A the bill intended to address the potential for lawsuits against mortgage holders or servicers who enter into modifications or workout agreements with borrowers by investors is making its way before the House Committee on Financial Services and was addressed at length in a hearing held by the Committee on December 6th.
The ”Emergency Mortgage Loan Modification Act of 2007” (HR 4178) introduced by Representative Michael Castle (DE) would amend the Truth in Lending Act to grant a safe harbor for holders of mortgage loans who enter into loan modifications or workout agreements with certain troubled borrowers.
Emergency Mortgage Loan Modification Act of 2007 (Introduced in House)
HR 4178 IH
November 14, 2007
Mr. CASTLE introduced the following bill; which was referred to the Committee on Financial Services
- 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 2007′.
SEC. 2. SAFE HARBOR FOR HOLDERS ENGAGED IN TROUBLED DEBT RESTRUCTURING WITH REGARD TO RESIDENTIAL MORTGAGE LOANS.
- (a) In General- Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by inserting after section 129 the following new section:
`Sec. 129A. Safe harbor for holders engaged in troubled debt restructuring with regard to residential mortgage loans
- `(a) In General- A creditor, assignee, servicer, securitizer, or other holder of a residential mortgage loan shall not be liable to any person under any law or regulation of the United States or any law or regulation of any State or political subdivision of any State, or under any contract, for entering into a qualified loan modification or workout plan on any residential mortgage loan, as provided by this subsection, that was consummated on or after January 1, 2004.
- `(b) Definitions- For purposes of this section, the following definitions shall apply:
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- `(1) QUALIFIED LOAN MODIFICATION OR WORKOUT PLAN- The term `qualified loan modification or workout plan’ means a troubled debt restructuring that meets the following criteria with respect to a residential mortgage loan:
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- `(A) The loan is in payment default under the loan agreements or payment default is imminent or reasonably foreseeable.
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- `(B) The creditor, assignee, servicer, securitizer, or other holder reasonably believes that the net present value to be realized on the loan, as determined under the applicable contract, will be maximized by entering into the workout plan.
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- `(2) QUALIFIED MORTGAGE-
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- `(A) IN GENERAL- The term `qualified mortgage’ means–
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- `(i) any residential mortgage loan that constitutes a first lien on the dwelling or real property securing the loan and either–
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- `(I) has an annual percentage rate that does not equal or exceed the yield on securities issued by the Secretary of the Treasury under chapter 31 of title 31, United States Code, that bear comparable periods of maturity by more than 3 percentage points; or
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- `(II) has an annual percentage rate that does not equal or exceed the most recent conventional mortgage rate, or such other annual percentage rate as may be established by regulation under paragraph (6), by more than 175 basis points;
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- `(ii) any residential mortgage loan that is not the first lien on the dwelling or real property securing the loan and either–
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- `(I) has an annual percentage rate that does not equal or exceed the yield on securities issued by the Secretary of the Treasury under chapter 31 of title 31, United States Code, that bear comparable periods of maturity by more than 5 percentage points; or
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- `(II) has an annual percentage rate that does not equal or exceed the most recent conventional mortgage rate, or such other annual percentage rate as may be established by regulation under paragraph (6), by more than 375 basis points; and
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- `(iii) a loan made or guaranteed by the Secretary of Veterans Affairs.
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- `(B) MOST RECENT CONVENTIONAL MORTGAGE RATE- The term `most recent conventional mortgage rate’ means the contract interest rate on commitments for fixed-rate first mortgages most recently published in the Federal Reserve Statistical Release on selected interest rates (daily or weekly), and commonly referred to as the H.15 release (or any successor publication), in the week preceding a date of determination for purposes of applying this subsection.
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- `(3) RESIDENTIAL MORTGAGE LOAN DEFINED- For purposes of this subsection, the term `residential mortgage loan’ means a loan that is secured by a lien on an owner-occupied dwelling and is not a qualified mortgage.
