Preserving Homes and Communities Act of 2026

Bill Number

S. 3753

Origin Chamber

Senate

Congress

119th Congress, Session 2

Policy Area

Finance and Financial Sector

Status

Introduced

Latest Action

2026-01-30: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs. (Sponsor introductory remarks on measure: CR S420)

Last Updated

2026-02-25T20:39:35Z

AI-Generated Summary

Purpose

The Preserving Homes and Communities Act of 2026 aims to regulate the sale of non-performing (delinquent) and re-performing (recently recovered) single-family residential mortgage loans by the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac. It prioritizes affordable housing, borrower protections, and neighborhood stability while preventing sales that could harm homeowners or communities. The goal is to ensure these sales support home retention, fair lending, and community revitalization rather than profit-driven practices.

Key Provisions

The bill amends the National Housing Act (for FHA) and the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (for Fannie Mae and Freddie Mac) to impose strict rules on loan sales and foreclosed property dispositions.

FHA Loan Sales (New Section 259)

• Conditions for Sales: FHA can only sell non-performing loans if no other options exist to maintain the Mutual Mortgage Insurance Fund's minimum capital levels. Sales must prioritize federal, state, local, or Tribal governments and nonprofits experienced in affordable housing, homeownership counseling, and neighborhood stabilization.
• Pre-Sale Requirements: All loss mitigation options (e.g., loan modifications to make payments affordable) must be exhausted. Borrowers receive 90 days' certified mail notice detailing the sale process, available protections, and servicer obligations (servicers are companies that manage loans).
• Purchaser Obligations: Buyers must offer loss mitigation at least as favorable as FHA guidelines (no fees, affordable payment reductions, deferral programs for those who can afford pre-hardship payments). They cannot release liens on vacant properties until sold or donated, must maintain abandoned properties (including paying taxes), and are barred from using risky sales like contracts for deed unless to nonprofits. For foreclosed properties where home retention fails, 75% must go to affordable outcomes: sale to owner-occupants at fair market value, donation to nonprofits/governments for such sales or 10-year affordable rentals (rents ≤30% of income for those ≤100% area median income, accepting all legal income sources like vouchers or Social Security), or demolition/donation for uninhabitable properties.
• Direct Sales: Allowed only to governments, land banks (community land trusts), or affordable housing nonprofits at prices reflecting compliance costs.
• Forbearance Restrictions: No sales of loans in active forbearance (temporary payment pauses) or within 90 days after forbearance ends.
• Data and Reporting: Purchasers report quarterly loan-level data for 4 years (e.g., loan details, borrower demographics like race and income location, outcomes). FHA submits semiannual public reports to Congress on sales, performance, fair lending analysis (to detect discrimination), and related claims programs.
• Penalties: FHA can reclaim loans/properties without compensation for noncompliance and impose fines or bans on repeat violators.

FHA Claims Without Conveyance of Title First Look Program (New Section 260)

• Priority Purchase Rights: For foreclosed properties sold without conveying title to FHA (a program allowing servicers to keep title while claiming insurance), eligible buyers get an exclusive "first look" period to buy at or below fair market value (adjusted for condition).
• Eligible Buyers: Owner-occupants (those living in the home as primary residence), pre-approved nonprofits (501(c)(3) status, 2+ years in affordable housing/community development), and governments meeting similar criteria.
• Allowable Uses: Properties must be renovated (if needed) and used for affordable homeownership (to those ≤120% area median income), shared equity programs (e.g., community land trusts), 10-year affordable rentals (as above), or demolition only if part of broader revitalization (e.g., new construction or public use).
• Reporting: Non-owner buyers report annually on rehab, costs, end-use, and end-user demographics/income until completion; data made public by FHA.
• Implementation: FHA can use third-party vendors for approvals, monitoring, and reporting; ensures property access for inspections.

Fannie Mae and Freddie Mac Non-Performing Loan Sales (New Section 1329)

• Similar to FHA: Priority for governments/nonprofits, exhaust loss mitigation, 90-day borrower notice, purchaser obligations (favorable loss mitigation per enterprise guidelines, no lien release on vacants, no risky sales except to nonprofits, 75% affordable outcomes for foreclosures, maintenance of abandoned properties).
• Forbearance ban as with FHA.
• Data/reporting mirrors FHA (quarterly purchaser data, semiannual FHFA reports with fair lending analysis).
• Penalties: Reclaim assets; FHFA (regulator) can add fines/bans.

