Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, introduced The FHA Foreclosure Prevention Act of 2019 in an attempt to combat foreclosures for borrowers with FHA mortgages. The Act would increase HUD oversight of FHA mortgage servicers in an effort to make sure every homeowner with an FHA mortgage is given fair opportunities to avoid foreclosure once they have defaulted.
Waters’ logic behind the Act is that the Federal Housing Administration promotes ownership to underserved borrowers (first time buyers, minorities buyers, etc.), the very people who may suffer financial hardship, putting them at greater foreclosure risk. Waters wants increased oversight over FHA lenders/servicers to make sure they’re following FHA’s loss mitigation requirements. She also wants to establish a “robust” complaint and appeals process so that homeowners can report what they deem as unfair treatment. Some of the amended language and a new subsection are as follows:
Documentation of loss mitigation efforts
Notwithstanding any other provision of this title, the Secretary may not pay insurance benefits to any mortgagee of a single family mortgage insured under this Act unless the mortgagee or other servicer for the mortgage has provided documentation to the Secretary that is sufficient to demonstrate compliance with any requirements of the Secretary applicable to such mortgage relating to loss mitigation. This paragraph may not be construed to limit the authority of the Secretary to impose civil monetary penalties.
(d) Oversight of mortgage servicers
(1) Oversight
(A) In general
The Secretary shall conduct oversight of servicers of single family mortgages insured under this Act on a regular and ongoing basis and in a manner designed to ensure that such servicers comply with the requirements of this Act and the standards and guidelines established by the Secretary The Secretary shall conduct oversight of servicers of single family mortgages insured under this Act on a regular and ongoing basis and in a manner designed to ensure that such servicers comply with the requirements of this Act and the standards and guidelines established by the Secretary for servicing of such mortgages and to identify systemic problems and trends with such compliance.
(B) Loss mitigation requirements
Such oversight shall include oversight designed to ensure that such servicers comply with the requirements under this Act, and the standards and guidelines established by the Secretary, for loss mitigation, and shall include appropriate sampling and review of such servicer compliance, Such oversight shall include oversight designed to ensure that such servicers comply with the requirements under this Act, and the standards and guidelines established by the Secretary, for loss mitigation, and shall include appropriate sampling and review of such servicer compliance, including direct information collection through generally accepted means from borrowers whose files were sampled, such as surveys, focus groups, interview, or other similar measures.
(2) Corrective action
The Secretary shall take such actions as may be necessary to remedy failures by servicers of single family mortgages insured under this Act to comply with the requirements of this Act and the standards and guidelines established by the Secretary for servicing of such mortgages, including The Secretary shall take such actions as may be necessary to remedy failures by servicers of single family mortgages insured under this Act to comply with the requirements of this Act and the standards and guidelines established by the Secretary for servicing of such mortgages, including ordering non-compliant servicers to take corrective actions, including barring foreclosure and cancelling from the borrowers account balance and from any insurance claim any interest and other fees that accrued during periods of noncompliance.
It should be noted that this bill was introduced on April 18, 2018, in a previous session of Congress, but was not enacted. Read the full text is here.