Sec. 103. Conditions for the sale of real estate-owned properties and non-performing loans

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Congress finds that— the Federal Housing Administration, the Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation provide critical homeownership opportunities that greatly benefit individuals, families, and communities; and it is the purpose of this section to— preserve owner-occupied homes with mortgages insured by the Federal Housing Administration or purchased by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation for continued use as owner-occupied homes; and direct that, upon the sale of those properties or transfer of those mortgages, certain percentages of those properties are sold to low- and moderate-income homeowners.

Title II of the National Housing Act ( 12 U.S.C. 1707 et seq. ) is amended by adding at the end the following: In this section— the term Claim Without Conveyance of Title program means the program of the Federal Housing Administration carried out under section 203.368 of title 24, Code of Federal Regulations, or any successor regulation; and the term community partner has the meaning given the term nonprofit organization in section 229 of the Low-Income Housing Preservation and Resident Homeownership Act of 1990 ( 12 U.S.C. 4119 ).

Not later than 1 year after the date of enactment of this section, the Secretary shall develop programs within the Federal Housing Administration to ensure that not less than 75 percent of the single-family residential properties conveyed to the Federal Housing Administration after foreclosure or conveyed to third parties under the Claim Without Conveyance of Title program are sold— directly to an owner-occupant; or to community partners that will— rehabilitate or develop the property; and sell the property to an owner-occupant.

Not later than 1 year after the date of enactment of this section, the Secretary shall develop guidelines for the Claim Without Conveyance of Title program that provide an exclusive listing period during which only eligible Governmental Entities, HUD-approved Nonprofit Organizations, and Owner-Occupant Buyers may submit bids. Unless the Secretary provides prior approval, the Secretary shall prohibit any purchaser of a real estate-owned property of the Federal Housing Administration from reselling the property within 15 years of purchase using a land installment contract or through any other mechanism that does not transfer title to the buyer at the time of sale.

In this section— the term community partner has the meaning given the term in section 259; and the term covered mortgage — means any mortgage insured under this title that is secured by a single-family residential property; and includes the promissory note secured by the mortgage described in subparagraph (A). Except as provided in this section, the Secretary may not sell or transfer any covered mortgage. The Secretary— may sell or transfer a covered mortgage only if— the capital level of the Fund is substantially below the capital ratio required under section 205(f)(2); the Secretary certifies that other reasonable measures are not available to restore the Fund to that capital ratio; and the Secretary complies with paragraph (2)(C), if applicable; and may sell or transfer only such covered mortgages as are necessary to assist in restoration of that capital ratio.

If the Secretary intends to sell or transfer a covered mortgage, the Secretary shall provide the current borrower and all owners of record of the property securing the covered mortgage, or require that the current borrower and owners of record be provided, a separate written notice of the intent to sell the covered mortgage that— is mailed via certified and first class mail not less than 90 days before the date on which the loan is included in any proposed sale; and includes— a description of the loss mitigation options of the Federal Housing Administration that are available to borrowers in financial distress and the obligation of servicers to consider borrowers in default for those options; a description of the actions that the servicer of the loan has taken to review and implement those options for the borrower; and a description of the procedures the borrower may use to contest with the Secretary the compliance by the servicer with that obligation.

The determination of the Secretary to authorize the sale of a mortgage insured under this title shall be reviewable under chapter 7 of title 5, United States Code, for abuse of discretion and arbitrary and capricious agency action. The Secretary may not sell any covered mortgage through any type of non-performing loan sale auction program until the Secretary issues rules, through the notice and comment rule making procedures under section 553 of title 5, United States Code, that address essential aspects of any non-performing loan sale program, including— the method of selection of loans for sale; notice to borrowers prior to inclusion of the loan in a sale; and review of loss mitigation status prior to the sale, selection of eligible bidders, loss mitigation guidelines applicable to loan purchasers, and reporting requirements for purchasers.

As a condition to payment of an insurance claim under this title in connection with any non-performing loan sale, the lender or servicer of the loan shall provide the Secretary and the borrower with written certification of the loss mitigation review contained in the FHA Single Family Housing Policy Handbook 4000.1, or any successor handbook, which certification shall include a description of the actions the lender or servicer has taken, prior to transfer of the loan to the Secretary, to— review the borrower for all available loss mitigation options of the Federal Housing Administration; and implement the options described in clause

(i)that are appropriate to the borrower. Any false statement provided in a certification described in subparagraph

(A)shall be a basis for— recovery by the Secretary of any amounts paid under the insurance claim and any other penalties and sanctions authorized under Federal law; and a private right of action by the borrower against the lender and servicer, with remedies to include compensatory and punitive damages and an assessment of costs and attorney's fees. Unless a bona fide purchaser has acquired title to the property as a primary residence— a certification described in subparagraph

