The FDCPA :: Just the Text

In the post "failed modification," "post foreclosure" world, I have never had so many questions posed at parties, private gatherings and baseball games about the Fair Debt Collection Practices Act ("FDCPA"). If an anecdotal sampling of questions is any test of the economy, then my guess is the economy is bad.

The questions that are almost as common as Fair Debt Collection Practices Act questions concern the workings of the "means test" in Chapter 7 vis-a-vis Chapter 13 after October 17, 2005 revisons to the Bankruptcy Act. Maybe I will post those next.

Here, by virtue of the number of times I have been asked and emailed questions about same is the (relevant part of) the FDCPA.

Hugh Wood
Atlanta, GA

& & &

The Fair Debt Collection Practices Act
TITLE 15. Commerce and Trade
CHAPTER 41. Consumer Credit Protection
15 USCS prec § 1692
§ 1692. Congressional findings and declaration of purpose
(a) Abusive practices. There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.

(b) Inadequacy of laws. ESxisting laws and procedures for redressing these injuries are inadequate to protect consumers.

(c) Available non-abusive collection methods. Means other than misrepresentation or other abusive debt collection practices are available for the effective collection of debts.

(d) Interstate commerce. Abusive debt collection practices are carried on to a substantial extent in interstate commerce and through means and instrumentalities of such commerce. Even where abusive debt collection practices are purely intrastate in character, they nevertheless directly affect interstate commerce.

(e) Purposes. It is the purpose of this title [15 USCS § § 1692 et seq.] to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.
15 USCS § 1692a
§ 1692a. Definitions
As used in this title [15 USCS § § 1692 et seq.]--
(1) The term "Commission" means the Federal Trade Commission.
(2) The term "communication" means the conveying of information regarding a debt directly or indirectly to any person through any medium.
(3) The term "consumer" means any natural person obligated or allegedly obligated to pay any debt.
(4) The term "creditor" means any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.
(5) The term "debt" means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.
(6) The term "debt collector" means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 808(6) [15 USCS § 1692f(6)], such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests. The term does not include--
(A) any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor;
(B) any person while acting as a debt collector for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts;
(C) any officer or employee of the United States or any State to the extent that collecting or attempting to collect any debt is in the performance of his official duties;
(D) any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt;
(E) any nonprofit organization which, at the request of consumers, performs bona fide consumer credit counseling and assists consumers in the liquidation of their debts by receiving payments from such consumers and distributing such amounts to creditors; and
(F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) concerns a debt which was originated by such person; (iii) concerns a debt which was not in default at the time it was obtained by such person; or (iv) concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor.
(7) The term "location information" means a consumer's place of abode and his telephone number at such place, or his place of employment.
(8) The term "State" means any State, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any political subdivision of any of the foregoing.
15 USCS § 1692b
§ 1692b. Acquisition of location information
Any debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer shall--
(1) identify himself, state that he is confirming or correcting location information concerning the consumer, and, only if expressly requested, identify his employer;
(2) not state that such consumer owes any debt;
(3) not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information;
(4) not communicate by post card;
(5) not use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of a debt; and
(6) after the debt collector knows the consumer is represented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney's name and address, not communicate with any person other than that attorney, unless the attorney fails to respond within a reasonable period of time to communication from the debt collector.
15 USCS § 1692c
§ 1692c. Communication in connection with debt collection
(a) Communication with the consumer generally. Without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt--
(1) at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer. In the absence of knowledge of circumstances to the contrary, a debt collector shall assume that the convenient time for communicating with a consumer is after 8 o'clock antimeridian and before 9 o'clock postmeridian, local time at the consumer's location;
(2) if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney's name and address, unless the attorney fails to respond within a reasonable period of time to a communication from the debt collector or unless the attorney consents to direct communication with the consumer; or
(3) at the consumer's place of employment if the debt collector knows or has reason to know that the consumer's employer prohibits the consumer from receiving such communication.
(b) Communication with third parties. Except as provided in section 804 [15 USCS § 1692b], without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a postjudgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.

(c) Ceasing communication. If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except--
(1) to advise the consumer that the debt collector's further efforts are being terminated;
(2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or
(3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy. If such notice from the consumer is made by mail, notification shall be complete upon receipt.
(d) "Consumer" defined. For the purpose of this section, the term "consumer" includes the consumer's spouse, parent (if the consumer is a minor), guardian, executor, or administrator.
15 USCS § 1692d
§ 1692d. Harassment or abuse
A debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person.
(2) The use of obscene or profane language or language the natural consequence of which is to abuse the hearer or reader.
(3) The publication of a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency or to persons meeting the requirements of section 603(f) or 604(3) of this Act [15 USCS § § 1681a(f) or 1681b(3)].
(4) The advertisement for sale of any debt to coerce payment of the debt.
(5) Causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.
(6) Except as provided in section 804 [15 USCS § 1692b], the placement of telephone calls without meaningful disclosure of the caller's identity.
15 USCS § 1692e
§ 1692e. False or misleading representations
A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The false representation or implication that the debt collector is vouched for, bonded by, or affiliated with the United States or any State, including the use of any badge, uniform, or facsimile thereof.
(2) The false representation of--
(A) the character, amount, or legal status of any debt; or
(B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.
(3) The false representation or implication that any individual is an attorney or that any communication is from an attorney.
(4) The representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action.
(5) The threat to take any action that cannot legally be taken or that is not intended to be taken.
(6) The false representation or implication that a sale, referral, or other transfer of any interest in a debt shall cause the consumer to--
(A) lose any claim or defense to payment of the debt; or
(B) become subject to any practice prohibited by this title [15 USCS § § 1692 et seq.].
(7) The false representation or implication that the consumer committed any crime or other conduct in order to disgrace the consumer.
(8) Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.
(9) The use or distribution of any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by any court, official, or agency of the United States or any State, or which creates a false impression as to its source, authorization, or approval.
(10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.
(11) The failure to disclose in the initial written communication with the consumer and, in addition, if the initial communication with the consumer is oral, in that initial oral communication, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector, except that this paragraph shall not apply to a formal pleading made in connection with a legal action.
(12) The false representation or implication that accounts have been turned over to innocent purchasers for value.
(13) The false representation or implication that documents are legal process.
(14) The use of any business, company, or organization name other than the true name of the debt collector's business, company, or organization.
(15) The false representation or implication that documents are not legal process forms or do not require action by the consumer.
(16) The false representation or implication that a debt collector operates or is employed by a consumer reporting agency as defined by section 603(f) of this Act [15 USCS § 1681a(f)].
15 USCS § 1692f
§ 1692f. Unfair practices
A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.
(2) The acceptance by a debt collector from any person of a check or other payment instrument postdated by more than five days unless such person is notified in writing of the debt collector's intent to deposit such check or instrument not more than ten nor less than three business days prior to such deposit.
(3) The solicitation by a debt collector of any postdated check or other postdated payment instrument for the purpose of threatening or instituting criminal prosecution.
(4) Depositing or threatening to deposit any postdated check or other postdated payment instrument prior to the date on such check or instrument.
(5) Causing charges to be made to any person for communications by concealment of the true purpose of the communication. Such charges include, but are not limited to, collect telephone calls and telegram fees.
(6) Taking or threatening to take any nonjudicial action to effect dispossession or disablement of property if--
(A) there is no present right to possession of the property claimed as collateral through an enforceable security interest;
(B) there is no present intention to take possession of the property; or
(C) the property is exempt by law from such dispossession or disablement.
(7) Communicating with a consumer regarding a debt by post card.
(8) Using any language or symbol, other than the debt collector's address, on any envelope when communicating with a consumer by use of the mails or by telegram, except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business.
15 USCS § 1692g
§ 1692g. Validation of debts
(a) Notice of debt; contents. Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing--
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
(b) Disputed debts. If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.

(c) Admission of liability. The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer.
15 USCS § 1692h
§ 1692h. Multiple debts
If any consumer owes multiple debts and makes any single payment to any debt collector with respect to such debts, such debt collector may not apply such payment to any debt which is disputed by the consumer and, where applicable, shall apply such payment in accordance with the consumer's directions.
15 USCS § 1692i
§ 1692i. Legal actions by debt collectors
(a) Venue. Any debt collector who brings any legal action on a debt against any consumer shall--
(1) in the case of an action to enforce an interest in real property securing the consumer's obligation, bring such action only in a judicial district or similar legal entity in which such real property is located; or
(2) in the case of an action not described in paragraph (1), bring such action only in the judicial district or similar legal entity--
(A) in which such consumer signed the contract sued upon; or
(B) in which such consumer resides at the commencement of the action.
(b) Authorization of actions. Nothing in this title [15 USCS §§ 1692 et seq.] shall be construed to authorize the bringing of legal actions by debt collectors.
15 USCS § 1692j
§ 1692j. Furnishing certain deceptive forms
(a) It is unlawful to design, compile, and furnish any form knowing that such form would be used to create the false belief in a consumer that a person other than the creditor of such consumer is participating in the collection of or in an attempt to collect a debt such consumer allegedly owes such creditor, when in fact such person is not so participating.

(b) Any person who violates this section shall be liable to the same extent and in the same manner as a debt collector is liable under section 813 [15 USCS § 1692k] for failure to comply with a provision of this title [15 USCS § § 1692 et seq.].
15 USCS § 1692k
§ 1692k. Civil liability
(a) Amount of damages. Except as otherwise provided by this section, any debt collector who fails to comply with any provision of this title [15 USCS § § 1692 et seq.] with respect to any person is liable to such person in an amount equal to the sum of--
(1) any actual damage sustained by such person as a result of such failure;
(2) (A) in the case of any action by an individual, such additional damages as the court may allow, but not exceeding $ 1,000; or
(B) in the case of a class action, (i) such amount for each named plaintiff as could be recovered under subparagraph (A), and (ii) such amount as the court may allow for all other class members, without regard to a minimum individual recovery, not to exceed the lesser of $ 500,000 or 1 per centum of the net worth of the debt collector; and
(3) in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney's fee as determined by the court. On a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney's fees reasonable in relation to the work expended and costs.
(b) Factors considered by court. In determining the amount of liability in any action under subsection (a), the court shall consider, among other relevant factors--
(1) in any individual action under subsection (a)(2)(A), the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, and the extent to which such noncompliance was intentional; or
(2) in any class action under subsection (a)(2)(B), the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, the resources of the debt collector, the number of persons adversely affected, and the extent to which the debt collector's noncompliance was intentional.
(c) Intent. A debt collector may not be held liable in any action brought under this title [15 USCS § § 1692 et seq.] if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.

(d) Jurisdiction. An action to enforce any liability created by this title [15 USCS § § 1692 et seq.] may be brought in any appropriate United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction, within one year from the date on which the violation occurs.

(e) Advisory opinions of Commission. No provision of this section imposing any liability shall apply to any act done or omitted in good faith in conformity with any advisory opinion of the Commission, notwithstanding that after such act or omission has occurred, such opinion is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.
15 USCS § 1692l
§ 1692l. Administrative enforcement
(a) Federal Trade Commission. Compliance with this title [15 USCS § § 1692 et seq.] shall be enforced by the Commission, except to the extent that enforcement of the requirements imposed under this title [15 USCS § § 1692 et seq.] is specifically committed to another agency under subsection (b). For purpose of the exercise by the Commission of its functions and powers under the Federal Trade Commission Act [15 USCS § § 41 et seq.], a violation of this title [15 USCS § § 1692 et seq.] shall be deemed an unfair or deceptive act or practice in violation of that Act [15 USCS § § 41 et seq.]. All of the functions and powers of the Commission under the Federal Trade Commission Act [15 USCS § § 41 et seq.] are available to the Commission to enforce compliance by any person with this title [15 USCS § § 1692 et seq.], irrespective of whether that person is engaged in commerce or meets any other jurisdictional tests in the Federal Trade Commission Act [15 USCS § § 41 et seq.], including the power to enforce the provisions of this title [15 USCS § § 1692 et seq.] in the same manner as if the violation had been a violation of a Federal Trade Commission trade regulation rule.

(b) Applicable provisions of law. Compliance with any requirements imposed under this title [15 USCS § § 1692 et seq.] shall be enforced under--
(1) section 8 of the Federal Deposit Insurance Act [12 USCS § 1818], in the case of--
(A) national banks, and Federal branches and Federal agencies of foreign banks, by the Office of the Comptroller of the Currency;
(B) member banks of the Federal Reserve System (other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies, and insured State branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25(a) [25A] of the Federal Reserve Act [12 USCS § § 601 et seq. or § § 611 et seq.], by the Board of Governors of the Federal Reserve System; and
(C) banks insured by the Federal Deposit Insurance Corporation (other than members of the Federal Reserve System) and insured State branches of foreign banks, by the Board of Directors of the Federal Deposit Insurance Corporation;
(2) section 8 of the Federal Deposit Insurance Act [12 USCS § 1818], by the Director of the Office of Thrift Supervision, in the case of a savings association the deposits of which are insured by the Federal Deposit Insurance Corporation;
(3) the Federal Credit Union Act [12 USCS § § 1751 et seq.], by the Administrator of the National Credit Union Administration [National Credit Union Administration Board] with respect to any Federal credit union;
(4) the Acts to regulate commerce [49 USCS § § 10101 et seq.], by the Secretary of Transportation, with respect to all carriers subject to the jurisdiction of the Surface Transportation Board;
(5) the Federal Aviation Act of 1958 [49 USCS § § 40101 et seq.], by the Secretary of Transportation with respect to any air carrier or any foreign air carrier subject to that Act [49 USCS § § 40101 et seq.]; and
(6) the Packers and Stockyards Act, 1921 [7 USCS § § 181 et seq.] (except as provided in section 406 of that Act [7 USCS § § 226 and 227]), by the Secretary of Agriculture with respect to any activities subject to that Act [7 USCS § § 181 et seq.].
The terms used in paragraph (1) that are not defined in this title [15 USCS § § 1692 et seq.] or otherwise defined in section 3(s) of the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the meaning given to them in section 1(b) of the International Banking Act of 1978 (12 U.S.C. 3101).

(c) Agency powers. For the purpose of the exercise by any agency referred to in subsection (b) of its powers under any Act referred to in that subsection, a violation of any requirement imposed under this title [15 USCS § § 1692 et seq.] shall be deemed to be a violation of a requirement imposed under that Act. In addition to its powers under any provision of law specifically referred to in subsection (b), each of the agencies referred to in that subsection may exercise, for the purpose of enforcing compliance with any requirement imposed under this title [15 USCS § § 1692 et seq.] any other authority conferred on it by law, except as provided in subsection (d).

(d) Rules and regulations. Neither the Commission nor any other agency referred to in subsection (b) may promulgate trade regulation rules or other regulations with respect to the collection of debts by debt collectors as defined in this title [15 USCS § § 1692 et seq.].
15 USCS § 1692m
§ 1692m. Reports to Congress by the Commission; views of other Federal agencies
(a) Not later than one year after the effective date of this title and at one-year intervals thereafter, the Commission shall make reports to the Congress concerning the administration of its functions under this title [15 USCS § § 1692 et seq.], including such recommendations as the Commission deems necessary or appropriate. In addition, each report of the Commission shall include its assessment of the extent to which compliance with this title [15 USCS § § 1692 et seq.] is being achieved and a summary of the enforcement actions taken by the Commission under section 814 of this title [15 USCS § 1692l]

(b) In the exercise of its functions under this title [15 USCS § § 1692 et seq.], the Commission may obtain upon request the views of any other Federal agency which exercises enforcement functions under section 814 of this title [15 USCS § 1692l].
15 USCS § 1692n
§ 1692n. Relation to State laws
This title [15 USCS § § 1692 et seq.] does not annul, alter, or affect, or exempt any person subject to the provisions of this title [15 USCS § § 1692 et seq.] from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of this title [15 USCS § § 1692 et seq.], and then only to the extent of the inconsistency. For purposes of this section, a State law is not inconsistent with this title [15 USCS § § 1692 et seq.] if the protection such law affords any consumer is greater than the protection provided by this title [15 USCS § § 1692 et seq.].
15 USCS § 1692o
§ 1692o. Exemption for State regulation
The Commission shall by regulation exempt from the requirements of this title [15 USCS § § 1692 et seq.] any class of debt collection practices within any State if the Commission determines that under the law of that State that class of debt collection practices is subject to requirements substantially similar to those imposed by this title [15 USCS § § 1692 et seq.], and that there is adequate provision for enforcement.

Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084

www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
twitter: USALawyer_
Phone: 404-633-4100
Fax: 404-633-0068

Have A Dispute With Your Lawyer? Send it to Fee Arbitration

Georgia is one of a majority of States that demands its attorneys submit to State Bar sponsored Fee Arbitration. If the attorney and client cannot agree on the amount of the fee to be paid the lawyer, the client may petition for fee arbitration.

Generally, the public does not know and is not aware that Georgia lawyers must submit, initially, to a demand made against them pursuant to State Bar sponsored fee arbitration.

This does not mean that a dissatisfied client may taken his or her attorney to task for no reason, nor does it set aside a valid contract entered into between the attorney and client. It does, however, provide an out of court solution to many common fee disputes.

The rules are stated below. The client must file within two (2) years of the date the dispute began, the client and lawyer cannot be (at the time of filing) in court litigating the same fee and the client must agree to be bound be the result rendered at the State Bar.

An unknown novel outcome to fee arbitration is: If the client wins at fee arbitration and the lawyer refuses to pay, the State Bar of Georgia will (after the award is entered) provide the client with a free lawyer to help defend and enforce the award against the losing lawyer.

Hugh Wood
Atlanta, GA

& & &

Georgia State Bar Rule 6-201. Jurisdiction.
The Committee may accept jurisdiction over a fee dispute only if all of the following requirements are satisfied:
(a) The fee in question, whether paid or unpaid, has been charged for legal services rendered by a lawyer who is or who at the time of rendition of the service had been licensed to practice law in the State of Georgia or who been duly licensed as a foreign legal consultant in the State of Georgia.
(b) The services in question were performed either in the State of Georgia or from an office located in the State of Georgia.
(c) At the time the legal services in question were performed there existed between the lawyer and the client an expressed or implied contract establishing between them a lawyer/client relationship. A relative or other person paying the legal fees of the client may request arbitration of disputes over those fees provided both the client and the payor join as co-petitioners or co-respondents and both agree to be bound by the result of the arbitration.
(d) The disputed fee:
(1) exceeds ($750) seven hundred and fifty dollars.
(2) is not one the amount of which is governed by statute or other law, nor one the full amount or all terms of which have already been fixed or approved by order of a court.
(e) A petition seeking arbitration of the dispute is filed with the Committee by the lawyer or the client no more than two (2) years following the date on which the controversy arose. If this date is disputed, it shall be determined in the same manner as the commencement of a cause of action on the underlying contract.
(f) The client, whether petitioner or respondent, agrees to be bound by the result of the arbitration.
(g) The fee dispute is not the subject of litigation in court at the time the petition for arbitration is filed.
(h) The petition contains the following elements:
(1) A statement of the nature of the dispute and the particulars of the petitioner's position, including relevant dates.
(2) The identities of both the client and the lawyer and the addresses of both.
(3) A statement that the petitioner has made a good faith effort to resolve the dispute and the details of that effort.
(4) The agreement of the petitioner to be bound by the result of the arbitration.
(5) The signature of the petitioner and date of the petition.
(6) The petition shall be filed on a form which will be supplied by the Committee. Such petition shall be served upon the opposite party at such party's last known address by certified mail, return receipt requested.
(i) In case of disputes between lawyers, the lawyers who are parties to the dispute are all members of the State Bar of Georgia, and all the lawyers involved agree to the arbitration.