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- `(4) SECURITIZATION VEHICLE- The term `securitization vehicle’ means a trust, corporation, partnership, limited liability entity, or special purpose entity that–
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- `(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
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- `(B) holds such loans.
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- `(5) SECURITIZER- The term `securitizer’ means the person that transfers, conveys, or assigns, or causes the transfer, conveyance, or assignment of, residential mortgage loans, including through a special purpose vehicle, to any securitization vehicle, excluding any trustee that holds such loans solely for the benefit of the securitization vehicle.
- `(c) Effective Period- This section shall apply only with respect to qualified loan modification or workout plans initiated during the 6-month period beginning on the date of the enactment of this section.’.
- (b) Clerical Amendment- The table of sections for chapter 2 of the Truth in Lending Act is amended by adding after the item relating to section 129 the following new item:
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- `129A. Safe harbor for holders engaged in troubled debt restructuring with regard to residential mortgage loans.’.
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This NY Times Article appears online today: “Central Bankers to Lend Billions in Credit Crisis”
“A day after the Federal Reserve disappointed investors with a modest cut in interest rates, central banks in North America and Europe on Wednesday announced the most aggressive infusion of capital into the banking system since the terrorist attacks of September 2001.”
“Economists said the move was intended to deal with specific problems in the interbank lending market and would not allay the biggest problems in the credit markets related to the weakening American housing market, where prices are falling and defaults and foreclosures are rising.”
“Central bank officials first discussed the plan as early as September, but discussions were put aside when markets appeared to stabilize in October. They were revived this month in conference calls among officials of several nations.”
THIS PART IS VERY INTERESTING:
“When markets are functioning properly, banks easily and regularly borrow money from each other at rates that are only slightly higher than what the United States government, considered one of the world\’e2\’80\’99s safest borrowers, pays when it issues Treasury bills. Like homeowners who borrow against the value of their property, banks borrow against the securities they own. But with markets increasingly uncertain about the quality of banks\’e2\’80\’99 holdings, lending between banks has slowed and become more expensive. Banks are also less likely to extend loans because they need to hold more capital on their books.”
Read the full article here:
http://www.nytimes.com/2007/12/13/business/13fed.html?pagewanted=1&th&emc=th
All I can say is that this is a sign of the times.
My wife and I have never missed a loan payment or been late .We where approved for an FHA Loan ,and was told our house needed to appraise at 220 to be approved.It appraised at 225 .The appraisal was done only two months ago and the Mortgage company now is telling my wife and I that the comps on the appraisal are to old. This process has taken over three months and after running around and spending over 50.00 to fax them every nesacary document only to find out they are saying the comps are to old on appraisal .I have attached appraisal for you could take a look at it.
Everything I read is that you are trying to help people like me with a adjustable loan ready to adjust in a couple of months,but these Mortgage Companies who are offering these FHA loans are making it impossible for even people who have paid their loan on time never missing a payment to get these loans.
Our mortgage will increase to 600.00 more making it really difficult for my wife and I .I am on Social Security Disability ,and if we can’t get a FHA loan we could be possibly facing foreclosure.This is the second Mortgage company telling us we where approved and FHA loan only to come up with some lame accuse why they can’t close the loan.The last one told us that my wife needed to make 35.000,and she did this year a year ,but they said she only made 30.000 in 2006.What I read today on line that hardly anyone is being approved for these loans causing foreclosures through out our nation.
If possible after reviewing attached appraisal and you feel it can be used ,could you call Ocean Side Mortgage to tell them the loan can be approved with this appraisal.
The owners name is Steven Stone .His number is 609-994-3496 extension 14.His cell is 732-616-0876.This company has made the loan process very drug out and stressful and has taking a toll on my wife and I physically and mentally heath ,as I am disabled already. Please forward this to anyone that may be able to help us. Thank you .Ken and Cindy Tedesco. Phone number 856-222-0280 or cell 609-502-2091