Congress moved with light speed to push through a $790 billion stimulus bill, with the goal of turning around the economy, slowing down the foreclosure rate, and helping to turn around this horrendous recession.
One of the items that didn’t make it into the bill was the very popular $15,000 tax credit available to people who purchased a home. This was very popular among the populous and I think would have been a great benefit for the overall economy.
The goal of the overall plan is the following:
(1) modernize the nation’s infrastructure;
(2) enhance America’s energy independence;
(3) expand educational opportunities;
(4) preserve and improve affordable health care;
(5) provide tax relief; and
(6) protect those in greatest need.
Sec. 7001 Mandatory Loan Modifications
The bill includes specific provisions for helping to avoid foreclosure in section 7001. I have included all of the provisions below and given an explanation as well to help you wade through the legal mess.
- This bill made it legal for loan mod agents to collect $2,000 or moderate fees for helping homeowners
- Fees can be paid in a lump sum or monthly
Fees Paid to Eligible Servicers-
(1) IN GENERAL- An eligible servicer may collect reasonable incentive fee payments, as established by the Secretary, not to exceed $2,000 per loan.
(2) CONSULTATION- The fees permitted under this section shall be subject to standards established by the Secretary, in consultation with the Secretary of Housing and Urban Development and the Chairman of the Board of Directors of the Federal Deposit Insurance Corporation, which standards shall–
(A) include an evaluation of whether an eligible mortgage is affordable for the remainder of its term; and
(B) identify a reasonable fee to be paid to the servicer in the event that an eligible mortgage is prepaid.
(3) FORM OF PAYMENT- Fees permitted under this section may be paid in a lump sum or on a monthly basis. If paid on a monthly basis, the fee may only be remitted as long as the loan performs.
(c) Safe Harbor- Notwithstanding any other provision of law, and notwithstanding any investment contract between a servicer and a securitization vehicle, a servicer–
(1) owes any duty to maximize the net present value of the pooled mortgages in the securitization vehicle to all investors and parties having a direct or indirect interest in such vehicle, and not to any individual party or group of parties; and
(2) shall be deemed to act in the best interests of all such investors and parties if the servicer agrees to or implements a modification, workout, or other loss mitigation plan for a residential mortgage or a class of residential mortgages that constitutes a part or all of the pooled mortgages in such securitization vehicle, if–
(A) default on the payment of such mortgage has occurred or is reasonably foreseeable;
(B) the property securing such mortgage is occupied by the mortgagor of such mortgage or the homeowner; and
(C) the servicer reasonably and in good faith believes that the anticipated recovery on the principal outstanding obligation of the mortgage under the modification or workout plan exceeds, on a net present value basis, the anticipated recovery on the principal outstanding obligation of the mortgage through foreclosure;
(3) shall not be obligated to repurchase loans from, or otherwise make payments to, the securitization vehicle on account of a modification, workout, or other loss mitigation plan that satisfies the conditions of paragraph (2); and
(4) if it acts in a manner consistent with the duties set forth in paragraphs (1) and (2), shall not be liable for entering into a modification or workout plan to any person–
(A) based on ownership by that person 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 in the pool;
(B) who is obligated pursuant to a derivative instrument to make payments determined in reference to any loan or any interest referred to in subparagraph (A); or
(C) that insures any loan or any interest referred to in subparagraph (A) under any provision of law or regulation of the United States or any State or political subdivision thereof.
(d) Reporting Requirements-
(1) IN GENERAL- Each servicer shall report regularly, not less frequently than monthly, to the Secretary on the extent and scope of the loss mitigation activities of the mortgage owner.
(2) CONTENT- Each report required by this subsection shall include–
(A) the number and percent of residential mortgage loans receiving loss mitigation that have become performing loans;
(B) the number and percent of residential mortgage loans receiving loss mitigation that have proceeded to foreclosure;
(C) the total number of foreclosures initiated during the reporting period;
(D) data on loss mitigation activities, including the performance of mitigated loans, disagreggated for each form of loss mitigation, which forms may include–
(i) a waiver of any late payment charge, penalty interest, or any other fees or charges, or any combination thereof;
(ii) the establishment of a repayment plan under which the homeowner resumes regularly scheduled payments and pays additional amounts at scheduled intervals to cure the delinquency;
(iii) forbearance under the loan that provides for a temporary reduction in or cessation of monthly payments, followed by a reamortization of the amounts due under the loan, including arrearage, and a new schedule of repayment amounts;
(iv) waiver, modification, or variation of any material term of the loan, including short-term, long-term, or life-of-loan modifications that change the interest rate, forgive or forbear with respect to the payment of principal or interest, or extend the final maturity date of the loan;
(v) short refinancing of the loan consisting of acceptance of payment from or on behalf of the homeowner of an amount less than the amount alleged to be due and owing under the loan, including principal, interest, and fees, in full satisfaction of the obligation under such loan and as part of a refinance transaction in which the property is intended to remain the principal residence of the homeowner;
(vi) acquisition of the property by the owner or servicer by deed in lieu of foreclosure;
(vii) short sale of the principal residence that is subject to the lien securing the loan;
(viii) assumption of the obligation of the homeowner under the loan by a third party;
(ix) cancellation or postponement of a foreclosure sale to allow the homeowner additional time to sell the property; or
(x) any other loss mitigation activity not covered; and
(E) such other information as the Secretary determines to be relevant.
(3) PUBLIC AVAILABILITY OF REPORTS- After removing information that would compromise the privacy interests of mortgagors, the Secretary shall make public the reports required by this subsection and summary data.
