FHA Foreclosure Prevention Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 3958 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 to prevent foreclosures on FHA borrowers, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JULY 25, 2019 Ms. WATERS (for herself, Mrs. CAROLYN B. MALONEY of New York, Mr. CLAY, Ms. TLAIB, Mr. FOSTER, and Mr. CLEAVER) introduced the fol- lowing bill; which was referred to the Committee on Financial Services 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 to prevent foreclosures on FHA borrowers, 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\H3958.IH H3958 kjohnson on DSK79L0C42 with BILLS 2 •HR 3958 IH SEC. 2. DOCUMENTATION OF LOSS MITIGATION EFFORTS. 1 Subsection (a) of section 204 of the National Hous- 2 ing Act (12 U.S.C. 1710(a)) is amended by adding at the 3 end the following new paragraph: 4 ‘‘(10) DOCUMENTATION OF LOSS MITIGATION 5 EFFORTS.—Notwithstanding any other provision of 6 this title, the Secretary may not pay insurance bene- 7 fits to any mortgagee of a single family mortgage in- 8 sured under this Act unless the mortgagee or other 9 servicer for the mortgage has provided documenta- 10 tion to the Secretary that is sufficient to dem- 11 onstrate compliance with any requirements of the 12 Secretary applicable to such mortgage relating to 13 loss mitigation. This paragraph may not be con- 14 strued to limit the authority of the Secretary to im- 15 pose civil monetary penalties.’’. 16 SEC. 3. HUD OVERSIGHT OF SERVICERS. 17 Section 533 of the National Housing Act (12 U.S.C. 18 1735f–11) is amended by adding at the end the following 19 new subsection: 20 ‘‘(d) OVERSIGHT OF MORTGAGE SERVICERS.— 21 ‘‘(1) OVERSIGHT.— 22 ‘‘(A) IN GENERAL.—The Secretary shall 23 conduct oversight of servicers of single family 24 mortgages insured under this Act on a regular 25 and ongoing basis and in a manner designed to 26 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3958.IH H3958 kjohnson on DSK79L0C42 with BILLS 3 •HR 3958 IH ensure that such servicers comply with the re- 1 quirements of this Act and the standards and 2 guidelines established by the Secretary for serv- 3 icing of such mortgages and to identify systemic 4 problems and trends with such compliance. 5 ‘‘(B) LOSS MITIGATION REQUIREMENTS.— 6 Such oversight shall include oversight designed 7 to ensure that such servicers comply with the 8 requirements under this Act, and the standards 9 and guidelines established by the Secretary, for 10 loss mitigation, and shall include appropriate 11 sampling and review of such servicer compli- 12 ance, including direct information collection 13 through generally accepted means from bor- 14 rowers whose files were sampled, such as sur- 15 veys, focus groups, interview, or other similar 16 measures. 17 ‘‘(2) CORRECTIVE ACTION.—The Secretary 18 shall take such actions as may be necessary to rem- 19 edy failures by servicers of single family mortgages 20 insured under this Act to comply with the require- 21 ments of this Act and the standards and guidelines 22 established by the Secretary for servicing of such 23 mortgages, including ordering non-compliant servi- 24 cers to take corrective actions, including barring 25 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3958.IH H3958 kjohnson on DSK79L0C42 with BILLS 4 •HR 3958 IH foreclosure and cancelling from the borrowers ac- 1 count balance and from any insurance claim any in- 2 terest and other fees that accrued during periods of 3 noncompliance.’’. 4 SEC. 4. COMPLAINT PROCEDURE REGARDING LOSS MITI- 5 GATION. 6 Title V of the National Housing Act (12 U.S.C. 7 1731a et seq.) is amended by adding at the end the fol- 8 lowing new section: 9 ‘‘SEC. 543. COMPLAINT PROCEDURE REGARDING LOSS 10 MITIGATION. 11 ‘‘(a) COMPLAINT PROCEDURE FOR BORROWERS.— 12 ‘‘(1) FEATURES.—The Secretary shall establish 13 and maintain a procedure for mortgagors under sin- 14 gle family mortgages insured under this Act to reg- 15 ister complaints with the Secretary regarding serv- 16 icing, including loss mitigation actions, which shall 17 include making available to the public a website of 18 the Department, an e-mail address, a phone number, 19 and a mailing address for such purpose. Such proce- 20 dure shall provide an opportunity for servicers to re- 21 spond to such complaints and submit information re- 22 garding complaints. 23 ‘‘(2) ATTEMPT TO RESOLVE.—For each com- 24 plaint registered under the procedure established 25 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3958.IH H3958 kjohnson on DSK79L0C42 with BILLS 5 •HR 3958 IH pursuant to this subsection, the Secretary shall re- 1 view the complaint and any response by the servicer 2 and shall seek to resolve any dispute between the 3 mortgagor and the servicer and make a determina- 4 tion with regard to complaint. 5 ‘‘(3) USE OF INFORMATION.—In making any 6 determinations regarding servicers’ compliance with 7 the requirements, standards, and guidelines for serv- 8 icing, including in identifying systemic problems and 9 trends with servicing, the Secretary shall take into 10 consideration information obtained under the com- 11 plaint procedure under this subsection. 12 ‘‘(b) NOTIFICATION OF OPPORTUNITY TO APPEAL.— 13 Upon making a determination with respect to a complaint, 14 the Secretary shall notify the complainant of such deter- 15 mination, of the opportunity for the complainant to appeal 16 an adverse determination under the procedure established 17 pursuant to subsection (a), and the requirements for and 18 how to initiate such an appeal. 