& & &

The purpose of this program is to provide a convenient mechanism for (1) the resolution of disputes between lawyers and clients over fees, (2) the resolution of disputes between lawyers in connection with the withdrawal of a lawyer from a partnership or the dissolution and separation of a partnership, or (3) the resolution of disputes between lawyers concerning the entitlement to portions of fees earned from joint services. It is a process which may be invoked by either side after the parties have been unable to reach an agreement between themselves. Regardless of whether it is the lawyer or the client who takes the initiative of filing a petition requesting arbitration of the disputes, the petitioner must agree to be bound by the result of the arbitration. This is intended to discourage the filing of complaints which are frivolous or which seek to invoke the process simply to obtain an "advisory opinion". If the respondent also agrees to be bound, the resulting arbitration award will be enforceable under the general arbitration laws of the State.
A unique feature of this program provides that where the petitioner is a client whose claim after investigation appears to warrant a hearing, and the respondent lawyer refuses to be bound by any resulting award, the matter will not be dismissed, but an ex parte arbitration hearing may be held. If the outcome of this hearing is in the client's favor, the State Bar will provide a lawyer at no cost, other than actual litigation expenses, to the client to represent the client in subsequent litigation to adjust the fee in accordance with the arbitration award.
CHAPTER 1 COMMITTEE ON RESOLUTION OF FEE DISPUTES
Rule 6-101. Committee
Rule 6-102. Membership
Rule 6-103. Terms
Rule 6-104. Responsibility
Rule 6-105. Staff
Rule 6-106. Waiting Period
CHAPTER 2 JURISDICTIONAL GUIDELINES
Rule 6-201. Jurisdiction
Rule 6-202. Termination or Suspension of Proceedings
Rule 6-203. Revocation
CHAPTER 3 SELECTION OF ARBITRATORS
Rule 6-301. Roster of Arbitrators
Rule 6-302. Neutrality of Arbitrators
Rule 6-303. Selection of Arbitrators
Rule 6-304. Qualifications
Rule 6-305. Compensation
CHAPTER 4 RULES OF PROCEDURE
Rule 6-401. Time and Place of Hearing
Rule 6-402. Attendance at Hearing
Rule 6-403. Counsel
Rule 6-404. Stenographic Record
Rule 6-405. Death, Disability, or Resignation of Arbitrator
Rule 6-406. Discovery and Witnesses
Rule 6-407. Adjournments
Rule 6-408. Oaths
Rule 6-409. Order of Proceedings
Rule 6-410. Arbitration in the Absence of a Party
Rule 6-411. Evidence
Rule 6-412. Written Contract
Rule 6-413. Closing of Hearings
Rule 6-414. Reopening of Hearings
Rule 6-415. Waiver of Rules
Rule 6-416. Waiver of Oral Hearings
Rule 6-417. Award
Rule 6-418. Time of Award
Rule 6-419. Form of Award
Rule 6-420. Award Upon Settlement
Rule 6-421. Delivery of Award to Parties
Rule 6-422. Communication with Arbitrators
Rule 6-423. Interpretation and Application of Rules
CHAPTER 5 POST DECISION ACTIVITY
Rule 6-501. Where Both Parties Agree
Rule 6-502. Where Lawyer Refuses to be Boun
CHAPTER 6 SPECIAL PROCEDURES
Rule 6-601. Special Case Procedure
CHAPTER 7 CONFIDENTIALITY
Rule 6-701. Confidentiality

END



Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084

www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
twitter: USALawyer_
Phone: 404-633-4100
Fax: 404-633-0068

Personal Liability Looms as Condo Market Continues to Implode

The continuing implosion of the condominium market is not only pushing the unpaid condominium first security deeds [first mortgages] back on the lender, it is leaving an ugly trail of personal liability of unpaid condo assessments following the defaulted unit owners. To add insult to injury, the Georgia Court of Appeals recently ruled that if the condominium association is forced to resort to suit to collect its condo fees an award of reasonable attorneys fees against the unit owner is virtually mandatory.

One lender recently reported to the Wall Street Journal at as of the end of 2008, "only 66 Atlanta units were sold in the second half of 2008, and just 645 were sold in all of last year (2008). That is down from 1,704 units sold in 2007 and a peak of 4,747 condos sold in 2005." Jonathan Karp, In Condo Terms, Atlanta Is the New Miami, Wall Street Journal, Jan 29, 2009. Of the 3,800 condo units that lender has for sale only 1,836 have been sold. Id.

A little watched statute change in the 2004 General Assembly granted condominium associations broad powers to sue the unit owners for unpaid condominium fees. OCGA § 44-3-109.[1] Prior to the 2004 change, it was cumbersome and expensive for condominium associations to sue the unit owners, obtain liens on the units and then foreclose against the units.

The 2004 statute provides a summary type action whereby the association simply affirmatively pleads the existence of the Condominium Declaration, the fact that owner "Y," owns unit "Z," and that owner "Y," is many thousands of dollars behind on condominium assessments due the association.

While the statute speaks for itself and the unit owner may interpose defenses, those defenses are limited to issues surrounding the debt and the legality of the Declaration, and the imposition of correct assessments. If the assessments are not paid, the Association goes to judgment against the unit Owner. The condominium association takes its judgment "subject to," the first security deed, which differs from the prior law. The condominium association is no longer required to conform the First leinholder about priority and possible acceptation and payoff of the first security deed.

While subordinate to county taxes and the first security deed, the condominium association nevertheless has a judgment. That judgment, unfortunately for the unit owner, becomes the "the personal obligation of the unit owner." OCGA § 44-3-109(a).

Not only is it painful in this economy that the unpaid judgment follows the owner as a "personal judgment," the Georgia Court of Appeals has indicated that the trial courts must award reasonable attorneys fees to the Associations if it is forced to collect its fees by suit. The Springs Condominium Association, Inc. v. Harris, Appeal Case No., A09A0297, Court of Appeals of Georgia, Second Division (April 16, 2009).[2]

Because the case is governed by OCGA § 44-3-109(b)(3), which mandates an award of attorney fees when an association is forced to file a statutory lien for condominium assessments and the association's condominium's documents provide for the payment of these fees, we reverse the trial court's order and remand this case for the trial court to determine the reasonableness of the Association's attorney fees. Id.

The old days of sleepy condominium associations are over. The battle for unpaid fees in this economy has now begun. [3] Armed with new state of the art collection weapons, expect to see more filings by condominium associations, until this real estate recession (depression) subsides.

Hugh Wood
Atlanta, GA


& & &


[1]

OCGA § 44-3-109. Lien For Assessments; Personal Obligation Of unit Owner; Notice And Foreclosure; Lapse; Right To Statement Of Assessments; Effect Of Failure To Furnish Statement.
(a) All sums lawfully assessed by the association against any unit owner or condominium unit, whether for the share of the common expenses pertaining to that condominium unit, for fines, or otherwise, and all reasonable charges made to any unit owner or condominium unit for materials furnished or services rendered by the association at the owner's request to or on behalf of the unit owner or condominium unit, shall, from the time the same become due and payable, be the personal obligation of the unit owner and constitute a lien in favor of the association on the condominium unit prior and superior to all other liens whatsoever except:
(1) Liens for ad valorem taxes on the condominium unit;
(2) The lien of any first priority mortgage covering the unit and the lien of any mortgage recorded prior to the recording of the declaration;
(3) The lessor's lien provided for in Code Section 44-3-86; and
(4) The lien of any secondary purchase money mortgage covering the unit, provided that neither the grantee nor any successor grantee on the mortgage is the seller of the unit.
The recording of the declaration pursuant to this article shall constitute record notice of the existence of the lien, and no further recordation of any claim of lien for assessments shall be required.
(b) To the extent that the condominium instruments provide, the personal obligation of the unit owner and the lien for assessments shall also include:
(1) A late or delinquency charge not in excess of the greater of $10.00 or 10 percent of the amount of each assessment or installment thereof not paid when due;
(2) At a rate not in excess of 10 percent per annum, interest on each assessment or installment thereof and any delinquency or late charge pertaining thereto from the date the same was first due and payable;
(3) The costs of collection, including court costs, the expenses of sale, any expenses required for the protection and preservation of the unit, and reasonable attorney's fees actually incurred; and
(4) The fair rental value of the condominium unit from the time of the institution of an action until the sale of the condominium at foreclosure or until the judgment rendered in the action is otherwise satisfied.
(c) Not less than 30 days after notice is sent by certified mail or statutory overnight delivery, return receipt requested, to the unit owner both at the address of the unit and at any other address or addresses which the unit owner may have designated to the association in writing, the lien may be foreclosed by the association by an action, judgment, and foreclosure in the same manner as other liens for the improvement of real property, subject to superior liens or encumbrances, but any such court order for judicial foreclosure shall not affect the rights of holders of superior liens or encumbrances to exercise any rights or powers afforded to them under their security instruments. The notice provided for in this subsection shall specify the amount of the assessments then due and payable together with authorized late charges and the rate of interest accruing thereon. Unless prohibited by the condominium instruments, the association shall have the power to bid on the unit at any foreclosure sale and to acquire, hold, lease, encumber, and convey the same. The lien for assessments shall lapse and be of no further effect, as to assessments or installments thereof, together with late charges and interest applicable thereto, four years after the assessment or installment first became due and payable.
(d) Any unit owner, mortgagee of a unit, person having executed a contract for the purchase of a condominium unit, or lender considering the loan of funds to be secured by a condominium unit shall be entitled upon request to a statement from the association or its management agent setting forth the amount of assessments past due and unpaid together with late charges and interest applicable thereto against that condominium unit. Such request shall be in writing, shall be delivered to the registered office of the association, and shall state an address to which the statement is to be directed. Failure on the part of the association to mail or otherwise furnish such statement regarding amounts due and payable at the expiration of such five-day period with respect to the condominium unit involved to such address as may be specified in the written request therefore within five business days from the receipt of such request shall cause the lien for assessments created by this Code section to be extinguished and of no further force or effect as to the title or interest acquired by the purchaser or lender, if any, as the case may be, and their respective successors and assigns, in the transaction contemplated in connection with such request. The information specified in such statement shall be binding upon the association and upon every unit owner. Payment of a fee not exceeding $10.00 may be required as a prerequisite to the issuance of such a statement if the condominium instruments so provided.
(e) Nothing in this Code section shall be construed to prohibit actions maintainable pursuant to Code Section 44-3-76 to recover sums for which subsection (a) of this Code section creates a lien.
History. Amended by 2004 Ga. Laws 535, § 7, eff. 7/1/2004.

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[2]

THE SPRINGS CONDOMINIUM ASSOCIATION, INC.
v.
HARRIS.
A09A0297
Court of Appeals of Georgia, Second Division
April 16, 2009
JOHNSON, P. J., ELLINGTON and MIKELL, JJ.
Johnson, Presiding Judge.
The Springs condominium association, Inc. (the "Association") appeals the trial court's refusal to grant it an award of attorney fees in this case. Because the case is governed by OCGA § 44-3-109 (b) (3), which mandates an award of attorney fees when an association is forced to file a statutory lien for condominium assessments and the association's condominium's documents provide for the payment of these fees, we reverse the trial court's order and remand this case for the trial court to determine the reasonableness of the Association's attorney fees.
The facts of this case are not in dispute. The Association is an incorporated condominium association duly authorized to levy and collect assessments at The Springs Condominium. Cedric Harris is the owner of a condominium unit located at The Springs Condominium, and he is required to pay assessments to the Association pursuant to its declaration and OCGA § 44-3-70 et seq. The declaration and OCGA § 44-3-70 et seq. also authorize the collection of late charges, interest (at the rate of 10% per annum), reasonable attorney fees actually incurred, and costs and expenses related to the collection of these assessments. It is undisputed that Harris did not pay any required assessments, charges, late fees or interest, and the Association placed a lien on his condominium.
On November 8, 2007, the Association, through its attorney, sent Harris the statutory notice of intent to foreclose on its condominium lien. Harris did not respond, and on February 8, 2008, the Association sued Harris, seeking to recover a statutory lien in the amount of $15,522.90, reasonable attorney fees, costs and expenses. It also requested an order for judicial foreclosure of the statutory lien. On March 10, 2008, Harris answered and paid $15,522.90. However, this amount did not include attorney fees incurred after December 12, 2007, when the complaint was initially drafted. The trial court entered a final order on June 17, 2008, finding that Harris had paid the full amount of the statutory lien and declining to grant the Association an award of attorney fees. We agree with the Association's contention that the trial court was mandated by law to grant an award of attorney fees in this matter.
OCGA § 44-3-109 (b) (3) states as follows: "To the extent that the condominium instruments provide, the personal obligation of the unit owner and the lien for assessments shall also include... [t]he costs of collection, including court costs,... and reasonable attorney's fees actually incurred." Since the undisputed evidence in this case shows that The Springs Condominium declaration provides that a delinquent unit owner shall be liable for reasonable attorney fees actually incurred, an award of attorney fees was mandated under the statute. Where a statute's language as to an award of attorney fees is mandatory, the trial court is required to award attorney fees. [1] The trial court, therefore, erred in refusing to enter an award for attorney fees actually incurred subsequent to December 12, 2007. [2] We reverse the trial court's order and remand this case for the trial court to determine the reasonableness of the Association's attorney fees.
Judgment reversed.
Ellington and Mikell, JJ., concur.
---------
Notes:
[1] See Preece v. Turman Realty Co., 228 Ga.App. 609, 610 (492 S.E.2d 342) (1997).
[2] See Casey v. North Decatur Courtyards Condominium Assoc., 213 Ga.App. 190, 192 (3) (444 S.E.2d 361) (1994).
[Many thanks to my good friend Ned Blumenthal, Esq., for his helpful emails in this curious area of the law]



Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta, GA 30084

www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
Phone: 404-633-4100Fax: 404-633-0068

U.S. Senate Defeats Mortgage “Cram-Down” Provisions in S. 896

Senate Bill 896, with provisions similar to H.R. 1106 (Conyers, D-MI), went down to defeat today.

The legistlation Senator Dick Durbin (Durbin D-IL) referred to as: “The Helping Families Save Their Homes in Bankruptcy Act,” failed to garner enough votes in the Senate to stave off defeat.

The handwriting in the Senate may have been on the Wall for some weeks now. Durbin has been unable to convince large U.S. Banks to drop their opposition to its passage. The Mortgage Bankers Association and the American Bankers Association advanced strong opposition to both H.R. 1106 and S. 896.

Had S. 896 it passed, it would have moved forward with the following provisions. It would have operated by:

1) Eliminating a provision of the bankruptcy law that prohibits modifications to mortgage loans on a debtor's principal residence, so that primary mortgages are treated the same as vacation homes and family farms.
2) Extending the time frame debtors are allowed for repayment, in order to reduce monthly payments to make the mortgage more affordable.

3) Permitting bankruptcy judges to replace escalating variable interest rates with a new interest rate that will keep the mortgage affordable over the long term while also compensating creditors appropriately for risk.

4) Waiving the bankruptcy counseling requirement for families for whom foreclosure will soon commence, so that precious time is not lost as families fight to save their homes.
5) Ensuring lenders provide proper notice when assessing fees and allow judges to waive prepayment penalties.
6) Maintaining debtors' legal claims against predatory lenders while in bankruptcy.

Since S. 896 failed, a bankruptcy judge in a CH 13 or CH 7 proceeding still may not change personal residential home debt.

After the S. 896 failed to pass, Durbin indicated he intended to redraft and reintroduce similiar legislation in the future.

Hugh Wood
Atlanta, GA

& & &

WASHINGTON -- The Democratic-controlled Senate on Thursday defeated President Barack Obama's plan to spare hundreds of thousands of homeowners from foreclosure through bankruptcy.

A dozen Democrats joined Republicans in the 45-51 vote to scuttle the bill, which Obama had said was important to saving the economy and promised to push through Congress. But facing stiff opposition from banks, Obama did little to pressure lawmakers who worried it would encourage bankruptcy filings and spike interest rates.

"The vote today was a bipartisan rejection of an interest-rate hike, which is exactly the wrong solution for jobs, homeowners and the economy," said Senate Republican Leader Mitch McConnell of Kentucky.


Democratic leaders lamented that they were powerless, with the 45 votes falling far short of the 60 to overcome procedural hurdles. The newest Democrat, Sen. Arlen Specter of Pennsylvania, voted against it.

"The banks that are too big to fail are saying that 8 million Americans facing foreclosure are too little to count in this economy," said Senate Majority Whip Dick Durbin of Illinois, who championed the bill and had spent weeks negotiating with financial lobbyists in a bid to strike a deal.

Obama long has backed the proposal to give debt-ridden individuals the option of asking a bankruptcy judge to reduce their mortgage payment. He cited that support last fall as he privately lobbied skeptical Democrats to back the $700 billion Wall Street bailout. And once he was president, he had promised, he would push for its passage.

In February, the newly inaugurated president included the proposal as the stick in a housing plan full of carrots for the banking industry. The broader rescue plan encouraged, but did not require, lenders to cut homeowners' monthly payments and refinance loans for individuals whose home's market value has sunk below what they owe.

The following month, the House passed the bankruptcy legislation along party lines in a 234-191 vote.

But the bankruptcy option got only a tepid endorsement from Treasury Secretary Timothy Geithner. As debate on the measure brewed, Geithner was pushing for the creation of a government-sponsored program that would rely on private investors to buy the risky mortgage-backed securities weighing down the market.

The forced easing, or "cram-down," of a mortgage by a bankruptcy judge would have likely introduced additional uncertainty for investors.

Congressional Democrats also questioned the merits.

"Do I want to have my rate go up so that somebody else might be able to cram down" their mortgage payment? asked Sen. Ben Nelson, D-Neb., who voted against the bill.

In recent days, as it became clear the bill would fail, the administration did little to counter the aggressive lobbying by banks fighting the bill.

Spokeswomen at the Treasury Department and White House did not respond to requests for comment, and absent from the debate was any statement of administration policy.

Obama supporters blamed the banks.

"There was a lot of fear-mongering," said Andrew Jakabovics, associate director for housing and economics at the Center for American Progress in Washington. "The banks put on a good show, saying, 'Hey, if you force us to take more losses, we're going to go out of business.'"

Indeed, the banking industry had a direct line to Capitol Hill. Officials from some of the biggest banks, including JP Morgan Chase & Co., Bank of America Corp. and Wells Fargo & Co., as well as groups representing credit unions and community banks, negotiated for weeks with Durbin and other leading Senate Democrats.


Trying to win support, Durbin narrowed the provision substantially. The latest proposal would have restricted eligibility to homeowners already in foreclosure whose lender had not offered them better terms. Homes would also have to be worth less than $729,000 and apply to mortgage loans originated before 2009.

Durbin had offered the measure as an amendment to a housing bill aimed at easing the nation's credit crunch. That bill would guarantee bank deposits up to $250,000 through 2013.

The bill also would permanently increase the borrowing authority for the Federal Deposit Insurance Corp. from $30 billion to $100 billion. Increasing the FDIC's credit would allow the agency to reduce large new premiums it has begun charging banks to insure deposits.

The Senate is expected to vote on that measure next week. Durbin said he would try to restore the bankruptcy provision in conference with the House, although it was considered unlikely he would succeed.

"I'll be back," he said. "I'm not going to give up."

By ANNE FLAHERTY
The Associated Press
Thursday, April 30, 2009; 4:59 PM

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Here is the full text of S. 896 (failed in Senate :: 04/30/2009)



111th CONGRESSCommentsClose CommentsPermalink

1st SessionCommentsClose CommentsPermalink

S. 896CommentsClose CommentsPermalink

To prevent mortgage foreclosures and enhance mortgage credit availability.CommentsClose CommentsPermalink

IN THE SENATE OF THE UNITED STATESCommentsClose CommentsPermalink

April 24, 2009CommentsClose CommentsPermalink

Mr. DODD (for himself, Mr. DURBIN, and Mr. SCHUMER) introduced the following bill; which was read the first timeCommentsClose CommentsPermalink

April 27, 2009CommentsClose CommentsPermalink

Read the second time and placed on the calendarCommentsClose CommentsPermalink


A BILLCommentsClose CommentsPermalink

To prevent mortgage foreclosures and enhance mortgage credit availability.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title- This Act may be cited as 'Helping Families Save Their Homes Act of 2009'.CommentsClose CommentsPermalink

(b) Table of Contents- The table of contents of this Act is the following:CommentsClose CommentsPermalink

Sec. 1. Short title; table of contents.CommentsClose CommentsPermalink

TITLE I--PREVENTION OF MORTGAGE FORECLOSURES
Sec. 101. FHA loan modification program.CommentsClose CommentsPermalink

Sec. 102. Mortgage modification data collecting and reporting.CommentsClose CommentsPermalink

TITLE II--FORECLOSURE MITIGATION AND CREDIT AVAILABILITY
Sec. 201. Servicer safe harbor for mortgage loan modifications.CommentsClose CommentsPermalink

Sec. 202. Changes to HOPE for Homeowners Program.CommentsClose CommentsPermalink

Sec. 203. Requirements for FHA-approved mortgagees.CommentsClose CommentsPermalink

Sec. 204. Enhancement of liquidity and stability of insured depository institutions to ensure availability of credit and reduction of foreclosures.CommentsClose CommentsPermalink

Sec. 205. Application of GSE conforming loan limit to mortgages assisted with TARP funds.CommentsClose CommentsPermalink

Sec. 206. Mortgages on certain homes on leased land.CommentsClose CommentsPermalink

Sec. 207. Sense of Congress regarding mortgage revenue bond purchases.CommentsClose CommentsPermalink

TITLE III--MORTGAGE FRAUD
Sec. 301. Short title.CommentsClose CommentsPermalink

Sec. 302. Nationwide Mortgage Fraud Task Force.CommentsClose CommentsPermalink

TITLE IV--FORECLOSURE MORATORIUM PROVISIONS
Sec. 401. Sense of the Congress on foreclosures.CommentsClose CommentsPermalink

TITLE I--PREVENTION OF MORTGAGE FORECLOSURESCommentsClose CommentsPermalink

SEC. 101. FHA LOAN MODIFICATION PROGRAM.
(a) In General- Subsection (a) of section 204 of the National Housing Act (12 U.S.C. 1710(a)) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink

'(10) LOAN MODIFICATION PROGRAM-CommentsClose CommentsPermalink

'(A) AUTHORITY- The Secretary may carry out a program solely to encourage loan modifications for eligible delinquent mortgages through the payment of insurance benefits and assignment of the mortgage to the Secretary and the subsequent modification of the terms of the mortgage according to a loan modification approved by the mortgagee.CommentsClose CommentsPermalink

'(B) PAYMENT OF BENEFITS AND ASSIGNMENT- Under the program under this paragraph, the Secretary may pay insurance benefits for a mortgage, in the amount determined in accordance with paragraph (5)(A), without reduction for any amounts modified, but only upon the assignment, transfer, and delivery to the Secretary of all rights, interest, claims, evidence, and records with respect to the mortgage specified in clauses (i) through (iv) of paragraph (1)(A).CommentsClose CommentsPermalink