(A)that contains a false statement shall be a basis for revoking the transfer of the property; and the pre-sale lender and servicer of the property shall— resume servicing the loan as a loan insured under this title; and reimburse the Secretary for any insurance claim paid and all costs related to the sale of the property. Each purchaser of a covered mortgage shall offer the borrower on the covered mortgage loss mitigation options that allow for payment reduction at least as great as would be available to the borrower if the loan had not been sold. The specific formula, calculations, waterfall steps, and other terms for appropriate loss mitigation options described in subparagraph

(A)shall be published by the Secretary, made available to the public, and included in a written notice given to borrowers before any acceleration or foreclosure is initiated after a loan sale. With respect to a transferee, including any subsequent transferee, of a covered mortgage that is sold under this title— the transferee shall certify in writing to the Secretary that the transferee will comply with the provisions of this section in the marketing and transfer of any property received in the disposition of any transferred loan; the transferee shall provide to the Secretary records documenting that the transfers of those properties are in compliance with this section; and the failure of the Secretary or the transferee to comply with the requirements under this section for a loan in default shall be a defense to foreclosure, and a transferee may not execute a foreclosure judgment or order of sale, or conduct a foreclosure sale, until the transferee has complied with all requirements under this section. With respect to covered mortgages that are sold under this title and acquired by the buyer through foreclosure sale, not less than 90 percent of the properties that are the subject of the covered mortgages shall be— sold to owner-occupants; operated or transferred to an entity that will operate the property as affordable rental housing for households below 80 percent of the area median income for a period of not less than 15 years; or transferred or donated to a nonprofit agency that is certified by the Secretary and will redevelop the property for owner occupancy or affordable rental housing. The Secretary shall implement policies, procedures, and controls to— identify and recruit community partners; engage in consultations with community partners before the sale of a pool of covered mortgages under this title to determine whether that sale can be designed to meet the specific needs of the communities served by the community partners; and prioritize the sale of pools of single-family mortgages to community partners by— designing pools of covered mortgages for direct sale to a community partner, the price of which shall be set by the Secretary based on a pricing model that considers— the current fair market value of the properties; and the potential impact of foreclosures on those properties to the value of other homes that secure mortgages insured under this title in the same census tract; or in the case of an auction, if the winning bid is not from a community partner, permitting any community partner that bid during that same auction to have a final opportunity to enter a higher bid on the pool. . Section 302 of the Federal National Mortgage Association Charter Act ( 12 U.S.C. 1717 ) is amended by adding at the end the following: In this subsection, the term covered mortgage — means any mortgage that is secured by a single-family residential property; and includes the promissory note secured by the mortgage described in subparagraph (A). The corporation may not sell or transfer any covered mortgage under this section unless the requirements of this subsection are met. If the corporation intends to sell or transfer a covered mortgage, the corporation shall provide the current borrower and all owners of record of the property securing the covered mortgage, or require that the current borrower and owners of record be provided, a separate written notice of the intent to sell the covered mortgage that— is mailed via certified and first class mail not less than 90 days before the date on which the loan is included in any proposed sale; and includes— a description of the loss mitigation options of the corporation that are available to borrowers in financial distress and the obligation of servicers to consider borrowers in default for those options; a description of the actions that the servicer of the loan has taken to review and implement those options for the borrower; and a description of the procedures the borrower may use to contest with the corporation the compliance by the servicer with that obligation. The Federal Housing Finance Agency, as receiver for the corporation, may not authorize the corporation to sell any covered mortgage through any type of non-performing loan sale auction program until the Director of the Federal Housing Finance Agency issues rules, through the notice and comment rule making procedures under section 553 of title 5, United States Code, that address essential aspects of any non-performing loan sale program, including— the method of selection of loans for sale; notice to borrowers prior to inclusion of the loan in a sale; and review of loss mitigation status prior to the sale, selection of eligible bidders, loss mitigation guidelines applicable to loan purchasers, and reporting requirements for purchasers. Each purchaser of a covered mortgage shall offer the borrower on the covered mortgage loss mitigation options that allow for payment reduction at least as great as would be available to the borrower if the loan had not been sold. The specific formula, calculations, waterfall steps, and other terms for loss mitigation options described in subparagraph

