FHA Foreclosure Prevention Act of 2019

II 116TH CONGRESS 1ST SESSION S. 2279 To make necessary reforms to improve compliance with loss mitigation re- quirements by servicers of mortgages for single family housing insured by the FHA, and for other purposes. IN THE SENATE OF THE UNITED STATES JULY 25, 2019 Ms. CORTEZ MASTO (for herself and Mr. VAN HOLLEN) introduced the fol- lowing bill; which was read twice and referred to the Committee on Bank- ing, Housing, and Urban Affairs A BILL To make necessary reforms to improve compliance with loss mitigation requirements by servicers of mortgages for single family housing insured by the FHA, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘FHA Foreclosure Pre- 4 vention Act of 2019’’. 5 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2279.IS S2279 kjohnson on DSK79L0C42 with BILLS 2 •S 2279 IS SEC. 2. DOCUMENTATION OF LOSS MITIGATION EFFORTS. 1 Section 204(a) of the National Housing Act (12 2 U.S.C. 1710(a)) is amended by adding at the end the fol- 3 lowing: 4 ‘‘(10) DOCUMENTATION OF LOSS MITIGATION 5 EFFORTS.— 6 ‘‘(A) IN GENERAL.—Notwithstanding any 7 other provision of this title, the Secretary may 8 not pay insurance benefits to any mortgagee of 9 a single family mortgage insured under this Act 10 unless the mortgagee or other servicer for the 11 mortgage has provided documentation to the 12 Secretary that is sufficient to demonstrate com- 13 pliance with any requirements of the Secretary 14 applicable to the mortgage relating to loss miti- 15 gation. 16 ‘‘(B) RULE OF CONSTRUCTION.—Nothing 17 in this paragraph may be construed to limit the 18 authority of the Secretary to impose civil mone- 19 tary penalties.’’. 20 SEC. 3. HUD OVERSIGHT OF SERVICERS. 21 Section 533 of the National Housing Act (12 U.S.C. 22 1735f–11) is amended by adding at the end the following: 23 ‘‘(d) OVERSIGHT OF MORTGAGE SERVICERS.— 24 ‘‘(1) OVERSIGHT.— 25 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2279.IS S2279 kjohnson on DSK79L0C42 with BILLS 3 •S 2279 IS ‘‘(A) IN GENERAL.—The Secretary shall 1 conduct oversight of servicers of single family 2 mortgages insured under this Act on a regular 3 and ongoing basis and in a manner designed 4 to— 5 ‘‘(i) ensure that the servicers comply 6 with the requirements of this Act and the 7 standards and guidelines established by the 8 Secretary for the servicing of those mort- 9 gages; and 10 ‘‘(ii) identify systemic problems and 11 trends with the compliance described in 12 clause (i). 13 ‘‘(B) LOSS MITIGATION REQUIREMENTS.— 14 The oversight conducted under subparagraph 15 (A) shall include— 16 ‘‘(i) oversight designed to ensure that 17 the servicers comply with the requirements 18 under this Act, and the standards and 19 guidelines established by the Secretary, for 20 loss mitigation; and 21 ‘‘(ii) appropriate sampling and review 22 of the compliance described in clause (i), 23 including direct information collection 24 through generally accepted means from 25 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2279.IS S2279 kjohnson on DSK79L0C42 with BILLS 4 •S 2279 IS borrowers whose files were sampled, such 1 as surveys, focus groups, interview, or 2 other similar measures. 3 ‘‘(2) CORRECTIVE ACTION.—The Secretary 4 shall take such actions as may be necessary to rem- 5 edy failures by servicers of single family mortgages 6 insured under this Act to comply with the require- 7 ments of this Act and the standards and guidelines 8 established by the Secretary for the servicing of 9 those mortgages, including ordering noncompliant 10 servicers to take corrective actions, including barring 11 foreclosure and cancelling from the borrower’s ac- 12 count balance and from any insurance claim any in- 13 terest and other fees that accrued during periods of 14 noncompliance.’’. 15 SEC. 4. COMPLAINT PROCEDURE REGARDING LOSS MITI- 16 GATION. 