To prohibit the provision of Federal funds to the housing-related government-sponsored enterprises and to remove certain competitive advantages granted under law to such enterprises.

Summary: Free Housing Market Enhancement Act - Prohibits providing Federal funds to the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), or any Federal Home Loan bank (Such entities are referred to as government sponsored enterprises, or GSEs.)Amends the Federal National Mortgage Association Charter Act ( Fannie Mae) and the Federal Home Loan Mortgage Corporation Act (Freddie Mac) to repeal: (1) the State tax exemption; (2) the requirement that the Treasury approve debt issues; (3) Treasury authority to purchase Fannie Mae/Freddie Mac obligations; (4) depositary authority; and (5) the designation of obligations as lawful investments.Amends the Federal Home Loan Bank Act to repeal: (1) the State tax exemption; (2) Treasury authority to purchase bank obligations; (3) depositary authority; and (4) the designation of obligations as lawful investments.Amends the Federal Reserve Act to prohibit Federal Reserve purchase of GSE debt.Repeals the eligibility of GSE obligations for unlimited investment by national banks, federally chartered thrifts, and credit unions.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Free Housing Market Enhancement 
Act''.

SEC. 2. PROHIBITION OF FEDERAL FUNDS FOR HOUSING-RELATED GOVERNMENT-
              SPONSORED ENTERPRISES.

    Notwithstanding any other provision of law, no Federal funds may be 
provided, directly or indirectly, to the Federal National Mortgage 
Association, the Federal Home Loan Mortgage Corporation, or any Federal 
Home Loan Bank.

SEC. 3. AMENDMENTS TO FEDERAL NATIONAL MORTGAGE ASSOCIATION CHARTER 
              ACT.

    (a) Exemption From State Taxation.--Section 309(c) of the Federal 
National Mortgage Association Charter Act (12 U.S.C. 1723a(c)) is 
amended--
            (1) by striking paragraph (2); and
            (2) by striking ``(1)''.
    (b) Authority of Treasury To Approve Debt Issues.--Section 304(b) 
of the Federal National Mortgage Association Charter Act (12 U.S.C. 
1719(b)) is amended--
            (1) by striking ``, upon the approval of the Secretary of 
        the Treasury,''; and
            (2) by striking ``with the approval of the Secretary of the 
        Treasury''.
    (c) Authority To Borrow From Treasury.--Section 304 of the Federal 
National Mortgage Association Charter Act (12 U.S.C. 1719) is amended 
by striking subsection (c).
    (d) Depositary Authority.--Section 309(g) of the Federal National 
Mortgage Association Charter Act (12 U.S.C. 1723a(g)) is amended--
            (1) by striking ``each of the bodies corporate named in 
        section 302(a)(2)'' and inserting ``the Association''; and
            (2) by striking ``such bodies corporate'' and inserting 
        ``the bodies corporate named in section 302(a)(2)''.
    (e) Designation of Obligations as Lawful Investments.--The first 
sentence of section 311 of the Federal National Mortgage Association 
Charter Act (12 U.S.C. 1723c) is amended by striking ``either of the 
bodies corporate named in section 302(a)(2)'' and inserting ``the 
Association''.
    (f) Appointment of Members of Board of Directors.--
            (1) In general.--Section 308(b) of the Federal National 
        Mortgage Association Charter Act (12 U.S.C. 1723(b)) is 
        amended--
                    (A) in the first sentence, by striking ``five of 
                whom shall be appointed annually by the President of 
                the United States, and the remainder of whom'' and 
                inserting ``who'';
                    (B) in the second sentence, by striking ``appointed 
                by the President'';
                    (C) in the third sentence--
                            (i) by striking ``appointed or''; and
                            (ii) by striking ``, except that any such 
                        appointed member may be removed from office by 
                        the President for good cause'';
                    (D) in the fourth sentence, by striking 
                ``elective''; and
                    (E) by striking the fifth sentence.
            (2) Applicability.--The amendments made by paragraph (1) 
        shall apply only with respect to the first election of members 
        of the board of directors of the Federal National Mortgage 
        Association occurring after the date of the enactment of this 
        Act, and the board resulting from such election, and to 
        elections and boards thereafter.

SEC. 4. AMENDMENTS TO FEDERAL HOME LOAN MORTGAGE CORPORATION.

