Prevention and Sound Mortgage Servicing Act

Rep. Maxine Waters (D-California) has revised a bill she’s brought to the table several times before that would compel lenders to engage in what she says are “reasonable loss mitigation activities” for all delinquent homeowners.

“In light of the slap of the wrist our regulators are preparing to give 14 servicers who admitted to breaking the law, legislation to require loss mitigation prior to foreclosure is needed now more than ever before,” said Rep. Waters. “It’s the only way to protect homeowners and to prevent foreclosures.”


Waters has reintroduced an updated version of the Foreclosure Prevention and Sound Mortgage Servicing Act (H.R. 1567). It’s legislation she says could be a step in the right direction for ending the foreclosure crisis and holding servicers accountable.

The bill places one entity in charge of modifying primary and secondary liens and requires principal reduction for underwater mortgages.


A spokesperson from Waters’ office explained that this “one entity” refers to the servicers/mortgagee of the first lien. For example, if a borrower has two mortgages, with the second being a subordinate lien, under Waters’ legislation, the first lien holder would have primary responsibility for modifying both loans, with the second modified in proportion with the first.




According to Waters’ office, the current protocol is that when first liens are modified, generally nothing happens to seconds; or first-lien holders will refuse to modify unless subordinate lien holders modify as well, and seconds hardly ever modify.

A copy of Waters’ revised bill has not yet been logged in the congressional tracking system. Although her latest version has since been updated, a copy of the previously introduced legislation can be viewed:
http://www.govtrack.us/congress/billtext.xpd?bill=h111-3451