,,ii #aacth ,,congress #b;d ,session ,s4 #bhed ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,september #ah1 #bjad,mr4 ,menendez 7for himself1 ,ms4 ,warren1 ,mr4 ,reed1 and ,mr4 ,blumenthal7 introduced the following bill2 which was read twice and referred to the ,committee on ,banking1 ,housing1 and ,urban ,affairs ,a ,,bill ,to establish pilot programs to encourage the use of shared equity mortgage modifications1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,preserving ,american ,homeownership ,act of #bjad4 #b4 ,findings ,congress finds the following3 7#a7 ,high national1 regional1 or local foreclosure rates destabilize the economy1 housing market1 and neighborhoods of the ,united ,states4 7#b7 ,shared equity mortgage modifications can provide alternatives to foreclosures that benefit both underwater homeowners and mortgage investors4 #c4 ,shared equity mortgage modification pilot programs 7a7 ,definitions ,in this section-- 7#a7 the term covered mortgage means a mortgage-- 7,a7 that is-- 7i7 purchased by1 guaranteed by1 or otherwise sold to the ,federal ,national ,mortgage ,association1 the ,government ,national ,mortgage ,association1 or the ,federal ,home ,loan ,mortgage ,corporation2 or 7ii7 insured under title ,,ii of the ,national ,housing ,act 7#ab ,u4,s4,c4 #agjg et seq472 7,b7 that is secured by real property that is the primary or secondary residence of a homeowner2 7,c7 that is in an amount that is greater than the appraised value of the real property securing the mortgage on or about the date on which the homeowner is approved to participate in the pilot program under subsection 7b72 7,d7 with respect to which the homeowner-- 7i7 is not fewer than #fj days delinquent2 or 7ii7 is at risk of imminent default2 7,e7 of a homeowner who has a documented financial hardship that prevents or will prevent the homeowner from making mortgage payments2 and 7,f7 that may1 at the discretion of the ,director of the ,federal ,housing ,finance ,agency with respect to mortgage-backed securities or participation certificates issued by an enterprise or of the ,secretary of ,housing and ,urban ,development with respect to mortgage-backed securities issued by the ,government ,national ,mortgage ,association1 respectively1 be made part of any security instrument that may combine or separate the mortgage note and equity position in the real property securing the mortgage2 7#b7 the term equity value of the real property means with respect to a covered mortgage1 the difference between the value of the real property securing the covered mortgage upon the time of sale 7or refinance7 and the initial principal obligation amount owed on the covered mortgage1 less any transaction costs associated with the sale or refinancing1 provided that if the equity value is negative at time of sale 7or refinance71 no payment is due the investor2 7#c7 the term enterprise has the same meaning as in section #acjc of the ,federal ,housing ,enterprises ,financial ,safety and ,soundness ,act of #aiib 7#ab ,u4,s4,c4 #dejb72 7#d7 the term homeowner means the mortgagor under a covered mortgage2 7#e7 the term investor means-- 7,a7 the mortgagee under a covered mortgage2 or 7,b7 in the case of a covered mortgage that collateralizes an asset-backed security1 as defined in section #c7;a7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;c7a771 the trustee for the asset-backed security2 7#f7 the term pilot program means a pilot program established under subsection 7b72 and 7#g7 the term shared equity mortgage modification means a modification of a covered mortgage in accordance with subsection 7c74 7b7 ,pilot programs established ,the ,director of the ,federal ,housing ,finance ,agency and the ,federal ,housing ,commissioner shall each establish a pilot program to encourage the use of shared equity mortgage modifications that are designed to return greater net present value to investors than other loss-mitigation activities1 including foreclosure4 7c7 ,shared equity mortgage modification ,for purposes of the pilot program1 a shared equity mortgage modification shall-- 7#a7 reduce the loan-to-value ratio of a covered mortgage to #ajj percent or less within #c years1 by reducing the difference between the initial original principal obligation amount owed on the covered mortgage and the reduced principal obligation amount determined by the targeted loan-to-value ratio set forth in this paragraph by #a_/c at the end of each year for #c years2 7#b7 reduce the interest rate for a covered mortgage1 if a reduction of principal under paragraph 7#a7 would not result in a reduced monthly payment that is affordable to the homeowner2 7#c7 reduce the amount of any periodic payment required to be made by the homeowner1 so that the amount payable by the homeowner is equal to the amount that would be payable by the homeowner if1 on the date on which the shared equity mortgage modification takes effect-- 7,a7 all reductions of the amount of principal under paragraph 7#a7 had been made2 and 7,b7 any reduction in the interest rate under paragraph 7#b7 for which the covered mortgage is eligible had been made2 7#d7 require the homeowner to pay to the investor upon refinancing or selling the real property securing a covered mortgage1 a percentage 7not to exceed #ej percent7 of the equity value of such real property1 provided that-- 7,a7 the dollar amount due to the investor upon such sale or refinance shall not exceed an amount that is equal to twice the largest dollar amount of the principal reduction that the homeowner achieved as a result of the principal reduction under paragraph 7#a72 7,b7 the cap established under subparagraph 7,a7 shall on ,february #a of the year following the year of enactment of this ,act1 and each ,february #a thereafter1 be adjusted for inflation1 by multiplying the prior year's cap amount by the ratio of the annual average of the ,consumer ,price ,index for ,all ,urban ,consumers 7,,cpi-,u71 or a ,,bls-designated successor to ,,cpi-,u1 for the prior calendar year to its annual average for the calendar year two years prior2 and 7,c7 the investor is permitted to structure the equity-sharing interest that the investor is entitled to receive under this paragraph to be transferrable1 including by structuring such interest for future sale to other investors2 7#e7 be designed to deliver maximal net present value to the investor1 taking into account-- 7,a7 the principal reduction under paragraph 7#a72 7,b7 any interest rate reductions under paragraph 7#b72 7,c7 expected reductions in foreclosure and in any other costs that might reduce net present value2 and 7,d7 the value of the equity sharing interest determined under paragraph 7#d72 and 7#f7 be based on factors including the percentage value of any principal reduction under paragraph 7#a71 the amount of any such principal reduction1 and any other factors as determined appropriate by the ,director of the ,federal ,housing ,finance ,agency or the ,federal ,housing ,commissioner1 respectively4 7d7 ,determination of value of home 7#a7 ,in general ,for purposes of this section1 the value of real property securing a covered mortgage shall be determined by a licensed appraiser who is independent of and does not otherwise do business with the homeowner1 servicer1 investor1 or an affiliate of the homeowner1 servicer1 or investor4 7#b7 ,time for determination ,the value of real property securing a covered mortgage shall be determined on a date that is as close as practicable to the date on which a homeowner begins to participate in a pilot program4 7#c7 ,cost 7,a7 ,responsibility for cost 7i7 ,initial cost ,the investor shall pay the cost of an appraisal under paragraph 7#a74 7ii7 ,deduction from homeowner share ,at the option of the investor1 up to one-half of the cost of an appraisal under paragraph 7#a7 may be added to the amount paid by the homeowner to the investor under subsection 7c77#d74 7,b7 ,reasonableness of cost ,the cost of an appraisal under paragraph 7#a7 shall be reasonable1 as determined by the ,director of the ,federal ,housing ,finance ,agency or the ,federal ,housing ,commissioner1 respectively4 7#d7 ,second appraisal ,at the time of refinancing or sale of real property securing a covered mortgage1 the investor may request a second appraisal of the value of the real property1 at the expense of the investor1 by a licensed appraiser selected by the ,director of the ,federal ,housing ,finance ,agency or the ,federal ,housing ,commissioner1 respectively1 who is independent of and does not otherwise do business with the homeowner1 servicer1 investor1 or an affiliate of the homeowner1 servicer1 or investor1 if the investor believes that the sale price or claimed value at the time of the refinancing is not an accurate reflection of the fair market value of the real property4 7e7 ,eligibility for reduction of principal ,each pilot program shall provide that a homeowner is not eligible for a reduction in the amount of principal under a covered mortgage under a shared equity mortgage modification if1 after the homeowner begins participating in the pilot program1 the homeowner-- 7#a7 is delinquent on more than #c payments under the shared equity mortgage modification during any of the #c successive #a-year periods beginning on the date on which the shared equity mortgage modification is made2 and 7#b7 fails to be current with all payments described in paragraph 7#a7 before the end of each #a-year period described in paragraph 7#a74 7f7 ,participation by servicers ,the ,director of the ,federal ,housing ,finance ,agency shall require each enterprise to require that any servicer of a covered mortgage in which the enterprise is an investor participate in the pilot program of the ,federal ,housing ,finance ,agency by offering shared equity mortgage modifications to a random and statistically significant sampling of homeowners with covered mortgages4 7g7 ,studies and reports ,the ,director of the ,federal ,housing ,finance ,agency and the ,federal ,housing ,commissioner shall-- 7#a7 conduct annual studies of the pilot program of the ,federal ,housing ,finance ,agency and the ,federal ,housing ,administration1 respectively2 7#b7 submit a report to ,congress containing the results of each study at the end of each of the #c successive #a-year periods beginning on the date on which the pilot program is established2 and 7#c7 make publicly available to the maximum extent possible1 consistent with the protection of any personal information1 and in a timely manner any data generated by the pilot program4