109th CONGRESS
2d Session
H. R. 4991
To require the Secretary of the Treasury to carry out a program
to temporarily make payments under residential mortgage loans for properties
significantly damaged by Hurricane Katrina.
IN THE HOUSE OF REPRESENTATIVES
March 16, 2006
Mr. JEFFERSON (for himself, Mr. TAYLOR of Mississippi, Mr. MELANCON, Mr.
DAVIS of Alabama, Mr. BISHOP of Georgia, Mr. MCDERMOTT, Mr. FORD, Mr. WATT,
Mr. OWENS, Ms. KILPATRICK of Michigan, and Mr. TOWNS) introduced the following
bill; which was referred to the Committee on Financial Services
A BILL
To require the Secretary of the Treasury to carry out a program
to temporarily make payments under residential mortgage loans for properties
significantly damaged by Hurricane Katrina.
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 Preservation of Equity Act of 2006'.
SEC. 2. HURRICANE KATRINA MORTGAGE PROTECTION PROGRAM.
(a) In General- The Secretary of the Treasury, in consultation with the
Federal banking agencies, the National Credit Union Administration, and
the appropriate State bank supervisors of each State contained in whole
or in part in the GO Zone, shall establish a program to provide emergency
mortgage assistance through the provision of direct mortgage payments on
behalf of eligible individuals.
(b) Definitions- For purposes of this section, the following definitions
shall apply:
(1) CONSUMER MORTGAGE- The term `consumer mortgage' means any consumer
credit transaction (which term shall have the same meaning given such
term for purposes of the Truth in Lending Act) in which a security interest,
including any such interest arising by operation of law, is retained or
acquired in any property that is used as the principal dwelling (under
the meaning given such term for purposes of section 121 of the Internal
Revenue Code of 1986) of the person to whom credit is extended.
(2) CONSUMER MORTGAGE PAYMENT- The term `consumer mortgage payment' means
the scheduled payment on a consumer mortgage for principal, interest,
and any scheduled deposit in an escrow account for the purpose of ensuring
payment of taxes, insurance, or other charges with respect to the property
securing such consumer mortgage.
(3) ELIGIBLE CONSUMER MORTGAGE- The term `eligible consumer mortgage'
means a consumer mortgage that meet the following requirements:
(A) TIMING- The mortgage was entered into before August 29, 2005.
(B) GOOD STANDING- As of August 28, 2005, the mortgage was not in foreclosure.
(C) PROPERTY REQUIREMENTS- The property in which a security interest
was retained or acquired under the mortgage--
(i) was designed principally as a one- to four-family residence;
(ii) was located in the GO Zone;
(iii) was, as of August 28, 2005, the primary residence of the mortgagor;
and
(iv)(I) was significantly damaged by Hurricane Katrina or by flooding
resulting from Hurricane Katrina; or
(II) is uninhabitable as a result of damage or flooding resulting
from Hurricane Katrina, including uninhabitability resulting from
lack of electricity, water, or other services due to such damage or
flooding.
(D) SERVICER AGREEMENTS- The servicer for the mortgage has made such
assurances as the Secretary shall require to ensure that the servicer
will comply with the requirements of subsection (h).
(4) ELIGIBLE INDIVIDUAL- The term `eligible individual' means an individual--
(A) who is a citizen, national, or qualified alien as defined in section
431(b) of the Personal Responsibility and Work Opportunity Reconciliation
Act of 1996 (8 U.S.C. 1641(b));
(B) who was a mortgagor on an eligible consumer mortgage;
(C) whose ability to continue meeting the consumer mortgage payment
obligations under the eligible consumer mortgage was severely impaired
as a result of hurricane-related disruption in the GO Zone, as determined
in accordance with a standard established by the Secetary that compares
the debt of the individual to the income of the individual; and
(D) who has agreed to the terms for repayment of assistance under subsection
(i).