    (a) Exemption From State Taxation.--Section 303 of the Federal Home 
Loan Mortgage Corporation Act (12 U.S.C. 1452) is amended by striking 
subsection (e).
    (b) Authority of Treasury To Approve Debt Issues.--Section 306(j) 
of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1455(j)) 
is amended--
            (1) by striking ``(1)'';
            (2) by striking ``be issued upon the approval of the 
        Secretary of the Treasury and shall'';
            (3) by striking ``with the approval of the Secretary of the 
        Treasury''; and
            (4) by striking paragraphs (2) and (3).
    (c) Authority To Borrow From Treasury.--Section 306 of the Federal 
Home Loan Mortgage Corporation Act (12 U.S.C. 1455) is amended by 
striking subsection (c).
    (d) Depositary Authority.--Section 303(d) of the Federal Home Loan 
Mortgage Corporation Act (12 U.S.C. 1452(d)) is amended by striking the 
second and third sentences.
    (e) Designation of Obligations as Lawful Investments.--Section 303 
of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1452) is 
amended by striking subsection (g).
    (f) Appointment of Members of Board of Directors.--
            (1) In general.--Section 303(a)(2) of the Federal Home Loan 
        Mortgage Corporation Act (12 U.S.C. 1452(a)(2)) is amended--
                    (A) in subparagraph (A)--
                            (i) in the first sentence, by striking ``5 
                        of whom shall be appointed annually by the 
                        President of the United States and the 
                        remainder of whom'' and inserting ``who''; and
                            (ii) in the second sentence, by striking 
                        ``appointed by the President of the United 
                        States'';
                    (B) in subparagraph (B)--
                            (i) by striking ``such or''; and
                            (ii) by striking ``, except that any 
                        appointed member may be removed from office by 
                        the President for good cause''; and
                    (C) in subparagraph (C)--
                            (i) by striking the first sentence; and
                            (ii) by striking ``elective''.
            (2) Applicability.--The amendments made by paragraph (1) 
        shall apply only with respect to the first election of members 
        of the Board of Directors of the Federal Home Loan Mortgage 
        Corporation occurring after the date of the enactment of this 
        Act, and the Board resulting from such election, and to 
        elections and Boards thereafter.

SEC. 5. AMENDMENTS TO FEDERAL HOME LOAN BANKS.

    (a) Exemption From State Taxation.--
            (1) Notes and obligations.--The first sentence of section 
        13 of the Federal Home Loan Bank Act (12 U.S.C. 1433) is 
        amended by striking ``, by any Territory,'' and all that 
        follows through ``local taxing authority''.
            (2) Banks.--The second sentence of section 13 of the 
        Federal Home Loan Bank Act (12 U.S.C. 1433) is amended by 
        striking ``, by any Territory,'' and all that follows through 
        ``taxed''.
    (b) Authority To Borrow From Treasury.--Section 11 of the Federal 
Home Loan Bank Act (12 U.S.C. 1431) is amended by striking subsection 
(i).
    (c) Depositary Authority.--The Federal Home Loan Bank Act is 
amended--
            (1) by striking section 14 (12 U.S.C. 1434); and
            (2) in section 15 (12 U.S.C. 1435), by striking the second 
        sentence.
    (d) Designation of Obligations as Lawful Investments.--Section 15 
of the Federal Home Loan Bank Act (12 U.S.C. 1435), as amended by 
subsection (c)(2) of this section, is further amended by striking the 
first sentence.

SEC. 6. PROHIBITION OF FEDERAL RESERVE PURCHASE OF GSE DEBT.

    Section 14(b)(2) of the Federal Reserve Act (12 U.S.C. 355(2)) is 
amended--
            (1) by inserting ``(A)'' after ``(2)''; and
            (2) by adding at the end the following new subparagraph:
    ``(B) For purposes of this subsection, the Federal National 
Mortgage Association, the Federal Home Loan Mortgage Corporation, and 
the Federal Home Loan Banks shall not be considered agencies of the 
United States.''.

SEC. 7. REPEAL OF ELIGIBILITY OF GSE OBLIGATIONS FOR UNLIMITED 
              INVESTMENTS.

    (a) National Banks.--Section 5136 of the Revised Statutes of the 
United States (12 U.S.C. 24) is amended in the sixth sentence of the 
paragraph designated ``Seventh''--
            (1) by striking ``or the Federal Home Loan Banks'';
            (2) by striking ``the Federal National Mortgage Association 
        or''; and
            (3) by striking ``or mortgages, obligations, or other 
        securities which are or ever have been sold by the Federal Home 
        Loan Mortgage Corporation pursuant to section 305 or 306 of the 
        Federal Home Loan Mortgage Corporation Act''.
    (b) Federally Chartered Thrifts.--Section 5(c)(1) of the Home 
Owners' Loan Act (12 U.S.C. 1464(c)(1)) is amended--
            (1) by striking subparagraphs (D) and (E);
            (2) in subparagraph (F), by striking ``the Federal National 
        Mortgage Association,'';
            (3) in subparagraph (M), by striking ``or a Federal home 
        loan bank''; and
            (4) by redesignating subparagraphs (F) through (U) as 
        subparagraphs (D) through (S), respectively.
    (c) Credit Unions.--Section 107(7)(E) of the Federal Credit Union 
Act (12 U.S.C. 1757(7)(E)) is amended--
            (1) by striking ``Federal home loan banks, the Federal Home 
        Loan Bank Board,'';
            (2) by striking ``the Federal National Mortgage Association 
        or''; and
            (3) by striking ``or in mortgages, obligations, or other 
        securities which are or ever have been sold by the Federal Home 
        Loan Mortgage Corporation pursuant to section 305 or section 
        306 of the Federal Home Loan Mortgage Corporation Act;''.