'(C) DISPOSITION- After modification of a mortgage pursuant to this paragraph, the Secretary may provide insurance under this title for the mortgage. The Secretary may subsequently--CommentsClose CommentsPermalink

'(i) re-assign the mortgage to the mortgagee under terms and conditions as are agreed to by the mortgagee and the Secretary;CommentsClose CommentsPermalink

'(ii) act as a Government National Mortgage Association issuer, or contract with an entity for such purpose, in order to pool the mortgage into a Government National Mortgage Association security; orCommentsClose CommentsPermalink

'(iii) re-sell the mortgage in accordance with any program that has been established for purchase by the Federal Government of mortgages insured under this title, and the Secretary may coordinate standards for interest rate reductions available for loan modification with interest rates established for such purchase.CommentsClose CommentsPermalink

'(D) LOAN SERVICING- In carrying out the program under this section, the Secretary may require the existing servicer of a mortgage assigned to the Secretary under the program to continue servicing the mortgage as an agent of the Secretary during the period that the Secretary acquires and holds the mortgage for the purpose of modifying the terms of the mortgage. If the mortgage is resold pursuant to subparagraph (C)(iii), the Secretary may provide for the existing servicer to continue to service the mortgage or may engage another entity to service the mortgage.'.CommentsClose CommentsPermalink

(b) Amendment to Partial Claim Authority- Paragraph (1) of section 230(b) of the National Housing Act (12 U.S.C. 1715u(b)(1)) is amended by striking '12 of the monthly mortgage payments' and inserting '30 percent of the unpaid principal balance of the mortgage'.CommentsClose CommentsPermalink

(c) Implementation- The Secretary of Housing and Urban Development may implement the amendments made by this section through notice or mortgagee letter.CommentsClose CommentsPermalink

SEC. 102. MORTGAGE MODIFICATION DATA COLLECTING AND REPORTING.
(a) Reporting Requirements- Not later than 120 days after the date of the enactment of this Act, and quarterly thereafter, the Comptroller of the Currency, in coordination with the Director of the Office of Thrift Supervision, shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate, the Committee on Financial Services of the House of Representatives, and the Joint Economic Committee on the volume of mortgage modifications reported to the Office of the Comptroller of the Currency and the Office of Thrift Supervision, under the mortgage metrics program of each such Office, during the previous quarter, including the following:CommentsClose CommentsPermalink

(1) A copy of the data collection instrument currently used by the Office of the Comptroller of the Currency and the Office of Thrift Supervision to collect data on loan modifications.CommentsClose CommentsPermalink

(2) The total number of mortgage modifications resulting in each of the following:CommentsClose CommentsPermalink

(A) Additions of delinquent payments and fees to loan balances.CommentsClose CommentsPermalink

(B) Interest rate reductions and freezes.CommentsClose CommentsPermalink

(C) Term extensions.CommentsClose CommentsPermalink

(D) Reductions of principal.CommentsClose CommentsPermalink

(E) Deferrals of principal.CommentsClose CommentsPermalink

(F) Combinations of modifications described in subparagraph (A), (B), (C), (D), or (E).CommentsClose CommentsPermalink

(3) The total number of mortgage modifications in which the total monthly principal and interest payment resulted in the following:CommentsClose CommentsPermalink

(A) An increase.CommentsClose CommentsPermalink

(B) Remained the same.CommentsClose CommentsPermalink

(C) Decreased less than 10 percent.CommentsClose CommentsPermalink

(D) Decreased between 10 percent and 20 percent.CommentsClose CommentsPermalink

(E) Decreased 20 percent or more.CommentsClose CommentsPermalink

(4) The total number of loans that have been modified and then entered into default, where the loan modification resulted in--CommentsClose CommentsPermalink

(A) higher monthly payments by the homeowner;CommentsClose CommentsPermalink

(B) equivalent monthly payments by the homeowner;CommentsClose CommentsPermalink

(C) lower monthly payments by the homeowner of up to 10 percent;CommentsClose CommentsPermalink

(D) lower monthly payments by the homeowner of between 10 percent to 20 percent; orCommentsClose CommentsPermalink

(E) lower monthly payments by the homeowner of more than 20 percent.CommentsClose CommentsPermalink

(b) Data Collection-CommentsClose CommentsPermalink

(1) REQUIRED-CommentsClose CommentsPermalink

(A) IN GENERAL- Not later than 60 days after the date of the enactment of this Act, the Comptroller of the Currency and the Director of the Office of Thrift Supervision, shall issue mortgage modification data collection and reporting requirements to institutions covered under the reporting requirement of the mortgage metrics program of the Comptroller or the Director.CommentsClose CommentsPermalink

(B) INCLUSIVENESS OF COLLECTIONS- The requirements under subparagraph (A) shall provide for the collection of all mortgage modification data needed by the Comptroller of the Currency and the Director of the Office of Thrift Supervision to fulfill the reporting requirements under subsection (a).CommentsClose CommentsPermalink

(2) REPORT- The Comptroller of the Currency shall report all requirements established under paragraph (1) to each committee receiving the report required under subsection (a).CommentsClose CommentsPermalink

TITLE II--FORECLOSURE MITIGATION AND CREDIT AVAILABILITYCommentsClose CommentsPermalink

SEC. 201. SERVICER SAFE HARBOR FOR MORTGAGE LOAN MODIFICATIONS.
(a) Safe Harbor-CommentsClose CommentsPermalink

(1) LOAN MODIFICATIONS AND WORKOUT PLANS- Notwithstanding any other provision of law, and notwithstanding any investment contract between a servicer and a securitization vehicle or investor, a servicer that acts consistent with the duty set forth in section 129A(a) of Truth in Lending Act (15 U.S.C. 1639a) shall not be liable for entering into a loan modification, workout, or other loss mitigation plan, including, but not limited to, disposition, including any modification or refinancing undertaken pursuant to standard loan modification, sale, or disposition guidelines issued by the Secretary of the Treasury or his designee under the Emergency Economic Stabilization Act of 2008, with respect to any such mortgage that meets all of the criteria set forth in paragraph (2)(B) to--CommentsClose CommentsPermalink

(A) any person, based on that person's ownership 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 on the pool;CommentsClose CommentsPermalink

(B) any person who is obligated pursuant to a derivatives instrument to make payments determined in reference to any loan or any interest referred to in subparagraph (A); orCommentsClose CommentsPermalink

(C) any person that insures any loan or any interest referred to in subparagraph (A) under any law or regulation of the United States or any law or regulation of any State or political subdivision of any State.CommentsClose CommentsPermalink

(2) ABILITY TO MODIFY MORTGAGES-CommentsClose CommentsPermalink

(A) ABILITY- Notwithstanding any other provision of law, and notwithstanding any investment contract between a servicer and a securitization vehicle or investor, a servicer--CommentsClose CommentsPermalink

(i) shall not be limited in the ability to modify mortgages, the number of mortgages that can be modified, the frequency of loan modifications, or the range of permissible modifications; andCommentsClose CommentsPermalink

(ii) 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 for a residential mortgage or a class of residential mortgages that constitute a part or all of the mortgages in the securitization vehicle,CommentsClose CommentsPermalink

if any mortgage so modified meets all of the criteria set forth in subparagraph (B).CommentsClose CommentsPermalink

(B) CRITERIA- The criteria under this subparagraph with respect to a mortgage are as follows:CommentsClose CommentsPermalink

(i) Default on the payment of such mortgage has occurred or is reasonably foreseeable.CommentsClose CommentsPermalink

(ii) The property securing such mortgage is occupied by the mortgagor of such mortgage.CommentsClose CommentsPermalink

(iii) The servicer reasonably and in good faith believes that the anticipated recovery on the principal outstanding obligation of the mortgage under the particular modification or workout plan or other loss mitigation action will exceed, on a net present value basis, the anticipated recovery on the principal outstanding obligation of the mortgage to be realized through foreclosure.CommentsClose CommentsPermalink

(3) APPLICABILITY- This subsection shall apply only with respect to modifications, workouts, and other loss mitigation plans initiated before January 1, 2012.CommentsClose CommentsPermalink

(b) Reporting- Each servicer that engages in loan modifications or workout plans subject to the safe harbor in subsection (a) shall report to the Secretary on a regular basis regarding the extent, scope and results of the servicer's modification activities. The Secretary shall prescribe regulations specifying the form, content, and timing of such reports.CommentsClose CommentsPermalink

(c) Definitions- For purposes of this section, the following definitions shall apply:CommentsClose CommentsPermalink

(1) SECRETARY- The term 'Secretary' means the Secretary of the Treasury.CommentsClose CommentsPermalink

(2) SECURITIZATION VEHICLE- The term 'securitization vehicle' means a trust, corporation, partnership, limited liability entity, special purpose entity, or other structure that--CommentsClose CommentsPermalink

(A) is the issuer, or is created by the issuer, of mortgage pass-through certificates, participation certificates, mortgage-backed securities, or other similar securities backed by a pool of assets that includes residential mortgage loans; andCommentsClose CommentsPermalink

(B) holds such mortgages.CommentsClose CommentsPermalink

SEC. 202. CHANGES TO HOPE FOR HOMEOWNERS PROGRAM.
(a) Program Changes- Section 257 of the National Housing Act (12 U.S.C. 1715z-23) is amended--CommentsClose CommentsPermalink

(1) in subsection (c)--CommentsClose CommentsPermalink

(A) in the heading for paragraph (1), by striking 'THE BOARD' and inserting 'SECRETARY';CommentsClose CommentsPermalink

(B) in paragraph (1), by striking 'Board' inserting 'Secretary, after consultation with the Board,'; andCommentsClose CommentsPermalink

(C) by adding after paragraph (2) the following:CommentsClose CommentsPermalink

'(3) DUTIES OF BOARD- The Board shall advise the Secretary regarding the establishment and implementation of the HOPE for Homeowners Program.'.CommentsClose CommentsPermalink

(2) by striking 'Board' each place such term appears in subsections (e), (h)(1), (h)(3), (j), (l), (n), (s)(3), and (v) and inserting 'Secretary';CommentsClose CommentsPermalink

(3) in subsection (e)--CommentsClose CommentsPermalink

(A) by striking paragraph (1) and inserting the following:CommentsClose CommentsPermalink

'(1) BORROWER CERTIFICATION-CommentsClose CommentsPermalink

'(A) NO INTENTIONAL DEFAULT OR FALSE INFORMATION- The mortgagor shall provide a certification to the Secretary that the mortgagor has not intentionally defaulted on the existing mortgage or mortgages and has not knowingly, or willfully and with actual knowledge, furnished material information known to be false for the purpose of obtaining the eligible mortgage to be insured and has not been convicted under Federal or State law for fraud during the 10-year period ending upon the insurance of the mortgage under this section.CommentsClose CommentsPermalink

'(B) LIABILITY FOR REPAYMENT- The mortgagor shall agree in writing that the mortgagor shall be liable to repay to the Secretary any direct financial benefit achieved from the reduction of indebtedness on the existing mortgage or mortgages on the residence refinanced under this section derived from misrepresentations made by the mortgagor in the certifications and documentation required under this paragraph, subject to the discretion of the Secretary.';CommentsClose CommentsPermalink

(B) in paragraph (4)(A), by striking '; subject to standards established by the Board under subparagraph (B),';CommentsClose CommentsPermalink

(C) in paragraph (7), by striking 'and provided that' and all that follows through 'new second lien' and inserting 'and except that the Secretary may, under such terms and conditions as the Secretary may establish, permit the establishment of a second lien on a property under an eligible mortgage to be insured, for the purpose of facilitating payment of closing or refinancing costs by a State or locality using funds provided under the HOME Investment Partnerships program under title II of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12721 et seq.) or the community development block grants program under title I of the Housing and Community Development Act of 1974 (42 U.S.C. 5301 et seq.) or by a State or local housing finance agency';CommentsClose CommentsPermalink

(D) in paragraph (9)--CommentsClose CommentsPermalink

(i) by striking 'by procuring (A) an income tax return transcript of the income tax return of the mortgagor, or (B)' and inserting 'in accordance with procedures and standards that the Secretary shall establish, which may include requiring the mortgagee to procure'; andCommentsClose CommentsPermalink

(ii) by striking 'and by any other method, in accordance with procedures and standards that the Board shall establish';CommentsClose CommentsPermalink

(E) by striking subparagraph (10);CommentsClose CommentsPermalink

(F) in paragraph (11), by inserting before the period at the end the following: ', except that the Secretary may provide exceptions to such latter requirement (relating to present ownership interest) for any mortgagor who has inherited a property or for any mortgagor who has relocated to a new jurisdiction, and is in the process of trying to sell such property or has been unable to sell such property due to adverse market conditions';CommentsClose CommentsPermalink

(G) by redesignating paragraph (11) as paragraph (10); andCommentsClose CommentsPermalink

(H) by adding at the end:CommentsClose CommentsPermalink

'(11) BAN ON MILLIONAIRES- The mortgagor shall not have a net worth, as of the date the mortgagor first applies for a mortgage to be insured under the Program under this section, that exceeds $1,000,000.';CommentsClose CommentsPermalink

(4) in subsection (h)(2)--CommentsClose CommentsPermalink

(A) by striking 'The Board shall prohibit the Secretary from paying' and inserting 'The Secretary shall not pay'; andCommentsClose CommentsPermalink

(B) by inserting after the period at the end the following: 'In implementing this provision with respect to a failure by a mortgagor to make a first payment, the Secretary shall establish policies and timing of endorsements as consistent as is possible with endorsement policies established with respect to mortgages insured under section 203(b)';CommentsClose CommentsPermalink

(5) in subsection (i)--CommentsClose CommentsPermalink

(A) by inserting ', after weighing maximization of participation with consideration of collection of premiums,' after 'Secretary shall';CommentsClose CommentsPermalink

(B) in paragraph (1), by striking 'equal to 3 percent' and inserting 'not more than 2 percent'; andCommentsClose CommentsPermalink

(C) in paragraph (2), by striking 'equal to 1.5 percent' and inserting 'not more than 1 percent';CommentsClose CommentsPermalink

(6) in subsection (k)--CommentsClose CommentsPermalink

(A) by striking the subsection heading and inserting 'Exit Fee';CommentsClose CommentsPermalink

(B) in paragraph (1), in the matter preceding subparagraph (A), by striking 'such sale or refinancing' and inserting 'the mortgage being insured under this section'; andCommentsClose CommentsPermalink

(C) in paragraph (2), by striking 'and the mortgagor' and all that follows through the end and inserting 'may, upon any sale or disposition of the property to which the mortgage relates, be entitled to up to 50 percent of appreciation, up to the appraised value of the home at the time when the mortgage being refinanced under this section was originally made. The Secretary may share any amounts received under this paragraph with the holder of the eligible mortgage refinanced under this section.';CommentsClose CommentsPermalink

(7) in the heading for subsection (n), by striking 'the Board' and inserting 'Secretary';CommentsClose CommentsPermalink

(8) in subsection (p), by striking 'Under the direction of the Board, the' and inserting 'The';CommentsClose CommentsPermalink

(9) in subsection (s)--CommentsClose CommentsPermalink

(A) in the first sentence of paragraph (2), by striking 'Board of Directors of' and inserting 'Advisory Board for'; andCommentsClose CommentsPermalink

(B) in paragraph (3)(A)(ii), by striking 'subsection (e)(1)(B) and such other' and inserting 'such';CommentsClose CommentsPermalink

(10) in subsection (v), by inserting after the period at the end the following: 'The Secretary shall conform documents, forms, and procedures for mortgages insured under this section to those in place for mortgages insured under section 203(b) to the maximum extent possible consistent with the requirements of this section.'; andCommentsClose CommentsPermalink

(11) by adding at the end the following new subsections:CommentsClose CommentsPermalink

'(x) Payment to Existing Loan Servicer- The Secretary may establish a payment to the servicer of the existing senior mortgage for every loan insured under the HOPE for Homeowners Program in an amount, for each such loan, that does not exceed $1,000.CommentsClose CommentsPermalink

'(y) Auctions- The Secretary, with the concurrence of the Board, shall, if feasible, establish a structure and organize procedures for an auction to refinance eligible mortgages on a wholesale or bulk basis.'.CommentsClose CommentsPermalink

(b) Reducing TARP Funds To Offset Costs of Program Changes- Paragraph (3) of section 115(a) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5225) is amended by inserting ', as such amount is reduced by $2,316,000,000,' after '$700,000,000,000'.CommentsClose CommentsPermalink

SEC. 203. REQUIREMENTS FOR FHA-APPROVED MORTGAGEES.
(a) Mortgagee Review Board- Paragraph (2) of section 202(c) of the National Housing Act (12 U.S.C. 1708(c)) is amended--CommentsClose CommentsPermalink

(1) in subparagraph (E), by inserting 'and' after the semicolon;CommentsClose CommentsPermalink

(2) in subparagraph (F), by striking '; and' and inserting a period; andCommentsClose CommentsPermalink

(3) by striking subparagraph (G).CommentsClose CommentsPermalink

(b) Limitations on Participation and Mortgagee Approval and Use of Name- Section 202 of the National Housing Act (12 U.S.C. 1708) is amended--CommentsClose CommentsPermalink

(1) by redesignating subsections (d), (e), and (f) as subsections (e), (f), and (g), respectively;CommentsClose CommentsPermalink

(2) by inserting after subsection (c) the following new subsection:CommentsClose CommentsPermalink

'(d) Limitations on Participation in Origination and Mortgagee Approval-CommentsClose CommentsPermalink

'(1) REQUIREMENT- Any person or entity that is not approved by the Secretary to serve as a mortgagee, as such term is defined in subsection (c)(7), shall not participate in the origination of an FHA-insured loan except as authorized by the Secretary.CommentsClose CommentsPermalink

'(2) ELIGIBILITY FOR APPROVAL- In order to be eligible for approval by the Secretary, an applicant mortgagee shall not be, and shall not have any officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, or loan originator of the applicant mortgagee who is--CommentsClose CommentsPermalink

'(A) currently suspended, debarred, under a limited denial of participation (LDP), or otherwise restricted under part 24 or 25 of title 24 of the Code of Federal Regulations, or any successor regulations to such parts, or under similar provisions of any other Federal agency;CommentsClose CommentsPermalink

'(B) under indictment for, or has been convicted of, an offense that reflects adversely upon the applicant's integrity, competence or fitness to meet the responsibilities of an approved mortgagee;CommentsClose CommentsPermalink

'(C) subject to unresolved findings contained in a Department of Housing and Urban Development or other governmental audit, investigation, or review;CommentsClose CommentsPermalink

'(D) engaged in business practices that do not conform to generally accepted practices of prudent mortgagees or that demonstrate irresponsibility;CommentsClose CommentsPermalink

'(E) convicted of, or who has pled guilty or nolo contendre to, a felony related to participation in the real estate or mortgage loan industry--CommentsClose CommentsPermalink

'(i) during the 7-year period preceding the date of the application for licensing and registration; orCommentsClose CommentsPermalink

'(ii) at any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering;CommentsClose CommentsPermalink

'(F) in violation of provisions of the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any applicable provision of State law; orCommentsClose CommentsPermalink

'(G) in violation of any other requirement as established by the Secretary.CommentsClose CommentsPermalink

'(3) RULEMAKING AND IMPLEMENTATION- The Secretary shall conduct a rulemaking to carry out this subsection. The Secretary shall implement this subsection not later than the expiration of the 60-day period beginning upon the date of the enactment of this subsection by notice, mortgagee letter, or interim final regulations, which shall take effect upon issuance.'; andCommentsClose CommentsPermalink

(3) by adding at the end the following new subsection:CommentsClose CommentsPermalink

'(h) Use of Name- The Secretary shall, by regulation, require each mortgagee approved by the Secretary for participation in the FHA mortgage insurance programs of the Secretary--CommentsClose CommentsPermalink

'(1) to use the business name of the mortgagee that is registered with the Secretary in connection with such approval in all advertisements and promotional materials, as such terms are defined by the Secretary, relating to the business of such mortgagee in such mortgage insurance programs; andCommentsClose CommentsPermalink

'(2) to maintain copies of all such advertisements and promotional materials, in such form and for such period as the Secretary requires.'.CommentsClose CommentsPermalink

(c) Change of Status- The National Housing Act is amended by striking section 532 (12 U.S.C. 1735f-10) and inserting the following new section:CommentsClose CommentsPermalink

'SEC. 532. CHANGE OF MORTGAGEE STATUS.
'(a) Notification- Upon the occurrence of any action described in subsection (b), an approved mortgagee shall immediately submit to the Secretary, in writing, notification of such occurrence.CommentsClose CommentsPermalink

'(b) Actions- The actions described in this subsection are as follows:CommentsClose CommentsPermalink

'(1) The debarment, suspension of a Limited Denial of Participation (LDP), or application of other sanctions, fines, or penalties applied to the mortgagee or to any officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, or loan originator of the mortgagee pursuant to applicable provisions of State or Federal law.CommentsClose CommentsPermalink

'(2) The revocation of a State-issued mortgage loan originator license issued pursuant to the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any other similar declaration of ineligibility pursuant to State law.'.CommentsClose CommentsPermalink

(d) Civil Money Penalties- Section 536 of the National Housing Act (12 U.S.C. 1735f-14) is amended--CommentsClose CommentsPermalink