(5) FEDERAL BANKING AGENCY AND STATE BANK SUPERVISOR- The terms `Federal
banking agency' and `State bank supervisor' have the meanings given such
terms in section 3 of the Federal Deposit Insurance Act.
(6) GO ZONE- The term `GO Zone' has the meaning given such term in section
1400M of the Internal Revenue Code of 1986)
(7) SECRETARY- The term `Secretary' means the Secretary of the Treasury.
(8) SERVICER- The term `servicer', with respect to a consumer mortgage,
has the meaning given such term in section 6(i) of the Real Estate Settlement
Procedures Act of 1974 (12 U.S.C. 2605(i)).
(9) HABITABLE; UNINHABITABLE-
(A) IN GENERAL- The terms `habitable' and `uninhabitable' mean, with
respect to a residence, that the residence has been determined to be
fit or not to be fit, respectively, for human habitation.
(B) DETERMINATION- The Secretary shall, by regulations pursuant to subsection
(l), establish procedures and standards for determinations of habitability
and uninhabitability for purposes of the program under this section.
Such standards shall take into consideration determinations and declarations
of habitability and unihabitability by Federal and State and local governments
or agencies, including the Federal Emergency Management Agency and State
and local disaster relief agencies, and by insurers, access or lack
thereof to necessary infrastructure or services, including electricity,
potable water, and waste water service, and such other factors as the
Secretary considers appropriate.
(c) Mortgage Payment Relief Program- The Secretary shall design and implement
the program under this section in a manner that provides that assistance
to be paid by the Secretary with respect to an eligible consumer mortgage
and on behalf of an eligible individual is paid directly to the servicer
for such mortgage.
(d) Period of Assistance- Payments under the program under this section
with respect to an eligible consumer mortgage may be made only for consumer
mortgage payments due under such mortgage during the period beginning on
August 28, 2005, and ending on the earlier of--
(2) the expiration of the 60-day period beginning upon the the date that
the eligible individual first reoccupies the property subject to the mortgage.
(e) Limitations on Payments-
(1) IN GENERAL- Subject to subsection (f), in no case may the value of
the assistance provided under the program under this section with respect
to any eligible consumer mortgage exceed the aggregate amount of the consumer
mortgage payments due under the mortgage during the period for which assistance
is provided for such mortgage under the program.
(2) NO DOUBLE PAYMENTS- The Secretary shall take appropriate actions to
ensure that, in the case of any consumer mortgage payment paid by an eligible
individual on an eligible consumer mortgage for any period for which payment
has already been made under the program under this section, the servicer
of the consumer mortgage shall return such payment within a reasonable
period of time or shall immediately credit such payment toward amortization
of the principal obligation under the mortgage and promptly notify the
eligible individual of such credit.
(3) TERMS OF PAYMENT- For purposes of this section, the amount of any
consumer mortgage payment shall be equal to the amount of such payment
due under the terms of such consumer mortgage as in effect on August 28,
2005.
(4) PROHIBITION OF FEES AND CHARGES- Payments under the program under
this section may not be made to the servicer of a consumer mortgage that
provides for any penalites, fees, charges, additional interest, or servicing
costs of any kind attributable to--
(A) participation in the program under this section;
(B) any prepayment of consumer mortgage, including prepayment involving
application of insurance proceeds to the mortgage; or
(C) late payment of any consumer mortgage payment due under the consumer
mortgage during the period beginning on August 28, 2005, and ending
on the commencement of payments under this section for the mortgage.
(5) REVERSAL OF ADVERSE ACTIONS ALREADY TAKEN- Payments under the program
under this section may not be made to the servicer of a consumer mortgage
if, during the period beginning on August 29, 2005, and ending upon the
enrollment of the consumer mortgage in the program, the servicer has furnished
to any consumer reporting agency (as such term is defined in section 603
of the Fair Credit Reporting Act) any information that relates to such
consumer mortgage or the mortgagor under such mortgage and is adverse
to the interests of the mortgagor and has failed to withdraw or remove
such information from the consumer reporting agency.