17 Title V of the National Housing Act (12 U.S.C. 18 1731a et seq.) is amended by adding at the end the fol- 19 lowing: 20 ‘‘SEC. 543. COMPLAINT PROCEDURE REGARDING LOSS 21 MITIGATION. 22 ‘‘(a) COMPLAINT PROCEDURE FOR BORROWERS.— 23 ‘‘(1) FEATURES.—The Secretary shall establish 24 and maintain a procedure for mortgagors under sin- 25 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2279.IS S2279 kjohnson on DSK79L0C42 with BILLS 5 •S 2279 IS gle family mortgages insured under this Act to reg- 1 ister complaints with the Secretary regarding serv- 2 icing, including loss mitigation actions, which 3 shall— 4 ‘‘(A) include making available to the public 5 a website of the Department of Housing and 6 Urban Development, an e-mail address, a phone 7 number, and a mailing address for registering 8 complaints; and 9 ‘‘(B) provide an opportunity for servicers 10 to respond to complaints and submit informa- 11 tion regarding complaints. 12 ‘‘(2) ATTEMPT TO RESOLVE.—For each com- 13 plaint registered under the procedure established 14 under this subsection, the Secretary shall— 15 ‘‘(A) review the complaint and any re- 16 sponse by the servicer; and 17 ‘‘(B) seek to resolve any dispute between 18 the mortgagor and the servicer and make a de- 19 termination regarding the complaint. 20 ‘‘(3) USE OF INFORMATION.—In making any 21 determination regarding the compliance of a servicer 22 with the requirements, standards, and guidelines for 23 servicing, including in identifying systemic problems 24 and trends with servicing, the Secretary shall take 25 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2279.IS S2279 kjohnson on DSK79L0C42 with BILLS 6 •S 2279 IS into consideration information obtained under the 1 procedure established under this subsection. 2 ‘‘(b) NOTIFICATION OF OPPORTUNITY TO APPEAL.— 3 Upon making a determination with respect to a complaint 4 regarding servicing, the Secretary shall notify the com- 5 plainant of— 6 ‘‘(1) the determination; 7 ‘‘(2) the opportunity for the complainant to ap- 8 peal an adverse determination under the procedure 9 established under subsection (a); and 10 ‘‘(3) the requirements for and how to initiate 11 an appeal described in paragraph (2). 12 ‘‘(c) APPEALS PROCEDURE.— 13 ‘‘(1) ESTABLISHMENT.—The Secretary— 14 ‘‘(A) shall provide a procedure for mortga- 15 gors to appeal an adverse determination by the 16 Secretary regarding a complaint registered 17 under the procedure established under sub- 18 section (a); and 19 ‘‘(B) if appropriate, may take action pur- 20 suant to section 533(d)(2) with respect to a de- 21 cision on an appeal described in subparagraph 22 (A). 23 ‘‘(2) LIMITATION.—The procedure established 24 under this subsection may not provide an appeal for 25 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2279.IS S2279 kjohnson on DSK79L0C42 with BILLS 7 •S 2279 IS any complaint that was previously appealed under 1 the procedure. 2 ‘‘(d) PROHIBITION ON FORECLOSURE.—The Sec- 3 retary shall prohibit the foreclosure of a mortgage during 4 any period that a complaint or appeal regarding the mort- 5 gage is pending under the procedures established under 6 this section and during a reasonable period after a com- 7 plainant is notified of a determination regarding a com- 8 plaint that provides the complainant an opportunity to ap- 9 peal the decision. 10 ‘‘(e) REPORTING.—The Secretary shall submit an an- 11 nual report to Congress regarding complaints received 12 under the procedure maintained under subsection (a), 13 which shall— 14 ‘‘(1) specify the number of complaints received, 15 disaggregated by types of complaints, status of com- 16 plaints, geographic distribution of complaints, and 17 average times for resolution of complaints; 18 ‘‘(2) include relevant information submitted by 19 servicers and any other information that the Sec- 20 retary considers relevant; and 21 ‘‘(3) comply with any applicable privacy protec- 22 tions.’’