(1) in subsection (b)--CommentsClose CommentsPermalink

(A) in paragraph (1)--CommentsClose CommentsPermalink

(i) in the matter preceding subparagraph (A), by inserting 'or any of its owners, officers, or directors' after 'mortgagee or lender';CommentsClose CommentsPermalink

(ii) in subparagraph (H), by striking 'title I' and all that follows through 'Act of 1989)' and inserting 'title I or II'; andCommentsClose CommentsPermalink

(iii) by inserting after subparagraph (J) the following:CommentsClose CommentsPermalink

'(K) Violation of section 202(d) of this Act (12 U.S.C. 1708(d)).'; andCommentsClose CommentsPermalink

(B) in paragraph (2)--CommentsClose CommentsPermalink

(i) in subparagraph (B), by striking 'or' at the end;CommentsClose CommentsPermalink

(ii) in subparagraph (C), by striking the period at the end and inserting '; or'; andCommentsClose CommentsPermalink

(iii) by adding at the end the following new subparagraph:CommentsClose CommentsPermalink

'(D) causing or participating in any of the violations set forth in paragraph (1) of this subsection.'; andCommentsClose CommentsPermalink

(2) in subsection (g), by striking 'The term' and all that follows through the end of the sentence and inserting 'For purposes of this section, a person acts knowingly when a person has actual knowledge of acts or should have known of the acts.'.CommentsClose CommentsPermalink

(e) Expanded Review of FHA Mortgagee Applicants and Newly Approved Mortgagees- Not later than the expiration of the 3-month period beginning upon the date of the enactment of this Act, the Secretary of Housing and Urban Development shall--CommentsClose CommentsPermalink

(1) expand the existing process for reviewing new applicants for approval for participation in the mortgage insurance programs of the Secretary for mortgages on 1- to 4-family residences for the purpose of identifying applicants who represent a high risk to the Mutual Mortgage Insurance Fund; andCommentsClose CommentsPermalink

(2) implement procedures that, for mortgagees approved during the 12-month period ending upon such date of enactment--CommentsClose CommentsPermalink

(A) expand the number of mortgages originated by such mortgagees that are reviewed for compliance with applicable laws, regulations, and policies; andCommentsClose CommentsPermalink

(B) include a process for random reviews of such mortgagees and a process for reviews that is based on volume of mortgages originated by such mortgagees.CommentsClose CommentsPermalink

SEC. 204. ENHANCEMENT OF LIQUIDITY AND STABILITY OF INSURED DEPOSITORY INSTITUTIONS TO ENSURE AVAILABILITY OF CREDIT AND REDUCTION OF FORECLOSURES.
(a) Permanent Increase in Deposit Insurance-CommentsClose CommentsPermalink

(1) AMENDMENTS TO FEDERAL DEPOSIT INSURANCE ACT- Effective upon the date of the enactment of this Act, section 11(a) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)) is amended--CommentsClose CommentsPermalink

(A) in paragraph (1)(E), by striking '$100,000' and inserting '$250,000';CommentsClose CommentsPermalink

(B) in paragraph (1)(F)(i), by striking '2010' and inserting '2015';CommentsClose CommentsPermalink

(C) in subclause (I) of paragraph (1)(F)(i), by striking '$100,000' and inserting '$250,000';CommentsClose CommentsPermalink

(D) in subclause (II) of paragraph (1)(F)(i), by striking 'the calendar year preceding the date this subparagraph takes effect under the Federal Deposit Insurance Reform Act of 2005' and inserting 'calendar year 2008'; andCommentsClose CommentsPermalink

(E) in paragraph (3)(A), by striking ', except that $250,000 shall be substituted for $100,000 wherever such term appears in such paragraph'.CommentsClose CommentsPermalink

(2) AMENDMENT TO FEDERAL CREDIT UNION ACT- Section 207(k) of the Federal Credit Union Act (12 U.S.C. 1787(k)) is amended--CommentsClose CommentsPermalink

(A) in paragraph (3)--CommentsClose CommentsPermalink

(i) by striking the opening quotation mark before '$250,000';CommentsClose CommentsPermalink

(ii) by striking ', except that $250,000 shall be substituted for $100,000 wherever such term appears in such section'; andCommentsClose CommentsPermalink

(iii) by striking the closing quotation mark after the closing parenthesis; andCommentsClose CommentsPermalink

(B) in paragraph (5), by striking '$100,000' and inserting '$250,000'.CommentsClose CommentsPermalink

(3) REPEAL OF EESA PROVISION- Section 136 of the Emergency Economic Stabilization Act (12 U.S.C. 5241) is hereby repealed.CommentsClose CommentsPermalink

(b) Extension of Restoration Plan Period- Section 7(b)(3)(E)(ii) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(3)(E)(ii)) is amended by striking '5-year period' and inserting '8-year period'.CommentsClose CommentsPermalink

(c) FDIC and NCUA Borrowing Authority-CommentsClose CommentsPermalink

(1) FDIC- Section 14(a) of the Federal Deposit Insurance Act (12 U.S.C. 1824(a)) is amended by striking '$30,000,000,000' and inserting '$100,000,000,000'.CommentsClose CommentsPermalink

(2) NCUA- Section 203(d)(1) of the Federal Credit Union Act (12 U.S.C. 1783(d)(1)) is amended by striking '$100,000,000' and inserting '$6,000,000,000'.CommentsClose CommentsPermalink

(d) Expanding Systemic Risk Special Assessments- Section 13(c)(4)(G)(ii) of the Federal Deposit Insurance Act (12 U.S.C. 1823(c)(4)(G)(ii)) is amended to read as follows:CommentsClose CommentsPermalink

'(ii) REPAYMENT OF LOSS-CommentsClose CommentsPermalink

'(I) IN GENERAL- The Corporation shall recover the loss to the Deposit Insurance Fund arising from any action taken or assistance provided with respect to an insured depository institution under clause (i) from 1 or more special assessments on insured depository institutions, depository institution holding companies (with the concurrence of the Secretary of the Treasury with respect to holding companies), or both, as the Corporation determines to be appropriate.CommentsClose CommentsPermalink

'(II) TREATMENT OF DEPOSITORY INSTITUTION HOLDING COMPANIES- For purposes of this clause, sections 7(c)(2) and 18(h) shall apply to depository institution holding companies as if they were insured depository institutions.CommentsClose CommentsPermalink

'(III) REGULATIONS- The Corporation shall prescribe such regulations as it deems necessary to implement this clause. In prescribing such regulations, defining terms, and setting the appropriate assessment rate or rates, the Corporation shall establish rates sufficient to cover the losses incurred as a result of the actions of the Corporation under clause (i) and shall consider: the types of entities that benefit from any action taken or assistance provided under this subparagraph; economic conditions, the effects on the industry, and such other factors as the Corporation deems appropriate and relevant to the action taken or the assistance provided. Any funds so collected that exceed actual losses shall be placed in the Deposit Insurance Fund.'.CommentsClose CommentsPermalink

(e) Establishment of a National Credit Union Share Insurance Fund Restoration Plan Period- Section 202(c)(2) of the Federal Credit Union Act (12 U.S.C. 1782(c)(2)) is amended by adding at the end the following new subparagraph:CommentsClose CommentsPermalink

'(D) FUND RESTORATION PLANS-CommentsClose CommentsPermalink

'(i) IN GENERAL- Whenever--CommentsClose CommentsPermalink

'(I) the Board projects that the equity ratio of the Fund will, within 6 months of such determination, fall below the minimum amount specified in subparagraph (C) for the designated equity ratio; orCommentsClose CommentsPermalink

'(II) the equity ratio of the Fund actually falls below the minimum amount specified in subparagraph (C) for the equity ratio without any determination under sub-clause (I) having been made,CommentsClose CommentsPermalink

the Board shall establish and implement a Share Insurance Fund restoration plan within 90 days that meets the requirements of clause (ii) and such other conditions as the Board determines to be appropriate.CommentsClose CommentsPermalink

'(ii) REQUIREMENTS OF RESTORATION PLAN- A Share Insurance Fund restoration plan meets the requirements of this clause if the plan provides that the equity ratio of the Fund will meet or exceed the minimum amount specified in subparagraph (C) for the designated equity ratio before the end of the 5-year period beginning upon the implementation of the plan (or such longer period as the Board may determine to be necessary due to extraordinary circumstances).CommentsClose CommentsPermalink

'(iii) TRANSPARENCY- Not more than 30 days after the Board establishes and implements a restoration plan under clause (i), the Board shall publish in the Federal Register a detailed analysis of the factors considered and the basis for the actions taken with regard to the plan.'.CommentsClose CommentsPermalink

SEC. 205. APPLICATION OF GSE CONFORMING LOAN LIMIT TO MORTGAGES ASSISTED WITH TARP FUNDS.
In making any assistance available to prevent and mitigate foreclosures on residential properties, including any assistance for mortgage modifications, using any amounts made available to the Secretary of the Treasury under title I of the Emergency Economic Stabilization Act of 2008, the Secretary shall provide that the limitation on the maximum original principal obligation of a mortgage that may be modified, refinanced, made, guaranteed, insured, or otherwise assisted, using such amounts shall not be less than the dollar amount limitation on the maximum original principal obligation of a mortgage that may be purchased by the Federal Home Loan Mortgage Corporation that is in effect, at the time that the mortgage is modified, refinanced, made, guaranteed, insured, or otherwise assisted using such amounts, for the area in which the property involved in the transaction is located.CommentsClose CommentsPermalink

SEC. 206. MORTGAGES ON CERTAIN HOMES ON LEASED LAND.
Section 255(b)(4) of the National Housing Act (12 U.S.C. 1715z-20(b)(4)) is amended by striking subparagraph (B) and inserting:CommentsClose CommentsPermalink

'(B) under a lease that has a term that ends no earlier than the minimum number of years, as specified by the Secretary, beyond the actuarial life expectancy of the mortgagor or comortgagor, whichever is the later date.'.CommentsClose CommentsPermalink

SEC. 207. SENSE OF CONGRESS REGARDING MORTGAGE REVENUE BOND PURCHASES.
It is the sense of the Congress that the Secretary of the Treasury should use amounts made available in this Act to purchase mortgage revenue bonds for single-family housing issued through State housing finance agencies and through units of local government and agencies thereof.CommentsClose CommentsPermalink

TITLE III--MORTGAGE FRAUDCommentsClose CommentsPermalink

SEC. 301. SHORT TITLE.
This title may be cited as the 'Nationwide Mortgage Fraud Task Force Act of 2009'.CommentsClose CommentsPermalink

SEC. 302. NATIONWIDE MORTGAGE FRAUD TASK FORCE.
(a) Establishment- There is established in the Department of Justice the Nationwide Mortgage Fraud Task Force (hereinafter referred to in this section as the 'Task Force') to address mortgage fraud in the United States.CommentsClose CommentsPermalink

(b) Support- The Attorney General shall provide the Task Force with the appropriate staff, administrative support, and other resources necessary to carry out the duties of the Task Force.CommentsClose CommentsPermalink

(c) Executive Director- The Attorney General shall appoint one staff member provided to the Task Force to be the Executive Director of the Task Force and such Executive Director shall ensure that the duties of the Task Force are carried out.CommentsClose CommentsPermalink

(d) Branches- The Task Force shall establish, oversee, and direct branches in each of the 10 States determined by the Attorney General to have the highest concentration of mortgage fraud.CommentsClose CommentsPermalink

(e) Mandatory Functions- The Task Force, including the branches of the Task Force established under subsection (d), shall--CommentsClose CommentsPermalink

(1) establish coordinating entities, and solicit the voluntary participation of Federal, State, and local law enforcement and prosecutorial agencies in such entities, to organize initiatives to address mortgage fraud, including initiatives to enforce State mortgage fraud laws and other related Federal and State laws;CommentsClose CommentsPermalink

(2) provide training to Federal, State, and local law enforcement and prosecutorial agencies with respect to mortgage fraud, including related Federal and State laws;CommentsClose CommentsPermalink

(3) collect and disseminate data with respect to mortgage fraud, including Federal, State, and local data relating to mortgage fraud investigations and prosecutions; andCommentsClose CommentsPermalink

(4) perform other functions determined by the Attorney General to enhance the detection of, prevention of, and response to mortgage fraud in the United States.CommentsClose CommentsPermalink

(f) Optional Functions- The Task Force, including the branches of the Task Force established under subsection (d), may--CommentsClose CommentsPermalink

(1) initiate and coordinate Federal mortgage fraud investigations and, through the coordinating entities established under subsection (e), State and local mortgage fraud investigations;CommentsClose CommentsPermalink

(2) establish a toll-free hotline for--CommentsClose CommentsPermalink

(A) reporting mortgage fraud;CommentsClose CommentsPermalink

(B) providing the public with access to information and resources with respect to mortgage fraud; andCommentsClose CommentsPermalink

(C) directing reports of mortgage fraud to the appropriate Federal, State, and local law enforcement and prosecutorial agency, including to the appropriate branch of the Task Force established under subsection (d);CommentsClose CommentsPermalink

(3) create a database with respect to suspensions and revocations of mortgage industry licenses and certifications to facilitate the sharing of such information by States;CommentsClose CommentsPermalink

(4) make recommendations with respect to the need for and resources available to provide the equipment and training necessary for the Task Force to combat mortgage fraud; andCommentsClose CommentsPermalink

(5) propose legislation to Federal, State, and local legislative bodies with respect to the elimination and prevention of mortgage fraud, including measures to address mortgage loan procedures and property appraiser practices that provide opportunities for mortgage fraud.CommentsClose CommentsPermalink

(g) Definition- In this section, the term 'mortgage fraud' means a material misstatement, misrepresentation, or omission relating to the property or potential mortgage relied on by an underwriter or lender to fund, purchase, or insure a loan.CommentsClose CommentsPermalink

TITLE IV--FORECLOSURE MORATORIUM PROVISIONSCommentsClose CommentsPermalink

SEC. 401. SENSE OF THE CONGRESS ON FORECLOSURES.
(a) In General- It is the sense of the Congress that mortgage holders, institutions, and mortgage servicers should not initiate a foreclosure proceeding or a foreclosure sale on any homeowner until the foreclosure mitigation provisions, like the Hope for Homeowners program, as required under title II, and the President's 'Homeowner Affordability and Stability Plan' have been implemented and determined to be operational by the Secretary of Housing and Urban Development and the Secretary of the Treasury.CommentsClose CommentsPermalink

(b) Scope of Moratorium- The foreclosure moratorium referred to in subsection (a) should apply only for first mortgages secured by the owner's principal dwelling.CommentsClose CommentsPermalink

(c) FHA-Regulated Loan Modification Agreements- If a mortgage holder, institution, or mortgage servicer to which subsection (a) applies reaches a loan modification agreement with a homeowner under the auspices of the Federal Housing Administration before any plan referred to in such subsection takes effect, subsection (a) shall cease to apply to such institution as of the effective date of the loan modification agreement.CommentsClose CommentsPermalink

(d) Duty of Consumer to Maintain Property- Any homeowner for whose benefit any foreclosure proceeding or sale is barred under subsection (a) from being instituted, continued , or consummated with respect to any homeowner mortgage should not, with respect to any property securing such mortgage, destroy, damage, or impair such property, allow the property to deteriorate, or commit waste on the property.CommentsClose CommentsPermalink

(e) Duty of Consumer to Respond to Reasonable Inquiries- Any homeowner for whose benefit any foreclosure proceeding or sale is barred under subsection (a) from being instituted, continued, or consummated with respect to any homeowner mortgage should respond to reasonable inquiries from a creditor or servicer during the period during which such foreclosure proceeding or sale is barred.CommentsClose CommentsPermalink

Calendar No. 52CommentsClose CommentsPermalink

111th CONGRESSCommentsClose CommentsPermalink

1st SessionCommentsClose CommentsPermalink

S. 896CommentsClose CommentsPermalink

A BILL


& & &


Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084

www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
Phone: 404-633-4100
Fax: 404-633-0068

Georgia HB 233 Ad Valorem Tax Freeze Is A Bad Idea

HB 233 is dead man walking legislation.

For those who do not know, the 2009 Georgia General Assembly passed an ad valorem property tax freeze and sent the Bill (HB 233) [1] to the Governor. HB 233 creates a new Georgia Tax Statute, OCGA Sec. 48-5B-1. It proposes to freeze all statewide property assessments for two (2) years on all Georgia real property.

HB 233 is a bad legislation for following reasons. First, it shifts the burden of taxation from commercial properties to residential properties and from existing owners to new owners. Second, HB 233 is facially unconstitutional. It violates the uniformity provision of the 1983 Georgia Constitution.

1. HB 233 Shifts the Burden of Property Taxation to New Owners

While the General Assembly seeks tax relief, it has only passed legislation that shifts burdens of taxation from existing Georgia owners to those new owners and new business that choose to move to Georgia [or choose not move to Georgia after they read HB 233].

A common misconception regarding property tax relief is that assessment
caps lower or limit the growth in property tax. They do neither. They
simply shift the burden and institutionalize unfair and unequal treatment
among owners of comparable properties. There is significant scientific and
anecdotal evidence of the failure of these policies. Some of the problems [associated with assessment caps are]: Assessment caps tend to be anti-competitive by taxing new entrants more heavily than current owners. The benefit accrues to those owners of rapidly appreciating property and shifts the burden to those owning slower appreciating property (and owners of property decreasing in value). [Assessment caps] provide the largest tax break to upper-income homeowners and provide little or no tax relief to low-income homeowners. Assessment caps tend to be regressive. [Assessment caps] eliminate "uniformity" from the property tax system. That is, huge disparities in effective taxes are created among comparable property owners. It is inevitably and irrefutably unfair and inequitable. Millage rates rise and new fees are born to make up for the revenue lost through artificial manipulation of individually assessed property values and the total tax digest. Unequal taxation distorts the decision making process of buyers and sellers and thereby reduces economic growth as transactions don't occur or occur at reduced prices. [2]

2. HB 233 is Facially Unconstitutional

In facial violation of the uniformity clause of the 1983 Georgia Constitution, the same property, of the same class for the same purpose receives two (2) completely different assessments under new OCGA Sec. 48-5B-1.

We know that HB 233 is unconstitutional for a reason not apparent from the language of the passed House Bill. The General Assembly spent the entire 2009 session fighting over the passage of a properly drafted assessment freeze bill, HR1 (later SB1). HR1 provided for a proper Amendment to the Georgia Constitution.

HR1 provided for a statewide assessment freeze, which then allowed values to rise (approximately 3% per year, or thereabouts); the First Reader Summary read:

A RESOLUTION proposing an amendment to the Constitution so as to freeze the valuation of residential and nonresidential real property except for certain adjustments; to provide for ratification of certain exemptions and assessment freezes which were previously enacted; to provide for applicability; to provide for the submission of this amendment for ratification or rejection; and for other purposes. HR1. [3]

Political in-fighting or the failure of its backers to obtain the necessary two-thirds vote in both the House and Senate doomed HR1. Instead of going home with no tax freeze, certain members of the General Assembly deemed it better to pass the hopelessly flawed HB 233 than return home with no progress on containing local property tax increases.

As far back at the Georgia Constitution of 1877, the following phrase has been part of every Georgia Constitution: "[A]ll taxation shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax." Art. VII, Sec. I, Para III, Georgia Const. (1983). [Uniformity; classification of property; assessment of agricultural land; utilities.] Because HB 233 sets up non-uniform taxation for identical property it runs afoul of this provision of the Georgia Constitution. See also, Benson-Corwin, Inc. v. Cobb County School District, et. al., 239 Ga. 199, 236 S.E.2d 361 (1977). [4]

A modification of the "uniformity," clause in the Constitution requires a constitutional amendment and amending the Constitution is no easy matter. Article X of the 1983 Georgia Constitution provides the only method(s) by which it may be amended. Skipping the bizarre statewide Constitutional Convention method, the Constitution may be amended by a Proposal to amend the Constitution passed by two-thirds of both the House and Senate. The passed conformed proposal (after formal review and lengthy publishing on a statewide basis) is presented to the people for a vote in a regular election. If a majority approves the Amendment is shall become part of the Constitution on the date specified in the Proposal. [5]

HB 233 has none of the trappings of a Constitutional Amendment. It is a mere naked House Bill holding no more than 50 percent passage in both the House and Senate. Since it seeks by its terms to modify a significant clause of the 1983 Georgia Constitution and yet it was not created in conformity with Article X of the current Constitution, it is, well - a nullity. Or, at least, a Court should so find it to be a nullity.

As painful as the new 2008-2009 Depression is, it would be better - over the long haul - to allow market forces to run their course on the correction of real property taxes than to inject an artificial ad valorem tax freeze into the system. Like an inverted version of "rent control," nothing good will come out in the long haul from "tax control."

