HR 5579
110th CONGRESS
2d Session
H. R. 5579
To remove an impediment to troubled debt restructuring on the part
of holders of residential mortgage loans, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
March 11, 2008
Mr. CASTLE (for himself and Mr. KANJORSKI) introduced the following bill;
which was referred to the Committee on Financial Services
A BILL
To remove an impediment to troubled debt restructuring on the part
of holders of residential mortgage loans, and for other purposes.
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 `Emergency Mortgage Loan Modification Act of
2008'.
SEC. 2. SAFE HARBOR FOR QUALIFIED LOAN MODIFICATIONS OR WORKOUT PLANS FOR
CERTAIN RESIDENTIAL MORTGAGE LOANS.
(a) Standard for Loan Modifications or Workout Plans- Absent specific contractual
provisions to the contrary--
(1) the duty to maximize, or to not adversely affect, the recovery of total
proceeds from pooled residential mortgage loans is owed by a servicer of
such pooled loans to the securitization vehicle for the benefit of all investors
and holders of beneficial interests in the pooled loans, in the aggregate,
and not to any individual party or group of parties; and
(2) a servicer of pooled residential mortgage loans shall be deemed to be
acting on behalf of the securitization vehicle in the best interest of all
investors and holders of beneficial interests in the pooled loans, in the
aggregate, if for a loan that is in payment default under the loan agreement
or for which payment default is imminent or reasonably foreseeable, the
loan servicer makes reasonable and documented efforts to implement a modification
or workout plan or, if such efforts are unsuccessful or such plan would
be infeasible, engages in other loss mitigation, including accepting a short
payment or partial discharge of principal, or agreeing to a short sale of
the property, to the extent that the servicer reasonably believes the modification
or workout plan or other mitigation actions will maximize the net present
value to be realized on the loan over that which would be realized through
foreclosure.
(b) Safe Harbor- Absent specific contractual provisions to the contrary, a
servicer of a residential mortgage loan that acts in a manner consistent with
the duty set forth in subsection (a), shall not be liable for entering into
a qualified loan modification or workout plan, to--
(1) 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;
(2) any person who is obligated to make payments determined in reference
to any loan or any interest referred to in paragraph (1); or
(3) any person that insures any loan or any interest referred to in paragraph
(1) under any law or regulation of the United States or any law or regulation
of any State or political subdivision of any State.
(c) Rule of Construction- No provision of this section shall be construed
as limiting the ability of a servicer to enter into loan modifications or
workout plans other than qualified loan modification or workout plans.
(d) Definitions- For purposes of this section, the following definitions shall
apply:
(1) QUALIFIED LOAN MODIFICATION OR WORKOUT PLAN- The term `qualified loan
modification or workout plan' means a modification or plan that--
(A) is scheduled to remain in place until the borrower sells or refinances
the property, or for at least 5 years from the date of adoption of the
plan, whichever is sooner;
(B) does not provide for a repayment schedule that results in negative
amortization at any time; and
(C) does not require the borrower to pay additional points and fees.
(2) RESIDENTIAL MORTGAGE LOAN DEFINED- The term `residential mortgage loan'
means a loan that is secured by a lien on an owner-occupied residential
dwelling.
(3) SECURITIZATION VEHICLE- The term `securitization vehicle' means a trust,
corporation, partnership, limited liability entity, special purpose entity,
or other structure that--
(A) 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
(e) Effective Period- This section shall apply only with respect to qualified
loan modification or workout plans initiated prior to January 1, 2011.
END