. 23 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2279.IS S2279 kjohnson on DSK79L0C42 with BILLS 8 •S 2279 IS SEC. 5. NOTICE TO BORROWERS OF LOSS MITIGATION STA- 1 TUS AND DECISIONS. 2 Section 204(a) of the National Housing Act (12 3 U.S.C. 1710(a)), as amended by section 2, is amended by 4 adding at the end the following: 5 ‘‘(11) NOTICE TO BORROWERS OF LOSS MITIGA- 6 TION STATUS AND DECISIONS.— 7 ‘‘(A) REQUIRED NOTICE.—The Secretary 8 shall require that, before any acceleration of the 9 indebtedness due under a mortgage, the servicer 10 for the mortgage shall provide written notice to 11 the mortgagor that includes— 12 ‘‘(i) a summary explaining how the 13 servicer applied the loss mitigation option 14 priority analysis established by the Sec- 15 retary, including the loss mitigation review 16 waterfall under section III.A.2.j.iii of the 17 FHA Single Family Housing Policy Hand- 18 book 4000.1, or any successor provision, 19 and setting forth the actual information 20 entered in applying the analysis; 21 ‘‘(ii) if the servicer did not conduct 22 the analysis described in clause (i) because 23 the servicer determined that the mortgagor 24 did not express any interest in loss mitiga- 25 tion or provide appropriate documents— 26 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2279.IS S2279 kjohnson on DSK79L0C42 with BILLS 9 •S 2279 IS ‘‘(I) a statement of that deter- 1 mination; 2 ‘‘(II) a description of the actions 3 that the servicer took to solicit the 4 borrower for loss mitigation review 5 and obtain appropriate documents; 6 and 7 ‘‘(III) a statement of the dates 8 that the servicer took the actions de- 9 scribed in subclause (II); 10 ‘‘(iii) a statement setting forth the re- 11 sults of the monthly loss mitigation evalua- 12 tions of the servicer for the mortgage re- 13 quired under section 203.605(a) of title 14 24, Code of Federal Regulations, or any 15 successor regulation; 16 ‘‘(iv) with respect to any loss mitiga- 17 tion action for which the mortgagor was 18 determined to be ineligible, an explanation 19 of, and documentation showing, why the 20 mortgagor was determined to be ineligible; 21 ‘‘(v) a statement informing the bor- 22 rower that, upon the request of the bor- 23 rower, the Secretary shall provide the bor- 24 rower with all loss mitigation evaluation 25 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2279.IS S2279 kjohnson on DSK79L0C42 with BILLS 10 •S 2279 IS documentation required by the Secretary 1 with respect to the mortgage, including the 2 monthly evaluations described in clause 3 (iii); and 4 ‘‘(vi) information describing the proce- 5 dure under section 543(a) for registering 6 complaints regarding loss mitigation and 7 the procedure under section 543(c) for ap- 8 pealing the decision of a servicer regarding 9 loss mitigation actions. 10 ‘‘(B) REFERENCES.—The notice required 11 under subparagraph (A) shall— 12 ‘‘(i) contain references to the applica- 13 ble provisions of the applicable handbook 14 of the Department of Housing and Urban 15 Development regarding ongoing loss miti- 16 gation reviews and the standards for those 17 reviews; and 18 ‘‘(ii) identify how the provisions de- 19 scribed in clause (i) may be accessed on a 20 publicly accessible website of the Depart- 21 ment of Housing and Urban Develop- 22 ment.’’. 23 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2279.IS S2279 kjohnson on DSK79L0C42 with BILLS 11 •S 2279 IS SEC. 6. RULE OF CONSTRUCTION. 1 Nothing in this Act may be construed to supercede, 2 or exempt any person from complying with, any provision 3 of the Real Estate Settlement Procedures Act of 1974 (12 4 U.S.C. 2601 et seq.) or any regulations issued under that 5 Act. 6 Æ VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6301 E:\BILLS\S2279.IS S2279 kjohnson on DSK79L0C42 with BILLS