Hugh Wood
Atlanta, GA



[1]

A BILL TO BE ENTITLED
AN ACT

To amend Title 48 of the Official Code of Georgia Annotated, related to revenue and taxation, so as to provide for a moratorium period during which valuation increases of property shall be limited; to provide for legislative findings; to provide for the authority for this Act; to provide for procedures, conditions, limitations, and exclusions; to provide for applicability; to provide for related matters; to provide for an effective date; to provide for automatic repeal; to repeal conflicting laws; and for other purposes.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:

SECTION 1.
Title 48 of the Official Code of Georgia Annotated, related to revenue and taxation, is amended by adding a new chapter to read as follows:

"CHAPTER 5B

48-5B-1.
(a) The General Assembly finds that the citizens and property owners of this state are experiencing a crisis in the reduction of value of tangible property of unprecedented magnitude and that it is in the best interests of this state that immediate action be taken to secure the economic stability of all Georgians. This crisis is having a devastating effect on the economy of the State of Georgia, and this Code section is enacted in order to provide for more effective regulation and management of the finance and fiscal administration of the state and pursuant to and in furtherance of the provisions of Article III, Section IX, Paragraph II(c) of the Constitution and other provisions of the Constitution.
(b) In recognition of the emergency situation and fiscal conditions set forth in subsection (a) of this Code section and pursuant to the authority specified in subsection (a) of this Code section, for taxable years beginning on or after January 1, 2009, and continuing only until the Sunday immediately preceding the second Monday in January, 2011, a moratorium is declared on all increases in the assessed value of all classes of all subjects of property which are subject to ad valorem taxation property except as specifically permitted under this Code section. The rate of increase of the assessed value of property for county, county school district, municipal, or independent school district ad valorem tax purposes shall not exceed from one taxable year to the succeeding taxable year 0 percent except as otherwise permitted in this Code section.
(c) The limitations of this Code section shall not apply to the correction by local tax officials, pursuant to Chapter 5 of this title, of any manifest, factual error or omission in the valuation of property. The limitations of this Code section shall take effect on January 1, 2010, for any county which performed or had performed on its behalf a comprehensive county-wide revaluation of all properties in the county in 2008 or any county which in 2009 was under contract prior to February 28, 2009, to have performed on its behalf a comprehensive county-wide revaluation of all properties in the county.
(d) Nothing in this Code section shall be construed to prohibit the assessed value of property from decreasing.
(e) If property or interests therein are sold or transferred, the assessed value of such property for ad valorem tax purposes shall not exceed the most recent value established under subsection (b) of this Code section.
(f) Additions or improvements to property shall be valued for ad valorem tax purposes at their fair market value and shall be added to the owner's valuation amount under this subsection.
(g) If property is rezoned, subdivided, or combined with other property at the request of the owner of such property and the use of such property is changed to conform with the use authorized or caused by such rezoning, subdivision, or combination with other property, such property shall be valued for ad valorem tax purposes at its fair market value.
(h) Nothing in this Code section shall be construed to alter or affect in any manner the authority granted to the General Assembly under Article VII, Section II, Paragraph II of the Constitution to enact homestead exemptions.
(i) The provisions of this chapter shall not apply to real property in any county for which a local constitutional amendment has been continued in force and effect as part of the Constitution which imposes millage rate limitations regarding ad valorem property taxes with respect to real property in such county or county school district unless such local constitutional amendment is repealed.
(j) During the period of time in which this Code section is in effect, the commissioner shall continue to examine and review county tax digests as required under this chapter; provided, however, that, in the event a deficiency in the tax digest of a county is attributable directly to the limitations required by this Code section, no penalties shall be levied against such county regarding such deficiency.
(k) This chapter shall be repealed in its entirety on the second Monday in January, 2011."


SECTION 2.
This Act shall become effective upon its approval by the Governor or upon its becoming law without such approval.


SECTION 3.
All laws and parts of laws in conflict with this Act are repealed.

& & &

[2]

Georgia Association of Property Tax Professional, Inc., Controlling Property Taxes Through Proven Legislation: Assessment Limits versus Revenue Limits. Revised Jan. 2009.

& & &

[3]

HR1

The House Committee on Rules offers the following substitute to HR 1:


A RESOLUTION


Proposing an amendment to the Constitution so as to limit valuation increases of real property; to provide for procedures, conditions, and limitations; to provide for ratification of prior and enactment of new exemptions and assessment freezes; to provide for applicability; to provide for the submission of this amendment for ratification or rejection; and for other purposes.


BE IT RESOLVED BY THE GENERAL ASSEMBLY OF GEORGIA:


SECTION 1.
Article VII, Section I of the Constitution is amended by revising Paragraph III and by adding a new Paragraph to read as follows:
"Paragraph III. Uniformity Applicability of uniformity; exceptions; classification of property; assessment of agricultural land; conservation use; timber; utilities. (a) All taxes shall be levied and collected under general laws and for public purposes only. Except as otherwise provided in subparagraphs (b), (c), (d), (e), and (f) of this Paragraph and Paragraph IV of this section, all taxation shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax.
(b)(1) Except as otherwise provided in this subparagraph (b) Paragraph, classes of subjects for taxation of property shall consist of real property, other tangible property, and one or more classes of intangible personal property including money; provided, however, that any taxation of intangible personal property may be repealed by general law without approval in a referendum effective for all taxable years beginning on or after January 1, 1996.
(2) Subject to the conditions and limitations specified by law, each of the following types of property may be classified as a separate class of property for ad valorem property tax purposes, and different rates, methods, and assessment dates may be provided for such properties:
(A) Trailers.;
(B) Mobile homes other than those mobile homes which qualify the owner of the home for a homestead exemption from ad valorem taxation.; and
(C) Heavy-duty equipment motor vehicles owned by nonresidents and operated in this state.
(3) Motor vehicles may be classified as a separate class of property for ad valorem property tax purposes, and such class may be divided into separate subclasses for ad valorem purposes. The General Assembly may provide by general law for the ad valorem taxation of motor vehicles, including, but not limited to, providing for different rates, methods, assessment dates, and taxpayer liability for such class and for each of its subclasses, and need not provide for uniformity of taxation with other classes of property or between or within its subclasses. The General Assembly may also determine what portion of any ad valorem tax on motor vehicles shall be retained by the state. As used in this subparagraph, the term 'motor vehicles' means all vehicles which are self-propelled.
(c) Tangible real property, but no more than 2,000 acres of any single property owner, which is devoted to bona fide agricultural purposes shall be assessed for ad valorem taxation purposes at 75 percent of the value which other tangible real property is assessed. No property shall be entitled to receive the preferential assessment provided for in this subparagraph if the property which would otherwise receive such assessment would result in any person who has a beneficial interest in such property, including any interest in the nature of stock ownership, receiving the benefit of such preferential assessment as to more than 2,000 acres. No property shall be entitled to receive the preferential assessment provided for in this subparagraph unless the conditions set out below are met:
(1) The property must shall be owned by:
(A)(i) One or more natural or naturalized citizens;
(ii) An estate of which the devisee or heirs are one or more natural or naturalized citizens; or
(iii) A trust of which the beneficiaries are one or more natural or naturalized citizens; or
(B) A family-owned farm corporation, the controlling interest of which is owned by individuals related to each other within the fourth degree of civil reckoning, or which is owned by an estate of which the devisee or heirs are one or more natural or naturalized citizens, or which is owned by a trust of which the beneficiaries are one or more natural or naturalized citizens, and such corporation derived 80 percent or more of its gross income from bona fide agricultural pursuits within this state within the year immediately preceding the year in which eligibility is sought.;
(2) The General Assembly shall provide by law:
(A) For a definition of the term 'bona fide agricultural purposes,' but such term shall include timber production; and
(B) For additional minimum conditions of eligibility which such properties must meet in order to qualify for the preferential assessment provided for herein, including, but not limited to, the requirement that the owner be required to enter into a covenant with the appropriate taxing authorities to maintain the use of the properties in bona fide agricultural purposes for a period of not less than ten years and for appropriate penalties for the breach of any such covenant.
(3) In addition to the specific conditions set forth in this subparagraph (c), the General Assembly may place further restrictions upon, but may not relax, the conditions of eligibility for the preferential assessment provided for herein.; and
(4) Property under this subparagraph (c) shall be subject to the limitations under Paragraph IV of this section only if provided by general law and only to the extent provided for in such general law.
(d)(1) The General Assembly shall be authorized by general law to establish as a separate class of property for ad valorem tax purposes any tangible real property which is listed in the National Register of Historic Places or in a state historic register authorized by general law. For such purposes, the General Assembly is shall be authorized by general law to establish a program by which certain properties within such class may be assessed for taxes at different rates or valuations in order to encourage the preservation of such historic properties and to assist in the revitalization of historic areas. Property under this subparagraph (d) shall be subject to the limitations under Paragraph IV of this section only if provided by general law and only to the extent provided for in such general law.
(2) The General Assembly shall be authorized by general law to establish as a separate class of property for ad valorem tax purposes any tangible real property on which there have been releases of hazardous waste, constituents, or substances into the environment. For such purposes, the General Assembly is shall be authorized by general law to establish a program by which certain properties within such class may be assessed for taxes at different rates or valuations in order to encourage the cleanup, reuse, and redevelopment of such properties and to assist in the revitalization thereof by encouraging remedial action. Property under this subparagraph (d) shall be subject to the limitations under Paragraph IV of this section only if provided by general law and only to the extent provided for in such general law.
(e) The General Assembly shall provide by general law:
(1) For the definition and methods of assessment and taxation, such methods to include a formula based on current use, annual productivity, and real property sales data, of: 'bona fide conservation use property,' to include bona fide agricultural and timber land not to exceed 2,000 acres of a single owner; and 'bona fide residential transitional property,' to include private single-family residential owner occupied property located in transitional developing areas not to exceed five acres of any single owner. Such methods of assessment and taxation shall be subject to the following conditions:
(A) A property owner desiring the benefit of such methods of assessment and taxation shall be required to enter into a covenant to continue the property in bona fide conservation use or bona fide residential transitional use; and
(B) A breach of such covenant within ten years shall result in a recapture of the tax savings resulting from such methods of assessment and taxation and may result in other appropriate penalties;
(2) That standing timber shall be assessed only once, and such assessment shall be made following its harvest or sale and on the basis of its fair market value at the time of harvest or sale. Said assessment shall be two and one-half times the assessed percentage of value fixed by law for other real property taxed under the uniformity provisions of subparagraph (a) of this Paragraph but in no event greater than its fair market value; and for a method of temporary supplementation of the property tax digest of any county if the implementation of this method of taxing timber reduces the tax digest by more than 20 percent, such supplemental assessed value to be assigned to the properties otherwise benefiting from such method of taxing timber; and
(3) Property under this subparagraph (e) shall be subject to the limitations under Paragraph IV of this section only if provided by general law and only to the extent provided for in such general law.
(f)(1) The General Assembly shall provide by general law for the definition and methods of assessment and taxation, such methods to include a formula based on current use, annual productivity, and real property sales data, of 'forest land conservation use property' to include only forest land each tract of which exceeds 200 acres of a qualified owner. Such methods of assessment and taxation shall be subject to the following conditions:
(A) A qualified owner shall consist of any individual or individuals or any entity registered to do business in this state;
(B) A qualified owner desiring the benefit of such methods of assessment and taxation shall be required to enter into a covenant to continue the property in forest land use;
(C) All contiguous forest land conservation use property of an owner within a county for which forest land conservation use assessment is sought under this subparagraph shall be in a single covenant;
(D) A breach of such covenant within 15 years shall result in a recapture of the tax savings resulting from such methods of assessment and taxation and may result in other appropriate penalties; and
(E) The General Assembly may provide by general law for a limited exception to the 200 acre requirement in the case of a transfer of ownership of all or a part of the forest land conservation use property during a covenant period to another owner qualified to enter into an original forest land conservation use covenant if the original covenant is continued by both such acquiring owner and the transferor for the remainder of the term, in which event no breach of the covenant shall be deemed to have occurred even if the total size of a tract from which the transfer was made is reduced below 200 acres.
(2) No portion of an otherwise eligible tract of forest land conservation use property shall be entitled to receive simultaneously special assessment and taxation under this subparagraph and either subparagraph (c) or (e) of this Paragraph.
(3)(A) The General Assembly shall appropriate an amount for assistance grants to counties, municipalities, and county and independent school districts to offset revenue loss attributable to the implementation of this subparagraph. Such grants shall be made in such manner and shall be subject to such procedures as may be specified by general law.
(B) If the forest land conservation use property is located in a county, municipality, or county or independent school district where forest land conservation use value causes an ad valorem tax revenue reduction of 3 percent or less due to the implementation of this subparagraph, in each taxable year in which such reduction occurs, the assistance grants to the county, each municipality located therein, and the county or independent school districts located therein shall be in an amount equal to 50 percent of the amount of such reduction.
(C) If the forest land conservation use property is located in a county, municipality, or county or independent school district where forest land conservation use value causes an ad valorem tax revenue reduction of more than 3 percent due to the implementation of this subparagraph, in each taxable year in which such reduction occurs, the assistance grants to the county, each municipality located therein, and the county or independent school districts located therein shall be as follows:
(i) For the first 3 percent of such reduction amount, in an amount equal to 50 percent of the amount of such reduction; and
(ii) For the remainder of such reduction amount, in an amount equal to 100 percent of the amount of such remaining reduction amount.
(4) Such revenue reduction shall be calculated by utilizing forest land fair market value. For purposes of this subparagraph, forest land fair market value means the 2008 fair market value of the forest land. Such 2008 valuation may increase from one taxable year to the next by a rate equal to the percentage change in the price index for gross output of state and local government from the prior year to the current year as defined by the National Income and Product Accounts and determined by the United States Bureau of Economic Analysis and indicated by the Price Index for Government Consumption Expenditures and General Government Gross Output (Table 3.10.4). Such revenue reduction shall be determined by subtracting the aggregate forest land conservation use value of qualified properties from the aggregate forest land fair market value of qualified properties for the applicable tax year and the resulting amount shall be multiplied by the millage rate of the county, municipality, or county or independent school district.
(5) For purposes of this subparagraph, the forest land conservation use value shall not include the value of the standing timber located on forest land conservation use property.
(6) Property under this subparagraph (f) shall be subject to the limitations under Paragraph IV of this section only if provided by general law and only to the extent provided for in such general law.
(g) The General Assembly may provide for a different method and time of returns, assessments, payment, and collection of ad valorem taxes of public utilities, but not on a greater assessed percentage of value or at a higher rate of taxation than other properties, except that property provided for in subparagraph (c), (d), (e), or (f) of this Paragraph. Property under this subparagraph (g) shall be subject to the limitations under Paragraph IV of this section only if provided by general law and only to the extent provided for in such general law.
Paragraph IV. Limitations on assessed value increases for real property. (a)(1) Except as otherwise provided in this Paragraph, the rate of increase of the assessed value of real property for state, county, municipal, or educational ad valorem tax purposes shall not exceed an aggregate of 9 percent for each three-year period of successive ownership and, except as provided in this subparagraph, shall not exceed from one taxable year to the succeeding taxable year the lesser of 3 percent or the percent change in the rate of economic inflation on individual taxpayers as determined by the state revenue commissioner. For such purpose, the state revenue commissioner may use the Consumer Price Index for all urban consumers published by the Bureau of Labor Statistics of the United States Department of Labor and any other reliable economic indicator determined by the state revenue commissioner or such other designee as specified by general law to be appropriate. Within such three-year period, such 3 percent limitation shall operate in a cumulative manner so if an increase in one year is less than 3 percent, the 3 percent cap for the next succeeding year shall be increased by an amount equal to the difference in the actual percentage increase in the preceding year and 3 percent. Nothing in this Paragraph shall be construed to prohibit the assessed value of property from decreasing.
(2) If real property or interests therein are sold or transferred, such real property shall be valued for ad valorem tax purposes in an amount not to exceed fair market value. Substantial additions or improvements to such real property shall be valued for ad valorem tax purposes at their fair market value and shall be added to the owner's valuation amount under this subparagraph.
(3) In addition to any general law authorizing error or omission correction by local tax officials, the state revenue commissioner shall be authorized to correct any manifest, factual error or omission in the valuation of real property.
(b) The General Assembly shall be authorized by general law to further define and implement the provisions of this Paragraph, including, but not limited to:
(1) The establishment of classes or subclasses of real property and methods of assessment and taxation, including percentage limitations applicable thereto;
(2) The definition of a sale or transfer of real property or interests therein under subparagraph (a)(2) of this Paragraph IV;
(3) Other circumstances that shall require a revaluation of the real property, including, but not limited to, rezoning;
(4) The timing of the reassessments as a result of sale, transfer, additions, or improvements and the establishment of phase-in periods of assessment increases due to sales or transfers of property at such rate or rates and in such manner as determined by general law; and
(5) The definition and methods of determining fair market value as applied to nonresidential real property under subparagraph (a)(2) of this Paragraph, such methods may include, but shall not be limited to, a formula based on current use, annual revenue, and real property sales data.
(c) The General Assembly shall be authorized to provide by local or general law for base year assessed value homestead exemptions that freeze the assessment of property with respect to any or all ad valorem taxes. Any local or general law providing for base year assessed value homestead exemptions that freeze the assessment of property with respect to any or all ad valorem taxes enacted prior to January 1, 2011, shall be ratified expressly; provided, however, that such ratification shall not be interpreted to imply that such laws were invalid at the time they became law. The provisions of this Paragraph shall not apply to any homestead's ad valorem taxes which are the subject of any such general or local law exemption unless such general law or local law is repealed. In the event of such repeal, the initial valuation amount of the homestead property for purposes of this Paragraph shall be the taxable value of such property established as the initial base year assessed value of such property; provided, however, that in the case of an adjusted base year assessed value homestead exemption, the initial valuation amount of the homestead property for purposes of this Paragraph shall be the taxable value of the property established as the most recent adjusted base year assessed value applicable to such property.
(d) This Paragraph shall not apply to homestead real property in any county or consolidated government for which a local constitutional amendment has been continued in force and effect as part of this Constitution which freezes ad valorem property taxes with respect to such homestead real property unless such local constitutional amendment is repealed. In the event of such repeal, the initial valuation amount of each parcel of homestead real property shall be the most recent taxable value of such parcel as established under such local constitutional amendment.
(e) This Paragraph shall not apply to real property in any county for which a local constitutional amendment has been continued in force and effect as part of this Constitution which imposes millage rate limitations regarding ad valorem property taxes with respect to real property in such county or county school district unless such local constitutional amendment is repealed.
(f) The General Assembly shall be authorized to provide for procedures to discontinue the limitations under this Paragraph conditioned upon approval by a majority of the qualified electors residing within the limits of a county voting in a referendum thereon which shall discontinue such limitations for ad valorem taxes for such county and each municipality and each county or independent school system located in such county."


SECTION 2.
The above proposed amendment to the Constitution shall be published and submitted as provided in Article X, Section I, Paragraph II of the Constitution. The ballot submitting the above proposed amendment shall have written or printed thereon the following:
"( ) YES


( ) NO
Shall property taxes in Georgia be reformed by limiting increases of the value of real property through an amendment to the Constitution of Georgia?"
All persons desiring to vote in favor of ratifying the proposed amendment shall vote "Yes." All persons desiring to vote against ratifying the proposed amendment shall vote "No." If such amendment shall be ratified as provided in said Paragraph of the Constitution, it shall become a part of the Constitution of this state.


[4]


GEORGIA CONSTITUTION
Article VII. TAXATION AND FINANCE
Section I. POWER OF TAXATION
Current through 2004
Paragraph III. Uniformity; classification of property; assessment of agricultural land; utilities.
(a) All taxes shall be levied and collected under general laws and for public purposes only. Except as otherwise provided in subparagraphs (b), (c), (d), and (e), all taxation shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax.


& & &

236 S.E.2d 361 (Ga. 1977)
239 Ga. 199
BENSON-CORWIN, INC.
v.
COBB COUNTY SCHOOL DISTRICT et al.
No. 32247.
Supreme Court of Georgia.
June 8, 1977
Page 362
[239 Ga. 201] Downey, Cleveland & Moore, Lynn A. Downey, Joseph C. Parker, Marietta, for appellant.
Richard H. Still, Jr., Awtrey, Parker, Risse, Mangerie & Brantley, Dana L. Jackel, Bentley & Schindelar, Fred D. Bentley, Sr., Marietta, for appellees.
[239 Ga. 199] INGRAM, Justice.
Appellant's property was annexed into the City of Marietta from the unincorporated area of Cobb County. [239 Ga. 200] Thereafter, the assessed value of appellant's property was increased by the county and this caused an increase in appellant's tax liability for the retirement of Cobb County School bonds. Appellant brought suit in Cobb Superior Court for a temporary and permanent injunction to prevent the appellees from collecting a school bond tax on its property at a valuation higher than the assessed valuation of appellant's property at the time it was annexed by the City of Marietta. This appeal follows the trial court's denial of appellant's prayers for injunctive relief. We affirm as we find no error.
At trial appellant stipulated: that its property is within the Cobb County school district; that it is subject to taxation for the purpose of retiring Cobb County school bonds issued prior to the annexation of its property into the City of Marietta; and, that the assessed value placed on its property is completely fair.
Thus, the only question for decision is whether the trial court erred in not freezing the assessed value of appellant's property, for purposes of the county school bond tax, at its assessed value when it was annexed into the city. We agree with the trial court that to grant appellant the relief requested would contravene the constitutional rule of uniformity in taxation which exists in this State.
Article VII, Sec. I, Par. III of the Constitution of Georgia of 1976 (Code Ann. § 2-4603) provides in part that, "All taxation shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax. Classes of subjects for taxation of property shall consist of tangible property and one or more classes of intangible personal property including money."
Under this constitutional provision all real and personal tangible property, except "motor vehicles, including trailers," and "mobile homes, other than those mobile homes which qualify the owner thereof for the homestead property tax exemption under Georgia law," constitutes a single class of property and must be assessed and taxed alike. See Griggs v. Greene, 230 Ga. 257, 258(2), 197 S.E.2d 116 (1973); Hutchins et al. v. Howard et al., 211 Ga. 830(2), 89 S.E.2d 183 (1955).
Code Ann. § 92-5701 (Ga.L.1909, p. 72) provides that, [239 Ga. 201] "(a)ll property shall be returned for taxation at its fair market value."
To freeze the assessed value of appellant's property at an amount obviously below its fair market value would also obfuscate the application of Art. VIII, Sec. VII, Par. I of our Constitution (Code Ann. § 2-5501) which provides in part that, "(t)he fiscal authority of each county shall annually levy a school tax for the support and maintenance of education, not greater than twenty mills per dollar as certified to it by the county board of education, upon the assessed value of all taxable property within the county located outside any independent school system or area school district therein." The "assessed value" referred to in the Constitution is the correctly assessed fair market value. See Board of Commissioners of Newton County v. Allgood, 234 Ga. 9, 17(7), 214 S.E.2d 522 (1976).
Judgment affirmed.
All the Justices concur.