19 ‘‘(c) APPEALS PROCEDURE.— 20 ‘‘(1) ESTABLISHMENT.—The Secretary shall 21 provide a procedure for mortgagors to appeal an ad- 22 verse determination by the Secretary regarding a 23 complaint registered under the procedure established 24 pursuant to subsection (a), and, if appropriate, may 25 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3958.IH H3958 kjohnson on DSK79L0C42 with BILLS 6 •HR 3958 IH take action pursuant to section 533(d)(2) pursuant 1 to a decision on such an appeal. 2 ‘‘(2) LIMITATION.—The Secretary shall provide 3 that the procedure established pursuant to this sub- 4 section may not provide an appeal for any complaint 5 that was previously appealed under such procedure. 6 ‘‘(d) PROHIBITION ON FORECLOSURE.—The Sec- 7 retary shall prohibit the foreclosure of a mortgage during 8 any period that a complaint or appeal regarding such 9 mortgage is pending under the procedures established pur- 10 suant to this section and during a reasonable period after 11 a complainant is notified of a determination regarding a 12 complaint that provides the complainant an opportunity 13 to appeal such decision. 14 ‘‘(e) REPORTING.—The Secretary shall submit a re- 15 port to the Congress annually regarding complaints re- 16 ceived under the procedure maintained pursuant to sub- 17 section (a), which shall specify the number of complaints 18 received, disaggregated by types of complaints, status of 19 complaints, geographic distribution of complaints, and av- 20 erage times for resolution of complaints, shall include rel- 21 evant information submitted by servicers, and shall in- 22 clude any other information that the Secretary considers 23 relevant. Such report shall comply with any applicable pri- 24 vacy protections.’’. 25 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3958.IH H3958 kjohnson on DSK79L0C42 with BILLS 7 •HR 3958 IH SEC. 5. NOTICE TO BORROWERS OF LOSS MITIGATION STA- 1 TUS AND DECISIONS. 2 Subsection (a) of section 204 of the National Hous- 3 ing Act (12 U.S.C. 1710(a)), as amended by the preceding 4 provisions of this Act, is further amended by adding at 5 the end the following new paragraph: 6 ‘‘(11) NOTICE TO BORROWERS OF LOSS MITIGA- 7 TION STATUS AND DECISIONS.— 8 ‘‘(A) REQUIRED NOTICE.—The Secretary 9 shall require that before any acceleration of the 10 indebtedness due under a mortgage, the servicer 11 for the mortgage shall provide written notice to 12 the mortgagor that includes— 13 ‘‘(i) a summary explaining how the 14 servicer applied the loss mitigation option 15 priority analysis established by the Sec- 16 retary, including the loss mitigation review 17 waterfall under section III.A.2.j.iii of the 18 Secretary’s Handbook 4000.1 or any suc- 19 cessor provision, and setting forth the ac- 20 tual information entered in applying such 21 analysis; 22 ‘‘(ii) with respect to any mortgage for 23 which the servicer did not conduct the 24 analysis referred to in clause (i) because 25 the servicer determined that the mortgagor 26 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3958.IH H3958 kjohnson on DSK79L0C42 with BILLS 8 •HR 3958 IH did not express any interest in loss mitiga- 1 tion or provide appropriate documents— 2 ‘‘(I) a statement of such deter- 3 mination; 4 ‘‘(II) a description of the actions 5 that the servicer took to solicit the 6 borrower for loss mitigation review 7 and obtain appropriate documents; 8 and 9 ‘‘(III) a statement of the dates 10 that the servicer took such actions; 11 and 12 ‘‘(iii) a statement setting forth the re- 13 sults of the servicers’ monthly loss mitiga- 14 tion evaluations for the mortgage required 15 under section 203.605(a) of the Sec- 16 retary’s regulations (24 C.F.R. 17 203.605(a)) or any successor provision; 18 ‘‘(iv) with respect to any loss mitiga- 19 tion action for which the mortgagor was 20 determined to be ineligible, an explanation 21 of, and documentation showing, why the 22 mortgagor was determined to be ineligible; 23 ‘‘(v) a statement informing the bor- 24 rower that, upon the request of the bor- 25 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H3958.IH H3958 kjohnson on DSK79L0C42 with BILLS 9 •HR 3958 IH rower, the Secretary will provide the bor- 1 rower with all loss mitigation evaluation 2 documentation required by the Secretary 3 with respect to the mortgage, including 4 monthly evaluations referred to in clause 5 (iii); and 6 ‘‘(vi) information describing the proce- 7 dure under section 543(a) for registering 8 complaints regarding loss mitigation and 9 the procedure under section 543(c) for ap- 10 pealing a servicer’s decisions regarding loss 11 mitigation actions. 12 ‘‘(B) REFERENCES.—Such notice shall 13 contain references to the applicable provisions 14 of applicable handbook of the Secretary regard- 15 ing ongoing loss mitigation reviews and stand- 16 ards for such reviews and shall identify how 17 such provisions may be accessed on a publicly 18 accessible website of the Department.’’. 19 SEC. 6. RULE OF CONSTRUCTION. 20 Nothing in this Act may be construed to supercede, 21 or exempt any person from complying with, any provision 22 of the Real Estate Settlement Procedures Act of 1974 (12 23 VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H3958.IH H3958 kjohnson on DSK79L0C42 with BILLS 10 •HR 3958 IH U.S.C. 2601 et seq.) or the regulations issued under such 1 Act. 2 Æ VerDate Sep 11 2014 23:35 Aug 03, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6301 E:\BILLS\H3958.IH H3958 kjohnson on DSK79L0C42 with BILLS