(f) Enrollment in Program-
(1) EXPEDITED PROCESS- The Secretary shall establish an expedited process,
in accordance with this subsection, for the enrollment of eligible individuals
in the program under this section.
(2) NOTIFICATION- To be eligible to receive payments under the program
under this section, the servicer of a consumer mortgage shall notify the
Secretary--
(A) of the nonpayment of a scheduled consumer mortgage payment from
an individual in GO Zone, not earlier than 31 days following such nonpayment;
or
(B) of a communication to the servicer by an individual reasonably indicating
eligibility for assistance under the program, after such communication.
(3) ENROLLMENT- The Secretary, upon receipt of a notice under paragraph
(2) regarding a consumer mortgage, shall enroll the eligible individual
involved in the program under this section, subject to the servicer of
the mortgage submitting such confirmation to the Secretary as the Secretary
shall require that the servicer has verified, in accordance with such
procedures as the Secretary shall establish, that mortgagor under such
consumer mortgage is an eligible individual and that the consumer mortgage
is an eligible consumer mortgage.
(4) DUTY OF SERVICER- The servicer of a consumer mortgage shall make a
reasonable effort to notify an eligible individual--
(A) of the enrollment of such individual in the program under paragraph
(3);
(B) that, if it is later determined that the individual is not an eligible
individual or the consumer mortgage is not an eligible consumer mortgage
(as determined by the audit process under subsection (g) or otherwise),
such servicer may be required at a later date to repay the program for
the total amount of consumer mortgage payments made by the Secretary
on behalf of such individual, but that there shall be no liability on
the part of the individual to repay the program for such amounts; and
(C) that such individual may elect to decline enrollment, or cancel
enrollment, in the program by notifying the servicer involved.
(1) IN GENERAL- The Secretary shall provide for the performance of an
appropriate audit of the program under this section by a date that is
not later than 180 days after the date of the enactment of this Act.
(2) REPAYMENT OF IMPROPERLY PROVIDED FUNDS-
(A) ACTION BY SECRETARY- If the Secretary determines, pursuant to the
audit under paragraph (1) or otherwise, that an individual that was
enrolled in the program under this section was not an eligible individual
under subsection (b) or the consumer mortgage was not an eligible consumer
mortgage, the Secretary shall seek repayment from the servicer of the
consumer mortgage of the amounts paid under the program on behalf of
such individual. Such individual shall not be liable to the Secretary
for the repayment of such amounts paid under the program on behalf of
the individual.
(B) TERMS OF REPAYMENT- Any repayment pursuant to subparagraph (A) shall
be made with no interest or late penalty to accrue prior to the commencement
of a repayment period which shall begin not earlier than the date that
is 3 months after the date on which a determination and notice of noneligibility
is provided.
(h) Prohibited Actions- During the period that payments are made under the
program under this section for an eligible consumer loan, a servicer who
accepts payments under the program under this section with respect to any
eligible consumer mortgage, and any person who makes or holds such eligible
consumer mortgage (if other than the servicer), may not--
(1) accelerate the maturity of or commence any legal action regarding
such mortgage (including mortgage foreclosure to recover under such obligation)
or take possession of any security of the mortgagor for such eligible
consumer mortgage obligation;
(2) increase the annual percentage rate of interest with respect to such
eligible consumer mortgage, except in the case of any mortgage the terms
of which provide for changes in the rate of interest that are not made
in connection with delinquency, default, or other credit-related events;
(3) refuse to accept, prevent, or otherwise limit the prepayment (in whole
or in part) of any outstanding principal amount due under the mortgage,
including prepayment involving application of any insurance proceeds;
or
(4) impose any other fees or charges with respect to such consumer mortgage,
including any fees or charges for any prepayment described in paragraph
(3).
