National Mortgage Servicing Standards: Legislation in the 112th Congress

Sean M. Hoskins
Analyst in Financial Economics

The United States single-family housing market has $10.5 trillion of mortgage debt outstanding. Servicers play an important role in this market. The owner of a mortgage loan or mortgagebacked security typically hires a servicer to act on its behalf. When loans are current, a mortgage servicer collects payments from borrowers and forwards them to the mortgage holders. If the borrower becomes delinquent, a servicer may offer the borrower an option that could allow the borrower to stay in his or her home, or the servicer may pursue foreclosure.

Following high foreclosure rates and recent allegations of abuse, mortgage servicing has attracted attention from Congress. In addition to hearings and congressional investigations, some in Congress have called for national servicing standards. The most comprehensive proposal, S. 824, the Foreclosure Fraud and Homeowner Abuse Prevention Act of 2011 (Senator Sherrod Brown et al.), and its companion bill in the House, H.R. 1783 (Representative Brad Miller et al.), contain provisions intended to protect investors and borrowers from improper servicing practices. S. 967, the Regulation of Mortgage Servicing Act of 2011 (Senator Jeff Merkley et al.), includes borrower protections in addition to those offered by S. 824 and H.R. 1783.

The servicing standards proposed in S. 824 and H.R. 1783 include provisions intended to ensure that servicers act in the best interest of investors who hold mortgage loans. The proposals would adjust the servicing compensation structure to better align servicer incentives with the incentives of the mortgage holder. Servicers would also be prohibited from purchasing services offered by their affiliates at inflated costs and passing the costs on to investors. In addition, servicers would be prohibited from choosing a loss mitigation option that would benefit their affiliates at the expense of other investors.

S. 824, H.R. 1783, and S. 967 have three major components for borrower protection. First, the three bills would require servicers to establish a single point of contact with the borrower. The single point of contact would be a case manager who is assigned to each delinquent borrower and would manage communications with the borrower. Second, the three bills would prohibit servicers from dual tracking, which means initiating foreclosure on a borrower while simultaneously pursuing a loan modification. Servicers would instead be required to determine whether the borrower is eligible for an alternative to foreclosure before initiating foreclosure. Third, S. 824 and H.R. 1783 would set minimum experience, education, and training levels for loan modification staff and limit caseload levels for individual employees.

Legislation is not the only avenue to setting servicing standards. On August 10, the Consumer Financial Protection Bureau (CFPB) issued proposed rules that would establish mortgage servicing standards that would apply to most mortgages. Servicing standards for some mortgages were also part of the national mortgage settlement and the enforcement actions taken by federal regulators in response to deficient servicing practices by some banks.


Date of Report: August 29, 2012
Number of Pages: 21
Order Number: R42041
Price: $29.95

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Small Business Administration HUBZone Program

Robert Jay Dilger
Senior Specialist in American National Government

The Small Business Administration (SBA) administers several programs to support small businesses, including the Historically Underutilized Business Zone Empowerment Contracting (HUBZone) program. The HUBZone program is a small business federal contracting assistance program “whose primary objective is job creation and increasing capital investment in distressed communities.” It provides participating small businesses located in areas with low income, high poverty rates, or high unemployment rates with contracting opportunities in the form of “setasides,” sole-source awards, and price-evaluation preferences.

In FY2011, the federal government awarded contracts valued at $9.9 billion to HUBZone certified businesses, with about $2.75 billion of that amount awarded through a HUBZone setaside, sole source, or price-evaluation preference award. The program’s FY2011 administrative cost was about $15.6 million. Its FY2012 appropriation is $2.5 million, with the additional cost of administering the program provided by the SBA’s appropriation for general administrative expenses.

Congressional interest in the HUBZone program has increased in recent years, primarily due to reports of fraud in the program. Some Members have called for the program’s termination. Others have recommended that the SBA continue its efforts to improve its administration of the program, especially its efforts to prevent fraud.

This report examines the arguments presented both for and against targeting assistance to geographic areas with specified characteristics, such as low income, high poverty, or high unemployment, as opposed to providing assistance to people or businesses with specified characteristics. It then assesses the arguments presented both for and against the continuation of the HUBZone program.

The report also discusses the HUBZone program’s structure and operation, focusing on the definitions of HUBZone areas and HUBZone small businesses and the program’s performance relative to federal contracting goals. The report includes an analysis of (1) the SBA’s administration of the program, (2) the SBA’s performance measures, and (3) the effect of the 2010 decennial census on which areas qualify as a HUBZone.

This report also examines congressional action on P.L. 111-240, the Small Business Jobs Act of 2010, which amended the Small Business Act to remove certain language that had prompted federal courts and the Government Accountability Office (GAO) to find that HUBZone set-asides have “precedence” over other small business set-asides. It also discusses H.R. 2131, the Protect HUBZones Act of 2011; S. 1756, the HUBZone Protection Act of 2011; and S. 633, the Small Business Contracting Fraud Prevention Act of 2011. These bills would extend HUBZone eligibility for firms that lost their HUBZone eligibility due to the release of 2010 decennial census economic data for three years after the first date on which the SBA publishes a HUBZone map that is based on the results from the 2010 decennial census. S. 633 would also require the SBA to implement several GAO recommendations designed to improve the SBA’s administration of the program. Also, S. 1874, the HUBZone Qualified Census Tract Act of 2011, would expedite the identification of HUBZone qualified census tracts following the release of 2010 census data.