& & &

[5]

ARTICLE X.
AMENDMENTS TO THE CONSTITUTION

SECTION I.
CONSTITUTION, HOW AMENDED
Paragraph I. Proposals to amend the Constitution; new Constitution. Amendments to this Constitution or a new Constitution may be proposed by the General Assembly or by a constitutional convention, as provided in this article. Only amendments which are of general and uniform applicability throughout the state shall be proposed, passed, or submitted to the people.
Paragraph II. Proposals by the General Assembly; submission to the people. A proposal by the General Assembly to amend this Constitution or to provide for a new Constitution shall originate as a resolution in either the Senate or the House of Representatives and, if approved by two-thirds of the members to which each house is entitled in a roll-call vote entered on their respective journals, shall be submitted to the electors of the entire state at the next general election which is held in the even-numbered years. A summary of such proposal shall be prepared by the Attorney General, the Legislative Counsel, and the Secretary of State and shall be published in the official organ of each county and, if deemed advisable by the "Constitutional Amendments Publication Board," in not more than 20 other newspapers in the state designated by such board which meet the qualifications for being selected as the official organ of a county. Said board shall be composed of the Governor, the Lieutenant Governor, and the Speaker of the House of Representatives. Such summary shall be published once each week for three consecutive weeks immediately preceding the day of the general election at which such proposal is to be submitted. The language to be used in submitting a proposed amendment or a new Constitution shall be in such words as the General Assembly may provide in the resolution or, in the absence thereof, in such language as the Governor may prescribe. A copy of the entire proposed amendment or of a new Constitution shall be filed in the office of the judge of the probate court of each county and shall be available for public inspection; and the summary of the proposal shall so indicate. The General Assembly is hereby authorized to provide by law for additional matters relative to the publication and distribution of proposed amendments and summaries not in conflict with the provisions of this Paragraph.
If such proposal is ratified by a majority of the electors qualified to vote for members of the General Assembly voting thereon in such general election, such proposal shall become a part of this Constitution or shall become a new Constitution, as the case may be. Any proposal so approved shall take effect as provided in Paragraph VI of this article. When more than one amendment is submitted at the same time, they shall be so submitted as to enable the electors to vote on each amendment separately, provided that one or more new articles or related changes in one or more articles may be submitted as a single amendment.

& & &

END


Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084
www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
Phone: 404-633-4100Fax: 404-633-0068

Mere Mortgage Servicer Lacks Standing to Lift Automatic Stay

Foreclosure just got a bit uglier and more costly for (large nonlocal) mortgage banks.

The Federal Bankruptcy Court in the Eastern District of Washington sent a Servicer Packing on a routine Motion to Lift Stay. For a “bank,” or its agent to lose a routine Motion to Lift Stay is unusual -- indeed. In re: PETER A. JACOBSON and MARIA E. JACOBSON, Debtors, UBSC WDWA, Bankruptcy Case No. 08-45120 (Entered on Docket Mar. 06, 2009) (“Jacobson”)

The Jacobson Court denied UBS, AG’s Motion to Lift the Stay on the basis of Lack of Standing and lack of a Real Party in Interest.

The cast of characters in Jacobson (which is common in mortgage lending these days) borders on the comical:

Enter Stage Left:

UBS, AG: A large Multinational Swiss Bank appeared as “Servicer” of the Note; UBS appeared to represent ACT Properties, LLC.

ACT Properties, LLC :: An Alleged Assignee of the Trust Deed holding an unrecorded Assignment.

Castle Point Mortgage, Inc., Elkridge, Maryland: The Original Lender. This lender held the paper for approximately the same amount of time as the Inflationary Period associated with the Big Bang (somewhere between 10–36 seconds and 10–32 seconds after the Signing of the Note and Trust Deed).

MERS: The beneficiary,” identified in the Jacobsons’ Deed of Trust. MERS is “a separate corporation, "solely as nominee for lender and lender's successors and assigns."

Wells Fargo: A subsidiary of Wells Fargo apparently held the “original” Note via, “ Wells Fargo Document Custody "has possession" of the original note in Minneapolis, Minnesota.”

Bankruptcy Specialist: A declarant, perhaps an employee of Wells Fargo Document Custody, who testified from Irvine, California that “someone” in Minnesota is in possession of the original Note.

UBS’s Lawyer appeared electronically from San Diego, California.

Jacobsons appeared, initially, in person.

After describing the cast of characters and their parts in the bankruptcy drama, the Court proceeded to find that the Movant Bank did not have and could not have standing to bring the motion. The Court pointed out that Movant, UBS, AG, stated that it was a mere servicer, but it failed to assert that it had any beneficial interest in the Note and Deed of Trust. Thus, the Court concluded that Movant’s stated authority was woefully lacking.

The Court wrote:

UBS AG's records [show it to be] “servicing agent for ACT Properties"

But even if all of the deficiencies were overlooked or resolved in UBS AG’s favor, one emerges from the syntactical fog into an impassable swamp.

The declaration of someone in California, apparently based on business records, and perhaps predating his employer becoming servicing agent, is that Jacobson's note secured by the deed of trust is in "the possession" of a separate entity in Minnesota.

Assuming the exhibits to the motion are authentic and are the same as those intended to have been attached to the declaration, the note is indorsed in blank. Without more, that and possession (rather than mere custody) suggests that Wells Fargo is the holder of the note.

[Nothing in the]

record establish UBS AG's authority to enforce the Debtors' note, for whomever holds it; and thus to foreclose the deed of trust. The declaration states that UBS AG is "servicing agent," a term with no uniform meaning, and no definition cited.

At a minimum, there must be an unambiguous representation or declaration setting forth the servicer's authority from the present holder of the note to collect on the note and enforce the deed of trust. If questioned, the servicer must be able to produce and authenticate that authority.

UBS AG has not shown that it has standing to bring the motion for relief from stay or authority to act for whomever does.

V. CONCLUSION

As the motion was not brought In the name of the real party in interest, nor has standing to bring it been established, it will be

DENIED.


Philip H Brandt
United States Bankruptcy Judge

Jacobson, Supra [The Complete Opinion is listed below]


While MERS is only referred to in one footnote on page 13 of the opinion, the “nominee” assignment model may not survive “Jacobson,” type scrutiny.

If Bankruptcy Courts begin holding Banks to strict proof concerning the location of the original Note and Trust Deed and requiring the same be moved into evidence (or strictly accounted or) prior to proceeding with a routine Lift the Stay Motion, the entire LENDER, MERS, SERVICER triad may be in serious trouble.

On any given day at any given time, most folk have no idea who holds the Trust Deed and/or the Note. If these questions become routine in Lift the Stay Motions and in other ancillary court proceedings, watch for an unraveling of MERS Nominee system.

Hugh Wood
Atlanta, GA



& & &

Entered on Docket Mar. 06, 2009
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF WASHINGTON
FOR PUBLICATION

In re: No.08-45120
PETER A. JACOBSON and

DECISION ON RELIEF FROM STAY
MARIA E. JACOBSON,
Debtors.

Before the court is a motion for relief from the automatic stay of
§ 362(a)1 to enforce a deed of trust on the Debtors' residence. As it was neither brought in the name of the real party in interest, nor by anyone with standing, the motion for relief from stay will be DENIED.

I.

History

Attached to the motion of "UBS AG, as servicing agent for ACT Properties, LLC ("Movant")" (docket no. 31) are unauthenticated copies of:

Page 1


1. The adjustable rate note purportedly executed on November 2009 in Elkridge, Maryland, by Debtors in favor of Castle Point Mortgage, Inc., which bears an undated "without recourse" indorsement in blank by someone identified as "VP/CFO";

2. A barely-legible copy of Debtors' deed of trust in favor of Castle Point Mortgage (as "lender"); the beneficiary is identified as Mortgage Electronic Registration Systems, Inc.("MERS"), a separate corporation, "solely as nominee for lender and lender's successors and assigns," with an adjustable rate rider (executed in Pierce County, Washington, on the same day as the note, according to the acknowledgment);

3. An apparently unrecorded "Assignment of Mortgage" to ACT Properties, LLC, referencing the deed of trust by parties, date, and recording number, executed by a director of MERS in December of 2008, according to the acknowledgment; and,

4. Debtors' real property and secured claims schedules (A and D, respectively, the latter identifying the secured creditor as "UBS").

The motion notes Debtors' bankruptcy petition, filed 7 October 2008, the attendant automatic stay, and goes on to recount the history of the loan, including its transfer "to Movant," stating that Wells Fargo Document Custody "has possession" of the original note in Minneapolis, Minnesota. The narrative continues with Debtors' default and the commencement of non-judicial foreclosure proceedings, with sale set for 17 October 2008, (presumably by a predecessor in interest of ACT

Properties, since it was pre-assignment; the foreclosing party is not identified). The Debtors' filing automatically stayed the foreclosure, § 362(a); the motion indicates no foreclosure activity is pending. There follows a calculation of the amounts due and lack of equity, and sketchy argument that the Movant is entitled to relief under § 362(d)(1) for lack of adequate protection.

The motion is supported by the declaration of a "bankruptcy specialist" (docket no. 32) which parrots the narrative set forth in the motion (or perhaps it is the other way around - the text respecting the history of the transaction and documentation is virtually identical, and both make the same mistake regarding the date the deed of trust was executed they both state that the deed of trust was executed 8 December 2006, while the acknowledgment shows it as 14 November 2006). Declarant, too, declares that Wells Fargo Document Custody "has possession" of the original note in Minnesota, and indicates that true copies of the note, deed of trust, and assignment are attached, but there are no exhibits to the filed declaration. The declaration was executed in Irvine, California.

No evidence is provided, nor is any assertion even made, regarding UBS AG's authority to act for the holder of the note, beyond the unelaborated statements that it is "servicing agent for ACT Properties, LLC" in the motion, and "servicing agent for ACT Properties, LLC, its successors and/or assigns" in the declaration.

Nor do the papers disclose what kind of an entity "UBS AG" is. "AG" may indicate a corporate entity from Germany, Switzerland, Liechtenstein, Austria, or perhaps elsewhere, and UBS is a major Swiss financial institution. See Nelson D. Schwartz, For Swiss banks, an Uncomfortable Spotlight, Int'l Herald Tribune, March 4, 2009,2 and UBS AG: a Short History.

This latter point became significant when Debtors, pro se (although they have counsel), filed their Motion to Dismiss Movant's Motion for Relief from Stay (docket no. 44), the thrust of which is that UBS transferred the security in the real property to the Central Bank of Switzerland in return for approximately $220,000, and referencing numerous press and internet accounts respecting the Swiss bank. Debtors do not explicate how they reach the conclusion, from news stories about the handling of toxic assets in the banking systems of this country and Switzerland, that UBS AG (or UBS AG, which only claims to service the loan for another holder) was paid an amount approximating the default alleged in the motion. That said, they raise a standing question.

UBS AG's counsel, while located in San Diego, California, is admitted to practice in this district and electronically filed the motion and supporting papers. He continued the motion once and then confirmed the motion for hearing two days prior to the calendar, also via the court's electronic filing system. A local practitioner whose


Page 4


role in the case was not disclosed in the docket appeared for UBS AG at the continued hearing; Debtor Peter Jacobson appeared pro se.

II. Jurisdiction

This is a core proceeding within this court's jurisdiction. 28 U.S.C. §§ 1334(a) and (b), and 157(a) and (b)(2)(G); GR 7, 1.01, Local Rules, W.D. Washington.

III. Issues

A.

Appearances

Were the parties properly represented at hearing?

B. Real Party in Interest

Is a "servicing agent" the real party in interest in whose name a relief from stay motion may be brought?

C. Standing

Does UBS AG or Movant have standing to seek relief from stay to enforce Debtors' deed of trust?

IV. Analysis

A. Appearances

Debtors were and still are represented by counsel in this case. Although they filed their response to the motion pro se, they indicate having informed counsel of their intent to file their response. I infer counsel declined to argue their position. Nevertheless, because I have an independent duty to determine jurisdiction, see part IV.C. below, the question is before me, and Mr. Jacobson appeared at the hearing.

GR 2(g)(1) permits the court to hear represented individuals, even though their counsel is not present:

Whenever a party has appeared by attorney, he cannot thereafter appear or act in his own behalf in the cause, or take any step therein; provided, that the court may in its discretion hear a party in open court, notwithstanding the fact that he has appeared, or is represented by attorney.

Respecting Movants' representation at the hearing, Rule 9010(b) provides that:

[a]n attorney appearing for a party in a case under the Code shall file a notice of appearance with the attorney's name, office address and telephone number, unless the attorney's appearance is otherwise noted in the record.

(emphasis added). In other words, an attorney must first file a notice of appearance containing the data specified in Rule 9010(b) to represent a party in a hearing.

In addition to Rule 9010(b), a local rule of the U.S. District Court for the Western District of Washington, which applies via LBR 9029-2,4 requires:

An attorney eligible to appear may enter an appearance in a civil case by signing any pleading or other paper described in Rule 5(a), Federal Rules of Civil Procedure, filed by or on

Page 6

GR 2(h). No formal notice of appearance is required so long as the new attorney has somehow made his or her involvement in the case known prior to the hearing, such as by signing and filing pleadings.

But once counsel has appeared, GR 2(g)(3) provides:

The authority and duty of attorneys of record shall continue until there shall be a substitution of some other attorney of record, except as herein otherwise expressly provided, and shall continue after final judgment for all proper purposes.

And GR 2(g)(2)(B):

Where there has simply been a change or addition of counsel within the same law firm, an order of substitution is not required; the new attorney will file a Notice of Appearance and the withdrawing attorney will file a Notice of Withdrawal. However, where there is a change in counsel that effects a termination of one law office and the appearance of a new law office, the substitution must be effected . . . which requires leave of court.


And, of course, corporations must be represented by counsel in federal court. See Rowland v. California Men's Colony, 506 U.S. 194, 1201-02 (1993).


The careful reader will have noticed that none of the foregoing rules directly address the situation where the original attorney continues as counsel of record, but another lawyer, not of the same firm, joins for some portion of the representation. But, read together, the requirement of corporate representation and the continuing role of counsel of record preclude interloping counsel. For other attorneys not part of the same firm as record counsel to represent a party, something must be done of record. Customarily, this is accomplished by filing a


Page 7


notice of association, and it is common when lead counsel is distant and the use of local counsel for particular matters in the case will promote efficiency, or the new counsel provides particular expertise. Once the notice of association is served and filed, all parties to the case are aware of the changed representation, and associated counsel receives notice directly of events and filings in the case.

The practice of undisclosed "appearance attorneys" creates problems - other parties (and the court) are sandbagged, and the Debtor, trustee, other creditors, and counsel cannot readily communicate regarding scheduling or substance. In addition to the ramifications of this practice, explored in In re Wright, 290 B.R. 145 (Bankr. C.D. Cal. 2003); Hon. Jim D. Pappas, Simple Solution = Big Problem, 46 The [Idaho] Advocate 31 (Oct. 2003); and Neil M. Berman, Judge, This is Not My Case . . ., Norton Bankr. L. Adviser 3 (May 2004), the lack of formal association could raise questions about the informally-appearing attorney's authority to speak for, and make judicial admissions on behalf of, the client (the contrary suggestion would not be a promising argument).

While this defect is not dispositive, clarity of representation on the record is important to judicial economy and the orderly representation of other parties. So I will require, absent emergency or significant hardship, formal notice of association to be filed not later than the confirmation of the hearing. And there is no remedy for self-inflicted harm - law firms undertaking distant representations must be prepared to appear or timely associate local counsel who will. As corporations must be represented by counsel in federal court, the

Page 8


consequence of not having counsel of record at hearing will be that that party's position may be deemed without merit. See LBR 9013-1(e)(1).5 This is the flip side of Woody Allen's observation that "Eighty per cent of success is showing up" - if you (or your counsel of record if you are a corporate entity) don't, your chance of success approaches zero.

In short, henceforth only counsel of record or individuals representing themselves will be heard

B. Real Party in Interest

The moving party here is UBS AG, which claims only to be a servicer for the holder of the note. It neither asserts beneficial interest in the note, nor that it could enforce the note in its own right. As noted in In re Hwang, 396 B.R. 757, 766-67 (Bankr. C.D. Cal 2008), Rule 4001 makes stay relief a contested matter by providing that Rule 9014 governs. That rule in turn applies Rule 7017, imposing FRCP's requirement that actions be prosecuted in the name of the real party interest.

Page 9


[t]he right to enforce a note on behalf of a noteholder does not convert the noteholder's agent into a real party in interest. "As a general rule, a person who is an attorney-in-fact or an agent solely for the purpose of bringing suit is viewed as a nominal rather than a real party in interest and will be required to litigate in the name of his principal rather than in his own name."

Hwang, 396 B.R. at 767, quoting 6A Wright, Miller & Kane, Federal Practice and Procedure:
Civil 2d § 1553.

The real party in interest in relief from stay is whoever is entitled to enforce the obligation sought to be enforced. Even if a servicer or agent has authority to bring the motion on behalf of the holder, it is the holder, rather than the servicer, which must be the moving party, and so identified in the papers and in the electronic docketing done by the moving party's counsel.

It follows that orders granting relief from stay must do so to the holder of the obligation to be enforced - not the servicer or others, or the collective "Movant," as in the proposed order UBS AG submitted. Of course, setting forth that the holder may act through agents, or may later assign or transfer the interest, e.g., "ACT Properties, LLC, and its agents, successors, and assigns," is appropriate.

Page 10


If UBS AG'S motion had merit, the standing deficiency could be cured by joinder, as FRCP 17(a)(3),8 applicable via Rules 9014 and 7017, allows. As will be seen, joinder would not salvage this motion.


C. Standing.


UBS AG has submitted no evidence that it is authorized to act for whomever holds the note. That deficiency puts its standing in question, See In re Parrish, 326 B.R. 708, 720-21 (Bankr. N.D. Ohio 2005), and I have an independent duty to determine whether I have jurisdiction over matters that come before me. FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 231 (1990). I must therefore determine whether UBS AG (or Movant} has standing to seek relief from stay.


1. Law: For a federal court to have jurisdiction, the litigant must have constitutional standing, which requires an injury fairly traceable to the defendant's allegedly unlawful conduct and likely to be redressed by the requested relief. United Food & Commercial Workers Union Local 751 v. Brown Group, Inc., 517 U.S. 544, 551 (1996).

[T]he question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues. Standing doctrine embraces several judicially self-imposed limits on the exercise of federal

Page 11



jurisdiction, such as the general prohibition on a litigant's raising another person's legal rights . . . . Typically . . . the standing inquiry requires careful judicial examination of a complaint's allegations to ascertain whether the particular plaintiff is entitled to an adjudication of the particular claims asserted.

Allen v. Wright, 468 U.S. 737, 750-52 (1984) (citations omitted). Constitutional standing, predicated on the "case or controversy" requirement of Article III of the Constitution, is a threshold jurisdictional requirement, and cannot be waived. Pershing Park Villas Homeowners Ass'n v. United Pacific Ins. Co., 219 F.3d 895, 899-900 (9th Cir. 2000).

A litigant must also have "prudential standing," which stems from rules of practice limiting the exercise of federal jurisdiction to further considerations such as orderly management of the judicial system. Pershing Park, 219 F.3d at 899-900; In re Godon, 275 B.R. 555, 1564-565 (Bankr. E.D. Cal. 2002) (citing Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541-42 (1986).

Generally, a party without the legal right under applicable substantive law to enforce the obligation at issue, or pursuing an interest outside those protected by the law invoked or abstract questions more appropriately addressed legislatively, lacks prudential standing. Doran v. 7-Eleven, Inc., 524 F.3d 1034, 1044 (9th Cir. 2008).

Under the Bankruptcy Code, a party seeking relief from stay must establish entitlement to that relief. § 362(d); see In re Hayes, 2393 B.R. 259, 266-267 (Bankr. D. Mass. 2008). Foreclosure agents and servicers do not automatically have standing, In re Scott, 376 B.R. 285,

Page 12





290 (Bankr. D. Idaho 2007); Hwang, 396 B.R. at 767, and must show authority to act for the party which does.