(i) Repayment of Assistance Amounts- Assistance under the program under
this section may not be provided with respect to a consumer mortgage unless
the eligible individual who is the mortgagor under such mortgage enters
into an agreement with the Secretary that the aggregate amount of all such
assistance provided for such mortgage will be repaid to the Secretary, together
with interest on such amounts, as follows:
(1) INTEREST- The interest on amounts of assistance provided under the
program shall accrue at a rate, as determined by the Secretary, that is
equal to 50 percent of the average rate payable by the Treasury on its
obligations having a 5-year term to maturity and outstanding as of September
1, 2005, until full repayment is made.
(2) SILENT SECOND MORTGAGE- Amounts of assistance and interest shall be
secured by a lien on the property in the aggregate amount of such assistance
and interest, that is held by the Secretary and shall be subordinate to
all other mortgages on the property and to any Federal tax lien, but shall
be superior to any other lien. The lien shall be extinguished upon sale
or transfer of the property by the mortgagor and the payment to the Secretary
from the proceeds of such sale or transfer of the aggregate amount of
such assistance and interest. The Secretary may not require the mortgagor
to repay any amount of assistance or interest until the property is sold
or otherwise transferred.
(3) PREPAYMENT- Notwithstanding the third sentence of paragraph (2), the
mortgagor may make payments, in whole or in part, of amounts of assistance
and interest owed to the Secretary pursuant to this subsection at any
time after payments under this section on behalf of the mortgagor have
concluded and no penalty, fee, or charge may be imposed for any payments
made before sale or transfer of the property by the mortgagor.
(4) SECONDARY MARKET- The Secretary may sell and otherwise deal in liens
established under this section, and may issue and guarantee securities
backed by liens established under this section, as the Secretary considers
appropriate.
(1) IN GENERAL- In the case of each consumer mortgage that is submitted
under subsection (f) to the Secretary by a servicer and confirmed by the
servicer as eligible for participation in the program under this section
that is not an eligible consumer mortgage or for which the mortgagor is
not an eligible individual, the Secretary may assess to the servicer,
for each such mortgage so submitted--
(A) a civil penalty in an amount not exceeding the amount of any mortgage
payments received as a consequence of submission of such ineligible
mortgage or individual; and
(B) interest, at a rate determined by the Secretary, for the period
that any amounts improperly paid under the program on behalf of such
mortgage were held by the servicer.
(2) INTENTIONAL VIOLATIONS- If the Secretary determines that any submission
of a mortgage to which paragraph (1) applies was made with intentional
or reckless disregard of the requirements under subsection (f)(3) regarding
verification procedures or with actual knowledge that the consumer mortgage
or the mortgagor under the consumer mortgage was not eligible for assistance
under the program under this section, the Secretary may assess to the
servicer, for each such mortgage so submitted--
(A) a civil penalty in an amount not exceeding three times the amount
of any mortgage payments received as a consequence of submission of
such ineligible mortgage or individual; and
(B) interest, at a rate determined by the Secretary, for the period
that any amounts improperly paid under the program on behalf of such
mortgage were held by the servicer.
(3) EFFECT ON OTHER LAW- The penalties under this subsection shall be
in addition to any other remedies and penalties provided by other provisions
of Federal and State law, including any civil and criminal penalties for
fraud and false statements.
(k) Exclusion of Mortgage Relief Payments From Income of Mortgagor- Any
amounts paid under the program under this section with respect to an eligible
consumer mortgage shall not be included as gross income of the eligible
individual who is the mortgagor under such mortgage for purposes of the
Internal Revenue Code of 1986 or for any other program for benefits, payments,
or assistance for an individual, household, or family eligiblity unit provided
by any Federal or State agency or by appropriated funds of the United States
or any State, for which eligibility is determined on the basis of income
or assets or any other test of means.
(l) Expedited Rulemaking- The Secretary shall utilize expedited rulemaking
procedures to carry out this section.
(m) Authorization of Appropriations- There are authorized to be appropriated
such sums as may be necessary for fiscal years 2006 and 2007 to carry out
this section.
END