Fannie Mae and Freddie Mac Re-Performing Loan Sales (New Section 1330)

• Applies to recently recovered loans: Priority system, 90-day notice (less emphasis on pre-exhausted mitigation), purchasers must offer targeted relief for future delinquencies (>60 days, including deferrals and term extensions), no lien release on vacants, no risky sales except to nonprofits.
• No forbearance restrictions specified beyond general rules.
• Data/reporting similar but focused on post-sale performance and delinquencies.
• Penalties: Reclaim assets for noncompliance.

General Implementation

• Regulations required within 18 months (FHA) or as specified (FHFA for enterprises).

Significant Changes to Existing Law

• New Restrictions on Sales: Previously, FHA and enterprises could sell non-performing loans more freely via auctions; now, sales are conditional on capital needs (FHA only), require priority for mission-driven buyers, and mandate borrower notices and exhausted mitigations—changes not previously required.
• Enhanced Protections: Introduces mandatory affordable outcomes for 75% of foreclosed properties, bans on predatory financing (e.g., contracts for deed), and borrower defenses in foreclosure (noncompliance as a legal shield)—expanding beyond current guidelines.
• Data and Transparency: Requires detailed, demographic-inclusive reporting and public fair lending analyses, absent in prior law, to monitor equity.
• First Look Program: Creates a novel priority system for foreclosed properties under FHA's Claims Without Conveyance program, favoring affordable uses over open-market sales.
• Re-Performing Loans: First-time regulation of group sales for these loans, focusing on future delinquency prevention.

Potential Impacts

• Government Agencies: FHA (under HUD) and FHFA must develop regulations, oversee compliance, collect/report data, and potentially use vendors—increasing administrative workload but improving oversight. Could stabilize the FHA insurance fund by ensuring sales support capital needs without unnecessary disposals.
• Citizens/Borrowers: Stronger safeguards against abrupt sales or aggressive foreclosures, more access to affordable modifications/rentals, and protections for vulnerable groups (e.g., low-income, veterans via demographic tracking). May reduce evictions and promote home retention, but could delay resolutions for some delinquent loans.
• Communities: Encourages neighborhood stabilization by directing 75% of properties to affordable housing, potentially reducing blight from foreclosures; benefits low-income areas via rentals accepting vouchers/Social Security.
• International Relations: No direct impact, as it focuses on domestic housing finance.

Main Stakeholders Affected

• Borrowers and Homeowners: Primary beneficiaries through notices, mitigations, and foreclosure defenses; at risk if sales lead to stricter enforcement.
• Nonprofits and Governments: Gain purchase priority and direct sales opportunities for affordable housing/community projects; must meet experience/pre-approval criteria.
• FHA, Fannie Mae, and Freddie Mac: Face new constraints on sales, requiring compliance systems and reporting; enterprises (government-sponsored but privately held) adapt auction processes.
• Loan/Property Purchasers/Servicers: Investors limited by obligations (e.g., 75% affordable rule); nonprofits/governments empowered, while for-profit buyers face penalties for noncompliance.
• Communities and Low-Income Residents: Indirectly affected via increased affordable housing stock and anti-discrimination monitoring.

Notable Legal, Constitutional, or Political Implications

• Legal: Bolsters borrower rights by making purchaser noncompliance a defense in court (judicial foreclosures) or grounds to halt non-judicial ones (faster state processes), potentially increasing litigation. Mandates regulations, ensuring enforceability but allowing flexibility. Fair lending data collection supports enforcement of anti-discrimination laws like the Fair Housing Act.
• Constitutional: Aligns with equal protection (14th Amendment) by requiring demographic analysis to prevent disparate impacts on protected groups (e.g., by race or income); promotes due process via notices and exhausted mitigations before sales.
• Political: Advances Democratic priorities on housing equity and anti-predatory lending (sponsored by Sens. Reed, Smith, Wyden, Schumer, Merkley), but may draw opposition from housing investors favoring freer markets. Could influence broader affordable housing debates, emphasizing public benefit over privatization in federal-backed programs.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Sen. Reed, Jack [D-RI]

Cosponsors (4)

Sen. Smith, Tina [D-MN], Sen. Wyden, Ron [D-OR], Sen. Schumer, Charles E. [D-NY], Sen. Merkley, Jeff [D-OR]

Recent Actions

• 2026-01-30: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs. (Sponsor introductory remarks on measure: CR S420)
• 2026-01-30: Introduced in Senate

Bill Versions

• Preserving Homes and Communities Act of 2026 — issued 2026-01-30 — PDF (33 pages)