(A)shall be published by the corporation, made available to the public, and included in a written notice given to borrowers before any acceleration or foreclosure is initiated after a loan sale. With respect to a transferee, including any subsequent transferee, of a covered mortgage that is sold by the corporation under this section— the transferee shall certify in writing to the corporation that the transferee will comply with the provisions of this subsection in the marketing and transfer of any property received in the disposition of any transferred loan; the transferee shall provide to the corporation records documenting that the transfers of those properties are in compliance with this subsection; and the failure of the corporation or the transferee to comply with the requirements under this subsection for a loan in default shall be a defense to foreclosure, and a transferee may not execute a foreclosure judgment or order of sale, or conduct a foreclosure sale, until the transferee has complied with all requirements under this subsection. With respect to covered mortgages that are sold by the corporation under this section and foreclosed upon by the buyer, not less than 90 percent of the properties that are the subject of the covered mortgages in an auction shall be— sold to owner-occupants; operated or transferred to an entity that will operate the property as affordable rental housing for households below 80 percent of the area median income for a period of not less than 15 years; or transferred or donated to a nonprofit agency that is certified by the corporation and will redevelop the property for owner occupancy or affordable rental housing. The corporation shall implement policies, procedures, and controls to— identify and recruit community partners; engage in consultations with community partners before the sale of a pool of covered mortgages under this section to determine whether that sale can be designed to meet the specific needs of the communities served by the community partners; and prioritize the sale of pools of single-family mortgages to community partners by— designing pools of covered mortgages for direct sale to a community partner, the price of which shall be set by the corporation based on a pricing model that considers— the current fair market value of the properties; and the potential impact of foreclosures on those properties to the value of other homes in the same census tract; or in the case of an auction, if the winning bid is not from a community partner, permitting any community partner that bid during that same auction to have a final opportunity to enter a higher bid on the pool. . Section 305 of the Federal Home Loan Mortgage Corporation Act ( 12 U.S.C. 1454 ) is amended by adding at the end the following: In this subsection, the term covered mortgage — means any mortgage that is secured by a single-family residential property; and includes the promissory note secured by the mortgage described in subparagraph (A). The Corporation may not sell or transfer any covered mortgage under this section unless the requirements of this subsection are met. If the Corporation intends to sell or transfer a covered mortgage, the Corporation shall provide the current borrower and all owners of record of the property securing the covered mortgage, or require that the current borrower and owners of record be provided, a separate written notice of the intent to sell the covered mortgage that— is mailed via certified and first class mail not less than 90 days before the date on which the loan is included in any proposed sale; and includes— a description of the loss mitigation options of the Corporation that are available to borrowers in financial distress and the obligation of servicers to consider borrowers in default for those options; a description of the actions that the servicer of the loan has taken to review and implement those options for the borrower; and a description of the procedures the borrower may use to contest with the Corporation the compliance by the servicer with that obligation. The Federal Housing Finance Agency, as receiver for the Corporation, may not sell any covered mortgage through any type of non-performing loan sale auction program until the Director of the Federal Housing Finance Agency issues rules, through the notice and comment rule making procedures under section 553 of title 5, United States Code, that address essential aspects of any non-performing loan sale program, including— the method of selection of loans for sale; notice to borrowers prior to inclusion of the loan in a sale; and review of loss mitigation status prior to the sale, selection of eligible bidders, loss mitigation guidelines applicable to loan purchasers, and reporting requirements for purchasers. Each purchaser of a covered mortgage shall offer the borrower on the covered mortgage loss mitigation options that allow for payment reduction at least as great as would be available to the borrower if the loan had not been sold. The specific formula, calculations, waterfall steps, and other terms for loss mitigation options described in subparagraph

