(a) In General- The systematic foreclosure prevention and mortgage modification program under this section shall be a program established by the Secretary, in consultation with the Chairperson of the Board of Directors of the Federal Deposit Insurance Corporation and the Secretary of Housing and Urban Development, that--

(1) provides lenders and loan servicers with certain compensation to cover administrative costs for each loan modified according to the required standards; and

(2) provides loss sharing or guarantees for certain losses incurred if a modified loan should subsequently re-default.

(b) Program Administration- The Secretary, in consultation with the Chairperson of the Federal Deposit Insurance Corporation and the Secretary of Housing and Urban Development, may contract with one or more entities, including the Federal Deposit Insurance Corporation and entities selected as contractors under section 107 of the Emergency Economic Stabilization Act of 2008, to conduct the program activities required under the program under this section.

(c) Program Components- The program established under subsection (a) may include the following components:

(1) ELIGIBLE BORROWERS- The program shall be limited to loans secured by owner-occupied properties.

(2) EXCLUSION FOR EARLY PAYMENT DEFAULT- To promote sustainable mortgages, loss sharing or guarantees shall be available only after the borrower has made a specified minimum number of payments on the modified mortgage.

(3) STANDARD NET PRESENT VALUE TEST- In order to promote consistency and simplicity in implementation and audit, the Secretary shall prescribe a standardized net present value analysis for participating lenders and servicers comparing the expected net present value of modifying past due loans compared to the net present value of foreclosing on them will be applied. Under this test, standard assumptions shall be used to ensure that a consistent standard for affordability is provided based on a ratio of the borrower's mortgage-related expenses for the first priority mortgage-to-gross income specified by the Secretary.

(4) SYSTEMATIC LOAN REVIEW BY PARTICIPATING LENDERS AND SERVICERS- Participating lenders and servicers shall be required to undertake a systematic review of all of the loans under their management, to subject each loan to a standard net present value test to determine whether it is a suitable candidate for modification, and to offer modifications for all loans that pass this test. The penalty for failing to undertake such a systematic review and to carry out modifications where they are justified would be disqualification from further participation in the program until such a systematic program was introduced.

(5) MODIFICATIONS- Modifications may include any of the following:

(A) Reduction in interest rates and fees.

(B) Term or amortization extensions.

(C) Forbearance or forgiveness of principal.

(D) Other similar modifications.

(6) SIMPLIFIED LOSS SHARE CALCULATION- In order to ensure the administrative efficiency and effective operation of the program, the Secretary shall define appropriate measures for loss sharing or guarantees designed to reduce the risk and loss upon redefault of modified mortgages in order to provide adequate incentives to lenders, servicers, and investors to modify eligible mortgages and avoid unnecessary foreclosures. Interim modifications shall be allowed.

(7) DE MINIMIS TEST- To lower administrative costs, a de minimis test shall be used to exclude from loss sharing any modification that does not lower the monthly payment at least 10 percent.

(8) 8 YEAR LIMIT ON LOSS SHARING PAYMENT- The loss sharing guarantee shall terminate at the end of the 8-year period beginning on the date the modification was consummated.

(d) Alternative Components- The Secretary may, with the approval of the Board, implement foreclosure prevention and mitigation actions other than those included pursuant to subsection (c) in the comprehensive plan initially approved by the Board pursuant to section 201(b) that the Secretary believes would provide equivalent or greater impact on foreclosure mitigation.

(e) Regulations- The Secretary shall prescribe such regulations as may be necessary to implement this section and prevent evasions thereof.

(f) Troubled Assets- The costs incurred by the Federal Government in carrying out the loan modification program established under this section shall be covered out of the funds made available to the Secretary of the Treasury under title I of the Emergency Economic Stabilization Act of 2008 or such other funds as may be available to the Secretary.

(g) Report- Before the end of the 6-month period beginning on the date of the enactment of this Act, the Secretary shall submit a progress report to the Congress containing such findings and such recommendations for legislative or administrative action as the Secretary may determine to be appropriate.