Date of Report: August 30, 2012
Number of Pages: 34
Order Number: R41268
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Vulnerable Youth: Background and Policies

Adrienne L. Fernandes-Alcantara
Specialist in Social Policy

The majority of young people in the United States grow up healthy and safe in their communities. Most of those of school age live with parents who provide for their well-being, and they attend schools that prepare them for advanced education or vocational training and, ultimately, selfsufficiency. Many youth also receive assistance from their families during the transition to adulthood. During this period, young adults cycle between attending school, living independently, and staying with their families. Approximately 60% of parents today provide financial support to their adult children who are no longer in school. This support comes in the form of housing (50% of parents provide this support to their adult children), living expenses (48%), cost of transportation (41%), health insurance (35%), spending money (29%), and medical bills (28%). Even with this assistance, the current move from adolescence to adulthood has become longer and increasingly complex.

For vulnerable (or “at-risk”) youth populations, the transition to adulthood is further complicated by a number of challenges, including family conflict or abandonment and obstacles to securing employment that provides adequate wages and health insurance. These youth may be prone to outcomes that have negative consequences for their future development as responsible, selfsufficient adults. Risk outcomes include teenage parenthood; homelessness; drug abuse; delinquency; physical and sexual abuse; and school dropout. Detachment from the labor market and school—or disconnectedness—may be the single strongest indicator that the transition to adulthood has not been made successfully.

The federal government has not adopted a single overarching federal policy or legislative vehicle that addresses the challenges vulnerable youth experience in adolescence or while making the transition to adulthood. Rather, federal youth policy today has evolved from multiple programs established in the early 20th century and expanded in the years following the 1964 announcement of the War on Poverty. These programs are concentrated in six areas: workforce development, education, juvenile justice and delinquency prevention, social services, public health, and national and community service. They are intended to provide vulnerable youth with opportunities to develop skills to assist them in adulthood.

Despite the range of federal services and activities to assist disadvantaged youth, many of these programs have not developed into a coherent system of support. This is due in part to the administration of programs within several agencies and the lack of mechanisms to coordinate their activities. In response to concerns about the complex federal structure developed to assist vulnerable youth, Congress passed the Tom Osborne Federal Youth Coordination Act (P.L. 109- 365) in 2006. Though activities under the act were never funded, the Interagency Working Group on Youth Programs was formed in 2008 under Executive Order 13459 to carry out coordinating activities across multiple agencies that oversee youth programs. Separately, Congress has considered other legislation (the Younger Americans Act of 2000 and the Youth Community Development Block Grant of 1995) to improve the delivery of services to vulnerable youth and provide opportunities to these youth through policies with a “positive youth development” focus.


Date of Report: August 29, 2012
Number of Pages: 69
Order Number: RL33975
Price: $29.95


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Hearing Testimony by Chairman of the Federal Reserve Board and the Comptroller of the Currency

To: House Oversight and Government Reform Committee Attention: Jason Powell
From: Baird Webel Specialist in Financial Economics

 This responds to your request for information on testimony by the Chairman of the Federal Reserve Board and the Comptroller of the Currency before congressional committees, particularly the makeup of the panels on which they testified. Attached please find the hearing titles, dates, and accompanying witnesses for the time period from 2007-2012 as compiled using the ProQuest Congressional database.

To summarize the information: CRS identified 63 times that the Chairman of the Federal Reserve Board appeared before a congressional committee. In general, the Chairman appeared on a panel alone or with other witnesses holding federal government positions. In one instance, Chairman Ben Bernanke appeared before the House Financial Services Committee on a panel that included a state banking regulator representing the Conference of Bank Supervisors. This hearing is highlighted below. We were unable to identify any hearings where the Chairman of the Federal Reserve testified with witnesses that did not hold a federal or state governmental position.

CRS identified 28 times that the Comptroller of the Currency (or acting Comptroller) has testified before a congressional committee between 2007-2012. The Comptroller of the Currency generally appeared on a panel including other witnesses holding federal government positions. In 10 hearings, the Comptroller of the Currency testified on a panel including a state government official, such as a state banking regulator, a state insurance regulator, and a state Attorney General. These hearings are highlighted below. We were unable to identify any hearings where the Comptroller of the Currency testified with witnesses that did not hold a federal or state governmental position.


Date of Report: July 23, 2012
Number of Pages: 30
Order Number: M-072312
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The STOCK Act, Insider Trading, and Public Financial Reporting by Federal Officials

Jack Maskell
Legislative Attorney

The STOCK Act (Stop Trading on Congressional Knowledge Act of 2012), which was signed into law on April 4, 2012, affirms and makes explicit the fact that there is no exemption from the “insider trading” laws and regulations for Members of Congress, congressional employees, or any federal officials. The law also expressly affirmed that all federal officials have a “duty” of trust and confidentiality with respect to nonpublic, material information which they may receive in the course of their official duties, and a duty not to use such information to make a private profit.

The STOCK Act, as part of the law’s regulation of securities transactions by public officials, now requires expedited, periodic public disclosure of covered “financial transactions” by all officials in the executive and legislative branches of the federal government who are covered by the public reporting provisions of the Ethics in Government Act of 1978, as amended. The act thus works to require not only annual public reporting of such transactions (which reporting has been required since 1978), but also now requires public reporting within 30 days of receipt of a notice of a covered financial transaction (but in no event more than 45 days after such transaction).

All public financial disclosure statements filed under the Ethics in Government Act in the legislative and executive branches will eventually be made in electronic form, and will be posted on the Internet where they may be publicly searched, sorted, and, if a log-in protocol is followed, downloaded from official government websites. Amendments to the Stock Act have delayed by one month—until September 30, 2012— the requirement for posting on the Internet all of the public personal financial disclosure reports filed in May of 2012 by all covered employees in the legislative and executive branches of the United States Government.


Date of Report: August 17, 2012
Number of Pages: 9
Order Number: R42495
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