[Congressional Record Volume 170, Number 23 (Thursday, February 8, 2024)]
[Senate]
[Pages S498-S499]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. REED (for himself, Mr. Brown, Ms. Smith, Mr. Wyden, and 
        Mr. Merkley):
  S. 3784. A bill to provide requirements for the bulk auction or group 
sale of certain non-performing loans, and for other purposes; to the 
Committee on Banking, Housing, and Urban Affairs.
  Mr. REED. Madam President, today I am reintroducing the Preserving 
Homes and Communities Act with Senators Brown, Wyden, Smith, and 
Merkley. This legislation would reform Federal Housing Administration, 
FHA, Fannie Mae, and Freddie Mac note sale programs to protect 
homeowners from foreclosure and keep properties in the hands of 
families and local civic institutions.
  FHA, Fannie Mae, and Freddie Mac began selling nonperforming and 
reperforming loans after the great recession to strengthen their 
balance sheets. These transactions, known as note sales, transfer 
mortgage ownership to bulk purchasers, including private equity firms 
and institutional investors. The sale of nonperforming and reperforming 
loans may reduce financial risk for FHA, Fannie Mae, and Freddie Mac 
and help purchasers turn a profit, but they often directly harm 
homeowners by taking homes from families and moving properties into the 
single-family rental market.
  Loans insured by FHA or securitized by Fannie Mae or Freddie Mac have 
strong foreclosure protections for borrowers. Companies that service 
these mortgages must offer specific loss mitigation options to eligible 
borrowers before they can begin foreclosure proceedings, which helps 
many borrowers avoid foreclosure and catch up on their payments. But 
while these foreclosure protections are effective, they are drastically 
reduced when a mortgage is included in a note sale.
  Unfortunately, the lack of robust, required protections after a note 
sale has very real consequences for homeowners. Over 80 percent of 
homeowners whose nonperforming loans were sold by FHA ultimately lost 
their homes after their new servicers reached a final loan resolution, 
and the U.S. Government Accountability Office has found that 
nonperforming loans sold by FHA are more likely to face foreclosure 
than comparable loans that FHA keeps on its own balance sheet. The 
majority of homeowners with nonperforming loans sold by Fannie Mae and 
Freddie Mac have also lost their homes after servicers reached a final 
resolution. It is abundantly clear that note sales do not help most 
borrowers remain in their homes.
  Making matters worse, note sale purchasers are predominately private 
equity firms and institutional investors, which often move foreclosed 
properties out of the owner-occupied market. Indeed, approximately one-
third of properties foreclosed upon or voluntarily turned over to a 
lender after a Fannie Mae or Freddie Mac nonperforming loan note sale 
are sold to an investor, held by the purchaser for rental, or become 
real estate owned. In other words, one-third of these homes may be 
taken out of the owner-occupied market, reducing home ownership 
opportunities for families and shifting property ownership to large 
corporations that often drive up rents.
  The Preserving Homes and Communities Act tackles these problems. It 
would protect homeowners by, one, requiring mortgage servicers complete 
Agency-required loss mitigation actions before FHA, Fannie Mae, or 
Freddie Mac can sell a nonperforming mortgage, and two, by improving 
loss mitigation protections for these mortgages after purchasers 
acquire them. It would similarly protect communities by giving local 
entities with public missions, including States, municipalities, and 
nonprofits, the first opportunity to purchase nonperforming and 
reperforming mortgages--ahead of private equity and institutional 
investors--while requiring purchasers that foreclose on nonperforming 
note sale properties to prioritize owner-occupants and low- and 
moderate-income households when selling or renting these homes. In sum, 
our legislation seeks to keep homeowners in their homes, support home 
ownership opportunities, and preserve the supply of available and 
affordable homes for families.
  I thank the National Consumer Law Center, on behalf of its low-income 
clients, and the National Community Stabilization Trust for their 
support. I urge my colleagues to cosponsor this legislation and support 
its passage.

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