In Washington, only the holder of the obligation secured by the deed of trust is entitled to foreclose. RCW 61.24.005(2) defines "beneficiary" under a deed of trust as the holder of the instrument or document evidencing the obligations secured by the deed of trust. See also Fidelity & Deposit Co. Of Maryland v. Ticor Title Ins. Co., 88 Wash. App. 64, 943 P.2d 710 (1997). Having an assignment of the deed of trust is not sufficient, id. at 68-69, because the security follows the obligation secured, rather than the other way around. This principle is neither new nor unique to Washington:

[T]ransfer of the note carries with it the security, without any formal assignment or delivery, or even mention of the latter.

Carpenter v. Longan, 83 U.S. 271, 275 (1872).

It follows that, to have standing, UBS AG must establish its authority to act for the holder of Debtors' note.

2. Evidence: Some courts require a party moving for stay relief to provide admissible evidence tracing the identity of the various holders and servicers of the mortgage or deed of trust in question, and the holders of the note evidencing the underlying obligation. See Hayes, 393 B.R. at 269; and Parrish, 326 B.R. at 720-21. I need not here go so far, because UBS AG's proof neither shows who presently holds Debtors' note nor its own authority.

Page 13


While business records may provide the necessary proof, this exception to the hearsay rule requires that the records (1) be made at or near the time by, or from information transmitted by, a person with knowledge; (2) pursuant to a regular practice of the business activity; (3) kept in the course of regularly conducted business activity; and (4) the source, method, or circumstances of preparation must not indicate lack of trustworthiness. These elements must be established by the testimony of a custodian or other qualified witness, and the documents must be authenticated. In re Vinhnee, 336 B.R. 437, 444 (9th Cir. BAP 2005). Specifically, "the record being proffered must be shown to continue to be an accurate representation of the record that originally was created." Id.; FRE 901(a). A declarant authenticating business

Page 14



records must be qualified. The bare assertion that one works for the company and is familiar with its recordkeeping procedures is not sufficient: "there needs to be enough information presented to demonstrate that the person is sufficiently knowledgeable about the subject of the testimony." Vinhnee, 336 B.R. at 448 (citation omitted). The testimony must contain information warranting the conclusion that the proffered records are what they purport to be. Id.

The only evidence UBS AG has submitted is the declaration of one of its bankruptcy specialists. The initial paragraph of the declaration reads:

I am employed as a Bankruptcy Specialist by UBS AG, as servicing agent for ACT Properties LLC, its successors and/or assigns ("Movant"). In this capacity, I am one of the custodians of the books, records, files and banking records of Movant, as those books, records, files and banking records pertain to the loans and extensions of credit by Movant to Peter A. Jacobson and Maria E. Jacobson ("Debtors"). I have personally worked on said books, records, files and banking records and, as to the following facts, I know them to be true of my own knowledge or I have gained knowledge of them from the Movant's business records, which were made at or about the time of the events which were recorded, and which are maintained in the ordinary course of Movant's business.

Declaration in Support . . . (docket no. 32).


One hopes the declarant is not as unsure of his own identity as this imprecision suggests: is he employed as a bankruptcy specialist by UBS AG only in its capacity as servicing agent for ACT Properties? Or for a successor or assignee of ACT? Or is he a bankruptcy specialist for UBS AG and its successors and/or assigns?
Is he one of the custodians of "the books, records, files and banking records" of all of these

Page 15


entities? And since the motion must be brought in the name of the real party in interest; i.e., the present holder of Debtors' note, what is the relevance of a possible future successor or assignee? Or if the antecedent of "successors and/or assigns" is UBS AG, how does declarant know he will be employed by whomever it is, or have access to its records?

Setting aside for the moment that no business records are actually proffered - the declarant recounts his conclusions, from whatever records he consulted, and we are told that he is one of the custodians, that he works on those records, that they were made at or about the time of the events recorded, and that they are maintained in the ordinary course of Movant's business. While that formulaic recitation attempts to satisfy FRE 901(a), it would not withstand an objection to admissibility: there is nothing meaningful regarding the declarant's qualifications to authenticate business records, or the reliability of those records in this instance.

That reliability is questionable, given obvious errors, such as the date the Debtors executed the deed of trust and the assertion of a loan or extension of credit "by Movant" to the Jacobsons - the lender (and the payee of their note) was Castle Point Mortgage, Inc., not included in either of the compositions of "Movant" set forth in UBS AG's papers. And which of the matters he recounts are things he knows to be true of his own knowledge, and which did he gain from someone's business records? More fundamentally, ACT Properties was assigned the deed of trust just days before the motion was filed. Why should credence be given to

Page 16


UBS AG's records "as servicing agent for ACT Properties" respecting anything before that assignment?

But even if all of the deficiencies were overlooked or resolved in Movant's favor, one emerges from the syntactical fog into an impassable swamp. The declaration of someone in California, apparently based on business records, and perhaps predating his employer becoming servicing agent,
is that Debtor's note secured by the deed of trust is in "the possession" of a separate entity in Minnesota.

Assuming the exhibits to the motion are authentic and are the same as those intended to have been attached to the declaration, the note is indorsed in blank. Without more, that and possession (rather than mere custody) suggests that Wells Fargo is the holder of the note. RCW 62A.3-20113 and 3-30114. Nothing

Page 17


in the record establishes on whose behalf (if other than its own) Wells Fargo Document Custody possesses the note; that (and verification of current possession and present ability to produce the original, if required) would have to come from Wells Fargo. Nor does anything in the record establish UBS AG's authority to enforce the Debtors' note, for whomever holds it; and thus to foreclose the deed of trust. The declaration states that UBS AG is "servicing agent," a term with no uniform meaning, and no definition cited.
At a minimum, there must be an unambiguous representation or declaration setting forth the servicer's authority from the present holder of the note to collect on the note and enforce the deed of trust. If questioned, the servicer must be able to produce and authenticate that authority.

UBS AG has not shown that it has standing to bring the motion for relief from stay or authority to act for whomever does.

V. CONCLUSION

As the motion was not brought In the name of the real party in interest, nor has standing to bring it been established, it will be

DENIED.

END OF DECISION


Philip H Brandt
United States Bankruptcy Judge

Page 18











Footnotes Page 1


Absent contrary indication, all "Code," chapter and section
references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330 as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), Pub. L. 109-8, 119 Stat. 23. "Rule" references are to the Federal Rules of Bankruptcy Procedure, and "FRCP" and "FRE" references to the Federal Rules of Civil Procedure and the Federal Rules of Evidence, respectively. "GR" references are to the Local Rules, U.S. District Court, W.D. Washington, and "LBR" to the Local Bankruptcy Rules, W.D. Washington. "RCW" references are to the Revised Code of Washington.





Footnotes Page 4
___________________

available at: http://www.iht.com/articles/2009/03/04/business/04swiss.php (last visited 4 March 2009) available at:http://www.ubs.com/1/e/about/history/a_short_history.html?isPopup=yes (last visited 5 March 2009).



Footnotes Page 6


Which provides:

The Local Rules of the United States District Court for the Western District of Washington (herein "Local Rules W.D. Wash.") are rules of the United States Bankruptcy Court for the Western District of Washington, except as they may be inconsistent with Title 11, United States Code (herein "Bankruptcy Code"), the Federal Rules of Bankruptcy Procedure, or these Local Bankruptcy Rules. behalf
of the party the attorney represents, or by filing a Notice
of Appearance.



Footnotes Page 9

Which provides: [A]ppearance is required at all scheduled hearings. Failure to appear at the date and time appointed for hearing may be deemed by the court to be an admission that the motion, or the opposition to the motion, as the case may be, is without merit. Quoted in Thomas J. Peters and Robert H. Waterman, In Search of Excellence, Harper & Row 1982, at 119. Which provides in (a)(1): An action must be prosecuted in the name of the real party in interest. . . .


Footnotes Page 11

Which provides:

The court may not dismiss an action for failure to prosecute in the name of the real party in interest until, after an objection, a reasonable time has been allowed for the real party in interest to ratify, join, or be substituted into the action.

After ratification, joinder, or substitution, the action proceeds as if it had been originally commenced by the real party in interest.

Footnotes Page 13

Which renders problematic the identification of MERS "solely as nominee . . ." as the beneficiary of Jacobsons' deed of trust.


Footnotes Page 14


FRE 803(6) provides: Records of Regularly Conducted Activity.-A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnoses, made at or near the time by, or from information transmitted by, a person wit knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the memorandum, report, record or data compilation, all as shown by the testimony of the custodian or other qualified witness, or by certification that complies with Rule 902(11), Rule 902(12), or a statute permitting certification, unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness. The term "business" as used in this paragraph includes business, institution, association, profession, occupation, and calling of every kind, whether or not conducted for profit.

Which provides:

The requirement of authentication or identification as a condition precedent to admissibility is satisfied by evidence sufficient to support a


Footnotes Page 15

finding that the matter in question is what its proponent claims.


Footnotes Page 17

So in both the motion (at 3:11) and in the declaration (at 4). Which provides: (a) "Negotiation" means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder. (b) Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone. Which provides: "Person entitled to enforce" an instrument means(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to RCW 62A.3-309 or 62A.3-418(d). A person may be a person entitled to enforce the instrument even though the person is



Footnotes Page 18

not the owner of the instrument or is in wrongful possession of the instrument.

END

The Federal Home Affordable Refinance Program

The US Treasury released its Summary and Stated Guidelines for The Home Affordable Refinance program. They are displayed below:

Treasury Fact Sheet

Making Home Affordable will offer assistance to as many as 7 to 9 million homeowners, making their mortgages more affordable and helping to prevent the destructive impact of foreclosures on families, communities and the national economy.

The Home Affordable Refinance program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%. Under the Home Affordable Refinance program, many of them will now be eligible to refinance their loan to take advantage of today’s lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed rate loan.

GSE lenders and servicers already have much of the borrower’s information on file, so documentation requirements are not likely to be burdensome. In addition, in some cases an appraisal will not be necessary. This flexibility will make the refinance quicker and less costly for both borrowers and lenders. The Home Affordable Refinance program ends in June 2010.

The Home Affordable Modification program will help up to 3 to 4 million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments. Working with the banking and credit union regulators, the FHA, the VA, the USDA and the Federal Housing Finance Agency, the Treasury Department today announced program guidelines that are expected to become standard industry practice in pursuing affordable and sustainable mortgage modifications. This program will work in tandem with an expanded and improved Hope for Homeowners program.

With the information now available, servicers can begin immediately to modify eligible mortgages under the Modification program so that at-risk borrowers can better afford their payments. The detailed guidelines (separate document) provide information on the following:

Eligibility and Verification

Loans originated on or before January 1, 2009.

First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750.

Higher limits allowed for owner-occupied properties with 2-4 units.

All borrowers must fully document income, including signed IRS 4506-T, two most recent pay stubs, and most recent tax return, and must sign an affidavit of financial hardship.

Property owner occupancy status will be verified through borrower credit report and other documentation; no investor-owned, vacant, or condemned properties.

Incentives to lenders and servicers to modify at risk borrowers who have not yet missed payments when the servicer determines that the borrower is at imminent risk of default.

Modifications can start from now until December 31, 2012; loans can be modified only once under the program.

Loan Modification Terms and Procedures

Participating servicers are required to service all eligible loans under the rules of the program unless explicitly prohibited by contract; servicers are required to use reasonable efforts to obtain waivers of limits on participation.

Participating loan servicers will be required to use a net present value (NPV) test on each loan that is at risk of imminent default or at least 60 days delinquent. The NPV test will compare the net present value of cash flows with modification and without modification. If the test is positive – meaning that the net present value of expected cash flow is greater in the modification scenario – the servicer must modify absent fraud or a contract prohibition.

Parameters of the NPV test are spelled out in the guidelines, including acceptable discount rates, property valuation methodologies, home price appreciation assumptions, foreclosure costs and timelines, and borrower cure and redefault rate assumptions.

Servicers will follow a specified sequence of steps in order to reduce the monthly payment to no more than 31% of gross monthly income (DTI).

The modification sequence requires first reducing the interest rate (subject to a rate floor of 2%), then if necessary extending the term or amortization of the loan up to a maximum of 40 years, and then if necessary forbearing principal. Principal forgiveness or a Hope for Homeowners refinancing are acceptable alternatives.

The monthly payment includes principal, interest, taxes, insurance, flood insurance, homeowner’s association and/or condominium fees. Monthly income includes wages, salary, overtime, fees, commissions, tips, social security, pensions, and all other income.

Servicers must enter into the program agreements with Treasury’s financial agent on or before December 31, 2009.

Payments to Servicers, Lenders, and Responsible Borrowers
The program will share with the lender/investor the cost of reductions in monthly payments from 38% DTI to 31% DTI.

Servicers that modify loans according to the guidelines will receive an up-front fee of $1,000 for each modification, plus “pay for success” fees on still-performing loans of $1,000 per year.

Homeowners who make their payments on time are eligible for up to $1,000 of principal reduction payments each year for up to five years.

The program will provide one-time bonus incentive payments of $1,500 to lender/investors and $500 to servicers for modifications made while a borrower is still current on mortgage payments.

The program will include incentives for extinguishing second liens on loans modified under this program.

No payments will be made under the program to the lender/investor, servicer, or borrower unless and until the servicer has first entered into the program agreements with Treasury’s financial agent.

Similar incentives will be paid for Hope for Homeowner refinances.

Transparency and Accountability
Measures to prevent and detect fraud, such as documentation and audit requirements, will be central to the program.

Servicers will be required to collect, maintain and transmit records for verification and compliance review, including borrower eligibility, underwriting, incentive payments, property verification, and other documentation.

Freddie Mac will audit compliance.

Hugh Wood

Atlanta, GA

HERE ARE THE GUIDELIINES AS OF MARCH 4, 2009

Affordable Modification Program Guidelines

March 4, 2009

Trial loan modifications consistent with these Guidelines may be offered to homeowners beginning on this date, March 4, 2009, and may be considered for acceptance into the Home Affordable Modification Program upon completion of the trial period and other conditions.

These Guidelines, however, do not constitute a contract offer binding on the Department of the
Treasury.

Program Elements Described in the Guidelines

Monthly Payment
Reduction Cost
Share:

Treasury will partner with financial institutions to reduce homeowners'
monthly mortgage payments. The lender will have to first reduce
payments on mortgages to no greater than 38% Front-End Debt-to-
Income (DTI) ratio. Treasury will match further reductions in monthly
payments dollar-for-dollar with the lender/investor, down to a 31% Front-
End DTI ratio for the borrower.

Servicer Incentive
Payments and Pay
for Success Fees:

Servicers will receive an up-front Servicer Incentive Payment of $1,000
for each eligible modification meeting guidelines established under this
initiative. Servicers will also receive Pay for Success payments -as long
as the borrower stays in the program - of up to $1,000 each year for up to
three years.

Similar incentives will be paid for Hope for Homeowner refinances.

Borrower Pay-for-
Performance
Success Payments:

Borrowers are eligible to receive a Pay-for-Performance Success
Payment that goes straight towards reducing the principal balance on the
mortgage loan as long as the borrower is current on his or her monthly
payments. Borrowers can receive up to $1,000 of Pay-for-Performance
Success Payments each year for up to five years.

Current Borrower
One-Time Bonus
Incentive:

One-time bonus incentive payments of $1,500 to lender/investors and
$500 to servicers will be provided for modifications made while a
borrower is still current on mortgage payments. The servicer will be
required to maintain records and documentation evidencing that the Trial
Period payment arrangements were agreed to while the borrower was less
than 30 days delinquent. The servicer must comply with any express
pooling and servicing contractual restrictions for modifying current loans.


Program Payment
Conditions

No payments under the program to the lender/investor, servicer, or
borrower will be made unless and until the servicer has entered into the
program agreements with Treasury's financial agent. Servicers must
enter into the program agreements with Treasury's financial agent no later
than December 31, 2009.

Eligibility Requirements

Pooling and
Servicing
Agreements:

The program guidelines reflect usual and customary industry standards
for mortgage loan modifications contained in typical servicing
agreements, including pooling and servicing agreements (PSAs)
governing private label securitizations. Participating servicers are
required to consider all eligible loans under the program guidelines unless
prohibited by the rules of the applicable PSA and/or other investor
servicing agreements. Participating servicers are required to use
reasonable efforts to remove any prohibitions and obtain waivers or
approvals from all necessary parties.

Origination Date of
Loan Subject to
Modification:

The mortgage to be modified must have been originated on or before
January 1, 2009.

Program
Expiration:

New borrowers will be accepted until December 31, 2012. Program
payments will be made for up to five years after the date of entry into a
Home Affordable Modification. Monitoring will continue through the
life of the program.

Qualification
Terms:

• The home must be an owner occupied, single family 1-4 unit property
(including condominium, cooperative, and manufactured home
affixed to a foundation and treated as real property under state law).
• The home must be a primary residence (verified with tax return,
credit report, and other documentation such as a utility bill).
• The home may not be investor-owned.
• The home may not be vacant or condemned.
• Borrowers in bankruptcy are not automatically eliminated from
consideration for a modification.
• Borrowers in active litigation regarding the mortgage loan can qualify
for a modification without waiving their legal rights.
• First lien loans must have an unpaid principal balance (prior to
capitalization of arrearages) equal to or less than:
o 1 Unit: $729,750
o 2 Units: $934,200
o 3 Units: $1,129,250
o 4 Units: $1,403,400


In Foreclosure
Process:

Any foreclosure action will be temporarily suspended during the trial
period, or while borrowers are considered for alternative foreclosure
prevention options. In the event that the Home Affordable Modification
or alternative foreclosure prevention options fail, the foreclosure action
may be resumed.

Current LTV:

There is no minimum or maximum LTV ratio for eligibility purposes.

Loan Type
Exclusions:

Loans can only be modified under the Home Affordable Modification
program once.

Subordinate
Financing:

Subordinate liens are not included in the Front-End DTI calculation, but
they are included in the Back-End DTI calculation.


Solicitation to
Borrowers/
Incoming Inquiries:


Servicers should follow any existing express contractual restrictions with
respect to solicitation of borrowers for modifications.

Underwriting Analysis

Front-End DTI
Target:

Front-End DTI is the ratio of PITIA to Monthly Gross Income. PITIA is
defined as principal, interest, taxes, insurance (including homeowners
insurance and hazard and flood insurance) and homeowners association
and/or condominium fees. Mortgage insurance premiums are excluded
from the PITIA calculation.

The Front-End DTI Target is 31%. The Standard Waterfall step that
results in a Front-End DTI closest to 31%, without going below 31%, will
satisfy the Front-End DTI Target. There is no restriction on reducing
Front-End DTI below 31%, but any portion of the reduction below 31%
will not be covered by the Payment Reduction Cost Share.

Property Value:

The servicer may use, at its discretion, either one of the government
sponsored enterprises (GSEs) automated valuation model (AVM) -
provided that the AVM renders a reliable confidence score - or a broker
price opinion (BPO).

As an alternative, the servicer may rely on the AVM it uses internally
provided that (i) the servicer is subject to supervision by a Federal
regulatory agency, (ii) the servicer's primary Federal regulatory agency
has reviewed the model and/or its validation and (iii) the AVM renders a
reliable confidence score.

If the GSE or servicer AVM is unable to render a value with a reliable
confidence score, the servicer must obtain an assessment of the property
value utilizing a property valuation method acceptable to the servicer's
Federal regulatory agency, e.g. in accordance with the Interagency
Appraisal and Evaluation Guidelines (as though such guidelines apply to
loan modifications), or a BPO.

In all cases, the property valuation may not be more than 60 days old.

Income and Asset
Validation:

The borrower's income will be verified by requiring a signed Form 4506-
T (Request for Transcript of Tax Return) and obtaining the most recent
tax return on file for each borrower on the note. For wage earners, the
two most recent pay stubs for each wage earner on the note will also be
required. For self-employed borrowers or for non-wage income, the
borrower's income will be verified by obtaining other third party
documents that provide reasonably reliable evidence of income.
Borrowers must also represent and warrant that they do not have
sufficient liquid assets to make their monthly mortgage payments.

Monthly Gross
Income:

The borrower's Monthly Gross Income is the amount before any payroll
deductions includes wages and salaries, overtime pay, commissions, fees,
tips, bonuses, housing allowances, other compensation for personal
services, Social Security payment, including Social Security received by
adults on behalf of minors or by minors intended for their own support,
annuities, insurance polices, retirement funds, pensions, disability or
death benefits, unemployment benefits, rental income and other income.
Monthly net income can be used for preliminary screening and
qualification. If used, the servicer will need to multiply net income by
1.25 to get to an estimate of Monthly Gross Income.

Back-End DTI:

The Back-End DTI is the ratio of the borrower's total monthly debt
payments (such as Front-End PITIA, any mortgage insurance premiums,
payments on all installment debts, monthly payments on all junior liens,
alimony, car lease payments, aggregate negative net rental income from
all investment properties owned, and monthly mortgage payments for
second homes) to the borrower's Monthly Gross Income. The servicer
must validate monthly installment, revolving debt and secondary
mortgage debt by pulling a credit report for each borrower or a joint
report for a married couple. The servicer must also consider information
obtained from the borrower orally or in writing concerning incremental
monthly obligations.

Borrowers who otherwise qualify for a modification under this program,
but who would have a post-modification Back-End DTI greater than or
equal to 55%, will be provided with a letter stating that they are required
to work with a HUD-approved counselor and the modification will not
take effect until they provide a signed statement indicating that they will
obtain counseling.

