Washington, D.C. – U.S. Senators Catherine Cortez Masto (D-Nev.) and Chris Van Hollen (D-Md.) introduced the FHA Foreclosure Prevention Act, legislation to ensure banks, credit unions and mortgage lenders follow the law before foreclosing on Americans’ homes. When homeowners fall behind on their mortgage payments, lenders who benefit from taxpayer-backed mortgage insurance through the Federal Housing Administration (FHA) are required to communicate with the borrower, connect the borrower to homeownership counseling, offer pre-foreclosure sales and meet other loss mitigation requirements. This bill would prohibit the FHA from paying insurance benefits to lenders who cannot demonstrate their compliance with these requirements.
“As Nevada’s Attorney General during the housing crisis, I held the Big Banks and mortgage companies accountable for trying to take away the homes of hardworking families in the Silver State. Lenders must follow the law before foreclosing on borrowers, and that includes communicating transparently and doing everything possible to avoid eviction. Yet loan servicers and mortgage companies are still not following the law when it comes to helping homeowners, which is why my legislation is so important,” said Senator Cortez Masto. “This bill ensures that lenders put consumers first and take every step possible to keep struggling homeowners in Nevada and across the country in their homes.”
“The Federal Housing Administration (FHA) does critical work in Maryland and across the country to ensure that all Americans who want to own a home – including first-time buyers and underserved communities – have the support they need to try to make that dream a reality. Unfortunately, HUD’s Inspector General shined a light on serious problems with FHA insured mortgage servicing practices that pushed families into foreclosure unnecessarily. This legislation will ensure that HUD puts safeguards in place so this doesn’t happen again to other families,” said Senator Van Hollen.
U.S. Representative Maxine Waters (D-Calif.), Chairwoman of the House Committee on Financial Services, introduced a companion bill in the House of Representatives.
“The Federal Housing Administration is critical to our housing market and helps to promote homeownership for underserved borrowers, including first-time and minority homebuyers,” said Chairwoman Waters. “Unfortunately, we continue to see significant problems with the servicing of FHA loans that unnecessarily put homeowners at risk of foreclosure. That is why I have introduced the FHA Foreclosure Prevention Act of 2019, which would ensure that FHA servicers help families experiencing financial hardship avoid foreclosure so that they can remain in their homes.”
BACKGROUND:
The FHA Foreclosure Prevention Act would:
- Prohibit the Secretary of HUD from paying FHA insurance benefits to any lender unless it has provided documentation on its compliance with loss mitigation requirements.
- Require the Secretary of HUD to conduct oversight of servicers, which must include appropriate sampling and review of such compliance and direct information collection from borrowers whose files were sampled.
- Establish a robust complaint and appeals process for borrowers who believe they have been subject to unfair treatment related to noncompliance with FHA’s servicing requirement, including its loss mitigation requirements. The Secretary of HUD will be required to report annually to Congress regarding the types and volume of complaints received through this process.
- Require a servicer to provide borrowers with notification of the results of the servicer’s loss mitigation review before initiating foreclosure proceedings. The notice must include several components to help the borrower understand their rights, and their ability to file a complaint.