(A)shall be published by the Corporation, made available to the public, and included in a written notice given to borrowers before any acceleration or foreclosure is initiated after a loan sale. With respect to a transferee, including any subsequent transferee, of a covered mortgage that is sold by the Corporation under this section— the transferee shall certify in writing to the Corporation that the transferee will comply with the provisions of this subsection in the marketing and transfer of any property received in the disposition of any transferred loan; the transferee shall provide to the Corporation records documenting that the transfers of those properties are in compliance with this subsection; and the failure of the Corporation or the transferee to comply with the requirements under this subsection for a loan in default shall be a defense to foreclosure, and a transferee may not execute a foreclosure judgment or order of sale, or conduct a foreclosure sale, until the transferee has complied with all requirements under this subsection. With respect to covered mortgages that are sold by the Corporation under this section and foreclosed upon by the buyer, not less than 90 percent of the properties that are the subject of the covered mortgages in an auction shall be— sold to owner-occupants; operated or transferred to an entity that will operate the property as affordable rental housing for households below 80 percent of the area median income for a period of not less than 15 years; or transferred or donated to a nonprofit agency that is certified by the Corporation and will redevelop the property for owner occupancy or affordable rental housing. The Corporation shall implement policies, procedures, and controls to— identify and recruit community partners; engage in consultations with community partners before the sale of a pool of covered mortgages under this section to determine whether that sale can be designed to meet the specific needs of the communities served by the community partners; and prioritize the sale of pools of single-family mortgages to community partners by— designing pools of covered mortgages for direct sale to a community partner, the price of which shall be set by the Corporation based on a pricing model that considers— the current fair market value of the properties; and the potential impact of foreclosures on those properties to the value of other homes in the same census tract; or in the case of an auction, if the winning bid is not from a community partner, permitting any community partner that bid during that same auction to have a final opportunity to enter a higher bid on the pool. . The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4501 et seq. ) is amended by inserting after section 1328 ( 12 U.S.C. 4548 ) the following: An enterprise may not conduct bulk auctions or other group sales of single family re-performing residential loans unless the following requirements are met: The enterprise establishes a system that provides priority to Federal, State, local, or Tribal governments or nonprofit organizations that have the capacity and experience required for buying, servicing, and resolving single family mortgage loans in a manner that promotes affordable housing, fair housing, affordable homeownership, provision of housing counseling, or neighborhood stabilization. Clear, written notice is sent by the enterprise or servicer through certified and first-class mail to the borrower and all owners of record, with a copy sent to the enterprise if sent by the servicer, not less than 90 days before the inclusion of the loan in any proposed sale— stating that the loan will be included in a bulk auction or group sale of re-performing loans; and describing the bulk auction or group sale process, including— the loss mitigation or other protections available to the borrower and other owners of record both before and after the auction or sale; and the obligations of the servicer of the loan before and after the auction or sale, including loss mitigation requirements. The enterprise requires in the terms of the bulk auction or group sale that purchasers take loans subject to the following requirements: The purchaser is required to offer targeted payment relief options to borrowers that become more than 60 days delinquent on their mortgage after their loan is sold that includes deferral of principal and term extension options that reduce payments to an affordable level. The purchaser is required to offer a deferral program to borrowers that become more than 60 days delinquent on their mortgage after their loan is sold that offers terms and protections at least as favorable as those available under loss mitigation guidelines of the enterprise, including the absence of fees, to borrowers who can afford their pre-hardship mortgage payment. Failure by the purchaser to follow the established loss mitigation guidelines shall serve as a defense to a judicial foreclosure and a basis to enjoin or otherwise stay a non-judicial foreclosure. Data reporting as provided under subsection (b)(1). If a property becomes vacant, the purchaser shall not release the lien until the property is sold or donated. Use of contract for deed, lease to own, or a land installment contract to sell or otherwise transfer any property that is secured by a purchased loan shall be prohibited unless the tenant or purchaser is a nonprofit organization. During the 4-year period following any auction or sale of single family re-performing residential mortgage loans under subsection (a), the Director shall require the enterprise to collect from each purchaser of such loans, including any subsequent purchaser of a loan, quarterly loan-level data regarding the treatment and outcome of the loan, including— loan characteristics, including loan type, remaining loan term, loan to value ratio, number of months in arrears, and loan status; loss mitigation data, including whether loss mitigation was provided by the purchaser, debt-to-income ratio and percent payment reduction for any modified loans, and performance of modified loans; demographic data for each borrower and any co-borrower, including race, national origin, sex, ZIP Code, and census tract, and, if available, disability status and veteran status; and other purchaser actions, including charge offs and resales of loans and dates for such actions. The Director shall submit to Congress, and make publicly available at no cost to the public in a readily accessible format on the website of the Agency, semi-annual reports on— loans sold in an auction or sale under subsection

(a)by each enterprise, disaggregated by pool, including— the number of loans and types of loans; mean and median delinquency and loan to value ratios at the time of the sale; the number and percentage of loans modified prior to auction or sale; and demographic and geographic data, including property locations by census tract or larger geographic location if necessary to protect personally identifiable information; the performance of loans after an auction or sale under subsection (a), disaggregated by loan pool, including the initial purchaser, current owner, current servicer, data summarizing any alternatives to foreclosure offered and enacted, and data summarizing the data collected under subparagraph (A); and the results of a fair lending analysis conducted based on the data in subparagraphs

(A)and

(B)to identify any discriminatory impacts or outcomes associated with the auctions or sales. The enterprises may forcibly retain loans or properties, without providing compensation, from purchasers that do not meet the requirements under subsection (a)(3). The Director shall issue regulations defining the terms of permissible auctions or sales in accordance with the requirements in this section. .

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Sec. 103

Conditions for the sale of real estate-owned properties and non-performing loans

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