Reasonably
Foreseeable /
Imminent Default:

Every potentially eligible borrower who calls or writes in to their servicer
in reference to a modification must be screened for hardship. This screen
must ascertain whether the borrower has had a change in circumstances
that causes financial hardship, or is facing a recent or imminent increase
in the payment that is likely to create a financial hardship (payment
shock). If the borrower reports a material change in circumstances, the
servicer must ask about current income and assets, and current expenses
as well as the specific circumstances relating to the claimed financial
hardship. Each of these elements shall be verified through
documentation.

If the servicer determines that a non-defaulted borrower facing a financial
hardship is in Imminent Default and will be unable to make his or her
mortgage payment in the immediate future, the servicer must apply the
NPV Test.

Required
Modifications and
Optional
Modifications:

A standard NPV Test will be required on each loan that is in Imminent
Default or is at least 60 days delinquent under the MBA delinquency
calculation. This NPV Test will compare the net present value (NPV) of
cash flows expected from a modification to the net present value of cash
flows expected in the absence of modification. If the NPV of the
modification scenario is greater, the NPV result is deemed positive.
The NPV Test applies to the Standard Waterfall only and does not require
consideration of principal forgiveness. However, the servicer may
choose to forgive principal if the servicer determines that principal
forgiveness improves the likelihood of loan performance and the value of
modification. Required parameters for the NPV Test will be published
separately.

If the NPV Test generates a positive result when applying the Standard
Waterfall, the servicer is required to offer a Home Affordable
Modification to the borrower. If the NPV Test generates a negative
result, modification is optional, unless prohibited under contract. The
monthly payment reduction incentive is available for any Home
Affordable Modification, whether or not NPV positive, that meets the
eligibility requirements and is performed according to the waterfall
described below.

If the NPV Test result is negative and a Home Affordable Modification is
not pursued, the lender/investor must seek other foreclosure prevention
alternatives, including alternative modification programs, deed-in-lieu
and short sale programs.

Loan Modification and Standard Waterfall

Overview:

Servicers will follow the Standard Waterfall described below to reduce
monthly payments to the 31% Front-End DTI Target defined above. The
initiative will reimburse lenders/investors for one half of the cost of
reducing monthly payments from a level consistent with a 38% Front-
End DTI Ratio (or less, if the unmodified DTI is less than 38%) down to
a level consistent with a 31% Front-End DTI Ratio. This Payment
Reduction Cost Share can last for up to five years.

Hope for
Homeowners:

Servicers will be required to consider a borrower for refinancing into the
Hope for Homeowners program when feasible. Servicer incentive
payments will be paid for Hope for Homeowner refinances.
If the underwriting process for a Hope for Homeowners refinance would
delay eligible borrowers from receiving a modification offer, servicers
will use the Standard Waterfall to begin the Home Affordability
Modification and work to complete the Hope for Homeowners refinance
during the Trial Modification Period.

Consideration for a Hope for Homeowners refinance should not delay
eligible borrowers from receiving a modification offer and beginning the
Trial Modification Period.

Standard Waterfall
Process:

Step 1a: Request Monthly Gross Income as specified above.
Step 1b: Validate total first lien debt and monthly payments (PITIA). For
purposes of making a provisional modification offer during the trial
modification period, the borrower's unverified income and debt payments
can be used. Provisional information and modification terms will be
verified in a timely manner.

Step 2: Capitalize arrearage. Servicers may capitalize accrued interest,
past due real estate taxes and insurance premiums, delinquency charges
paid to third parties in the ordinary course of servicing and not retained
by the servicer, any required escrow advances already paid by the
servicer and any required escrow advances by the servicer that are
currently due and will be paid by the servicer during the Trial Period.
Late fees are not capitalized.

Step 3: Target a Front-End DTI of 31%. The lender/investor shall follow
steps 4, 5, and 6 to reduce the borrower's payment to the level
corresponding to the Front-End DTI Target.

Step 4: Reduce the interest rate to reach the Front-End DTI Target
(subject to a floor of 2%). The note rate should be reduced in increments
of 0.125 %, and should bring the monthly payment as close as possible to
the Front-End DTI Target without going below 31%. If the resulting
modified interest rate is at or above the Interest Rate Cap, this modified
interest rate will be the new note rate for the remaining loan term. If the
resulting modified interest rate is below the Interest Rate Cap, this
modified interest rate will be in effect for the first five years, followed by
annual increases of 1% (100 basis points) per year or such lesser amount
as may be needed until the interest rate reaches the Interest Rate Cap, at
which time it will be fixed for the remaining loan term.

Step 5: If the Front-End DTI Target has not been reached, extend the
term of the loan up to 40 years. If term extension is not permitted extend
amortization. The 40-year term begins at the start of the modification
(after the borrower successfully completes the Trial Period). Note that
the servicer should only extend to a term that is necessary to reach the
Front-End DTI Target; there is no requirement to extend to a 40-year
term.

Step 6: If the Front-End DTI Target has not been reached, forbear
principal. If there is a principal forbearance amount, a balloon payment
of that forbearance amount is due on the maturity date, upon sale of the
property, or upon payoff of the interest bearing balance. If the
modification does not pass the NPV Test and the servicer chooses to
modify the loan, the modified balance must be no lower than the current
property value.

Principal
Reduction Option:

There is no requirement to use principal reduction under the Home
Affordable Modification program; however, servicers may forgive
principal to achieve the Front-End DTI Target.

Principal forgiveness can be used on a standalone basis or before any step
in the Standard Waterfall process. If principal forgiveness is used,
subsequent steps in the Standard Waterfall may not be skipped. If
principal is forgiven and the rate is not reduced, the rate will be frozen at
its existing level and treated as a modified rate for the purposes of the
Interest Rate Cap.

In the event of principal forgiveness, the Payment Reduction Cost Share
continues to be based on the change in the borrower's monthly payment
from 38% to 31% Front-End DTI ratio and is limited to five years.

Modification Terms

Interest Rate Floor:

The Interest Rate Floor for modified loans is 2%.

Interest Rate Cap:

The modified interest rate must remain in place for five years, after which
time the interest rate will be gradually increased 1% (100 basis points)
per year or such lesser amount as may be needed until it reaches the
Interest Rate Cap.

The Interest Rate Cap for the modified loan is the lesser of (i) the fully
indexed and fully amortizing original contractual rate or (ii) the Freddie
Mac Primary Mortgage Market Survey rate for 30-year fixed rate
conforming mortgage loans, rounded to the nearest 0.125%, as of the date
that the modification document is prepared.

If the modified rate exceeds the Freddie Mac Primary Mortgage Market
Survey rate in effect on the date the modification document is prepared,
the modified rate will be the new note rate for the remaining loan term.

Principal
Forbearance:

No interest will accrue on the forbearance amount.
If the option to forebear principal is selected, the servicer shall forbear on
collecting the deferred portion of the Capitalized Balance until the
earliest of (i) the maturity of the modified loan, (ii) a sale of the property,
or (iii) a pay-off or refinancing of the loan.

Redefaulting
Loans:

A loan will be considered to have redefaulted when the borrower reaches
a 90-day delinquency status under the MBA delinquency calculation.
Redefaulting Loans will be terminated from the program, and no further
payments of any kind will be made to the lender/investor, servicer, or
borrower. Redefaulting Loans should be considered for other loss
mitigation programs prior to being referred to foreclosure.

Approval Conditions

Trial Period
Required:

Successful completion of the trial modification period and entry into
program agreements between the servicer and Treasury's financial agent
are prerequisites for any payments to the lender/investor, servicer, or
borrower.

Modification is effective the first calendar month following the
successful completion of the Trial Period. Successful completion means
that the borrower is current (under the MBA delinquency calculation) at
the end of the Trial Period.

Borrowers in foreclosure restart states will be considered to have failed
the Trial Period if they are not current at the time the foreclosure sale is
scheduled.

No payments under the program to the lender/investor, servicer, or
borrower will be made during the Trial Period. No payments under the
program to the lender/investor, servicer, or borrower will be made if the
Trial Period is not completed successfully. No payments under the
program to the lender/investor, servicer, or borrower will be made unless
and until the servicer has entered into the program agreements with
Treasury's financial agent.

Length of Trial
Period:

The Trial Period will last 90 days (three payments at modified terms) or
longer if necessary to comply with investor contractual obligations. The
borrower must be current at the end of the Trial Period to obtain a Home
Affordable Modification.

Escrows:

Servicers are required to escrow for modified borrowers' real estate taxes
and mortgage-related insurance payments immediately if they have the
capability of processing these payments or are already using a third-party
vendor for this purpose. Servicers who do not have this capacity must
implement an escrow process within six months of the program
agreement.

Counseling
Requirements:

For borrowers with a Back-End DTI of 55% or higher, the servicer must
inform the borrower of the availability and advantages of counseling and
provide a list of local HUD-approved counselors. The servicer must
provide the borrower with a letter stating that counseling is a requirement
of the modification terms. This letter may be required by counselors in
order to begin counseling. The modification will not take effect until the
borrower represents in writing that he or she will obtain counseling.

Assumable:

If the modified loan was assumable prior to modification, a Home
Affordable Modification cancels this feature.

Fees/Charges

Modification Fees
and Charges to
Borrower:

There are no modification fees or charges borne by the borrower.

Modification Fees
and Charges
Reimbursable by
Investor:

Modification fees and charges to the servicer will be reimbursable by the
investor. These include notary fees, property valuation and other
required fees. Servicer reimbursement by the investor will take place
within the normal process between the servicer and the investor.

Unpaid Late Fees
Waived:

Unpaid late fees will be waived for the borrower. These include late fees
prior to the start of the Trial Period and accrued during the period.

Credit Report:

The servicer will cover the cost of the credit report.

Compensation

Servicer
Compensation:

Compensation is provided to the servicer that performs the loss
mitigation or modification activities. Upon modification following
successful completion of the Trial Period, and contingent on signing the
program servicer agreement, the servicer will receive an incentive fee of
$1,000 for each eligible modification meeting Home Affordable
Modification guidelines.

Servicers will also receive Pay for Success fees - payable 12 months
from the effective date of the Trial Period as long as the borrower
continues in the program - of up to $1,000 each year for three years.
Servicers will no longer receive Pay for Success incentive payments for
Redefaulting Loans or for loans that have paid off subject to certain de
minimis constraints (discussed below).

For loans modified while still current under the MBA delinquency
calculation, the servicer will receive a Current Borrower One-Time
Incentive of $500 following successful completion of the Trial Period.
Lenders that service their own loans are eligible for these incentives.
Throughout this document the term "servicer" means the party that is
responsible for performing the modification activities.

Similar incentives will be paid for Hope for Homeowner refinances.

Borrower Cash
Contribution:

The investor may not require the borrower to contribute cash.

Lender/Investor
Compensation:

Lenders/investors will be compensated only in the event that the Front-
End DTI Target or a lower Front-End DTI is achieved. Lenders/investors
will follow the Standard Waterfall specified above to reach a monthly
payment that satisfies the Front-End DTI Target. As described above,
Treasury will provide compensation based on one half of the dollar
difference between the monthly payment for a 31% Front-End DTI Ratio
and the lesser of (i) the monthly payment for a 38% Front-End DTI Ratio
or (ii) the borrower's current monthly payment. This compensation will
be provided for up to five years or until the loan is paid off.

Upon a modification becoming effective following successful completion
of the Trial Period by a borrower who was current prior to the start of the
Trial Period, lenders/investors will be paid a $1,500 Current Borrower
One-Time Incentive, subject to certain de minimis constraints (discussed
below).

No monthly lender/investor payments will be made during the Trial
Period. Monthly lender/investor payments will begin after the Trial
Period is successfully completed, the servicer signs a service agreement
with Treasury, and formal modification begins. No monthly
lender/investor payments will be made if the Trial Period is not
completed successfully.

Borrower
Compensation:

Borrowers will be eligible to accrue up to $1,000 each year in Pay-for-
Performance Success Payments for up to five years, a total of up to
$5,000 over five years, subject to certain de minimis constraints
(discussed below). Accruals are based on on-time payment performance.
The first annual principal balance reduction will be effective 12 months
after entering the Trial Period as long as the borrower is not terminated
from the program. In any given month, the borrower's mortgage
payment must be made on time, accounting for standard servicer grace
periods, in order to accrue the monthly Pay for Performance Success
Payment. The borrower will receive information on a monthly basis
regarding the accrual of these payments.

The payment will be directed to the servicer, who will reduce the
principal balance by the payment amount (but not by more than $1,000
per year) for five years if the borrower continues in the program.
Payments are to be applied directly and entirely to reduce the principal
balance, and any applicable prepayment penalties on partial principal
prepayment made by the government must be waived. The equivalent of
three months of Pay-for-Performance Success Payments will be made
upon successful completion of the Trial Period, contingent upon the
servicer signing a service agreement with the Treasury.

Borrowers who are terminated from the program lose their right to
outstanding accruals.

De Minimis
Constraint:

To qualify for servicer Pay for Success payments and borrower Pay for
Performance Success Payments, the modification must reduce the
monthly payment by a minimum of 6 %. The monthly payment is the
PITIA payment, as used in defining DTI, with the loan fully indexed and
fully amortized.

When paid, servicer annual Pay for Success payments and borrower Pay
for Performance Success Payments will be the lesser of (i) $1,000 or (ii)
half the reduction in the borrower's annualized monthly payment.
The de minimis constraint does not apply to the up-front Servicer
Incentive Payment, the Payment Reduction Cost Share, or the Home
Price Depreciation Reserve Payment.

Consumer Protection

Disclosure

When promoting or describing loan modifications, servicers should
provide borrowers with information designed to help them understand the
modification terms that are being offered and the modification process.
Servicers also must provide borrowers with clear and understandable
written information about the material terms, costs, and risks of the
modified mortgage loan in a timely manner to enable borrowers to make
informed decisions.

Fair Lending

Servicers' modifications under this program must comply with the Equal
Credit Opportunity Act and the Fair Housing Act, which prohibit
discrimination on a prohibited basis in connection with mortgage
transactions. Loan modification programs are subject to the fair lending
laws, and servicers and lenders should ensure that they do not treat a
borrower less favorably than other borrowers on grounds such as race,
religion, national origin, sex, marital or familial status, age, handicap, or
receipt of public assistance income in connection with any loan
modification. These laws also prohibit redlining.

Consumer
Inquiries and
Complaints

Servicers should have procedures and systems in place to be able to
respond to inquiries and complaints relating to loan modifications.
Servicers should ensure that such inquiries and complaints are provided
fair consideration, and timely and appropriate responses and resolution.

Monitoring

Documentation:

Servicers will be required to maintain records of key data points for
verification/compliance reviews. These documents may include, but are
not limited to, borrower eligibility and qualification, underwriting
criteria, and incentive payments. These documents also include a
hardship affidavit, which every borrower is required to execute.
Borrowers will be required to provide declarations under penalty of
perjury attesting to the truth of the information that they have provided to
the servicer to allow the servicer to determine the borrower's eligibility
for entry into the Home Affordable Modification Program.
Detailed guidance on data requirements will be released separately.

Anti-Fraud
Measures:

Measures to prevent and detect fraud, such as documentation and audit
requirements, will be described in the servicer guidelines and the
program guidelines in the financial agency agreements with Fannie Mae
and Freddie Mac. Additional fraud protection measures will be
announced by Treasury.

Participating servicers and lenders/investors are not required to modify
the loan if there is reasonable evidence indicating the borrower submitted
false or misleading information or otherwise engaged in fraud in
connection with the modification. Servicers should employ reasonable
policies and/or procedures to identify fraud in the modification process.

Data Collection:

Servicers will be required to collect and transmit borrower and property
data in order to ensure compliance with the program as well as to
measure its effectiveness. Data elements may include data needed to
perform underwriting analysis, loan modification and waterfall analysis,
and modification terms. In addition, borrower profiles and property level
information may be included. Detailed guidance on data requirements
will be released separately.

Accounting and
Legal:

The provisions of the Program should not be construed to override, void
or in any way modify the responsibility of the management of lenders
and servicers for preparing financial statements and regulatory reports in
accordance with all applicable generally accepted accounting principles,
including standards such as Statement of Financial Accounting Standards
(SFAS) No. 15, Accounting by Debtors and Creditors for Troubled Debt
Restructurings, SFAS No. 114, Accounting by Creditors for Impairment
of a Loan, SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, and
AICPA Statement of Position 03-3, Accounting for Certain Loans or
Debt Securities Acquired in a Transfer, and their related amendments and
interpretations.

Other Program Features

Home Price
Depreciation
Payments:

To encourage lenders/investors to modify more mortgages, compensation
will be provided to partially offset probable losses from home price
declines. This will be structured as a simple cash payment on each
modified loan while the loan remains active in the program.

Payments for Short
Sales and Deeds-in-
Lieu:

Compensation will be provided to servicers and borrowers in order to
facilitate short sales or deeds-in-lieu in those cases in which borrowers
either fail the net present value (NPV) test (described below) or fail to
qualify for, or default under, the modification program.

Second Lien
Elimination
Payments:

To reduce the borrower's overall indebtedness and improve loan
performance, additional incentives will be provided to extinguish junior
liens on homes with first-lien loans that are modified under the program.

Government Loan
Programs:

FHA, VA and rural housing loans will be addressed through standalone
modification programs run by those agencies. FHA's Hope for
Homeowners refinancing program will also be included in a parallel
incentive program.


Net Present Value Model Parameters

NPV Test:

An NPV Test will be required on each loan that is in Imminent Default or
is at least 60 days delinquent under the MBA delinquency calculation.
This NPV test will compare the net present value (NPV) of cash flows
expected from a modification to the net present value of cash flows
expected in the absence of modification. If the NPV of the modification
scenario is greater, the NPV result is deemed positive, and the servicer
must modify the loan (absent fraud, etc.) However, an "NPV positive"
result is not necessary to qualify a loan for a Home Affordable
Modification and the associated lender/investor, servicer, and borrower
payments.

Standard NPV
Model:

To provide a consistent and industry-wide approach to the required NPV
Tests, Treasury will set forth a Standard NPV Model with parameters
specified below. Complete details on each component outlined below are
forthcoming.

Discount Rate:

The program allows the servicer to choose the Discount Rate to use in the
NPV Model, subject to a program-determined ceiling that will be
sensitive to the market-determined cost of funds. The ceiling on the
allowable Discount Rate for the NPV Test is the Freddie Mac Primary
Mortgage Market Survey rate (PMMS), plus a spread of 2.5 percentage
points. The PMMS is the conventional mortgage rate published in the
Federal Reserve's H.15 bulletin.

The servicer may choose a different Discount Rate for loans in portfolio
versus loans in investor pools, but may not otherwise apply different rates
to different loans in the servicing book. For example, it may choose to
use a Discount Rate equal to the PMMS + 2.0 percent for its investor
pools and a Discount Rate equal to the PMMS for its loans in portfolio.

Cure Rate and
Redefault Rate:

The Cure Rates and Redefault Rates will be obtained from a default
equation with parameters based on GSE analytics and program portfolio
data except where servicers use custom parameters (see below).
Treasury, in consultation with an inter-agency team of government
officials, will update these tables periodically based on incoming data.

Property Value:

Property value will be determined in accordance with the Guidelines.

Incentive
Payments:

Incentive payments, including the Payment Reduction Cost Share, annual
borrower performance bonus payments toward principal, and Current
Borrower One-Time Bonus Incentive, will be determined in accordance
with the Guidelines.

Other Parameters:

The remaining parameters will come from data sets held or produced by
the Federal Housing Finance Agency: home price forecast, valuation of
the house price depreciation reserve, foreclosure timelines, and
foreclosure costs and REO stigma

NPV Test
Customization:

Servicers having at least a $40 billion servicing book will have an option
to substitute a set of Cure Rates and Redefault Rates estimated based on
the experience of their own aggregate portfolios. A servicer using this
option should take into account, as feasible, current LTV, current DTI,
current credit score, delinquency status, and other relevant variables the
servicer identifies.

The Cure and Redefault Rates must be empirically validated where
possible. Servicer judgment regarding the effect of DTI is expected,
given the limited data available and the likelihood that the new program
will materially affect Cure and Redefault Rates. However, all
assumptions must be tested as program data become available and revised
as appropriate.

A servicer who chooses to use customized Cure and Redefault Rates
must apply the same assumptions for Cure and Redefault Rate to the
entire servicing portfolio, without distinguishing between loans in
portfolio and investor pools.

Models and assumptions will be subject to review by federal bank
supervisory agencies where applicable, and in all cases by Freddie Mac
as program compliance agent.

A servicer not meeting the size threshold may apply for permission to
apply Cure Rates and Redefault Rates estimated based on the servicer's
portfolio experience.

Mortgage
Insurance:

For loans that have mortgage insurance (MI) coverage, the NPV Test will
incorporate the value of the contingent claim payment in the event of
default when evaluating projected foreclosure or modification scenarios.
If the modification does not pass the NPV Test, then it will be referred to
the appropriate MI company. The major MI companies have agreed to
develop a mechanism by which they will pay partial claims where they
deem appropriate to avoid foreclosure.

Hugh Wood

Wood & Meredith, LLP

Atlanta, GA

404-633-4100

hwood@woodandmeredith.com

END