUSING EXPENSE LESS THAN 35 PERCENT- If the mortgagor's total housing expense is less than 35 percent of the mortgagor's net effective income, the mortgagor shall pay to the Secretary the difference between 35 percent of the mortgagor's net effective income and the mortgagor's total housing expense unless otherwise determined by the Secretary after examining the mortgagor's financial circumstances and ability to contribute to repayment of the mortgage assistance.

(2) HOUSING EXPENSE GREATER THAN 35 PERCENT- If the mortgagor's total housing expense is more than 35 percent of the mortgagor's net effective income, repayment of the mortgage assistance shall be deferred until the mortgagor's total housing expense is less than 35 percent of the mortgagor's net effective income.

(3) WHEN MORTGAGE PAID IN FULL- Notwithstanding paragraphs (1) and (2), if repayment of mortgage assistance is not made by the date that the mortgage is paid in full, the mortgagor shall make mortgage assistance repayments in an amount not less than the previous regular mortgage payment until the mortgage assistance is repaid.

(c) Interest- Interest shall accrue on all mortgage assistance made under this Act at the rate determined monthly by the Secretary of the Treasury to be equal to the then current average yield on outstanding 30-year bonds issued by the Secretary of the Treasury under section 3102 of title 31, United States Code, and shall accrue only during the period in which the mortgagor is required to make repayment under this section.

(d) Lien to Secure Repayment of Assistance- Repayment of amounts owed to the Secretary from a mortgagor shall be secured by a mortgage lien on the property and by such other obligation as the Secretary may require. The lien or other security interest of the Secretary shall not be deemed to take priority over any other secured lien or secured interest in effect against the mortgagor's property on the date assistance payments begin. The Secretary may allow subordination of the mortgage assistance lien only if such subordination is necessary to permit the mortgagor to obtain a home improvement loan for repairs necessary to preserve the property.

(e) Time for Repayment- Payments under this section shall be made by the mortgagor to the Secretary not later than 14 days after each mortgage payment is due under the mortgage (or in the case of repayment after the mortgage has been paid in full, not later than the date the mortgage payments were due under the mortgage).

SEC. 7. DEFINITIONS.

For the purposes of this Act, the following definitions apply:

(1) APPROVED COUNSELING AGENCY- The term `approved counseling agency' means a nonprofit housing counseling agency approved by the Secretary pursuant to section 2(e).

(2) GROSS HOUSEHOLD INCOME- The term `gross household income' means the total income of a mortgagor, the mortgagor's spouse, children residing in the same residence as the mortgagor, and any other person living in such residence that is declared by the mortgagor as a dependent for Federal income tax purposes.

(3) HOUSEHOLD- The term `household' means a mortgagor, the mortgagor's spouse, children residing in the same residence as the mortgagor, and any other person living in such residence that is declared by the mortgagor as a dependent for Federal income tax purposes.

(4) HOUSING EXPENSE- The term `housing expense' means the sum of the mortgagor's monthly maintenance, utility, and hazard insurance expense, taxes, and required mortgage payments, including escrows.

(5) MORTGAGEE; MORTGAGOR- The terms `mortgagee' and `mortgagor' have the meanings given such terms in section 201 of the National Housing Act (12 U.S.C. 1707).

(6) NET EFFECTIVE INCOME- The term `net effective income' means the gross household income of the mortgagor, less city, State, and Federal income and social security taxes.

(7) SECRETARY- The term `Secretary' means the Secretary of Housing and Urban Development.

END